Boral Limited
Annual Report 2010
Laying the foundations
Contents
BoRaL
LiMited
Financial highlights
Group overview
Chairman’s review
Chief Executive’s review
The building blocks of growth
Boral production system
Construction Materials
Cement
Building Products
USA
Financial Review
Sustainability in Boral
Board of Directors
Corporate governance report
Directors’ report
Remuneration report
Financial statements
Shareholder information
Financial history
1
2
4
6
10
12
14
16
18
20
22
26
30
32
40
45
61
134
136
Financial calendar
inside back cover
Boral Limited is an
international building
and construction
materials group,
headquartered in
Sydney, Australia.
With leading market
positions, Boral’s core
businesses are Cement
and Construction
Materials in Australia;
Plasterboard in Australia
and Asia; and Bricks,
Roof Tiles and
Masonry in Australia
and the USA.
Boral Limited
ABN 13 008 421 761
Level 39, AMP Centre
50 Bridge Street, Sydney NSW 2000
GPO Box 910, Sydney NSW 2001
Telephone: (02) 9220 6300
International: +61 2 9220 6300
Facsimile: (02) 9233 6605
International: +61 2 9233 6605
Internet: www.boral.com.au
Email: info@boral.com.au
Stock Exchange Listing
Australian Securities Exchange
Share Registry
c/- Link Market Services
Level 12
680 George Street, Sydney NSW 2000
Locked Bag A14,
Sydney South NSW 1235
Telephone: (02) 8280 7133
International: +61 2 8280 7133
Facsimile: (02) 9287 0303
International: +61 2 9287 0303
Internet: www.linkmarketservices.com.au
Email: registrars@linkmarketservices.com.au
Boral Limited Annual Report 2010
Boral Limited Annual Report 2010 – Directors Report
1
01
finanCiaL highLights
2010
•
•
Profit after tax before significant items
of $132 million
Building Products earnings up 90%
year-on-year
• Cash flow from operations up 10% to $459 million
•
•
•
•
Acquisition of remaining 50% share of MonierLifetile
in the USA
Announced the disposal of loss making non-core
Scaffolding and Precast Panels businesses
Successful completion of $490 million gross capital
raising to fund growth aspirations and strengthen
balance sheet
Increased final dividend of 6.5 cents versus 5.5 cents
in the prior year and took the full year dividend to
13.5 cents
•
$285 million impairment of under-performing and
obsolete assets
Revenue
$4,599m
Down 6%
EBIT*
$252m
Down 9%
Profit after tax*
$132m
Steady
Earnings Per Share*
Full year dividend
22.1c
Steady
13.5c
Up 4%
*Before significant items
02
Boral Limited Annual Report 2010
gRouP oVeRVieW
ConstRuCtion
MateRiaLs
CeMent
BuiLding
PRoduCts
Core business
Boral Construction Materials is an
integrated business supplying quarry
materials, concrete and asphalt. BCM also
operates a Quarry End Use business and an
integrated transport business.
Core business
Boral’s Cement division is a leading supplier
of cement, lime and fly ash in Australia and
of concrete, quarry and pipe products in
Indonesia and Thailand.
Core business
Boral Building Products is a leading supplier
in bricks, roofing and masonry products,
plasterboard and timber in Australia and in
plasterboard in Asia through a 50% owned
JV, LBGA.
Share of revenue
Share of revenue
Share of revenue
Quarries
Concrete
Asphalt
Quarry End Use
Cement
Indonesia
Thailand
Plasterboard Australia
Plasterboard Asia
Clay & Concrete Products
Timber
Main markets
Almost 50% of BCM’s business is
undertaken in the Australian engineering
and infrastructure segments, more
specifically roads, highways, bridges and
sub-divisions. BCM’s remaining revenues
derive from the Australian dwellings and
non-dwelling building segments.
Achievements of the year
BCM successfully supplied several large
infrastructure projects with record profits
from the Asphalt business during the year.
Strong cost and price disciplines resulted
in improved margins despite an overall
volume decline. Rebuilding of the Artarmon
concrete plant was completed on time and
on budget.
Strategic priorities
Margin growth through price discipline and
LEAN program efficiency gains. Investment
of around $200m in the Peppertree quarry
near Marulan to underpin Boral’s leading
position in the Sydney aggregates market.
Main markets
More than half of Cement division revenues
are derived from the Australian dwellings,
non-dwellings and infrastructure markets.
The remaining part of the business is
reliant on construction materials markets
in Indonesia and Thailand.
Achievements of the year
During the year, full year revenue was slightly
above last year reflecting improved market
conditions in Thailand and Indonesia offsetting
lower construction activity in Australia,
particularly in Queensland. EBIT was down
reflecting a $14m once off cost to reduce
inventories and higher energy costs.
Strategic priorities
Priorities are to maximise the potential
of the Asian Construction Materials
businesses, and to complete the
rebranding of Blue Circle Southern
Cement in Australia. The division will
strengthen the business through LEAN
manufacturing initiatives and innovative
product development.
Main markets
Building Products division relies primarily
on new home construction in Australia
including multi-residential and detached
housing including alterations and additions.
In Asia, Plasterboard is sold into the
dwelling and non-dwelling markets
in nine countries in South East Asia.
Achievements of the year
Building Products benefitted from improved
residential construction, the government
stimulus work and strong operational
performance. The Queensland plasterboard
plant performed strongly, and the new
masonry plant in Perth is substantially
complete. LBGA started new production lines
at Baoshan (China) and Saraburi (Thailand).
Strategic priorities
Focus is on completing the implementation
of a new streamlined organisation structure
and maximising the potential of all
businesses, particularly Timber. Investment
priorities include the $44m masonry plant in
Western Australia and an $80m upgrade of
Boral’s Plasterboard facility in Victoria.
Construction Materials
Revenue & Earnings
Sales
revenue
$m
1
6
2
,
2
9
1
1
,
2
EBIT*
$m
1
3
2
1
0
2
Cement
Revenue & Earnings
Sales
revenue
$m
EBIT*
$m
9
0
5
2
1
5
8
0
1
8
8
Building Products
Revenue & Earnings
Sales
revenue
$m
6
0
2
,
1
7
3
1
,
1
EBIT*
$m
1
0
1
3
5
9
0
0
1
9
0
0
1
9
0
0
1
9
0
0
1
9
0
0
1
9
0
0
1
*Before significant items
03
usa
otheR
Businesses
Core business
Boral today enjoys the number one position
in bricks, and leading positions in clay and
concrete roof tiles, and in construction
materials in Oklahoma and Colorado.
Core business
Following divestments of precast panels
and Boral Formwork & Scaffolding,
Boral’s other businesses consist of Dowell
Windows and DeMartin & Gasparini (DMG)
concrete placing.
Share of revenue
Share of revenue
Bricks
Roofing
Materials
Formwork & Scaffolding
DMG
Windows
Precast
Main markets
Two-thirds of US related revenues are
derived from the residential building market
with the remainder attributable to the
commercial markets and infrastructure
construction activity.
Main markets
The Dowell windows business is made
up of 14 fabrication operations servicing
the Australian housing market. DMG
largely services Sydney’s non-residential
construction market.
Achievements of the year
Despite challenging markets with further
volume declines, the performance of Bricks
and Roof Tiles improved on the prior year
as cost reduction initiatives took effect. The
remaining 50% of the Concrete Roof Tile
joint venture, MonierLifetile, was acquired
for US$75m.
Strategic priorities
Boral will continue to invest in the US
business in preparation for market recovery
and growth. Concrete Roof Tiles and Clay
Roof Tiles are being consolidated to form
Boral Roofing to deliver benefits from a
one Boral strategy. Maximising the potential
of US Construction Materials and Fly Ash is
a strategic priority.
Achievements of the year
Revenue was 13% above last year
with Windows revenue and profits up
due to stronger residential housing and
improvement initiatives. In DMG, revenue
and profitability increased due to large
contracts which were completed in the
first half, offsetting lower activity in the
second half.
Strategic priorities
Key priorities are to position the Concrete
Placing business to benefit from a recovery
in commercial construction activity in New
South Wales. Maximising the potential
of the Windows business and delivering
the successful commercialisation of a
new range of energy conserving window
designs is a key Windows priority.
USA
Revenue & Earnings
EBIT*
$m
9
0
0
1
Sales
revenue
$m
5
4
5
4
6
3
9
0
0
1
)
4
0
1
(
)
9
0
1
(
Other Businesses
Revenue & Earnings
Sales
revenue
$m
4
9
2
0
6
2
EBIT*
$m
6
9
0
0
1
2
9
0
0
1
04
Boral Limited Annual Report 2010
BuiLding soMething gReat
ChAIRMAN’S REVIEW 2010
Boral Limited has made good progress during FY2010
which is particularly pleasing given the difficult economic
and market conditions experienced throughout the year.
We have developed our strategy to focus on improving the
productivity of our existing operations, developing best in
class products and concentrating on those markets where
we can establish leading positions. From this we go forward
with confidence, focusing our efforts at the markets where
we see excellent prospects for growth.
FY2010 was a year of major change for the
Group, with a new management structure
and strategy tied to transforming Boral’s
business portfolio to highly focused,
leadership driven divisions.
Overview
As this is my first statement since
becoming Chairman, I would like to begin
by saying how delighted I am to have taken
up the Chairman’s role at a very exciting
stage of Boral’s development.
Since Mark Selway’s appointment as Chief
Executive in January 2010, the Group
has undergone significant changes. The
businesses have been reorganised into
five divisions and the planned divestment
of two non-core businesses has been
announced. Productivity improvements
are being implemented in all areas which,
despite difficult external conditions,
will underpin year on year progress
for the Group.
Since my appointment, I have visited many
of the Group’s key operations, and am
pleased to report that there is a great deal
of enthusiasm for our program to revitalise
our business portfolio and capitalise on
the manufacturing and sales streams of
the Group.
Financial performance
Profit after tax, excluding significant items,
was similar to last year at $132m ($131m
in 2009) despite a 6% reduction on Group
turnover to $4.6b ($4.9b in 2009). Earnings
Per Share amounted to 22.1c (22.2c in 2009).
There were several separate items with a
pre-tax cost totalling A$285m which were
classified as significant in FY2010. Charges
of A$93m arose from the write down of
FY2010 Key Announcements
16 September 2009
The Board appoints Mr Mark Selway
as the next CEO of Boral Limited,
effective 1 January 2010. Mr Selway
has been the Chief Executive of
the Weir Group PLC, and has an
impressive international career and
a strong track record of world-class
manufacturing, and growth through
innovation and geographic expansion.
31 December 2009
Mr Rod Pearse retires after ten years
as Boral’s Managing Director and
CEO and after 15 years with Boral.
“I thank Rod for his outstanding
contribution to Boral and for
his extraordinary commitment
to the Group, its employees
and shareholders,” said Boral’s
Chairman Dr Ken Moss.
08 February 2010
Boral appoints Andrew Poulter as
Chief Financial Officer to replace Ken
Barton who leaves Boral at the end
of February. Andrew joins Boral on
1 May following a successful career
with Adelaide Brighton Limited since
2003, and senior finance roles with
Lafarge and Blue Circle Cement
in the UK.
10 February 2010
Boral announces a net profit after tax
for the six months to 31 December
2009 of $68m, a 9% decline on the
prior year in a market environment
described by the Company as
challenging. Boral expects its full
year profit to be broadly in line with
current consensus.
05
On 1 December 2009, John Marlay was
appointed as non-executive Director.
Mr Marlay has had a distinguished career
in the building and construction materials
sector including his role as CEO of Alumina
Limited and senior roles with hanson plc
in the UK, Pioneer International in the UK
and Australia and James hardie Industries
in Australia.
On 15 March 2010, Dr Eileen Doyle joined
the Board as a non-executive Director.
Dr Doyle has had a distinguished career
in the materials and water industries in
Australia including her role as CEO of
CSR’s Panels division, various senior
roles with BhP Limited and four years
with hunter Water with responsibility for
planning and policy development.
On 15 September 2010, Catherine Brenner
will join the Board as a non-executive
Director. Ms Brenner’s career has included
working as a solicitor followed by ten years
at ABN Amro where she was Managing
Director, Investment Banking.
People
On behalf of the Board, I want to thank
the executive and our 14,800 employees
around the world for their commitment,
tireless energy and focus in what has been
a tough year. I ask every employee to show
belief in our potential and to recognise it
is up to us to deliver as we embark upon
our new strategic direction. I am convinced
that Boral has the right direction, structure
and depth of management expertise to
deliver improving returns to shareholders.
Dr Bob Every
Chairman
the carrying values of several loss making,
non-core businesses and $178m in asset
write downs related to underutilised and
obsolete assets in Australia and the United
States. A further $14m was provided for in
the Group’s ongoing restructuring activities.
Cash generation was excellent with cash
flow from operations of $459m, 10%
higher than the previous year, including a
$44m reduction in working capital. The
year ended with a net debt position of
$1.2b, showing a $331m improvement
from the previous year (net debt $1.5b
in FY2009).
Revenue from continuing operations was
5% down at A$4.5b (A$4.7b in FY2009).
Underlying earnings from continuing
operations (before significant items),
however, showed a 7% increase to
$145m ($135m in FY2009).
The Board is recommending a final
dividend of 6.5c per share making a
total distribution for the year of 13.5c
(13c in FY2009).
Strategy and structure
While still at its early stages, our program of
operational and strategic change is making
sound progress. The initial benchmarking
from our LEANmanufacturing and sales
and marketing excellence programs
validates our belief that operational
improvements provide the best short term
opportunity to deliver margin, earnings
and cash flow improvement in the face
of uncertain market conditions.
In July, we announced a capital raising of
approximately $490 million to strengthen
Boral’s balance sheet and to support
future capital investments and growth.
Growth investments include the strategic
acquisition of the remaining 50% of
Boral’s US concrete roof tile business,
MonierLifetile. In August, the Group
successfully concluded the one for
five entitlement offer with 92% take-up
from institutional investors and a 40%
participation rate from retail investors.
This level of take-up was in line with
recent market precedents and given
the challenging market conditions
experienced during the offer period,
it reflects a positive endorsement of Boral’s
new strategy.
After the financial year end, in August,
we announced the planned divestments
of non-core Panels and Scaffolding
businesses. These actions improve
significantly the focus of the Group and
release both financial and management
resources to facilitate progress in the
operational and strategic development of
the business.
The key management focus for FY2011 is
to ensure that the operational changes we
have initiated are successfully implemented
to yield their full potential. At the same time
we will continue to invest in new products
and in growth sectors of our business.
While the Group’s operating strategies
provide good prospects for profitable
growth, our strong cash generation and
improved balance sheet also give us the
leverage to create further growth through
business development and acquisitions.
Shareholders can be confident that our
financial strength will not be compromised
by any high risk or speculative business
development activity.
The Board
Rod Pearse retired at the end of December
2009 after 10 years as CEO of Boral. I take
this opportunity to once again thank Rod
for his outstanding contribution and his
extraordinary commitment to the Group,
its employees and shareholders.
Dr Ken Moss retired from the Board on
30 May 2010 after almost 11 years with the
Group, 10 years as Chairman. his personal
dedication, professional experience and
insight during his long association with
the Group have been invaluable.
Roland Williams who has been a
non-executive Director since 1999
has indicated his intention not to seek
re-election at the Annual General Meeting
in November 2010. his wise and helpful
counsel during his time in office has been
of immense value to the Group. I would
like to personally thank Ken and Roland
for their contributions.
31 May 2010
Boral confirms that after 10 years
in the role Dr Ken Moss is retiring
as Boral’s Chairman of the Board
and Dr Bob Every assumes the
role with effect from 1 June 2010.
Dr Every thanks Ken Moss for the
great contribution he has made as
Boral’s Chairman.
06 July 2010
Boral announces the completion of
a comprehensive strategic review of
Boral’s business portfolio, operations
and structures, together with the
MonierLifetile acquisition, a capital
raising of approximately $490m to
finance growth and to strengthen
the balance sheet, and $289m
of impairments.
04 and 17 August 2010
On 4 August Boral announces the
sale of Precast Panels to Brickworks
Ltd for $15m and on 17 August Boral
announces the sale of Formwork &
Scaffolding to Anchorage Capital
for $35m. These divestments are
in line with Boral’s strategy to focus
investments where Boral has or is
establishing a leading market position.
06 August 2010
Boral successfully completes its
retail entitlement offer with a Retail
Bookbuild price of $4.25 per share
versus the underwritten issue price of
$4.10. Retail shareholders subscribed
with a participation rate of ~40%.
The Institutional Entitlement Offer is
successfully completed on 8 July
2010, raising ~A$280m with 92%
participation rate.
06
Boral Limited Annual Report 2010
BuiLding soMething gReat
ChIEF ExECUTIVE REVIEW 2010
Group Executive (pictured)
From left to right: Mike Beardsell (Boral Cement),
Murray Read (Boral Construction Materials), Ross Batstone
(Boral Building Products), Mark Selway (Chief Executive),
Mike Kane (Boral USA), Warren Davison (Other Businesses).
In 2010 the Group executive engaged the entire organisation
in the Company’s mission to put in place decisive actions
designed to deliver excellent operational performance.
We remain absolutely convinced that in doing so we will
unlock our potential to deliver best in sector customer
satisfaction and financial returns in the medium term.
During 2010 we undertook a critical review of every element of our
business and validated our fundamental belief that delivering operational
excellence provides the basis for improving margins, earnings and cash flow.
From this work and the strategic outcomes we go forward with confidence,
while focusing our efforts at the markets where we see excellent prospects
for growth.
I am pleased with the Group’s progress during FY2010 especially in light
of the difficult economic and market conditions we faced during the year.
I attribute much of our success to the actions initiated by our management
team to improve productivity of our existing operations and focus our efforts
at those markets where Boral has a realistic ambition to lead.
In the year ahead all of our businesses will be managed robustly
with expectations that we press ahead with decisive actions to improve
competitiveness and shareholder returns. The strategic changes required
to deliver sector best performance are expected to make sound progress
during the year.
Profit after tax*
$132m
Steady
Cash flow from
operations
$459m
Up 10%
*Before significant items
07
Boral has invested US$75 million to
acquire the remaining 50% of its concrete
roof tile business, MonierLifetile, the
market leader in concrete roof tiles.
The acquisition allows Boral Roofing
to strengthen its roofing portfolio and
pursue its strategy of becoming a
significant player in the high end roofing
market. The MonierLifetile acquisition
represents excellent value for Boral in
a market that has been hit hard by the
housing downturn but which we expect
will recover over the next two to three
years. The investment highlights Boral’s
commitment to our US business for the
long term.
I want to recognise the contribution of our employees at all levels. I am
grateful for their tremendous enthusiasm and outstanding contribution during
the year. We have worked hard to improve our processes and manage our
costs in the face of an uncertain global economic outlook.
FY2010 divisional performance report
In July of 2010 we reorganised the business into five core divisions to better
reflect their composition and the markets in which we compete.
Full year revenue from Construction Materials was $2.1b, down 6% (FY2009:
$2.3b) due to ongoing softness in the commercial construction sector. EBIT
at $201m was 13% below prior year (FY2009: $231m) due to lower sales
volumes and $15m lower earnings from Quarry End Use. This was partially
offset by sustained levels of infrastructure activity in our higher margin
markets in the first half of the year.
Our strongest performance in FY2010 came from our Building Products
division where our leading product offerings and geographic diversity
produced earnings, profit and cash flow improvements when compared
with the prior year. Revenue from Building Products of $1.2b was up 6%
(FY2009: $1.1b), with growth in Plasterboard, Timber and Clay & Concrete
Products. EBIT of $101m was 90% above the prior year (FY2009: $53m)
reflecting strong performances from the Australian and Asian Plasterboard
businesses combined with improved operational performance and housing
related growth in our Clay & Concrete and Timber businesses.
Cement revenue at $512m was 1% above the same period last year
(FY2009: $509m) reflecting improved results in Asia offset by lower sales
volumes in the Australian non-dwelling sector. EBIT at $88m was $20m
below last year (FY2009: $108m) and included a significantly improved
Asian performance offset by energy cost increases and the impact of lower
Australian cement production as part of a planned strategy to reduce
clinker inventories.
The USA operations reported revenue of A$364m, 33% below last year
(FY2009: A$545m) and reflected continued deterioration in housing starts
and construction related activity, and the strengthening of the Australian
dollar during the year. At the EBIT level, the USA reported a loss of A$104m
against a A$109m loss last year.
As previously predicted our USA division continued to experience a tough
trading environment with housing starts and commercial construction
lagging significantly below historic averages. Mike Kane the new CEO of
the US businesses has settled in well and has a well developed plan to
capitalise on our excellent market positions and leverage our earnings as
the market recovers.
Revenue from the remaining Construction Related Businesses, which now
includes only Dowell Windows and De Martin & Gasparini, at $294m was
up 13% (FY2009: $260m) due to improved trading in the residential sector.
EBIT at $6m compared to $2m in the prior year. The Windows businesses
made excellent progress in the year and improved profits and sales, while
De Martin & Gasparini performed well in an environment of lower commercial
project work.
Pursuing our Building Something Great strategy
We are now actively engaged in developing those businesses which provide
the strongest prospects for the future. In 2010 the Group executive engaged
the entire organisation in the Company’s mission to put in place decisive
actions designed to deliver excellent operational performance. We remain
absolutely convinced that in doing so we will unlock our potential to deliver
best in sector customer satisfaction and financial returns in the medium term.
08
Boral Limited Annual Report 2010
Building Something Great
Chief Executive Review 2010
Continued
Operational excellence
The Group objective for operational excellence underpins our philosophy that
meeting and exceeding our customer expectations will play a pivotal role in
our earnings growth going forward.
In 2010 we commenced the implementation of the Boral Production System
which is a structured process, underpinned with Company-wide training,
and which is already beginning to deliver a leaner business culture across
all of our operations irrespective of product or geographic diversity.
Developing our product portfolio
All of Boral’s divisions are now completing their plans to develop more
focused product portfolios aimed at the most attractive markets. The first
range of new products will be launched in 2011 and a commitment has
been made to further investments in research and development for the
coming year.
I am confident that the technical and intellectual talent already in place at
Boral, coupled with a deliberate and systematic approach to innovation,
will enhance the Group’s competitive positioning in the near term.
Sales and marketing excellence
An essential building block in the Group’s future strategy is our ambition to
meet and exceed customer expectations, which we are confident will play
a direct role in the Group’s earnings growth. We have engaged the entire
organisation in the implementation of the sales and marketing excellence
initiative which is a structured process geared to delivering a leaner and
more customer focused organisation. Today, our best sales and marketing
teams deliver industry leading performance and every business in the Group
has well defined plans to maximise their customer performance. We remain
absolutely convinced that these developments will continue to unlock our full
potential for increased customer satisfaction and improving financial returns.
Leadership
During the year ahead we will continue to strengthen our management team
and focus increased resources at developing our leadership talents. Personal
development programs are being enhanced to identify our high potential
employees and a new and intensive executive leadership training program is
being developed to provide the platform to cultivate our next generation of
leaders. Employee appraisal, career development and succession planning
will form an important component of the executive calendar.
Boral is investing A$80 million in its
Australian plasterboard business to build
a new state-of-the-art manufacturing and
distribution facility at its Port Melbourne
site in Victoria. The project includes a
new energy efficient drier incorporated
into a refurbished board line which will lift
annual capacity by over 40% to around
30 million m2. A new gypsum receiving
system to take gypsum directly from
ships into the site will eliminate truck
movements and reduce costs and an
upgraded plaster production facility
will incorporate new recycling plant to
process on-site waste. The upgrade to
Boral’s ageing Port Melbourne facility,
which is expected to be completed
by June 2012, follows the successful
construction of Boral’s new Queensland
plasterboard facility in mid-2008
(pictured above).
There is an integral link between the strategic steps we are taking now
and our strategies for future growth. Excellent operational performance,
outstanding customer service and increased investment in highly
competitive products will deliver organic growth, provide the leverage to
target acquisitions, and give Boral the position to form strong collaborative
relationships with our partners, customers and suppliers.
Prospects
As we move forward into the new financial year, we will continue to focus
the entire group on delivering sector leading performance and rolling out best
practice processes across the Group, and with this backdrop we are ideally
placed to accelerate growth, both organically and by acquisition.
Structurally the Group has benefited from the disposal of a number of
non-core businesses. This rationalisation provides a clearer vision of the
massive potential for organic growth and inter-divisional collaboration within
our core markets and sectors.
We are working to develop mutually beneficial strategic alliances and
partnerships with businesses where we see opportunities to combine
our respective skills to the benefit of our customers and shareholders.
I am excited at the prospects for increased collaboration in our future
growth endeavours.
While the uncertain economic climate and the dire state of the US housing
market will continue to have an impact on short term profitability, Boral
remains well positioned to succeed even in these difficult market conditions
and the clear, decisive actions taken this year will have created a strong
platform to accelerate growth and earnings in the future.
In July 2010 the Group announced the acquisition of the remaining share
of MonierLifetile for a total consideration of US$75m.
Looking further ahead we intend to focus the Group’s available funding
on those markets and geographies that offer superior growth potential
and financial return. Our businesses hold commanding positions in our
core Australian markets and have excellent foundations in the US and
higher growth regions of Asia. All these geographies provide potential
for future growth.
Mark Selway
Chief Executive
09
Boral Construction Materials is
considering a potential investment
of around A$200 million in a new hard
rock quarry at Marulan South, known
as Peppertree Quarry, along with a
proposed new rail terminal in south-west
Sydney. The investment in Peppertree
Quarry would enable the Group to
further strengthen its leading position in
the Sydney market by providing a cost
competitive and secure supply of high
quality material for the next 50 years.
10
Boral Limited Annual Report 2010
the BuiLding BLoCKs
of gRoWth
1.
Laying the
foundations
Review and respond, creating
a strong platform for growth
We have conducted a detailed review
of the market and Boral’s position in it,
to identify market attractiveness and
Boral’s ability to compete. Our objective
is to operate at sector best performance.
The long term core businesses and
geographies have been identified and these
are Cement and Construction Materials
in Australia; Plasterboard in Australia and
Asia; and Bricks, Roof Tiles and Masonry
in Australia and the USA. Several non-core
businesses have potential for value uplift
from self-help initiatives and a number of
under-performing assets may have more
appropriate natural owners who can derive
greater value from these businesses than
Boral. A ‘one Boral’ approach has been
adopted with a simplified organisational
structure and streamlined processes.
11
Boral’s new strategic growth platform has now been defined. We have laid the foundations
and are putting the building blocks in place so that together we can work towards Building
Something Great for our shareholders, our customers, our employees and our communities.
2.
ReinfoRCing
the CoRe
3.
inVesting
foR gRoWth
4.
seCtoR Best
PeRfoRManCe
Focus and improve assets where
Boral can be market leader
Expand and invest, through
acquisition and innovation
worldwide
Realising sector best
performance and market
leading returns
We are implementing structured programs
of operational excellence, sales and
marketing excellence and increased
innovation to maximise the potential across
the Group. LEAN principles are being
applied to ‘one Boral’ with a Group-wide
focus on superior manufacturing
performance, reducing working capital,
minimising waste and improving plant
utilisation. Our ambition is to more
effectively leverage our scale, distribution
networks and geographic positions to
improve sales and marketing performance
across divisions. We are focused on
improving inter-divisional cooperation
to benefit the Group as a whole. We
will increase investment in research and
development to bring new innovative
products to market.
Our future investments will focus on
markets with higher returns and where
Boral has the potential to lead and grow.
The strategic review confirmed market
attractiveness and potential for Boral
Construction Materials in Australia and
we have highlighted a potential investment
of around $200m over three years in the
Peppertree hard rock quarry to secure
Boral’s leading quarry position in the New
South Wales market. We also intend to
invest $80m in upgrading the Melbourne
Plasterboard plant to expand capabilities
in the southern states of Australia. In the
USA, we are committed to further growth
and invested US$75m to acquire the
remaining 50% share of MonierLifetile.
We have started the journey to sector
best performance. Our goal is to move
all of our core businesses to be ‘best in
class’ with leading market positions and
returns. We are working towards superior
through-the-cycle returns which will be
an ongoing process over the next few
years, underpinned by regular performance
assessments to identify best practice
standards and to bring all businesses in
the Group to the highest standard in the
sector. While areas of best practice are
now evident throughout the Group, there
is significant potential to improve the
performance of Boral’s businesses.
12
Review of operating divisions
Boral Limited Annual Report 2010
ReinfoRCing the CoRe
OPERATIONAL ExCELLENCE
BORAL PRODUCTION SYSTEM
By continuously improving the Group’s operations and
manufacturing activities we have ambitions to be the best
in the market at what we do. We intend to improve working
capital through just-in-time principles, and reduce waste
while improving plant utilisation and the flow of production.
All of Boral’s divisions are actively
implementing the Boral Production System,
which is based on the principles of ‘LEAN
Manufacturing’. During the year, Boral’s
LEAN champions audited nearly 100 sites
to conduct baseline assessments against
which improvement targets have been
set and performance is being monitored.
Performance is assessed against 10 critical
characteristics of Lean, including:
housekeeping, continuous improvement,
quick changeover capability, productive
maintenance, material control and level
production. The initial assessments have
allowed Boral’s businesses to identify
common problems and issues and
have confirmed that there are significant
opportunities for improvement.
The review process has also identified
internal ‘best practice’, encouraging all our
businesses to strive towards a similar level
of performance.
Objectives
• Operational excellence delivers improved
results and better safety outcomes.
• Safety performance improves through
better housekeeping, improved workflow
and standardised operating procedures.
• Production wastes reduce, with
improved environment and lower costs.
• Working capital reduces to align
inventories to market demand.
• Plant capacity opens up through
improved utilisation without adding
new capital.
SALES AND MARKETING
ExCELLENCE
Excellence in sales and marketing is an essential
building block to the Group’s ambition of delivering
sector best returns. As ‘one Boral’ we are working
to improve collaboration between sales teams across
the businesses and strengthen our sales and marketing
effectiveness capabilities.
Audit
Following a pilot study in
Queensland, an assessment of
the Group’s sales effectiveness
was completed with
performance benchmarked
against seven areas
of performance: strategic
marketing, customer and
product mix, pricing, account
management, sales force
effectiveness, customer-
back innovation, and
channel management.
Improvements
The benchmark studies confirm
significant potential exists for
margin and customer service
improvements across the
Group. The Group is rolling
out a structured sales and
marketing program to deliver
a sustained improvement in
capabilities and performance,
which will involve every sales
and marketing professional
across Boral.
Maximise potential
We identified opportunities and
are developing processes to
maximise potential for logistics
and distribution efficiencies
across all of Boral. Sales
opportunities will be more
easily leveraged across Boral’s
product portfolio to maximise
value for our customers and
for Boral.
Leverage
Boral is one of the most
recognised brands in the
industry and is a household
name in Australia. We are
working hard to leverage
the Boral brand across the
entire Group and maximising
the potential for cross selling
integrated solutions by better
serving customers with
a ‘one Boral’ approach.
13
INNOVATION
To support our growth objective the Group is embarking
on an exciting program to create a culture of innovation.
We are developing processes and allocating resources to add
dynamism to our research activities and will invest in product
development to commercialise successful innovations faster.
Boral is well positioned to deliver new
products to market; we interact with
retailers, home builders, contractors and
commercial builders. We have a proven
ability to deliver innovative product
solutions, but we have been too slow at
doing this. We plan to increase funding for
research and to develop more dynamism
in delivering great new products to market.
We intend to capitalise on the use of fly
ash in Australia and the USA and other
by-products and recycled materials to
produce products that are recognised for
their environmental credentials. Boral Trim
is one such product which we are working
to commercialise in the USA by investing
$14 million to build our first world class
composite products plant.
Objectives
• Increased funding for innovation will
enable Boral to respond to changing
customer needs and market trends.
• Improved leverage of Boral’s
sustainability credentials and
reputation as an industry leader.
• Better utilisation of our existing channels
to market by developing great new
products to grow our market position.
• A culture of innovation delivering better
products, services and manufacturing
performance.
• Encouragement and support of
innovation will help to attract and retain
the best people in the industry.
Currently supporting
30 projects
focused on
innovation
Investing
$14m
to build world class
composites plant
Boral’s ground-breaking new
product Boral Trim has been
launched after four years of
research, development and
field testing. The product
has been designed for a
range of construction trim
applications including corners,
fascias, friezes, batten strips,
window and door surrounds
and rake boards. Boral Trim
is easy to install and has
exceptional durability. It will
be manufactured at Boral’s
first full-scale composite
production facility in the
US Southeast.
14
Review of operating divisions
Boral Limited Annual Report 2010
ConstRuCtion MateRiaLs
Boral Construction Materials (BCM) is an integrated, resource-
based manufacturing business with outstanding resource
positions in key markets. The division is actively developing
industry leading performance in manufacturing, sales and
marketing, logistics and contracting. The division’s leading
positions in the Australian concrete, quarry and asphalt
markets provide a strong foundation from which to grow.
Divisional results
Revenue
$2,119m
Down 6%
EBIT
$201m
Down 13%
LTIFR
3.1
Versus 2.6 last year
Revenue breakdown
Quarries
Concrete
Asphalt
Quarry End Use
Performance
Full year revenue from Construction Materials
was $2.1b, down 6% (prior year; $2.3b)
due to ongoing softness in the commercial
construction sector. EBIT at $201m was
13% below prior year (prior year: $231m)
due to lower sales volumes and $15m lower
earnings from Quarry End Use.
Infrastructure spending was particularly
strong in New South Wales and
Queensland while dwelling activity was
strong in Victoria and South Australia.
Offsetting these positive outcomes was
a significant downturn in non-dwelling
commercial work.
Despite a 4% decline in volumes, Concrete
and Quarry results were supported by
strong infrastructure activity, including the
Northern Expressway and Desalination
plant in South Australia, the hinze Dam
in Queensland, and the F3 widening and
Ballina Bypass in New South Wales.
While concrete and quarry prices made
progress during the year, concrete margin
remains unacceptable in a number of
markets and will be a key focus of the
division’s improvement objectives.
Record profits were delivered from the asphalt
businesses as a result of successful execution
of several major infrastructure projects.
Quarry End Use contributed $32m of
EBIT compared to $47m in the prior year,
underpinned by property sales at George’s
Fair (Moorebank) and sales of Boral sites in
Geelong and Perth.
Employee lost time injury frequency rate
of 3.1 was disappointing and compares
with 2.6 in the previous year. Renewed
management focus emphasising line
management accountability is being
rigorously implemented to reverse
this decline.
Key achievements
• The operating structure of the division
was realigned in August to increase
focus on operational and customer
initiatives.
• Completion of the Ipswich Motorway
project, upgrading from four to six lanes
and providing a multilevel interchange.
• The Port Botany project involving the
production of 200 precast counterfort
units on site as part of the largest port
project in Australia in 30 years.
• Rebuild and modernisation of Boral’s
Artarmon concrete plant was completed
in June 2010.
• Divisional LEAN implementation team
established and undertook baseline
LEAN assessments across 89 major
sites in the second half of the year.
Market review and outlook
In the year ahead we expect continued
strong infrastructure and improving
commercial activity to drive volume growth
in concrete and quarries. Asphalt demand
should remain at current high levels. We
anticipate some softening in dwelling
activity due to affordability and interest
rates and in social construction activity with
the completion of the government stimulus
programs in schools.
Concrete and quarry price increases that
became effective in April 2010 are being
reinforced by further increases announced
to take effect in October 2010 and
demonstrate our commitment to strong
pricing outcomes.
The increased focus on Sales and
Marketing initiatives and implementation
of the LEAN Boral Production System
is expected to improve productivity and
deliver growth. The BCM business is being
restructured to better support the delivery
from these initiatives.
Quarry End Use earnings are forecast to be
broadly similar in FY2011.
Quarries
Boral is Australia’s leading quarry
operator with 90 quarries, sand pits
and gravel operations producing
concrete aggregates, crushed
rock, asphalt, road base materials,
sands and gravels for the Australian
construction industry.
Concrete
Boral’s market-leading network of
250 premix concrete plants produce
a wide range of concrete mixes
throughout Australia. The Group’s
geographic cover and responsiveness
to customer needs differentiates us
in the market.
Asphalt
Boral is a leading full service supplier
of asphalt and technical materials for
the surfacing and maintenance of
road networks. The division has over
50 plants throughout Australia and
is a leading supplier to critical road
building projects.
Logistics and Property
The division operates an integrated
logistics business with a fleet of 316
company-owned and 860 contracted
vehicles. The division also operates a
Quarry End Use business, formed in
2000, to realise appropriate end uses
and maximise the value of Boral’s
land assets.
15
Boral has played a vital role in
the expansion project at the
Port Botany container port
facilities. Boral was selected
to supply 97,000 cubic
metres of high durability and
standard concrete which is
being used to produce more
than 200 enormous precast
concrete wall sections.
Employees
4,152
Down 2%
Capital expenditure
$81m
Down 18%
Many of Australia’s largest and most impressive bridges and road
networks have been built with Boral’s aggregates, asphalt, concrete
and cement, including the iconic Anzac Bridge.
16
Review of operating divisions
Boral Limited Annual Report 2010
CeMent
Boral’s Cement division is a leading supplier of cement,
lime and fly ash in Australia and of concrete, quarry and
pipe products in Asia. In 2009/10 the division experienced
robust markets in Asia and grew volumes and margins.
In Australia our focus was tied to improving productivity
and reducing inventories to reflect current market demand.
Divisional results
Revenue
$512m
Up 1%
EBIT
$88m
Down 19%
LTIFR
1.0
Versus 0.9 last year
Revenue breakdown
Cement
Indonesia
Thailand
Performance
Cement revenue at $512m was 1% above
the same period last year (prior year: $509m)
reflecting improved results in Asia offset by
lower profits in Australia. EBIT at $88m was
$20m below last year (prior year: $108m)
and included a significantly improved Asian
performance offset by energy cost increases
and the impact of lower Australian cement
production as part of a planned strategy to
reduce clinker inventories.
In Australia under a difficult trading
environment the business focused on
reducing costs and working capital while
preparing to meet growing demand as
markets recover. Cement kiln output was
reduced by 17% to reduce high levels of
clinker stock, resulting in the division’s
active cement kilns operating at less
than 80% of capacity. Sharp increases in
energy costs were offset by ongoing cost
reduction measures, and restructuring
costs including an 11% decrease in the
number of employees.
During the year markets in Asia
performed well and profitability of our
Asian businesses improved significantly.
Indonesian concrete and quarry revenue
grew by 11%, while the pipe and precast
business achieved 39% revenue growth.
The Thailand Construction Materials
business focused on the successful
execution of a plan to reduce costs
and increase sales volume.
Employee lost time injury frequency
rate of 1.0 was up from the exceptional
divisional result of 0.9 in the prior year.
however, there were no contractor LTIs
versus three in the prior year, giving a small
improvement overall.
Key achievements
• Reduced cost structure and working
capital leave the division well prepared
to capitalise on growth of construction
materials markets.
• Solid opening order book to supply
cement to major infrastructure projects.
• Rebranding of Blue Circle Southern
Cement to Boral Cement to capitalise
on Group synergies.
• Strong growth in volumes and returns
in the Indonesian concrete, quarry
and pipe business.
• A turnaround in the Thailand
Construction Materials business,
with the June 2010 quarter being the
first profitable quarter since 2007.
Market review and outlook
The outlook for Boral Cement is
encouraging, with a strong order book
of infrastructure projects, resurgent lime
demand driven by recovery in the steel
sector, and steadily improving demand
for ready-mixed concrete.
The division enters the new financial
year prepared for growth, with cement
clinker stocks at optimum levels, and
inventories and other working capital
reduced by $18m.
The outlook for the Asian businesses
remains positive in line with significant
projected economic growth in the region.
The division will continue to grow in
Indonesia through deployment of our fleet
of mobile batching plants and expansion
in pipes and precast.
In Thailand, our ambition is to grow
margins through continued focus on
materials cost and network optimisation.
Cement Division
Boral’s Cement division operates
two distinct businesses. In Australia
Boral Cement is a leading Australian
cement producer. In Asia the division
operates in Indonesia and Thailand,
supplying concrete, quarry and pipe
products. There are 4,600 employees
working in the Cement division.
Boral Cement
Boral Cement (formerly Blue Circle
Southern Cement) has manufacturing
operations in eastern states, including
cement plants in NSW and Victoria,
and through a 50%-owned JV,
Sunstate Cement, a cement milling
facility in Queensland. The division
also supplies lime and limestone for
a diverse range of purposes from
steel manufacture to agriculture.
Indonesia
PT Jaya Readymix is the #1 supplier
of concrete in Indonesia. With
39 concrete batch plants, 11 mobile
batch plants, two quarries and
pipe and precast operations, the
business is developing markets in
the rapidly growing regions outside
Western Java.
Thailand
Thailand Construction Materials
operates 45 concrete batch plants
and a growing quarry position
employing over 1,200 people.
Approximately 450 owned and
operated concrete trucks provide
sector leading geographic coverage
and responsiveness.
17
Boral’s PT Jaya Readymix has
supplied around 52,000 m3 of
concrete into Equity Tower, a
44 storey office building in the
Sudirman Central Business
District in Jakarta. On its
completion in October 2010
Equity Tower at 220 metres
will be the tallest building
in Jakarta.
Employees
4,519
Up 8%
Capital expenditure
$26m
Down 30%
Boral’s involvement in the construction of Sydney icons is impressive,
supplying products for the Sydney Opera House and much of the
development in Sydney’s foreshore.
18
Boral Limited Annual Report 2010
BuiLding PRoduCts
Boral Building Products division holds leading positions
in the manufacture and sale of clay and concrete products,
plasterboard and timber in Australia and in plasterboard
in Asia through its 50% owned venture, LBGA. A strong
turnaround was delivered in 2009/10 as plant output
realigned to stronger sales volumes and cost improvements
were delivered across all businesses.
Divisional results
Revenue
$1,206m
Up 6%
EBIT
$101m
Up 90%
LTIFR
2.0
Versus 2.1 last year
Revenue breakdown
1 Includes Boral’s share of
equity accounted revenue
from the LBGA JV in Asia,
which does not appear in
the consolidated accounts.
Performance
Revenue from Building Products of $1.2b
was up 6% (prior year: $1.1b), with growth
in Clay & Concrete Products, Plasterboard
and Timber. EBIT of $101m was 90% above
the prior year (prior year: $53m) reflecting
strong performances from the Plasterboard
businesses in Australia and Asia, combined
with improved operational performance
and housing related growth in our Clay
& Concrete and Timber businesses.
All businesses contributed to the major
operating profit and margin improvement
in 2009/10. In the prior year, performance
was impacted by the decision to operate
plants in the Clay & Concrete Products and
Timber businesses at below sales levels to
reduce working capital and investments.
One-off costs from the start up of the
new plasterboard plant in Queensland
also impacted returns in the prior year,
with a significant improvement delivered
year-on-year.
Cost reduction initiatives in our Brick,
Roofing and Timber businesses also
contributed to the EBIT increase,
particularly in the half year to June. In Asia,
LBGA improved strongly and benefited
from strong demand in most countries
and the delivery of excellent operational
performance.
Employee lost time injury frequency rate
improved from 2.1 in the prior year to 2.0.
Plasterboard
of Australia
Plasterboard
of Asia1
Clay & Concrete
Products
Timber
Key achievements
• The new plasterboard plant in
Queensland performed strongly,
achieving key performance goals
including operating costs, energy
efficiency, up-time and quality.
• Construction of the new masonry
products plant in Perth is substantially
complete and will replace two higher
cost, lower efficiency plants which
will be closed.
• New plasterboard production lines
commenced operation at Baoshan
(China) and Saraburi (Thailand);
each with 35 million m2 per annum
of capacity.
• Cost reduction initiatives and improved
operating efficiency in Bricks West,
hardwood and Plywood contributed
to EBIT.
• Lean audits and improvement
plans were completed in all of
our manufacturing plants.
Market review and outlook
Government stimulus projects are
expected to drive further demand for
Boral Building Products in the first half of
the year. We are expecting an increased
investor participation in new housing
markets which should contribute to
stronger sales volumes in the year. In Asia,
continued robust construction activity in
our key territories is expected to sustain
plasterboard sales volumes.
A new streamlined organisation will
facilitate LEAN manufacturing, sales and
marketing and back office improvements.
Lean audits highlight the potential for major
efficiency gains going forward and provide
a sound basis for improvement.
Plasterboard Australia
Boral is a leading integrated supplier
of plasterboard which operates six
production plants and 51 distribution
centres across Australia and is the
largest plasterboard installer to the
new housing sector.
Plasterboard Asia
Lafarge Boral Gypsum Asia (LBGA)
is the leading supplier of plasterboard
and other internal linings products
across Asia. The 50% owned joint
venture operates production plants
in seven countries and trades in a
further three, as well as exporting
to more than 30 countries.
Clay & Concrete Products
Boral is one of Australia’s leading
suppliers of clay and concrete bricks,
blocks, pavers and roof tiles. The
group operates 20 production plants
and 37 distribution centres nationally.
Timber
Boral operates wholly owned
hardwood and plywood businesses
on the east coast of Australia.
Boral also has 50% ownership
of highland Pine, a leading NSW
based softwood manufacturer.
19
Boral supplied bricks and
masonry products for a
housing NSW Affordable
Rental housing Project in
Sydney, made possible by
the Australian Government
Stimulus Program. Bricks were
chosen for their robust and
low maintenance finish and
good thermal mass.
Employees
2,962
Down 5%
Capital expenditure
$60m
Down 3%
Boral’s building products have been used in homes
throughout Australasia, including landmark residential
towers. The Eureka Tower in Melbourne used Boral
EurekaWALL™ as the internal walling system.
20
Boral Limited Annual Report 2010
usa
Boral USA has an industry leading position in bricks, and
concrete and clay roof tiles for exterior residential and
midrise commercial buildings. The construction materials
business has leading positions in Oklahoma and Colorado,
while the fly ash processing and distribution business
operates on a national basis. Housing starts remain at
historically low levels and our focus is on reducing costs
while readying the business for the upside in the cycle.
Divisional results
Revenue
A$364m
Down 33%
EBIT
A$(104)m
Up 5%
LTIFR
3.3
Versus 1.4 last year
Revenue breakdown
1 Includes Boral’s 50%
share of equity accounted
revenue from joint venture
businesses, which
does not appear in the
consolidated accounts.
Bricks
Roofing1
Materials
Performance
The USA operations reported revenue
of A$364m, 33% below last year (prior
year: A$545m) reflecting a continued
deterioration in housing starts and
construction related activity, and the
strengthening of the Australian dollar
during the year. At the EBIT level, the
USA reported a loss of A$104m against
a A$109m loss last year.
US dollar losses increased to US$91m
against US$81m in the prior year,
impacted by reduced volume and low
utilisation of fixed plant. Favourable
exchange rate movements, lower head
count and cost reductions largely mitigated
the reduction in revenue.
The US continued to experience significant
challenges during the year as housing
activity and a difficult non-residential market
resulted in declines in financial performance
across all areas of the US business.
Revenue from Bricks was down 24%
to US$154m due to an 18% decline in
volumes, coupled with a small decline
in pricing caused by product mix and
competitive pressures. Plant utilisation
averaged 25%, requiring continuation of
cost cutting initiatives which remains our
primary focus until the market recovers.
The Roofing business (including our
50% share of revenue from the joint
venture businesses) achieved revenues of
US$50m, 14% lower than the prior year
driven by reduced volume levels.
Revenues in Construction Materials were
down 17% to US$156m due to a 24%
decline in concrete volumes. Aggregate
volumes increased 9% due to an increased
market share and an increased focus
on external sales.
Employee lost time injury frequency rate
deteriorated significantly from 1.4 in
FY2009 to 3.3. The division has launched
a system-wide housekeeping initiative
driven by the Lean 55 tool and a behaviour
based safety observation program which is
currently delivering improved results.
Key achievements
• Purchased the remaining 50% of
MonierLifetile which will be combined
with clay roof tiles to form Boral Roofing.
• Roofing products achieved the
prestigious cradle to cradle gold
certification from the US Green Building
Council (USGBC).
• Both the Cladding and Roofing
businesses commenced the LEAN
manufacturing journey with three facilities
being audited.
• Our Technology Centre completed
the development of its PACT fly ash
beneficiation treatment to mitigate the
impact of mercury in fly ash.
• Aggregate sales increased versus the
prior year despite a falling market due
to new products and customers.
• Successfully piloted composite Boral
Trim plant which will move into volume
production in 2011.
Market review and outlook
It continues to remain unclear when and
how rapidly a turnaround in US housing
and construction activity will occur. We
expect an increase in housing starts in the
upcoming year, biased towards the second
half. Non-residential construction activity
is expected to remain flat throughout
the year.
The US division’s emphasis on LEAN
manufacturing, full ownership of
MonierLifetile with its associated synergies,
together with a simplified organisation
structure will provide the foundations to
maximise the benefits of a market recovery.
Bricks
Boral has a leading position in brick
manufacturing with low cost facilities
and arguably the best geographic
position in the industry. A distribution
network of 54 facilities across 11
states distributes brick, stone, and
complementary masonry products.
Roofing
Boral’s high end roofing solutions
consists of a market leading range
of concrete and clay tile products.
The acquisition of the remaining 50%
of MonierLifetile provides significant
synergy and market opportunities.
Materials
With national fly ash and regional
concrete and aggregates offerings,
we are positioned to satisfy growing
demand as the US economy returns
to more normalised construction
spending levels in the future.
Technology
A well-funded national Technology
Centre was developed during
the year to provide a platform for
innovation across the US businesses.
The development of Green
Sustainable products is a priority
of our future plans.
21
Boral is the largest brick
maker in the US with 80%
direct distribution through
Boral Direct, Boral’s network
of brick studios. Boral’s key
US market is the detached
housing market.
Employees
1,511
Down 5%
Capital expenditure
$10m
Down 65%
Boral bricks and roof tiles have been used to build some of the most
prestigious and timeless homes across the United States including
California’s magnificent beach homes.
22
Review of operating divisions
Boral Limited Annual Report 2010
steP By steP gRoWth
FINANCIAL REVIEW
Chief Financial Officer Andrew Poulter
Revenue at $4,599m declined by 6% over prior year as continued weakness in the US
residential housing sector and a softening of demand in the Queensland construction
materials sector directly impacted the result. Currency conversion had a measurable
impact weakening the reported 2010 financial year US revenues due to the strengthening
of the Australian dollar during the year. Adjusting for the US dollar conversion impact,
in constant currency terms underlying Group revenues were 4% below prior year.
In Australia, construction activity was broadly comparable with prior year with the
exception of Queensland, which after a record 2009, saw sales volumes soften as major
projects were completed during the first half year. Overall housing starts for FY2010 at
155,000 were around 18% above prior year driven by the increased Government stimulus
incentives for first time home buyers. Demand was sustained across all other states as
increased infrastructure and schools infrastructure spending, funded by further stimulus
programs, offset the continuing weakness in the commercial construction sector.
The latter sector continues to be adversely impacted by funding constraints, higher
vacancy rates and investor confidence.
Turning to the segmental reporting, Boral Construction Materials revenues at $2,119m
were 6% below prior year predominantly as a result of weaker demand in Queensland
which impacted both concrete and quarry products sales and weaker metro sales in
Western Australia. Asphalt sales weakened in the second half year due to the completion
of major infrastructure expenditure projects in Queensland and South Australia.
The Cement Division revenues incorporating South East Asia construction materials
showed broadly level revenues over prior year as growth in Indonesia and Thailand
offset weaker cement sales in New South Wales.
Building Products revenues grew by 6% to $1,206m through increased demand from all
sectors and specifically stronger plasterboard, bricks and concrete products sales, the
latter driven by the Government stimulus package directed towards investment in schools
infrastructure, which had a significant impact upon commercial activity throughout the year.
The US market showed further deterioration in the first half year with the primary driver of
demand, seasonally adjusted US housing starts, falling to an annualised rate of 576,000.
Second half activity after an encouraging start fell away in the final quarter as a result
of the cessation of the Federal first homeowner grant stimulus in June. As a result the
June 30th annualised housing starts fell to 537,000 versus 590,000 in the prior year.
Consequently Boral’s US revenues fell by a further 33% to $364m though this reduction
was also materially impacted by the strengthening of the Australian dollar. In local
currency terms, underlying US revenues were 21% below 2009. This reduction brings the
cumulative decline in US revenues to around 60% from the peak market demand in the
2006 financial year.
Agreements were entered into for the sale of both the Precast Panels and the Scaffolding
and Formwork businesses in August 2010. As a result, these operations have been
classified as discontinued operations and assets held for sale in the 2010 income
statement and balance sheet respectively. These sales realised gross proceeds of circa
$50m and are immediately earnings accretive from the 2011 financial year. The businesses
have been revalued as part of the 2010 impairment review to their anticipated sale value.
23
Profit after tax before significant items was $132m versus $131m for the prior year.
Group reported net loss at $91m included a number of significant items relating to asset
impairments and business write downs which are set out in the table below:
Reconciliation of underlying results to reported results
$ millions
EBIT
Interest
Tax
Minority
interest
Profit
after tax
Underlying results
Significant items
Business write downs
Impairment of assets
Organisation restructure
Tax
Total
Reported results
251.9
(97.0)
(22.1)
(1.2)
131.6
(92.6)
(178.7)
(13.7)
(285.0)
(33.1)
62.9
62.9
40.8
(97.0)
(1.2)
(92.6)
(178.7)
(13.7)
62.9
222.1
(90.5)
The Group has reviewed the carrying value of its assets with regard to the current
projections of future market demand and the change in strategic intent of the Group. As a
result a $285m impairment charge ($222m after tax) has been recognised as a significant
item. This impairment charge relates to three specific areas:
(i) Business Write Downs: Following the re-assessment of current net present value of
future cash flows of the Thailand Construction Materials business it has been necessary
to recognise a $17m impairment against the carrying value of these assets. At the
balance sheet date, written offers for the sale of the Precast Panels and Scaffolding
and Formwork businesses had been received. This required the recognition of a $76m
impairment against the net assets of these businesses.
(ii) Asset Impairments: Following the change in strategic intent of the Group the future
operating requirements of specific plants currently mothballed have changed. As a
result, it has been necessary to write down the carrying value of specific plant and
associated obsolete spare parts inventories. In addition, recognition has been made for
the impairment of specific obsolete and slow moving finished goods inventories. This
has required the write down of $94m of Australian and $43m of US assets respectively.
A further $42m impairment has been recognised with regard to the write down of the
carrying value of the Penrith Lakes Development. This has been necessary due to the
uncertainty of the viability of the future development of this site west of Sydney.
(iii) Organisational Restructure: As a result of the strategic review and the need to simplify
corporate and divisional management structures a $14m provision has been recognised
for the restructuring changes which were underway at June 30th.
The summary income statement recognising the significant items on an after tax basis is
set out as follows:
Income statement
$ millions
Sales revenue
EBITDA1
EBIT/(Loss)1
Interest1
Income Tax1
Minority Interest
Underlying Profit/(Loss)
after tax1
Net Significant Items
Net Profit/(Loss)
after tax
2010
2010
Discontinued
Operations
Group
2010
Continuing
Operations
2009
Group
2009
2009
Discontinued Continuing
Operations Operations
4,599.3
105.5
4,493.8
4,875.1
147.4 4,727.7
504.5
251.9
(97.0)
(22.1)
(1.2)
(12.8)
(18.6)
5.7
517.3
270.5
(97.0)
(27.8)
(1.2)
539.0
275.7
(127.2)
(17.1)
(0.2)
1.9
537.1
(4.9)
280.6
(127.2)
1.0
(18.1)
(0.2)
131.6
(222.1)
(12.9)
(58.9)
144.5
(163.2)
131.2
10.8
(3.9)
135.1
(17.2)
28.0
(90.5)
(71.8)
(18.7)
142.0
(21.1)
163.1
Earnings Per Share1 (cents)
22.1
Earnings Per Share (cents)
(15.2)
1 Excluding significant Items
22.2
24.1
24
Review of operating divisions
Boral Limited Annual Report 2010
Step by Step Growth
Financial Review
Continued
Earnings before interest and tax (EBIT)
EBIT at $252m was $24m (9%) below 2009 due to two significant variances, the loss of
the $16m dividend income from the Adelaide Brighton shareholding (which being fully
franked also reduced net profit after tax by the same amount), and a $15m reduction
in Quarry End Use earnings.
The fall in Quarry End Use earnings was due to reduced land development activities
in New South Wales during the year and specifically due to the completion of the
Moorebank development. This lower level of development activity will defer land sales
income to future years. EBIT from the operating divisions increased by 3% over the prior
year after adjusting for the Quarry End Use reduction and the receipt in 2009 of the
Adelaide Brighton dividend.
Boral Construction Materials. The Australian quarry, asphalt and concrete operations
incorporating the Quarry End Use income returned a $201m EBIT, a $30m (13%)
reduction over prior year. After adjusting for the Quarry End Use variance, underlying
construction material EBIT was 7% below prior year. This was primarily driven by the
weaker Queensland concrete sales volumes offset by tight cost control and gross margin
optimisation across all regions. As a result EBIT margins dipped to 9.5% from 10.2% for
the prior year.
Boral Building Products. The plasterboard, bricks, roof tile and masonry products
businesses delivered a $101m EBIT for the year, a $48m (90%) improvement over
prior year. This result was driven by improved operating performance in the Australian
plasterboard and brick operations and specifically the Pinkenba, Queensland and West
Australian plant investments. The LBGA Asian plasterboard joint venture showed a 31%
increase in equity accounted earnings as a result of stronger sales in China, India and
Vietnam. EBIT margins increased significantly to 8.4% versus 4.7% in the prior year.
Boral Cement. The Australian cement and Thailand and Indonesian construction
materials businesses returned an $88m EBIT for the year, a $20m (19%) reduction over
the prior year. Improved earnings from the Asian operations were based upon increased
market demand and continued focus upon margin improvement, through both sales price
and cost optimisation.
The Australian cement operations saw weaker earnings due to reduced equity accounted
income from Sunstate due to weaker cement demand in Queensland and due to the
planned 55% reduction in clinker inventories. The latter was achieved through a 15%
curtailment in production, the combined effect of which resulted in a $14m year on year
adverse fixed cost variance. Energy costs increased by $12m as a result of higher kiln fuel
costs, though this adverse impact was primarily offset by the continued focus upon fixed
cost reduction. EBIT margins declined to 17.2% versus 21.3% in the prior year.
Other. Following the agreement to sell the Precast Panels and Scaffolding businesses
in August 2010, the Windows and Concrete Placing businesses are the remaining
operations now reported in this category. The Windows business delivered a further
increase in earnings through improved sales and further gains in operating efficiency.
Concrete Placing continued to return stable earnings in its core New South Wales market.
Interest
Net finance costs before significant items reduced by $30m (24%) to $97m versus prior
year due to both the reduction in borrowings and the benefit of the lower underlying cash
rate. Other non cash movements in finance costs relate to the unwinding of the discount
on remediation provisions of $2.9m. Interest cover (EBIT to interest) before significant
items improved to 2.6 times versus 2.2 at 30 June 2009.
Income tax
The tax charge at $22m (2009 $17m) before impairments represents an underlying
effective tax rate of 14.3% (2009 11.5%). This increase resulted primarily from the loss
of franking credits associated with the Adelaide Brighton dividend following the sale of the
shares in May 2009. The underlying effective tax rate is below the 30% corporate tax rate
due to the impact of the US losses and the accounting for equity accounted income from
joint ventures.
25
Earnings Per Share and dividends
Earnings Per Share (before significant items) at 22.1 cents was in line with the prior year
(22.2 cents) as sustained net profits were delivered against a 1.9% increase in issued
capital as a result of the 43% average take up of the shareholder Dividend Reinvestment
Plan. Earnings Per Share (before significant items) from continuing operations increased
to 24.3 cents versus 22.9 cents in the prior year.
A final dividend of 6.5 cents per share was declared bringing the full year dividend
to 13.5 cents per share versus 13.0 cents per share for FY 2009. This 4% increase
represents a 67% payout ratio which is towards the upper end of the Board’s
preferred range of 50% to 70%.
The net financial position of the Company improved as net debt was reduced by
$331m (22%) to $1,183m. This reduction was achieved through a $281m net cash
inflow and a $50m reduction in US dollar denominated debt as a result of the stronger
Australian dollar at the balance sheet date.
At 30 June 2010 the Company had available undrawn committed debt facilities of
$1,030m, the Company’s average debt maturity profile was 5.9 years compared with
6.1 years at 30th June 2009.
Debt and Gearing
As at 30 June
Total debt
Total cash and deposits
Net debt
Total shareholder equity
Gearing ratios
Net debt : equity (%)
Net debt : equity plus net debt (%)
Net debt/EBITDA1
Interest cover1 (times)
1 Excluding significant items.
2010
$ millions
1,339.6
157.0
1,182.6
2,626.1
2009
$ millions
1,614.1
100.5
1,513.6
2,753.6
45
31
2.3
2.6
55
35
2.8
2.2
Gearing, net debt to equity, was reduced to 45% from 55% reflecting the impact of
the reduction in net debt. The underlying return on shareholders’ funds increased from
4.8% to 5.0%.
Subsequent to the year end the Company raised $490m through an accelerated
renounceable 1 for 5 rights issue at $4.10 per share. The pro forma gearing as at
30 June 2010 based upon the proceeds of this issue is reduced to 25%.1
The Net debt to EBITDA ratio improved to 2.3 times versus 2.8 at 30 June 2009.
Cash flow
Cash flow from operating activities increased by $40m to $459m as a result of a
$44m reduction in working capital and lower tax and interest payments. A key driver in
the working capital movement was the focus upon inventory reduction. Free cash flow
increased by $95m (41%) to $324m as a result of reduced capital expenditure which,
at $180m, was $60m (25%) below prior year. Sustaining, or stay in business capital
expenditure, was $119m, at 47% of depreciation (2009 $163m, 62% of depreciation)
and has continued for a second year at unsustainably low levels. This intentional capital
constraint has allowed the Company to optimise cash flow and to re-evaluate its capital
expenditure priorities to ensure consistency with the 2010 strategic review.
Net cash flow at $281m was broadly level with 2009 $286m though prior year included
the $205m sale proceeds from the divestment in the shareholding of Adelaide Brighton.
1 Pro forma gearing at 30 June 2010 following completion of the $490m equity raising and acquisition of 50%
of MonierLifetile.
26
Boral Limited Annual Report 2010
sustainaBiLity in BoRaL
Over the past decade Boral has demonstrated a clear commitment to sustainable
development and the ability to lift and sustain performance to a level of industry best
practice. This is evident through the external recognition that Boral has received including
membership of the FTSE4Good Index, the Dow Jones Sustainability Index and the 2010
Global 100 list of the world’s most sustainable companies, announced at the Davos World
Economic Forum.
Between 2001 and 2009 the Boral
Sustainability Diagnostic Tool (BSDT) was
an integral tool in developing sustainability
management in Boral. In 2001 we set a
target of ‘industry specific best practice’
across 20 sustainability elements. This
target was broadly achieved and was
verified with external assurance. All of
Boral’s divisions are now achieving high
levels of sustainability performance and
since 2004 we have provided extensive
sustainability reporting by division to assure
our stakeholders that this is the case. Our
sustainability initiatives have provided Boral
with a strong foundation to move forward
and our businesses are well equipped
to respond to regulatory reporting and
business specific requirements. We have
now streamlined our corporate reporting
with this summary report supplemented
by a more comprehensive online report.
Boral’s commitment to sustainability
remains firm, and we are prioritising
initiatives to ensure that our businesses
are focused on those areas that will
make the most difference to our
shareholders, our customers, our
communities, our employees and the
environment. Key areas of focus include
health and safety, energy efficiency and
emissions reduction, water management,
sustainable product development,
and community partnerships. These
priorities remain critical areas in terms
of business continuity and they present
opportunities for cost reductions, revenue
enhancement, reputation growth and
stakeholder engagement.
OUR PEOPLE
At a glance
FTE employees
JV employees
FTE contractors
Average length of service
Aus
USA
Asia
Women in Boral
Women in management
Employees by Region*
FY2010
14,806
~3,000
~6,000
8.7 yrs
11.8 yrs
4.8 yrs
13%
9%
FY2009
14,766
~3,000
~5,700
8.4 yrs
11.1 yrs
4.8 yrs
13%
9%
Australia, 64%
Asia, 26%
USA,10%
*FTE employees only
Workforce profile
As at 30 June 2010, Boral had 14,806
full-time equivalent (FTE) employees and
around 6,000 FTE contractors working
across its global operations. In addition,
approximately 3,000 employees were
working in joint venture operations. The
number of FTE employees was broadly
steady on the prior year with a 5% decrease
in the USA offset by an increase in employee
numbers in Asia.
The average length of service of Boral
employees is around eight years. In the
USA, the average length of service is high
at 11.8 years; in Australia it is 8.7 years;
and in Asia it is just under five years.
Diversity
Boral has maintained its status as
an Employer of Choice for Women
as recognised by the Australian
Government’s Equal Opportunity for
Women in the Workplace Agency.
Boral has also maintained its Indigenous
Employment Strategy in partnership with
the Australian Government’s Corporate
Leader Program.
Employing 46 Aboriginal people under
the current Structured Training and
Employment Program (STEP), Boral has
applied for funding for another STEP
program for 2010-12.
Policies and values
Boral’s corporate values guide employee
decision making and influence our
business activities. Boral’s Code of
Conduct states that Boral companies and
employees must observe both the letter
and the spirit of the law and adhere to high
standards of business conduct and strive
for best practice. We take adherence to
legal and ethical standards seriously.
Enhanced personal development programs
are being developed to identify high
potential employees and a new executive
leadership training program will cultivate
the next generation of leaders. Focus is
also being given to improving employee
appraisal, career development and
succession planning processes.
hEALTh AND
SAFETY
LTIFR* for Employees
1
.
3
8
.
2
5
.
2
1
.
2
8
.
1
6
0
7
0
8
0
9
0
0
1
LTIFR* for Contractors
3
.
7
7
.
5
7
.
5
4
.
2
9
0
3
.
2
0
1
6
0
7
0
8
0
Mechanism of Injury
Muscular stress
Hitting objects with
part of the body
Hit by moving object
Falls on same level
Repetitive movement
Other
*Lost Time Injury Frequency Rate per million hours worked
27
Performance
During 2009/10, Boral’s lost time injury
frequency rate (LTIFR) for employees at
2.1 was up from 1.8 in the prior year.
Percentage hours lost improved to 0.05
versus 0.06 last year. Contractor LTIFR of
2.3 was an improvement over last year’s
2.4 but percentage hours lost of 0.05 was
up from last year’s 0.03.
The Group’s overarching strategy has been
to reduce LTIFR and percentage hours lost
by 25% on the previous three year average.
The 2010 LTIFR of 2.1 for employees
represents an 11% improvement on the
prior three year average, which is below
targeted improvement and will remain a
critical area of our focus. The percentage
hours lost of 0.05 for employees is a
35% improvement, which is well above
targeted gains. Contractor LTIFR of 2.3 is
a 50% improvement on the prior three year
average and percentage hours lost of 0.05
is also better than target at 29% down.
While the results show significant
improvement, the year-on-year outcome
in 2010 is disappointing and reflects the
considerable work still required to achieve
a ‘zero accident’ culture across
all our operations.
During 2009/10, prosecutions for four past
safety incidents were finalised, two in New
South Wales, and one each in Western
Australia and South Australia. Three of the
four incidents occurred in 2006 while the
other occurred in 2007. One New South
Wales prosecution related to an incident
where a contractor was fatally electrocuted
while rewiring an electrical cabinet. The
Company pleaded guilty and was fined
$250,000. The remaining three incidents
resulted in prosecutions and fines totalling
$186,250. Lessons from all of these
incidents have resulted in a significant
enhancement to our systems of work
and work practices.
There were no fatalities in Boral wholly
owned operations in 2009/10, however,
tragically there was an incident in a joint
venture operation in China that resulted
in the death of a contractor. A team of
Boral staff were involved in reviewing the
management systems of the joint venture
operation to ensure the same standard
expected of Boral’s own operations. The
factors that contributed to the incident have
now been comprehensively addressed.
Risk management and injury type
Boral uses statistical injury analysis to
develop corrective action plans, including
training and process redesign, to address
specific risks and areas of concern. Nearly
two-thirds of injuries in Boral’s Australian
workplaces in 2009/10 resulted from
‘hitting objects with part of the body’,
‘muscular stress’ and ‘being hit by a
moving object’. Our corporate actions
will concentrate on these incident types
in the year ahead.
Employee health and wellbeing
Boral requires its employees to be fit for
work, with the required level of fitness
depending on the nature of the work.
Pre-employment medicals are conducted
for most employees, to ensure that they are
physically able to meet the demands of the
job, and in some higher-risk roles, regular
employment medicals are also conducted.
Beyond Boral’s requirement for employees
to be ‘fit for the job’, Boral is committed
to supporting the health and wellbeing of
its employees. Boral’s employee wellbeing
program, BWell, is available to employees
in Australia and is under consideration
globally. BWell provides three core services:
regular health assessments, wellbeing
awareness seminars, and provision of
educational information on health issues
for employees and their families.
BWell aims to improve the health and
awareness of employees through
improvements in lifestyle and diet. Amongst
Boral’s employees who have had two or
more health assessments, the average
number of risk factors remained steady at
2.8 and the number of employees at the
high end of the health risk spectrum with
five or more undesirable risks reduced by
a further 2% following a 9% improvement
last year.
Strategic initiatives
In line with Boral’s newly defined
strategic direction which is underpinned
by a ‘one Boral’ approach, we are
working toward the development of a
single Group-wide safety management
system, simplifying our workers
compensation insurance arrangements,
and introducing training initiatives to
support these changes.
28
Boral Limited Annual Report 2010
ENVIRONMENT
At a glance
GHG emissions (million T CO2e)
FY2010
FY2009
Boral operations
Share of JV operations
Mains water (million litres)
3.14
0.17
2,270
3.551
0.18
2,285
PINS
Number
Fines
Compliance audits
2
$4,000
47
9
$19,921
43
1Restated to reflect scope and methodology change
Boral’s energy use and related
GhG emissions
(‘000 tonnes of CO2)
2,500
2,000
1,500
1,000
500
0
Other
Electricity
Natural gas
Liquid fuels
Coal
Calcination
t
n
e
m
e
C
s
t
c
u
d
o
r
P
g
n
d
i
l
i
u
B
A
S
U
l
s
a
i
r
e
t
a
M
n
o
i
t
c
u
r
t
s
n
o
C
During 2009/10, Boral incurred two Penalty
Infringement Notices (PINs) related to
environmental contraventions in Australia
(resulting in $4,000 in fines). Both were
issued in Queensland for minor technical
non-compliances, being a contravention
of a license relating to polluting of
waters, and failure to report a monitoring
exceedence in a timely fashion. There were
no infringements in the USA or Asia for
environmental contraventions in 2009/10.
Energy use and GHG emissions
Boral’s operations consume a significant
amount of energy and some businesses
are particularly emissions intensive. In
2009/10, greenhouse gas (GhG) emissions
from Boral’s fully owned businesses
in Australia, the USA and Asia totalled
3.14 million tonnes of CO2 a 12% decrease
on the prior year. The decrease primarily
reflects lower production in the USA and
in Australia. Emissions from Boral’s US
operations were down by around 23% on a
comparable basis or around 43,000 tonnes
of CO2, reflecting the continued housing
downturn and Boral’s associated reduction
in production. In Australia, emissions were
down by a significant 355,000 tonnes of
CO2 or around 11%, as a result of Boral’s
strategy to reduce clinker inventories.
Clinker inventories reduced by 55% on the
prior year which was achieved in part by
lowering production volumes by 19%. In
Asia, Boral’s GhG emissions were down
7% or around 12,000 tonnes of CO2.
While Boral’s reduction in emissions was
primarily due to the market downturn
and inventory reductions, its businesses
continue to undertake a range of projects
to reduce energy consumption and
GhG emissions. As markets recover and
production increases, alternative fuel and
energy efficiency improvements will deliver
greater benefits. We have identified further
abatement opportunities in the areas
of energy efficiency, renewable energy,
alternate fuels and alternate materials.
The implementation and effectiveness
of these initiatives largely depends on
the anticipated cost of carbon in a trading
environment, when compared to the costs
of implementing identified abatement
initiatives and available technologies.
Water management
Boral’s operations rely on water for
manufacturing and maintenance
processes, and for suppressing
dust, for cleaning and for sanitation.
Mains or town water is Boral’s most
significant water source, with a total of
2,270 million litres of mains water used
in its wholly 100% owned and controlled
businesses in Australia, the USA and Asia
in 2009/10. Mains water use was down
slightly on a comparative basis on the prior
year due to lower production, the increased
use of rainwater, and water efficiency gains.
COMMUNITY PARTNERShIPS Boral’s longest standing
Boral’s strategic community
partnership model, supported
by key selection criteria, helps
to determine the most effective
partnerships for the Company.
The core platform of Boral’s
partnership program is to
make a valued and sustainable
contribution to the communities
in which we operate. Our
partnership model focuses on
our people, our products and
our places. We encourage
improved work/life balance
and involve our employees to
use our expertise to benefit
the wider community.
Boral has seven key strategic
partnerships. In 2009/10,
a total of $505,051 was
invested in these community
programs, together with a
further $371,191 donated
through employee fundraising
efforts in Australia, the USA and
Asia, to the Juvenile Diabetes
Research Foundation, and to
allow 10 children to undergo
restorative facial surgery
in Indonesia.
community partnership with
Conservation Volunteers
Australia funded 488
volunteer days across
61 conservation projects
which resulted in the planting
of 5,620 trees/stems and an
area of 21,470m2 weeded and
regenerated.
Partnering with the Taronga
Conservation Society Australia
since 2003, Boral sponsors
Youth at the Zoo (YATZ) and
engages employees and
customers. 204 Boral people
attended Twilight Concerts and
600 were at Boral’s Family Day.
Boral products are widely used in
Taronga’s redevelopment work.
Boral has partnered with
Bangarra Dance Theatre,
Australia’s leading Indigenous
dance company, since 2002.
In FY2010, 320 Boral people
saw Bangarra perform and
the partnership was named
Australia’s Arts Partnership
of the Year by the Australian
Business Arts Foundation.
The Juvenile Diabetes
Research Foundation (JDRF)
has been Boral’s preferred
charity since 2001. Contributing
over $2.5m since 2001 with
85% from employee fundraising
in Australia and the USA, in
2009 Boral jointly won JDRF’s
Freedom Award for the highest
corporate fundraising team.
29
CUSTOMERS AND
SUPPLIERS
Sustainable products
Through our Innovation Excellence
program, we intend to capitalise on the
use of fly ash and other by-products
and recycled materials to produce
products that are recognised for their
environmental credentials. In the USA we
have restructured our development team
to focus our Technology Centre on more
efficient and effective commercialisation
of product innovation. Boral Trim uses
patented bio-based polymer chemistry
together with Boral’s own Celceram®
technology to maximise fly ash by-products
from coal combustion. The Board has
approved US$12m to construct a leading
edge facility to produce Boral Trim for the
US$3b US housing trim market.
New product developments including the
integrated solar panel tile, The Solé Power
Tile, and with ‘Cradle to Cradle’ and US
Green Building Council accreditations,
Boral is recognised as the premier
sustainable and socially responsible roofing
manufacturer in the USA. The Group has
now supplied several ‘LEED’ certified
projects and Cool Roof rated tile which
provides the Southern California Air Quality
Management District with real life case
studies of cool roof options.
The Group continues to improve the
sustainability of its products with recent
examples including ENVIRO Plasterboard
and Envirocrete, which can be found at
www.boral.com.au/buildsustainable/.
Product lifecycle
During the year, Boral continued projects
to develop appropriate and consistent
methodologies for undertaking product
lifecycle assessments both internally
and through industry groups. Boral’s
internal lifecycle assessment project has
helped clarify the relative environmental
performance of key building products in a
typical residential building over its lifetime.
This study will provide scientifically based,
robust data to improve decision making
and develop a better understanding in
support of environmental related marketing.
In December 2009, Boral’s US Brick
business published a discussion paper
entitled: ‘Building with Brick: Sustainable
and Energy Efficient – A White Paper on
Performance Benefits of One of Man’s
Oldest Building Materials’. This paper
is available at www.boralbricks.com.
An important part of lifecycle management
is ensuring raw materials are sourced
in a sustainable way and Boral Timber
is at the forefront in its endeavours to
certify resource authenticity. Boral Timber
products have full Chain of Custody
certification aligned with the Australian
Forestry Standard (AFS), which verifies that
products are produced from certified, legal
and sustainable resources, which provides
an environmental assurance standard
for the sustainable use of Australia’s
forest resources.
Case study:
Sustainable Cement Packaging
By identifying and working with
like-minded suppliers we have
successfully changed our cement
bags from a three-ply to a two-ply
paper sack reducing annual paper
consumption by 860 tonnes, and
setting a global benchmark for paper
grammage, strength, customer
satisfaction and lowest environmental
impacts. More specifically, we have
delivered: a 39% reduction in paper
use per sack, which has associated
lower environmental impacts in terms
of emissions, water use and waste;
a 20% reduction in price; elimination
of perforations which created dust
leakages and consequential safety
hazards; an average 50% decrease
in plastic film weight per sack; and
reduction in leakage during transport
by over 90%.
This initiative was recognised with the
2010 Award for Excellence in Green
Purchasing (Business) at the Australian
ECO-Buy Awards.
MoRe infoRMation
Refer to Boral’s online report at www.boral.com.au/sustainability
for Boral’s 2010 Sustainability Data Table together with more
detailed information on the areas reported in this summary
report and information on: ‘Managing Sustainability’, Boral’s
Stakeholders’, ‘Employee Development and Training’, ‘Waste,
Recycling and Re-use’, ‘Land Management and Biodiversity’,
‘Other Emissions’ and ‘External Recognition’.
As a four-year partner with
HomeAid in the USA, Boral
commits US$50,000 in cash
and US$50,000 in-kind product
bi-annually to provide shelter
for the homeless. Through
this program Boral works with
customers, showcases product
and engages employees.
Boral continues to offer
Outward Bound Family
Re-Discovery Scholarships
to Boral employees with high
school aged sons or daughters.
Since 2003, a total of 96 family
groups have participated in
the program across five states.
Eight families received Boral
scholarships in FY2010.
Building Communities in
Asia Boral invested $48,800
in FY2010 in Bayah, Indonesia
to support 440 students, 20
teachers and 12 local clinic staff
as well as agricultural assistance.
Boral also has an Educational
Scholarship program for 200
children of our Indonesian
employees.
In addition to Boral’s
corporate partnerships,
Boral’s businesses support
local community activities,
including charities, emergency
services and environmental
groups, within Boral’s
Partnership Framework and
Criteria and subject to Boral’s
Limits of Authority policy.
30
Review of operating divisions
Boral Limited Annual Report 2010
BoaRd of diReCtoRs
Bob Every
Non-Executive Chairman,
age 65
Brian Clark
Non-Executive Director,
age 61
Paul Rayner
Non-Executive Director,
age 56
Mark Selway
Chief Executive,
age 51
Dr Bob Every joined the Boral
Board in September 2007
and became Chairman of
Directors on 1 June 2010. he
is the Chairman of Wesfarmers
Limited. he is also on the
Board of Malcolm Sargeant
Cancer Fund for Children
Limited known as Redkite.
he was Managing Director of
Tubemakers of Australia and
held senior executive positions
with BhP Limited before
becoming Managing Director
and CEO of OneSteel Limited.
he is a fellow of the Australian
Academy of Technological
Sciences and Engineers. he
has a science degree (honours)
and a doctorate of philosophy
(metallurgy) from the University
of New South Wales.
Dr Every is a member of the
Remuneration & Nomination
Committee.
Brian Clark joined the Boral
Board in May 2007. he has
experience as a Non-Executive
Director in Australia and
overseas. he is a Director
of AMP Limited. In South
Africa, he was President of
the Council for Scientific and
Industrial Research (CSIR)
and CEO of Telkom SA. he
also spent 10 years with the
UK’s Vodafone Group as CEO
Vodafone Australia, CEO
Vodafone Asia Pacific and
Group human Resources
Director. he has a doctorate
in physics from the University
of Pretoria, South Africa and
completed the Advanced
Management Program at the
harvard Business School.
Dr Clark is Chairman of the
Remuneration & Nomination
Committee.
Paul Rayner joined the Boral
Board in 2008. he is a Director
of Qantas Airways Limited
and Centrica plc, a UK listed
company. he has held senior
executive positions in finance
and operations in Australia
including Rothmans holdings
Limited and as Chief Operating
Officer of British American
Tobacco Australasia Limited.
he was Finance Director of
British American Tobacco plc
from January 2002 until 2008,
based in London. he has an
economics degree from the
University of Tasmania and
a Masters of Administration
from Monash University.
Mr Rayner is Chairman of the
Audit Committee.
Mark Selway became Chief
Executive of Boral in January
2010. From 2001 to 2009,
Mr Selway was the Chief
Executive of the Weir Group
PLC, a Scottish-headquartered,
listed engineering business.
Before returning to Australia to
join Boral, Mr Selway worked
in the UK for more than
13 years and prior to that, was
based in the USA for seven
years in the North American
automotive market.
Mr Selway was previously
a Non-Executive Director
of Lend Lease and has a
doctorate from the University
of West Scotland.
Board of Directors (pictured)
From left to right: Bob Every,
Brian Clark, Paul Rayner,
Mark Selway, John Marlay,
Eileen Doyle, Roland Williams,
Richard Longes.
31
John Marlay
Non-Executive Director,
age 61
Eileen Doyle
Non-Executive Director,
age 55
Roland Williams, CBE
Non-Executive Director,
age 71
Richard Longes
Non-Executive Director,
age 65
Roland Williams joined
the Boral Board in 1999.
he is a Director of Origin
Energy Limited. he had an
international career with the
Royal Dutch/Shell Group
from which he retired as
Chairman and Chief Executive
of Shell Australia. he has a
chemical engineering degree
(honours) and a doctorate of
philosophy from the University
of Birmingham.
Dr Williams is a member of the
Audit Committee.
Richard Longes joined the
Boral Board in 2004. he is
the Chairman of Austbrokers
holdings Limited and a
Director of Metcash Limited
and Investec Bank (Australia)
Limited. he was previously
an executive of Investec Bank,
a principal of Wentworth
Associates, the corporate
advisory and private equity
group; and a partner of
Freehills, a leading law firm.
he has arts and law degrees
from the University of Sydney
and an MBA from the University
of New South Wales.
Mr Longes is a member of the
Audit Committee.
John Marlay joined the Boral
Board in December 2009. he
is a Non-Executive Director
of Incitec Pivot Limited. he is
Chairman of the EITE Expert
Advisory Panel to the Australian
Government Minister for
Climate Change and Energy
Efficiency. he was the Chief
Executive Officer and Managing
Director of Alumina Limited
from December 2002 until his
retirement from this position
in 2008. Previously, he held
senior executive positions
and directorships with Esso
Australia Limited, James
hardie Industries Limited,
Pioneer International Group
holdings and hanson plc. he
has a Bachelor of Science
degree from the University of
Queensland and a Graduate
Diploma from the Australian
Institute of Company Directors.
he is a Fellow of The Australian
Institute of Company Directors.
Mr Marlay is a member of the
Remuneration & Nomination
Committee.
Eileen Doyle joined the Boral
Board in March 2010. She
is a Board member of the
CSIRO and a Non-Executive
Director of OneSteel Limited,
GPT Group Limited and Ross
human Directions Limited.
Dr Doyle’s career in the
materials and water industries
in Australia has included five
years in senior operational
roles with CSR Limited. Prior
to that Dr Doyle spent 13 years
with BhP Limited in various
senior operational, marketing
and planning roles and four
years with hunter Water with
responsibilities for planning and
policy development. She has a
PhD in Applied Statistics from
the University of Newcastle, is
a Fulbright Scholar and has an
Executive MBA from Columbia
University Business School.
She is a Fellow of the Australian
Institute of Company Directors.
Dr Doyle is a member of the
Audit Committee.
32
Review of operating divisions
Boral Limited Annual Report 2010
CoRPoRate goVeRnanCe
ASx Corporate Governance Council’s Principles and
Recommendations (ASx CGC’s Recommendations)
– Boral’s Corporate Governance Statement 2010
Principle ASx CGC’s Recommendations
Reference
Principle ASx CGC’s Recommendations
1 Lay solid foundations for management
and oversight
1.1 Establish the functions reserved to the Board
and those delegated to senior executives
and disclose those functions.
Page 33
1.2 Disclose the process for evaluating the
performance of senior executives.
1.3 Provide the information indicated in
Guide to reporting on Principle 1.
2 Structure the Board to add value
Pages 33-34
Pages 33-34
5 Make timely and balanced disclosure
5.1 Establish written policies designed to ensure
compliance with ASx Listing Rule disclosure
requirements and to ensure accountability at
a senior executive level for that compliance
and disclose those policies or a summary
of those policies.
5.2 Provide the information indicated in
Guide to reporting on Principle 5.
6 Respect the rights of shareholders
Reference
Page 37
Page 37
2.1 A majority of the Board should be
Page 34
6.1 Design a communications policy for
Page 37
independent Directors.
2.2 The chair should be an independent Director. Page 34
Page 34
2.3 The roles of chair and chief executive officer
should not be exercised by the same individual.
2.4 The Board should establish a nomination
Page 35
committee.
promoting effective communication with
shareholders and encouraging their
participation at general meetings and disclose
the policy or a summary of that policy.
6.2 Provide the information indicated in
Guide to reporting on Principle 6.
2.5 Disclose the process for evaluating the
Page 35
7 Recognise and manage risk
Pages 34-35
Page 36
performance of the Board, its committees
and individual Directors.
2.6 Provide the information indicated in
Guide to reporting on Principle 2.
3 Promote ethical and responsible
decision-making
3.1 Establish a code of conduct and disclose
the code or a summary of the code as to:
3.1.1 the practices necessary to maintain
confidence in the Company’s integrity.
3.1.2 the practices necessary to take into
account their legal obligations and
the reasonable expectations of their
stakeholders.
3.1.3 the responsibility and accountability of
individuals for reporting and investigating
reports of unethical practices.
3.2 Establish a policy concerning trading in
Company securities by Directors, senior
executives and employees, and disclose
the policy or a summary of that policy.
3.3 Provide the information indicated in
Guide to reporting on Principle 3.
Page 36
Page 36
4 Safeguard integrity in financial reporting
4.1 The Board should establish an audit committee. Page 36
Page 36
4.2 Structure the audit committee so that it:
•
•
•
consists only of non-executive Directors;
consists of a majority of independent Directors;
is chaired by an independent chair,
who is not chair of the Board; and
has at least three members.
4.3 The audit committee should have a
•
formal charter.
4.4 Provide the information indicated in
Guide to reporting on Principle 4.
Page 36
Pages 36-37
7.1 Establish policies for the oversight and
management of material business risks
and disclose a summary of those policies.
7.2 The Board should require management to
design and implement the risk management
and internal control system to manage the
Company’s material business risks and
report to it on whether those risks are being
managed effectively. The Board should
disclose that management has reported to
it as to the effectiveness of the Company’s
management of its material business risks.
7.3 The Board should disclose whether it has
received assurance from the chief executive
officer (or equivalent) and the chief financial
officer (or equivalent) that the declaration
provided in accordance with section 295A of
the Corporations Act is founded on a sound
system of risk management and internal
control and that the system is operating
effectively in all material respects in relation
to financial reporting risks.
7.4 Provide the information indicated in
Guide to reporting on Principle 7.
8 Remunerate fairly and responsibly
8.1 Establish a remuneration committee.
8.2 Clearly distinguish the structure of
non-executive Directors’ remuneration
from that of executive Directors and
senior executives.
8.3 Provide the information indicated in
Guide to reporting on Principle 8.
Page 37
Page 38
Page 38
Page 38
Page 38
Page 39
Page 39
Page 39
33
Introduction
This section of the Annual Report outlines Boral’s governance
framework.
Boral is committed to ensuring that its policies and practices
reflect a high standard of corporate governance. The Directors
consider that Boral’s governance framework and adherence
to that framework are fundamental in demonstrating that the
Directors are accountable to shareholders and are appropriately
overseeing the management of risk and the future direction of
the Company to enhance shareholder value.
Throughout the 2009/10 financial year, Boral’s governance
arrangements were consistent with the Corporate Governance
Principles and Recommendations released by the Australian
Securities Exchange (ASX) Corporate Governance Council in
August 2007.
The table on page 32 indicates where specific ASx Principles
and Recommendations are dealt with in this Statement.
In accordance with the ASx Principles and Recommendations,
the Boral policies referred to in this Statement have been
posted to the corporate governance section of Boral’s website:
www.boral.com.au/corporate_governance.
Principle 1: Lay solid foundations for management
and oversight
Responsibilities of the Board and management
The Board
The Board of Directors is responsible for setting the strategic
direction of the Company and for overseeing and monitoring
its businesses and affairs. Directors are accountable to the
shareholders for the Company’s performance and governance.
Under the Company’s Constitution, the business of the Company
is managed by or under the direction of the Directors, with
the Directors being permitted to delegate any of their powers
(including the power to delegate) to the Managing Director.
A copy of Boral’s Constitution is available on Boral’s website.
• appointing, rewarding and determining the duration of
the appointment of the Chief Executive and ratifying the
appointments of senior executives including the Chief
Financial Officer and the Company Secretary.
• reviewing the performance of the Chief Executive and
senior management.
• reviewing and verifying systems of risk management and
internal compliance and control, codes of conduct and
legal compliance.
• reviewing sustainability performance and overseeing
occupational health and safety and environmental management
and performance.
• approving and monitoring financial reporting and reporting to
shareholders on the Company’s direction and performance.
• meeting legal requirements and ensuring that the Company acts
responsibly and ethically and prudently manages business risks
and Boral’s assets.
Non-executive Directors spend approximately 30 days each year
on Board business and activities including Board and Committee
meetings, meetings with senior management to discuss in
detail the strategic direction of the Company’s businesses, visits
to operations and meeting employees, customers, business
associates and other stakeholders. During the year, the Directors
visited a number of Boral’s sites in the United States, including
operations in Georgia, Oklahoma and California.
Each month, Directors receive a detailed operating review from the
Chief Executive regardless of whether a Board Meeting is being
held that month.
Delegation to management
The Board has delegated to the Chief Executive and, through
the Chief Executive, to other senior executives, responsibility
for the day to day management of the Company’s affairs and
implementation of the Company’s strategy and policy initiatives.
The Chief Executive and senior executives operate in accordance
with Board approved policies and delegated limits of authority, as
set out in Boral’s Management Guidelines.
The matters that the Board has reserved for its decision include:
• oversight of the Company including its conduct and
accountability systems.
Senior executives reporting to the Chief Executive have their roles
and responsibilities defined in position descriptions, as set out in
relevant letters of appointment.
• reviewing and approving overall financial goals for the Company.
• approving strategies and plans for Boral’s businesses to achieve
these goals.
• approving financial plans and annual budgets.
• monitoring implementation of strategy, business performance
and results and ensuring appropriate resources are available.
• approving key management recommendations (such as major
capital expenditure, acquisitions, divestments, restructuring
and funding).
Evaluating the performance of senior executives
The performance of senior executives is reviewed annually against
appropriate measures as part of Boral’s performance management
system, which is in place for all managers and staff. The system
includes processes for the setting of objectives and the annual
assessment of performance against objectives and workplace
style and effectiveness.
On an annual basis, the Remuneration and Nomination Committee
and subsequently the Board formally review the performance of
the Chief Executive. The criteria assessed are both qualitative
and quantitative and include profit performance, other financial
measures, safety performance and strategic actions.
34
Review of operating divisions
Boral Limited Annual Report 2010
Corporate Governance
Continued
The Chief Executive annually reviews the performance of each
of Boral’s senior executives, being members of the Operations
Executive, using criteria consistent with those used for reviewing
the Chief Executive. The Chief Executive reports to the Board
through the Remuneration and Nomination Committee on the
outcome of those reviews.
Further details on the assessment criteria for Chief Executive and
senior executive remuneration (including equity-based plans) are
set out in the Remuneration Report which forms part of the
Annual Report.
Principle 2: Structure the Board to add value
Structure of the Board
Together the Board members have a broad range of financial
and other skills, extensive experience and knowledge necessary
to oversee Boral’s business. The Board of Directors comprises
seven non-executive Directors (including the Chairman) and one
executive Director, the Chief Executive. The roles of Chairman
and Chief Executive are not exercised by the same individual.
The skills, experience and expertise of each Director are set out
on page 30 and 31 of the Annual Report.
The Directors determine the size of the Board by reference to the
Constitution, which provides that there will be a minimum of three
Directors and a maximum of 12 Directors.
During the 2009/10 financial year, John Cloney, Rod Pearse and
Ken Moss retired from the Board (in October 2009, December
2009 and May 2010 respectively).
Two new non-executive Directors were appointed during the
2009/10 financial year, being John Marlay (in December 2009) and
Eileen Doyle (in March 2010). Mark Selway became an executive
Director in January 2010 upon his appointment as Chief Executive.
The period of office held by each current Director is:
Brian Clark
Bob Every
Richard Longes
Paul Rayner
Roland Williams
Mark Selway, Chief Executive
John Marlay
Eileen Doyle
Appointed
Last Elected at an
Annual General Meeting
2007
2007
2004
2008
1999
2010
2009
2010
29 October 2007
29 October 2007
29 October 2007
24 October 2008
29 October 2007
Not applicable
–
–
Details of the number of meetings attended by each Director are
set out at page 42 of the Directors’ Report.
Chairman’s appointment and responsibilities
The Board selects the Chairman from the non-executive
independent Directors. The Chairman leads the Board and
is responsible for the efficient organisation and conduct of
the Board’s functioning. he ensures that Directors have the
opportunity to contribute to Board deliberations. The Chairman
regularly communicates with the Chief Executive to review key
issues and performance trends. he also represents the Company
in the wider community.
Bob Every assumed the role of Chairman following the retirement
of Ken Moss in May 2010.
Committees
To assist the Board to carry out its responsibilities, the Board
has established an Audit Committee and a Remuneration and
Nomination Committee. The qualifications of each Committee
member and the number of meetings they attended during the
reporting period are set out at page 42 of the Directors’ Report.
These Committees review matters on behalf of the Board and,
as determined by the relevant Charter:
• refer matters to the Board for decision, with a recommendation
from the Committee, or
• determine matters (where the Committee acts with delegated
authority), which the Committee then reports to the Board.
These Committees are discussed further below under
Principle 4 (Audit Committee) and Principle 8 (Remuneration
and Nomination Committee).
Director Independence
The Board has assessed the independence of each of the
non-executive Directors (including the Chairman) in light of
their interests and relationships and considers each of them
to be independent. The criteria considered in assessing the
independence of non-executive Directors include that:
• the Director is not a substantial shareholder of the Company
or an officer of, or otherwise associated directly with,
a substantial shareholder.
• the Director is not employed, or has not previously been
employed in an executive capacity by a Boral company or, if the
Director has been previously employed in an executive capacity,
there has been a period of at least three years between ceasing
such employment and serving on the Board.
• the Director has not within the last three years been a principal
of a professional adviser or consultant to a Boral company,
or an employee associated with the service provided.
• the Director is not a significant material supplier or customer of
a Boral company or an officer of or otherwise associated directly
or indirectly with a material supplier or customer.
• the Director has no material contractual relationship with a Boral
company other than as a Director.
It is considered that none of the interests of Directors with other
firms or companies having a business relationship with Boral
could materially interfere with the ability of those Directors to
act in Boral’s best interests. Material in the context of Director
independence is, generally speaking, regarded as being 5% of the
revenue of the supplier, customer or other entity being attributable
to the association with a Boral company or companies.
Accordingly all of the non-executive Directors (including the
Chairman) are considered independent.
35
Nomination and appointment of Directors
Board succession planning, and the progressive and orderly
renewal of its Board membership, are an important part of the
governance process.
The Board’s policy for the selection, appointment and
re-appointment of Directors is to ensure that the Board possesses
an appropriate range of skills, experience and expertise to enable
the Board to carry out its responsibilities most effectively. As part
of this appointment process, the Directors consider Board renewal
and succession plans and whether the Board is of a size and
composition that is conducive to making appropriate decisions.
The appointment of John Marlay as a non-executive Director in
December 2009 and Eileen Doyle as a non-executive Director
in March 2010 followed a process during which the full Board
assessed the necessary and desirable competencies of potential
candidates and considered a number of names before deciding
on the most suitable candidate for appointment. The selection
process includes obtaining assistance from an external consultant,
where appropriate, to identify and assess suitable candidates.
Candidates identified as being suitable are interviewed by a
number of Directors. Confirmation is sought from prospective
Directors that they would have sufficient time to fulfil their duties
as a Director.
At the time of appointment of a new non-executive Director, the
key terms and conditions relative to that person’s appointment,
the Board’s responsibilities and the Company’s expectations
of a Director are set out in a letter of appointment. All current
Directors have been provided with a letter confirming their terms
of appointment.
In March 2010, the Board decided that it would be desirable
to have a committee to assist the Board with its nomination
responsibilities. Accordingly, the responsibilities of the
Remuneration Committee were expanded to encompass
nomination responsibilities, and the Remuneration Committee was
reconstituted as the Remuneration and Nomination Committee. In
addition to responsibilities relating to remuneration, the Committee
now has responsibility for making recommendations to the Board
on matters such as succession plans for the Board, suitable
candidates for appointment to the Board, Board induction and
Board evaluation procedures.
Induction
Management, with the Board, provides an orientation program for
new Directors. The program includes discussions with executives
and management, the provision to the new Director of materials
such as the Strategic Plan and the Share Trading Policy, site visits
to some of Boral’s key operations and discussions with other
Directors.
Tenure of Directorships
Under the Company’s Constitution, and as required by the ASx
Listing Rules, a Director must not hold office (without re-election)
past the longer of the third Annual General Meeting and three
years following that Director’s last election or appointment. Retiring
Directors are eligible for re-election. When a vacancy is filled by
the Board during a year, the new Director must stand for election
at the next Annual General Meeting. The requirements relating to
retirement from office do not apply to the Managing Director of
the Company.
The Directors have adopted a policy that the tenure of
Non-Executive Directors should generally be no longer than nine
years. A Non-Executive Director may continue to hold office after
a nine year term only if the Director is re-elected by shareholders
at each subsequent Annual General Meeting. It is expected
that this would be recommended by the Board in exceptional
circumstances only.
The Board does not regard nominations for re-election as being
automatic but rather being based on the individual performance
of Directors and the needs of the Company. Before the business
to be conducted at the Annual General Meeting is finalised, the
Board discusses the tenure of Directors standing for re-election
in the absence of those Directors.
Evaluation of Board performance
The Board periodically undertakes an evaluation of the
performance of the Board and its Committees. The evaluation
encompasses a review of the structure and operation of the
Board, the skills and characteristics required by the Board
to maximise its effectiveness and whether the blending of
skills, experience and expertise and the Board’s practices and
procedures are appropriate for the present and future needs of the
Company. Steps involved in the evaluation include the completion
of a questionnaire by each Director, review of responses to
the questionnaire at a Board Meeting and a private discussion
between the Chairman and each other Director.
An evaluation of the Board’s performance in accordance with the
process described above took place in the 2008/09 year. The next
evaluation will be undertaken in the 2010/11 year.
Conflicts of Interest
In accordance with Boral’s Constitution and the Corporations
Act, Directors are required to declare the nature of any interest
they have in business to be dealt with by the Board. Except as
permitted by the Corporations Act, Directors with a material
personal interest in a matter being considered by the Board
may not be present when the matter is being considered and
may not vote on the matter.
Access to Information, Independent Advice and
Indemnification
After consultation with the Chairman, Directors may seek
independent professional advice, in furtherance of their duties, at
the Company’s expense. Directors also have access to members
of senior management at any time to request relevant information.
The Company Secretary provides advice and support to the Board
and is responsible for Boral’s day-to-day governance framework.
Under the Company’s Constitution and agreements with Directors
and to the extent permitted by law, the Company indemnifies
Directors and executive officers against liabilities to third parties
incurred in their capacity as officers of the Company and against
certain legal costs incurred in defending an action for such
a liability.
36
Review of operating divisions
Boral Limited Annual Report 2010
Corporate Governance
Continued
Principle 3: Promote ethical and responsible
decision-making
Conduct and Ethics
The Board’s policy is that Boral companies and employees must
observe both the letter and spirit of the law, and adhere to high
standards of business conduct and comply with best practice.
Boral’s Management Guidelines contain a Code of Corporate
Conduct and other guidelines and policies which set out legal
and ethical standards for employees. As part of performance
management, employees are assessed against the Boral Values
of leadership, respect, focus, performance and persistence.
This policy and the Code guide the Directors, the Chief Executive,
the Chief Financial Officer, the Company Secretary and other
key executives as to the practices necessary to maintain
confidence in the Company’s integrity and as to the responsibility
and accountability of individuals for reporting and investigating
reports of unethical practices. The Code also guides compliance
with legal and other obligations to stakeholders.
A copy of Boral’s Code of Corporate Conduct is available
on Boral’s website.
Dealings in Boral Shares
Under Boral’s Share Trading Policy, trading in Boral shares by
Directors, senior executives and other designated employees
is restricted to the following trading windows:
• the 30 day period beginning on the day after the release
of Boral’s interim results;
• the 30 day period beginning on the day after the release
of Boral’s full year results;
• the 30 day period beginning on the day after the Annual
General Meeting; and
• any other period designated by the Board (for example,
during a period of enhanced disclosure).
Trading in Boral shares at any time is of course subject to
the overriding prohibition on trading while in possession
of inside information.
The Policy precludes executives from entering into any hedge or
derivative transactions relating to options or share rights granted
to them as long term incentives, regardless of whether or not the
options or share rights have vested.
Under the Share Trading Policy, Directors and senior executives
are required to notify the Company Secretary (or, in the case of
trading by Directors, the Chairman) before and after trading.
Breaches of the Policy are treated seriously and may lead
to disciplinary action being taken against the executive,
including dismissal.
A copy of Boral’s Share Trading Policy is available
on Boral’s website.
Share dealings by Directors are promptly notified to the ASx.
Directors must hold a minimum of 1,000 Boral shares.
Principle 4: Safeguard integrity in financial reporting
Audit Committee
Boral has an Audit Committee which assists the effective operation
of the Board. The Audit Committee comprises only independent
non-executive Directors. Its members are:
Paul Rayner (Chairman)
Richard Longes
Roland Williams
Eileen Doyle (from 26 May 2010)
The Committee met five times during the 2009/10 financial year.
The Audit Committee has a formal Charter which sets out its
role and responsibilities, composition, structure and membership
requirements. Its responsibilities include review and oversight of:
• the financial information provided to shareholders and the public;
• the integrity and quality of Boral’s financial statements
and disclosures;
• the systems and processes that the Board and management
have established to identify and manage areas of significant
risk; and
• Boral’s auditing, accounting and financial reporting processes.
The Committee has the necessary power and resources to meet
its responsibilities under its Charter, including rights of access
to management and auditors (internal and external) and to seek
explanations and additional information.
The Audit Committee Charter is available on Boral’s website.
Accounting and financial control policies and procedures have
been established and are monitored by the Committee to ensure
the accounts and other records are accurate and reliable. Any new
accounting policies are reviewed by the Committee. Compliance
with these procedures and policies and limits of authority
delegated by the Board to management are subject to review
by the external and internal auditors.
When considering the yearly and half yearly financial reports, the
Audit Committee reviews the carrying value of assets, provisions
and other accounting issues.
Questionnaires completed by divisional management are reviewed
by the Committee half yearly.
As required by the Corporations Act for year end financial
reports, the Chief Executive and the Chief Financial Officer give a
declaration to the Directors that the Company’s financial records
have been properly maintained and that the financial reports give
a true and fair view before the Board resolves that the Directors’
Declarations accompanying the financial reports be signed.
37
At each scheduled meeting of the Committee, both external and
internal auditors report to the Committee on the outcome of their
audits and the quality of controls throughout Boral. As part of its
agenda, the Audit Committee meets with the external and internal
auditors, in the absence of the Chief Executive and Chief Financial
Officer, at least twice during the year.
The Chairman of the Audit Committee reports to the full Board
after Committee Meetings. Minutes of Meetings of the Audit
Committee are included in the papers for the next full Board
Meeting after each Committee Meeting.
External Auditor
Boral’s external auditor is KPMG. The scope of the external audit
and the effectiveness, performance and independence of the
external auditor are reviewed by the Audit Committee.
If circumstances arise where it becomes necessary to replace
the external auditor, the Audit Committee will formalise a
process for the selection and appointment of a new auditor and
recommend to the Board the external auditor to be appointed to
fill the vacancy.
The Audit Committee monitors procedures to ensure the rotation
of external audit engagement partners every five years as required
by the Corporations Act.
The Audit Committee has approved a process for the monitoring
and reporting of non-audit work to be undertaken by the external
auditor. Services by the external auditor which are prohibited
because they have the potential or appear to impair independence
include the participation in activities normally undertaken by
management, being remunerated on a ‘success fee’ basis and
where the external auditor would be required to review their work
as part of the audit.
The Independence Declaration by the external auditor is set out
on page 44.
Internal Audit
The internal audit function is outsourced, with
PricewaterhouseCoopers being the Company’s internal audit
service provider. The internal audit program is approved by
the Audit Committee before the start of each year and the
effectiveness of the function is kept under review.
Principle 5: Make timely and balanced disclosure
The Company appreciates the importance of timely and adequate
disclosure to the market, and is committed to making timely
and balanced disclosure of all material matters and to effective
communication with its shareholders and investors so as to give
them ready access to balanced and understandable information.
The Company complies with all relevant disclosure laws and
ASx Listing Rule requirements and has in place mechanisms
designed to ensure compliance with those requirements, including
the Continuous Disclosure Policy adopted by the Board. These
mechanisms also ensure accountability at a senior executive level
for that compliance.
The Chief Executive, the Chief Financial Officer and the General
Counsel and Company Secretary are responsible for determining
whether or not information is required to be disclosed to the ASx.
A copy of Boral’s Continuous Disclosure Policy is available
on Boral’s website.
Principle 6: Respect the rights of shareholders
Communications with Shareholders
The Company’s policy is to promote effective communication
with shareholders and other investors so that they understand
how to assess relevant information about Boral and its
corporate proposals.
Annual and half-yearly reports are provided to shareholders
(other than those who have requested that they not receive
copies). Shareholders may elect to receive annual reports
electronically or to receive notifications via email when reports
are available online. While companies are not required to send
annual reports to shareholders other than those who have elected
to receive them, any shareholder who has not made an election
is sent an easy-to-read summary of the Annual Report, called
the Shareholder Review.
All formal reporting and company announcements made to the
ASx are published on Boral’s website after receipt of confirmation
of lodgment has been received from the ASx. Furthermore, Boral
has an email list of investors, analysts and other interested parties
who are sent relevant announcements via email alert after those
announcements have been lodged with the ASx. Announcements
are also sent to major media outlets and newswire services for
broader dissemination.
Boral encourages shareholders to attend and participate in all
general meetings including annual general meetings. Shareholders
are entitled to ask questions about the management of the
Company and of the auditor as to its conduct of the audit
and preparation of its reports.
Notices of Meeting are accompanied by explanatory notes to
provide shareholders with information to enable them to decide
whether to attend and how to vote upon the business of the
meeting. Full copies of Notices of Meeting and explanatory notes
are posted on Boral’s website. If shareholders are unable to attend
general meetings, they may vote by appointing a proxy using the
form attached to the Notice of Meeting or an online facility.
Shareholders are invited, at the time of receiving the Notice of
Meeting, to put forward questions that they would like addressed
at the Annual General Meeting.
A copy of Boral’s policy on Communications with Shareholders
is available on Boral’s website.
38
Review of operating divisions
Boral Limited Annual Report 2010
Corporate Governance
Continued
Principle 7: Recognise and manage risk
Risk identification and management
The managers of Boral’s businesses are responsible for identifying
and managing risks. The Board (through the Audit Committee)
is responsible for satisfying itself that a sound system of risk
oversight and management exists and that internal controls
are effective. In particular, the Board ensures that:
• the principal strategic, operational, financial reporting and
compliance risks are identified; and
• systems are in place to assess, manage, monitor and report
on these risks.
Under the supervision of the Board, management is responsible
for designing and implementing risk management and internal
control systems to manage the Company’s material business
risks. Boral’s senior management has reported to the Board on
the effectiveness of the management of the material business
risks faced by Boral during the 2009/10 financial year.
Risk management matters are analysed and discussed by
the Board at least annually and more frequently if required.
Boral has numerous risk management systems and policies
that govern the management of risk. In addition to maintaining
appropriate insurance and other risk management measures,
identified risks are managed through:
• established policies and procedures for the managing of
funding, foreign exchange and financial instruments (including
derivatives) including the prohibition of speculative transactions.
The Board has approved Treasury policies regarding exposures
to foreign currencies, interest rates, commodity price, liquidity
and counterparty risks which include limits and authority levels.
Compliance with these policies is reported to the Board monthly
and certified by Treasury management and the Audit Committee
twice yearly;
• key business risks being identified on a Divisional basis and on
a corporate wide basis and reported to the Directors;
• policies, standards and procedures in relation to environmental
and health and safety matters;
• training programs in relation to legal and compliance issues such
as trade practices, intellectual property protection, occupational
health and safety and environmental;
• procedures requiring that significant capital and revenue
expenditure and other contractual commitments are approved
at an appropriate level of management or by the Board; and
• comprehensive management guidelines setting out the
standards of behaviour expected of employees in the
conduct of the Company’s business.
The internal audit function is involved in risk assessment and
management and the measurement of effectiveness. The internal
and external audit functions are separate and independent of
each other.
The Board has acknowledged that the material provided to
it on risks has enabled it to review the effectiveness of the
risk management and internal control system to manage
the Company’s material business risks.
Compliance
The Company has adopted policies requiring compliance
with occupational health and safety, environmental and trade
practices laws.
There are also procedures providing employees with alternative
means to usual management communication lines through which
to raise concerns relating to suspected illegal or unethical conduct.
The Company acknowledges that whistleblowing can be an
appropriate means to protect Boral and individuals and to ensure
that operations and businesses are conducted within the law.
There are ongoing programs for audit of the large number of Boral
operating sites. Occupational health and safety, environmental
and other risks are covered by these audits. Boral also has
staff to monitor and advise on workplace health and safety and
environmental issues and in addition, education programs provide
training and information on regulatory issues.
Despite the Company’s policies and actions to avoid occurrences
which infringe regulations, there have been a small number
of prosecutions against subsidiary companies for breach of
occupational health and safety legislation.
Chief Executive and Chief Financial Officer declaration
The Chief Executive and the Chief Financial Officer have provided
the Audit Committee with a declaration in accordance with section
295A of the Corporations Act for the 2009/10 financial year,
including confirmation that the Company’s financial reports present
a true and fair view, in all material respects, of the Company’s
financial condition and operational results. The Board confirms
that it has received assurance from the Chief Executive and the
Chief Financial Officer that the above statement was founded on
a sound system of risk management and internal control, and
that such system is operating effectively in all material respects
in relation to financial reporting risks.
39
These principles ensure that the level and composition of
remuneration is sufficient and reasonable and that its relationship
to corporate and individual performance is defined.
In line with amendments to the ASx Principles and
Recommendations, from 2011 the Remuneration and
Nomination Committee will annually review and report
to the Board on gender diversity in Boral’s workforce.
Remuneration of non-executive Directors
The remuneration of the non-executive Directors is fixed and
they do not receive any options, variable remuneration or other
performance-related incentives. Nor are there any schemes for
retirement benefits for non-executive Directors.
Further information relating to the remuneration of the
non-executive Directors is set out in the Remuneration
Report on page 59.
Conclusion
While the Board is satisfied with its level of compliance with
governance requirements, it recognises that practices and
procedures can always be improved. Accordingly, the corporate
governance framework of the Company will be kept under review
to take account of changing standards and regulations.
Principle 8: Remunerate fairly and responsibly
Remuneration and Nomination Committee
The Board has a Remuneration and Nomination Committee
which currently comprises three independent Non-Executive
Directors. During part of the 2009/10 financial year, the Committee
comprised four independent Non-Executive Directors.
The members of the Committee are:
Brian Clark (Chairman from 27 July 2009)
John Cloney (Chairman until 27 July 2009)
Bob Every
Ken Moss (member until 30 May 2010)
John Marlay (member since December 2009)
The Committee met on five occasions during the 2009/10 financial
year; once as the Remuneration Committee, and four times as the
Remuneration and Nomination Committee.
The Remuneration and Nomination Committee has a formal
Charter which sets out its role and responsibilities, composition
structure and membership requirements.
A copy of the Remuneration and Nomination Committee Charter
is available on Boral’s website.
The Committee makes recommendations to the full Board on
remuneration arrangements for the Chief Executive and senior
executives and, as appropriate, on other aspects arising from
its functions.
Part of the role of the Remuneration and Nomination Committee
is to advise the Board on the remuneration policies and practices
for Boral generally and the remuneration arrangements for
senior executives.
Boral’s remuneration policy and practices are designed to attract,
motivate and retain high quality people. The policy is built around
principles that:
• executive rewards be competitive in the markets in which
Boral operates.
• executive remuneration has an appropriate balance of fixed and
variable reward.
• remuneration be linked to Boral’s performance and the creation
of shareholder value.
• variable remuneration for executives has both short and long
term components.
• a significant proportion of executive reward be dependent upon
performance assessed against key business measures.
40
Review of operating divisions
Boral Limited Annual Report 2010
diReCtoRs’ RePoRt
The Directors of Boral Limited (‘Company’) report on the
consolidated entity, being the Company and its controlled entities
(‘Boral’), for the financial year ended 30 June 2010:
(1) Review of Operations
A review of the operations of Boral during the year and the results
of those operations are contained in the Chairman’s Review and the
Chief Executive’s Review on pages 4 to 9 of the Annual Report.
(2) State of Affairs
The following significant changes in Boral’s state of affairs
occurred during the year:
• the Chief Executive Officer and Managing Director, Rod Pearse,
retired at the end of December 2009 and Mark Selway was
appointed Chief Executive effective 1 January 2010;
• Ken Moss retired as Chairman of the Board of Directors at the
end of May 2010 and Bob Every was appointed Chairman of
the Board of Directors, effective 1 June 2010; and
• significant items comprising impairment charges of $285m,
following a strategic review of underperforming businesses, a
review of obsolete and excessive inventories and a write-down
of underutilised and redundant equipment.
(3) Principal Activities and Changes
Boral’s principal activities are the manufacture and supply of
building and construction materials in Australia, the USA and Asia.
There were no significant changes in the nature of those activities
during the year.
(4) Events After End of Financial Year
There are no matters or circumstances that have arisen since the end
of the year that have significantly affected, or may significantly affect:
(a) Boral’s operations in future financial years; or
(b) the results of those operations in future financial years; or
(c) Boral’s state of affairs in future financial years,
other than the following:
• an equity raising, in the form of a renounceable entitlement
offer, was undertaken, resulting in gross proceeds of
approximately $490m,
• the acquisition by Boral of the remaining 50% shareholding it did
not own in MonierLifetile for US$75m, and
(7) Other Information
Other than information in the Annual Report, there is no
information that members of the Company would reasonably
require to make an informed assessment of:
(a) the operations of Boral; and
(b) the financial position of Boral; and
(c) Boral’s business strategies and its prospects for future
financial years.
(8) Dividends Paid or Resolved to be Paid
Dividends paid to members during the year were:
the final dividend of 5.5 cents per ordinary share
(fully franked at the 30% corporate tax rate) for
the year ended 30 June 2009 was paid on
28 September 2009
the interim dividend of 7 cents per ordinary share
(fully franked at the 30% corporate tax rate) for
the year was paid on 23 March 2010
Total Dividend
$m
32.6
41.7
The Directors have resolved to pay a final dividend of 6.5 cents per
ordinary share (fully franked at the 30% corporate tax rate) for the
year. The dividend will be paid on 28 September 2010.
(9) Names of Directors
The names of persons who have been Directors of the Company
during or since the end of the year are:
Brian Clark
John Cloney
Eileen Doyle
Robert Every
Richard Longes
John Marlay
Ken Moss
Rod Pearse
Paul Rayner
Mark Selway
• agreement by Boral to sell its Panels and Formwork and
Roland Williams
Scaffolding businesses.
(5) Future Developments and Results
Other than matters referred to under the heading ‘Prospects’
in the Chief Executive’s Review on page 9 of this Report, the
Directors have no comments to make on likely developments in
Boral’s operations in future financial years and the expected results
of those operations.
(6) Environmental Performance
Details of Boral’s performance in relation to environmental
regulation are set out under Environment on page 28 of
this Report.
Dr Clark, Dr Every, Dr Williams, Mr Longes and Mr Rayner
have been Directors at all times during and since the end of
the year. Dr Doyle was appointed a Director on 16 March 2010
and has been a Director at all times since that date. Mr Marlay
was appointed a Director on 1 December 2009 and has been a
Director at all times since that date. Mr Selway was appointed a
Director on 1 January 2010 and has been a Director at all times
since that date.
Mr Cloney was a Director from 1 July 2009 to 28 October 2009,
on which date he retired from the Board. Dr Moss was a Director
from 1 July 2009 to 31 May 2010, on which date he retired
from the Board. Mr Pearse was a Director from 1 July 2009 to
31 December 2009, on which date he retired from the Board.
41
(10) Options
Details of options that are granted over unissued shares of the Company, options that lapsed during the year and shares of the
Company that were issued during the year as a result of the exercise of options are as follows:
Tranche
Grant Date
Expiry
Date
Exercise
price
Balance at
beginning
of year
Options
issued
during
the year
Options
lapsed
during
the year
Shares
issued
during
the year
as a result
of exercise
of options
Options
at end
of year
(xii)
(xiii)
(xiv)
(xv)
(xvi)
(xvii)
04/11/2002
29/10/2003
29/10/2004
31/10/2005
06/11/2006
06/11/2007
Number
Number
Number
Number
Issued
Vested
04/11/2009
29/10/2010
29/10/2011
31/10/2012
06/11/2013
06/11/2014
$4.12
143,000
$5.57 2,443,280
$6.60 1,894,300
$7.70 3,114,000
$7.32 4,486,000
$6.83 5,854,400
17,934,980
–
–
150,084
–
152,100
–
208,400
–
256,900
–
–
316,300
1,083,784
143,000
24,186
–
–
–
–
–
2,269,010
1,742,200
2,905,600
4,229,100
5,538,100
167,186 16,684,010
–
651,296
–
–
–
–
651,296
The abovementioned options were held by 153 persons.
Brian Clark
AMP Limited from January 2008 (current)
Each option granted over unissued shares of the Company
entitles the holder to subscribe for one fully paid share in the
capital of the Company. Option holders have no rights under any
options to participate in any share issue or interest issue of any
body corporate other than the Company. No unissued shares
and interests of the Company or any controlled entity are under
option other than as set out in this clause.
John Cloney
QBE Insurance Group Limited from 1981 to July 2010
Eileen Doyle
OneSteel Limited from October 2000 (current)
GPT Group Limited from March 2010 (current)
Ross human Directions Limited from July 2005 (current)
(11) Indemnities and Insurance for Officers and Auditors
During or since the end of the year, Boral has not given any
indemnity to a current or former officer or auditor against a liability
or made any agreement under which an officer or auditor may be
given any indemnity of the kind covered by sub-section 199A (2)
or (3) of the Corporations Act 2001.
During the year, Boral paid premiums in respect of Directors’ and
Officers’ Liability and Legal Expenses insurance contracts for the
year ended 30 June 2010 and since the end of the year, Boral has
paid, or agreed to pay, premiums in respect of such contracts for
the year ending 30 June 2011. The insurance contracts insure
against certain liability (subject to exclusions) persons who are
or have been Directors or Officers of the Company and controlled
entities. A condition of the contracts is that the nature of the
liability indemnified and the premium payable not be disclosed.
(12) Directors’ qualifications, experience and special
responsibilities and directorships of other listed companies
in the last three financial years
Each Director’s qualifications, experience and special
responsibilities are set out on pages 30 to 31 of the
Annual Report.
Details for each Director of all directorships of other listed
companies held at any time in the three years before the end
of the financial year and the period for which such directorships
have been held are:
Bob Every
Iluka Resources Limited from March 2004 to May 2010
Sims Group Limited from October 2005 to November 2007
Wesfarmers Limited from February 2006 (current)
Richard Longes
Austbrokers holdings Limited from November 2005 (current)
Metcash Limited from April 2005 (current)
John Marlay
Incitec Pivot Limited from December 2006 (current)
Ken Moss
Centennial Coal Limited from 2000 (current)
GPT RE Limited from August 2000 to May 2010
Macquarie Capital Alliance Group (being Macquarie Capital
Alliance Limited, Macquarie Capital Alliance Management Limited
and Macquarie Capital Alliance Bermuda Limited) from
March 2005 to September 2008
Paul Rayner
British American Tobacco plc from January 2002 to April 2008
Centrica plc from September 2004 (current)
Qantas Airways Limited from July 2008 (current)
Rod Pearse
Nil
Mark Selway
Lend Lease Corporation Limited from June 2008
until February 2010
Roland Williams
Origin Energy Limited from 2000 (current)
42
Review of operating divisions
Boral Limited Annual Report 2010
Directors’ Report
Continued
(13) Meetings of Directors
The number of Meetings of the Board of Directors and each Board Committee held during the year and each Director’s attendance at
those Meetings are set out below:
Brian Clark
John Cloney
Eileen Doyle
Bob Every
Richard Longes
John Marlay
Ken Moss
Rod Pearse
Mark Selway
Paul Rayner
Roland Williams
Board of Directors
Audit Committee
Remuneration and
Nomination Committee
Meetings held while
a Director
Meetings
attended
Meetings held
while a member
Meetings
attended
Meetings held
while a member
Meetings
attended
11
6
2
11
11
5
11
7
4
11
11
11
6
2
11
10
5
11
7
4
11
10
–
–
1
–
5
–
–
–
–
5
5
–
–
1
–
5
–
–
–
–
5
4
5
1
–
5
–
4
5
–
–
–
–
5
1
–
5
–
4
5
–
–
–
–
Rod Pearse, Managing Director until 31 December 2009, was not a member of the Audit or Remuneration and Nomination Committees
but attended all of the Meetings held by those Committees in the period 1 July 2009 to 31 December 2009 other than one meeting of
the Remuneration and Nomination Committee.
Mark Selway, appointed the Chief Executive on 1 January 2010, is not a member of the Audit or Remuneration and Nomination
Committees but attended all of the Meetings held by those Committees from 1 January 2010 to 30 June 2010.
(14) Company Secretary
Margaret Taylor was appointed General Counsel and Company Secretary of Boral Limited in November 2008. Prior to joining Boral,
Margaret was Regional Counsel Australia/Asia with BhP Billiton, and prior to that she was a partner with law firm Minter Ellison for many
years, specialising in corporate and securities law. Margaret holds law and arts degrees from the University of Queensland.
(15) Directors’ Shareholdings
Set out below are details of each Director’s relevant interests in the shares and other securities of the Company as at 30 June 2010
(or, in the case of John Cloney, Ken Moss and Rod Pearse, as at the respective dates on which each ceased to be a Director):
Brian Clark
John Cloney
Eileen Doyle
Bob Every
Richard Longes
John Marlay
Ken Moss
Rod Pearse
Paul Rayner
Mark Selway
Roland Williams
Shares
Non-Executive Directors’
Share Plan a
60,180
14,629
1,000
38,004
14,282
2,000
46,000
4,103,989
8,854
8.800
54,250
4,441
27,027
–
3,847
8,453
–
33,328
–
1,491
–
22,430
Options
–
–
–
–
–
–
–
6,375,100 c
–
–
–
Share Acquisition
Rights (SARs) b
–
–
–
–
–
–
–
367,036
–
431,034 d
–
The shares are held in the name of the Director except in the case of:
• Brian Clark, 40,491 shares are held by UBS Wealth Management Australia Nominees Pty Limited –
and 18,215 shares are held by UBS Wealth Management Australia Nominees Pty Limited – JBC Investment holdings Pty Ltd
;
• John Cloney, 534 shares are held by Lizzey Investments Pty Limited and 12,500 shares are held by Cloney Superannuation Fund;
• Bob Every, 25,000 shares are held by RBC Dexia Investor Service Australia Nominees Pty Ltd ;
• Richard Longes, 10,000 shares are held by Gemnet Pty Limited for Richard Longes Superannuation Fund;
• John Marlay, 1,000 shares are held by The Marlay Superannuation Fund;
• Ken Moss, 31,000 shares are held by K J and G A Moss; and 15,000 shares are held by Rosebud (NSW) Pty Ltd,
;
• Rod Pearse, 44,016 shares are held by Pearse Nominees (NSW) Pty Limited;
• Paul Rayner, 7,841 shares are held by Yarradale Investments Pty Ltd.
43
Shares or other securities with rights of conversion to equity in the
Company or in a related body corporate are not otherwise held by
any Directors of the Company. There were no disposals of such
securities by any Directors or their Director-related entities during
the financial year.
In accordance with advice from the Company’s Audit Committee,
Directors are satisfied that the provision of the above non-audit
services during the year by the auditor is compatible with the
general standard of independence for auditors imposed by the
Corporations Act 2001.
a Shares in the Company allocated to the Director’s account in
the Non-Executive Directors’ Share Plan. Directors will only be
entitled to a transfer of the shares in accordance with the terms
and conditions of the Plan. No shares were allocated to non-
executive Directors during the 2009/10 financial year.
Also in accordance with advice from the Audit Committee,
Directors are satisfied that the provision of those non-audit
services, during the year, by the auditor did not compromise
the auditor independence requirements of the Corporations
Act 2001 because:
• Directors are not aware of any reason to question the
auditor’s independence declaration under section 307C
of the Corporations Act 2001;
• the nature of the non-audit services provided is not inconsistent
with those requirements; and
• provision of the non-audit services is consistent with the
processes in place for the Audit Committee to monitor the
independence of the auditor.
(18) Auditor’s Independence Declaration
The auditor’s independence declaration made under section 307C
of the Corporations Act 2001 is set out on page 44 of the Annual
Report and forms part of this report.
(19) Remuneration Report
The Remuneration Report is set out on pages 45 to 60 of the
Annual Report and forms part of this Report.
(20) Proceedings on behalf of the Company
No application under section 237 of the Corporations Act 2001
has been made in respect of the Company and there are no
proceedings that a person has brought or intervened in on behalf
of the Company under that section.
b The SARs are rights to acquire shares in the Company under the
Boral Senior Executive Performance Share Plan. The SARs will
vest only to the extent to which the performance hurdle, which
is measured by comparing the TSR of the Company to the TSR
of the companies comprising the ASx 100 during the vesting
period, is satisfied.
c Details of the options and SARs held by Rod Pearse are
as follows:
Number of Options
Expiry Date
Exercise Price
308,000
350,000
939,800
2,083,300
2,694,000
Number of SARs
120,000
247,036
29 October 2010
29 October 2011
31 October 2012
06 November 2013
06 November 2014
$5.57
$6.60
$7.70
$7.32
$6.83
Expiry Date
29 October 2011
31 October 2012
d The SARs held by Mark Selway will expire on 1 January 2017.
(16) No officers are Former Auditors
No officer of the Company has been a partner in an audit firm, or
a Director of an audit company, that is an auditor of the Company
during the year or was such a partner or Director at a time
when the audit firm or the audit company undertook an audit
of the Company.
(17) Non-Audit Services
Amounts paid or payable to Boral’s auditor, KPMG, for non-audit
services provided during the year by KPMG totalled $1,078,000.
These services consisted of:
Taxation compliance/advisory services in Australia
Taxation compliance/advisory services/assurance
related services in jurisdictions other than in Australia
Assurance related services
$148,000
$220,000
$710,000
44
Review of operating divisions
Boral Limited Annual Report 2010
Directors’ Report
Continued
(21) Rounding of amounts
The Company is of a kind referred to in ASIC Class Order 98/100
and in accordance with that Class Order, amounts in the financial
report and Directors’ Report have been rounded off to the nearest
one hundred thousand dollars unless otherwise indicated.
Lead Auditor’s Independence Declaration under
Section 307C of the Corporations Act 2001
To: The Directors of Boral Limited
Signed in accordance with a resolution of the Directors.
I declare that, to the best of my knowledge and belief, in relation
to the audit for the financial year ended 30 June 2010, there
have been:
(i) no contraventions of the auditor independence requirements as
set out in the Corporations Act 2001 in relation to the audit, and
(ii) no contraventions of any applicable code of professional
conduct in relation to the audit.
Bob Every
Director
Mark Selway
Director
Sydney, 3 September 2010
KPMG
David Rogers
Partner
Sydney, 3 September 2010
45
remuneration report
Message froM the Board
In 2009, the Board commissioned an extensive independent review of Boral’s remuneration policies and
practices and the outcomes were included in the 2009 remuneration report. shareholder and other
stakeholder concerns were considered and addressed as part of that review and the outcomes continue
to underpin the current remuneration structure.
In the 2009/10 financial year we continued to exercise restraint in our remuneration arrangements through
the ‘freeze’ on senior executive fixed salaries and directors’ fees.
the Board is committed to ensuring that Boral’s remuneration practices are properly aligned with
shareholder value creation over the short and long term and work to appropriately motivate, reward
and retain executives. our remuneration policies and practices are focused on linking performance and
reward while taking into consideration the particular challenges that face companies, such as Boral,
in cyclical industries.
the Board and Ceo intend to pursue ongoing improvements in Boral’s remuneration policies and priorities
in the coming years to ensure they align with our strategic objectives, market expectations and regulatory
requirements and reward management appropriately for delivering successful performance outcomes.
We received positive feedback on the format and content of the 2009 remuneration report, and have
retained our brief overview to provide shareholders a ‘plain english’ version of our remuneration practices,
and the more detailed report prepared in accordance with statutory obligations and accounting standards.
the Board listens to the input it receives from Boral’s shareholders. Your ongoing input is important to us
and helps to shape our decision-making.
We commend Boral’s 2010 remuneration report to you.
Bob Every
Chairman of the Board
Brian Clark
Chairman of the remuneration and
Nomination Committee
CoNteNts
MEssagE froM thE Board
2010 rEMunEration in BriEf
introduCtion
sEnior ExECutivE rEMunEration
CoMpany pErforManCE outCoMEs
ExECutivE rEMunEration taBlE
non-ExECutivE dirECtors’ rEMunEration
45
46
48
49
54
58
59
46 Boral limited annual report 2010
2010 reMuNeratIoN
IN BrIef
the Board is committed to clear and transparent disclosure of
the Company’s remuneration arrangements. this remuneration
snapshot sets out the key details regarding director and senior
executive remuneration for 2010. the full remuneration report
provides greater detail regarding the remuneration structures,
decisions and outcomes for Boral in 2010.
Particular events and actions that impacted Boral’s remuneration
structure and outcomes for 2010 were:
• Economic instability which continued throughout 2009/10.
While business activity showed some improvement in australia
over the previous year, in the usa, building and construction
activity remained depressed and trading conditions continued
to be difficult;
• CEo and significant Board transition. during the year Mark
selway was appointed Chief executive officer following rod
Pearse’s retirement, and Bob every was appointed Chairman
following Ken Moss’s retirement;
• improved financial performance against budgeted
outcomes for some Boral businesses. the improved financial
performance of some Boral businesses has been reflected in this
year’s short term Incentive (stI) awards;
• a comprehensive strategic review of the business. a review
of Boral’s portfolio of businesses and business performance
and subsequent review of the most appropriate organisational
structure was completed in June 2010; and
• national reviews of executive remuneration and
legislative changes.
each of these matters is discussed in this snapshot and in more
detail in the full remuneration report.
Continued focus on remuneration strategy
and restraint
following the 2008 annual general Meeting, the Board carried out
a review of Boral’s executive remuneration strategy and structure
with the assistance of independent advisers ernst & Young. this
review included extensive consultation with stakeholders, including
representatives of retail and institutional investors and governance
advisory firms. the process was complemented by the Ceo and
senior executives electing to forego their entitlement to any stI in
the 2008/09 financial year. furthermore, in response to the difficult
economic conditions impacting Boral’s profitability, remuneration
restraint initiatives were implemented which positively impacted the
2009/10 results. these included:
• a salary ‘freeze’ for all senior executives for the 2009/10 year;
• a ‘freeze’ on directors’ fees for the 2009/10 year;
• adopting a revised comparator group for benchmarking the
Ceo’s remuneration package which includes companies of
similar size and industry to Boral; and
• developing a contract for the new Ceo which reflects current
best practice in terms of employment arrangements and
remuneration structure.
during the year, the remuneration Committee was renamed the
remuneration and Nomination Committee and its responsibilities
were expanded to include Board nominations, development and
evaluation, and Ceo succession. the Board considers that good
corporate governance requires that it should receive high quality
independent remuneration advice and has accordingly appointed
PricewaterhouseCoopers as remuneration advisors to the Board
and to management.
CEo, Board and senior Executive transition
rod Pearse retired on 31 december 2009 after 10 years as Ceo
and 15 years with Boral. Mark selway was appointed as Boral’s
Ceo effective from 1 January 2010.
on 31 May 2010 after 10 years as Boral’s Chairman and having
overseen the Ceo transition, Ken Moss retired from the Board.
Bob every was appointed Chairman from 1 June 2010.
details of Mr Pearse’s retirement arrangements were set out in
full in the 2009 remuneration report. his remuneration details for
the part of 2009/10 worked are shown in the remuneration table
on page 58 of this report, including his termination entitlements as
approved by shareholders at the 2004 annual general Meeting.
the remuneration arrangements for Mark selway reflect current
corporate governance trends and ‘best’ market practice, with
a maximum separation payment that will not exceed 12 months
fixed salary. Mr selway’s remuneration arrangements were
disclosed at the time of his appointment and are detailed in
the report on page 53.
several new senior executive appointments were also made during
the year following the departures of emery severin, Ken Barton and
John douglas. the new appointees are Mike Kane as President
usa, andrew Poulter as Chief financial officer and Murray read
as Managing director Boral Construction Materials. all were
engaged under contemporary employment contracts which
specify maximum termination payments within the legislated cap.
remuneration outcomes for CEo and
senior executives
details of the Ceo and senior executive remuneration, prepared
in accordance with statutory obligations and accounting standards,
are contained on page 58 of the remuneration report.
the table below sets out the cash and other benefits received by
the Ceo and senior executives in the 2009/10 financial year.
the table highlights that most senior executives derived no value
in 2009/10 through the exercising of options or vesting of rights.
the Ceo and senior executives voluntarily elected to forego their
entitlement to short term Incentives in the 2008/09 financial year.
the stI awards made for the 2009/10 year reflect achievement of
key financial and non-financial performance objectives, including
improved financial performance against budgeted outcomes for
some Boral businesses.
47
Cash and other benefits actually received by the current Ceo and senior executives in 2009/10 are
substantially lower than the amounts shown in the remuneration table on page 58 of the remuneration
report. this is because the full remuneration table includes amounts in respect of benefits which did
not deliver value to executives in 2009/10. for example, it includes accounting values for current and
prior years’ Long term Incentive (LtI) grants which have not been and may never be realised as they
are dependent on the market-based performance hurdles being met in future years.
A$000’S
Mark selwayª
ross Batstone
Mike Beardsell
John douglasc
Mike Kaneª
andrew Poulterª
Nick Clark
FIXED
STI
LTI
OTHERb
TOTAL
1,029.8
1,100.0
744.0
631.5
833.6
170.0
125.0
575.0
461.3
272.8
750.3
203.5
65.1
294.5
0
0
0
0
0
0
2.2
17.0
29.6
29.3
866.3
26.8
2.0
9.3
2,146.8
1,234.9
933.6
2,450.2
400.3
192.1
881.0
a these executives commenced on the following dates: Mark selway – 1 January 2010; Mike Kane – 15 february 2010; and
andrew Poulter – 1 May 2010. details of executives who left Boral during the year are shown in the remuneration table on
page 58 of the remuneration report.
b other includes parking and long service leave accruals, and end of service payments are included for John douglas.
c John douglas resigned 9 July 2010.
Business and organisation review
a strategic review of Boral’s portfolio of businesses was completed in the second half of 2009/10.
one outcome of this review has been a change of organisational structure. the australian building
products divisions of Plasterboard, Clay & Concrete Products and timber were combined into one
division, Boral Building Products. Boral Construction Materials, Cement, usa and Construction related
Businesses remain as separate divisions and organisational structures within these divisions were changed
to provide improved focus on manufacturing and sales and marketing excellence, working together and
reducing complexity.
the organisational changes introduced will require a fundamental change to stI measures to better align
them with the stated objectives of the group. the remuneration and Nomination Committee, with advice
from independent advisors and consultation with management have designed an stI approach which
aligns management reward more closely to the interests of shareholders.
the main changes include performance measures which will be entirely focused on the achievement
of the financial outcomes, specifically the group’s earnings and working capital management.
the remuneration and Nomination Committee will also continue to review other remuneration
components and the performance management process to ensure delivery of business strategy
and non-financial objectives.
48 Boral limited annual report 2010
reMuNeratIoN rePort
INtroduCtIoN
the directors of Boral Limited present the remuneration report
for the Company and its controlled entities for the year ended
30 June 2010. this remuneration report forms part of the
directors’ report and has been audited in accordance with
the Corporations Act 2001.
the remuneration report sets out remuneration information for the
Company’s non-executive directors, Ceo and senior executives,
who are the key people accountable for planning, directing and
controlling the affairs of the Company and its controlled entities.
they include the five highest remunerated executives of the
Company and group for the 2009/10 financial year.
the people currently in these positions are listed in the table below.
NON-EXEcuTIvE DIREcTORS
Bob every
Brian Clark
eileen doyle
richard Longes
John Marlay
Paul rayner
roland Williams
Chairman
director
director
director
director
director
director
SENIOR EXEcuTIvES (INcLuDINg cHIEF EXEcuTIvE OFFIcER)
Mark selway
ross Batstone
Mike Beardsell
Mike Kane
andrew Poulter
Murray read
Chief executive officer
Md Boral Building Products
Md Boral Cement
President Boral Industries usa
Chief financial officer
Md Boral Construction Materials
during the 2009/10 year, the remuneration and Nomination
Committee comprised four independent non-executive directors
– Brian Clark (Committee Chairman), Ken Moss, Bob every and
John Marlay who was appointed to the Committee following the
retirement of John Cloney after the 2009 annual general Meeting.
49
seNIor exeCutIve
reMuNeratIoN
remuneration strategy
the Board has established a remuneration strategy that supports and drives the achievement of Boral’s
strategic objectives. By establishing a remuneration structure that motivates and rewards executives
for achieving targets linked to Boral’s business objectives, the Board is confident that its remuneration
approach aligns Boral management to creating superior shareholder returns.
the diagram below illustrates how Boral’s remuneration strategy, and the structures the Board has put
in place to achieve this strategy, align with the Company’s business objectives.
BuILDINg SOMETHINg gREAT – THE STRATEgIc BuILDINg BLOckS FOR gROwTH
1
laying the
foundations
review and
respond, creating
a strong platform
for growth
2
reinforcing
the core
focus and improve
assets where Boral
can be market
leader
3
investing
for growth
expand and invest
through acquisition
and innovation
worldwide
4
sector best
performance
realise sector best
performance and
market leading
returns
REMuNERATION cOMPONENTS
FIXED REMuNERATION
SHORT TERM INcENTIvE
LONg TERM INcENTIvE
• provides ‘predictable’ base level
• incentive focused predominantly
• delivered in equity to align executives
of reward
on financial outcomes
with shareholder interests
• set at market median (for local
geographic market) using external
benchmark data
• varies based on employee’s
experience, skills and performance
• consideration given to both
external and internal relativities
• financial targets linked to objective
measures at group, division,
and business unit level, such as
budgeted profit, cash flow and
capital management
• non-financial objectives linked to critical
sustainability measures (eg safety,
business improvement, environmental
performance, hr outcomes)
• tested three times after three, five and
seven years – a performance period
reflecting the typical building cycle
• no value derived unless returns to
shareholders exceed market median
• full vesting when Boral achieves
top quartile performance
BORAL’S REMuNERATION STRATEgY
attract and retain high calibre
executives by:
1. rewarding competitively
in the markets in which
Boral operates
2. providing a balance of fixed
and at-risk remuneration
align executive rewards to
Boral’s performance by:
1. assessing rewards against
objective financial and
non-financial business
measures
2. making short term and
long term components of
remuneration ‘at-risk’ based
on performance
50 Boral limited annual report 2010
seNIor exeCutIve reMuNeratIoN
CoNtINued
underpinning Boral’s remuneration strategy are several principles:
Standardised vs. tailored remuneration arrangements
remuneration strategy and frameworks will be consistent across
the executive and senior management group. Limited tailoring may
occur to take into account the unique challenges and differences
between roles.
Purpose of each element of remuneration
fixed remuneration: remunerate executives in line with market
benchmarks for effective completion of Company and specific
accountabilities and behaving in accordance with Boral’s values
taking into account individual, team and business unit performance
and any specific retention needs.
short term Incentives (stI): reward executives for achieving
annual targets (both financial and individual) measured at business
unit, divisional and/or Boral levels. Provide alignment with
shareholder reward.
Long term Incentives (LtI): reward senior executives for Boral
performance over the duration of the Boral business cycle.
Provide a retention element, equity exposure and alignment
with shareholder reward.
Benchmarking remuneration
the primary reference for remuneration benchmarking will be
australian listed companies in the Industrials and Materials sector.
for the Ceo and senior executives, pay levels for comparable roles
in appropriate international jurisdictions will also be considered as a
secondary reference to the australian market data. Consideration
will be given to sizing factors including market capitalisation
and business unit revenue. Complexity (such as number of
employees and geographies) will be referenced through the
job grading system.
Focus on market vs. internal relativities
Consideration will be given to both market and internal relativities.
Market will be the primary reference through its application to the
salary ranges attached to the job grading system.
the job grading system will be applied to individual roles to ensure
appropriate internal relativities.
as required, specific position matches may be sought for any jobs
or functions where there is a high demand for talent or unique
market considerations.
Market positioning
executives’ fixed remuneration is referenced to the market median.
a range around the median provides flexibility to recognise
capability, contribution, value to the organisation, performance
and tenure of individuals.
executives’ target total remuneration (fixed remuneration, target
short term plus long term incentives) is referenced to the market
median when setting remuneration elements. for the stI element,
achievement of stretch targets is intended to provide reward at the
75th percentile of the market for positions of similar size.
Remuneration mix
the variable remuneration mix for Ceo and senior executives has a
greater focus on long term incentives and moves towards a shorter
term focus for lower job grades.
the remuneration of directors, executives and staff is reviewed
by the Board with specific oversight and direction provided by the
remuneration and Nomination Committee. the Committee seeks
advice from independent specialist remuneration advisers.
Executive remuneration structure
Remuneration mix
Boral’s executive remuneration is structured as a mix of fixed
annual remuneration and variable remuneration, through ‘at risk’
short term and long term incentive components. the mix of these
components varies for different management levels. for the current
Ceo and senior executives the proportions are:
FIXED ANNuAL
REMuNERATION
AT RISk
STI
LTI
Chief executive officer
33.3%
33.3%
33.3%
senior executives¹
50–56%
21–25% 23–26%
1 Percentages vary between individuals. this is a range for the group.
While fixed remuneration is designed to provide a predictable
‘base’ level of remuneration, the short term and long term incentive
programs reward executives when pre-determined performance
conditions are met or exceeded. Both schemes have minimum
periods of employment that must also be met.
fixed annual remuneration
What is included in fixed remuneration?
fixed annual remuneration includes base salary, non-cash benefits
such as provision of a vehicle (including any fBt charges) and
superannuation contributions.
When and how is fixed remuneration reviewed?
remuneration levels are reviewed annually by the remuneration
and Nomination Committee and the Board through a process that
ensures an executive’s fixed remuneration remains competitive
with the market and reflects an employee’s skills, experience,
accountability and general performance.
What market benchmark is applied?
external benchmark market data from hay group’s Industrial and
service sector is used to determine remuneration midpoint levels
of fixed remuneration for senior executives and other executives.
short term incentive (sti)
What is the STI plan?
the stI is an ‘at risk’ cash payment awarded annually based
on performance against pre-set objectives.
Who participates in the STI plan?
stIs are provided to employees who have significant influence over
the annual financial outcomes of business units. approximately
6% of Boral employees participated in the stI plan in 2009/10.
51
Why does the Board consider the STI an appropriate incentive?
the stI plan is designed to put a proportion of executive
remuneration at risk against meeting:
• financial targets linked to annual budget performance
metrics; and
• non-financial targets linked to the measures that drive
long term sustainability.
Are both target and stretch performance conditions set?
Yes. the performance conditions set under the stI have been
designed to motivate and reward high performance. If performance
exceeds the already challenging targets, the stI will deliver higher
rewards to executives.
What is the value of the STI opportunity?
the Ceo has a target reward set at 100% of fixed remuneration
and stretch reward set at 140%. senior executives have a target
reward of 37.5 – 50% of fixed remuneration. the maximum stI
opportunity for executives other than the Ceo is set at double
the target reward. this is benchmarked at the 75th percentile
of the market based on external data. stretch outcomes require
results which significantly exceed budget, and are only achieved
in exceptional circumstances.
What are the performance conditions?
the stI performance measures vary depending on the
individual executive’s position, and include both financial
and non-financial measures.
financial measures
non-financial measures
67% of stI for Ceo and
divisional Managing directors
33% of stI for Ceo and
divisional Managing directors
50% of stI for other executives
50% of stI for other executives
this is measured at group,
divisional and business unit
levels, and is based on profit
after tax for the Ceo and
profit after funding for other
executives
these are linked to critical
business sustainability
measures including:
• safety
• cost reduction
• environment and
climate change
• customer satisfaction
• project outcomes
• succession planning
• strategy development
Why were these conditions chosen?
these stI performance measures have been selected because
they are directly linked to the creation of shareholder value and the
strategic direction of the Company.
How is performance measured?
targets are set at the beginning of the financial year and
performance against these targets is determined at the end of the
year. abnormal or unanticipated factors which may have affected
the Company’s performance during the year will only be considered
in extraordinary circumstances and with Board approval.
Who assesses performance against targets?
the Ceo assesses the performance of his direct reports and
confers with the remuneration and Nomination Committee and
the Board regarding his assessment. the Chairman in consultation
with the remuneration and Nomination Committee and the Board
assesses the performance of the Ceo against the objectives set at
the beginning of the year.
long term incentive (lti)
What is the purpose of the LTI plan?
the LtI plan aligns senior executive reward with shareholder
value, by tying this component of remuneration to the achievement
of performance conditions which underpin sustainable
long term growth.
What form does the LTI take?
the LtI is granted annually as either options and/or rights over
ordinary Boral shares.
Who participates in the LTI plan?
LtIs are provided to senior executives who are considered by the
Board to have significant influence over the long term outcomes
of Boral. only 1% of employees participate in the LtI plan.
Is there a limit on the number of equity units issued?
the number of rights or options that may be offered to executives
when aggregated with the number of shares held in the Company’s
employee share Plan, Non-executive directors’ share Plan, senior
executive option Plan and senior executive Performance share
Plan and the number of shares that would be issued on exercise
or vesting of outstanding LtIs is not permitted to exceed 5% of the
total number of issued shares at the time of the offer.
What is the value of the LTI opportunity?
the size of grants under the LtI plan is set as a percentage of
fixed annual remuneration (100% for the Ceo and from 40 – 50%
for senior executives). the number of rights or options granted
is calculated based on the fair Market value of the right or option
as calculated by an independent valuer (PricewaterhouseCoopers)
using a Monte Carlo simulation analysis at the date of grant.
Participants in the LtI plan will not derive any value from their LtI
grants unless challenging performance hurdles are achieved.
How is reward delivered under the LTI program?
each right or option granted under the LtI plan is an entitlement to
a fully-paid ordinary share in the Company on terms and conditions
determined by the Board, including vesting conditions linked to
service and performance measured at three, five and seven years.
If the vesting conditions are satisfied, the rights and options vest
and the underlying shares may be delivered to the participating
executive. the Board determines the mix of options and rights for
each grant annually. for the grant made in 2009/10, the entire LtI
award was delivered in the form of rights.
52 Boral limited annual report 2010
seNIor exeCutIve reMuNeratIoN
CoNtINued
Do executives pay for the LTI instruments?
rights and options are offered at no cost to the senior executive
at the time of the grant. No price is payable upon vesting of rights;
however, an exercise price (set at the time of the grant) is payable
upon exercise of an option. the exercise price is determined at
date of grant based on the average closing price of Boral shares
over the five trading days following the agM.
What rights are attached to LTI instruments?
rights and options do not carry voting or dividend rights; however,
shares allocated upon vesting of rights and exercise of options will
carry the same rights as other ordinary shares.
Are there restrictions on dealing with shares allocated under
the LTI plan?
Boral has a policy on share trading which applies to directors,
officers and senior executives. this policy prohibits executives
entering into hedge and other derivative transactions regarding
options or rights granted to them as LtIs. shares allocated to
participants upon vesting of their LtIs may only be dealt with in
accordance with the share trading Policy.
the percentage of options and rights that vest will depend on
Boral’s relative tsr ranking over the measurement period, as
set out in the table below:
Boral’s tsr rank in asX 100
% of options/rights that vest
Below 50th percentile
Nil
Between 50th and 74th
percentile
Progressive vesting from 50–98%
(2% increase for each higher
percentile ranking)
at or above 75th percentile
100%
any options and rights that do not vest, based on performance
over the initial three year measurement period, will be available
for vesting based on performance over five year and seven year
measurement periods. options and rights that have not vested
following the seven year measurement period automatically lapse.
What happens when an executive leaves the Company?
generally, unvested options or rights will lapse, except where the
executive ceases employment due to retirement after the age of 62
or when the Board at its sole discretion determines otherwise.
given that the Company’s comparative tsr performance is tested
over a minimum three year period, satisfaction of the performance
condition attaching to the rights granted for 2009/10 will not be
measured until the 2012/13 financial year.
What is the performance hurdle?
the performance hurdle for the LtI plan is tied to the Company’s
relative total shareholder return (tsr). tsr represents the change
in capital value of a listed entity’s share price over a period, plus
reinvested dividends, expressed as a percentage of the opening
value. the compound growth in the Company’s tsr over the
performance measurement period is compared with the tsr
performance of all other companies comprising the asx 100
on the date of grant. the Board has discretion to adjust the
comparator group to take into account events including but
not limited to, takeovers or mergers that might occur during
the performance period.
How is TSR measured?
the performance hurdle for the 2008 and subsequent grants is
measured on three test dates, reflecting performance periods of
three, five and seven years. this testing frequency is designed to
span a typical building industry cycle so that executive incentive
and reward are linked to shareholder reward. In assessing whether
the performance hurdles have been met, the Company receives
independent data which sets out the Company’s tsr growth and
that of each company in the comparator group. the level of tsr
growth achieved by the Company is given a percentile ranking
having regard to its performance compared with the performance
of other companies in the comparator group (the highest ranking
company being ranked at the 100th percentile). opening and
closing share prices are calculated using the volume weighted
average price over the 60 days up to and including the first and last
day of the performance period (as applicable). this ‘smoothing’
of tsr reduces the impact of share price volatility.
Why does the Company think the TSR hurdle is appropriate?
relative tsr has been chosen as a performance hurdle because
it provides a direct link between executive reward and shareholder
return. executives will not derive any value from the LtI component
of their remuneration unless the Company’s performance is at least
at the median of the asx 100.
remuneration outcomes for 2009/10
In response to the sustained economic downturn and shareholder
concerns, the Board agreed to freeze non-executive directors’
fees and management agreed to freeze executive salaries for
2009/10. the salary and non-executive director fee freezes
resulted in no general increases occurring between september
2008 and september 2010.
following 2008/09 when the Ceo and senior executives elected to
forego their entitlement to short term Incentives, stI grants were
made for 2009/10. these grants were related to the achievement of
financial and non-financial performance objectives which were set
at the beginning of the financial year. financial measures typically
account for 50% to 67% of the stI outcomes and the measure
used for executives other than the Ceo is Profit after funding
(Paf) which is the business profit less a funding charge for assets
employed. for the Ceo, Profit after tax (Pat) is the financial
measure. the financial outcomes are assessed against budgeted
results and despite the 2009/10 year being another difficult one
for profitability overall for Boral, these awards reflect progress
towards key strategic objectives and improved financial performance
against budgeted outcomes. Many of Boral’s businesses delivered
improved financial outcomes relative to the prior year.
three senior executives, emery severin, Ken Barton and
John douglas, left Boral during or immediately after the year
end and their end of service payments reflect Boral pre-existing
policy and contractual obligations.
53
implications of rod pearse’s retirement
the details of Mr Pearse’s post-employment and share-based
payments were disclosed fully in the 2009 remuneration report.
amounts shown for the 2009/10 year in the remuneration table
on page 58 reflect remuneration for the period worked and the
proportion of his post-employment and share-based payments
which relate to this employment period according to the
requirements of the accounting standard.
any unexercised options and unvested rights at the time
of Mr Pearse’s retirement will continue to be subject to the
performance hurdle until normal expiry – seven years from date
of grant. It is important to note that these unvested rights and
options will not vest if Boral’s relative total shareholder return
(tsr) does not meet the hurdle rate. options issued from 2005-
2007 had exercise prices between $6.83 and $7.70. to provide
value to Mr Pearse, Boral’s tsr needs to be in the top half of the
asx 100 comparator group and the share price needs to exceed
the exercise price.
Business and organisation review
a strategic review of Boral’s portfolio of businesses and relative
performance was carried out in the second half of 2009/10. this
resulted in changes to the group’s organisational structure at
both the divisional level and within divisions to ensure more focus
on manufacturing and sales and marketing excellence, working
together and reducing complexity.
the organisational changes introduced will require a fundamental
change to stI measures to better align them with the stated
objectives of the group. the remuneration and Nomination
Committee, with advice from independent advisors and
consultation with management, have designed an stI approach
which aligns management reward more closely to the interests
of shareholders.
the main changes include performance measures which will be
entirely focused on the achievement of the financial outcomes,
specifically the group’s earnings and working capital management.
the remuneration and Nomination Committee will also continue
to review other remuneration components and the performance
management process to ensure delivery of business strategy and
non-financial objectives.
Employment contract details
CEo remuneration structure and contract terms
following rod Pearse’s retirement, a new Ceo contract was
agreed for Mark selway. In setting the new contract terms, the
Board took into account the views expressed by shareholders,
governance bodies and other stakeholders.
a new benchmark comparator group was established against
which to set and review the Ceo’s fixed and variable remuneration.
this comparator group is more closely aligned to Boral’s current
market position and was selected from similar companies within
a range of Boral’s market capitalisation. the group includes
companies from the Industrials and Materials sectors of the
asx 200 with a 12 month moving average market capitalisation
between 33% and 300% of Boral’s market capitalisation and
with annual revenue between 33% and 300% of Boral’s revenue.
the duration of the Ceo’s contract was carefully considered by the
Board and accordingly a rolling 12 month contract was adopted.
Mr selway’s commencing fixed remuneration was set at
$1,750,000 per annum. his annual short term Incentive
entitlement is 100% of fixed remuneration for ‘target’ performance
with a maximum of 140% of fixed remuneration for ‘stretch’
performance. stI measures will be typically weighted at 67% for
financial outcomes (currently based on Boral’s profit after tax)
although for the proportion of 2009/10 in which he was employed,
the Board linked part of his short term incentive to completion of a
strategic review of Boral’s portfolio of businesses. at the 2009 agM
shareholders approved an initial grant of share rights to Mr selway
equivalent to 100% of his fixed remuneration as disclosed in the
table on page 57. Mr selway’s Long term Incentive entitlement is
100% of fixed remuneration annually granted as options or share
rights in accordance with the Boral LtI Plan rules. the number
of equity units granted are determined based on the fair market
value calculated in accordance with accounting standard aasB 2.
If termination of employment occurs for reasons other than
resignation or performance, unvested LtI grants continue beyond
termination in accordance with the terms of the grant, unless the
Board determines otherwise.
the Board also considered the issue of termination payments.
If the Company terminates Mr selway’s employment without
cause, he is entitled to 12 months notice (or three months notice
in the case of illness). Mr selway may terminate his employment
immediately if there is a fundamental change in his role or
responsibilities without his consent. If Mr selway’s contract is
terminated without cause or as a result of a fundamental change,
he will be entitled to a separation payment. Mr selway will not
receive a restraint payment as part of any post-employment
arrangements and any separation payment he receives will not
exceed one year’s fixed remuneration (and will be inclusive of any
payment in lieu of notice to which he is entitled). Mr selway will not
receive a separation payment if he resigns on six months notice,
or is terminated immediately for cause.
Contract terms for other executives
Key features of the employment arrangements for senior
executives include:
• employment continues until terminated by either the executive
or Boral;
• notice periods are typically six months, but reduce where
termination is for performance reasons; and
• termination for reasons other than resignation or performance
results in a termination payment of one year’s fixed remuneration.
a limited number of us senior executives have entered into
executive transition agreements with Boral Industries Inc. pursuant
to which benefits (of up to two times annual salary plus stI) are
payable in the event of termination following a change of control
of Boral Limited or Boral Industries Inc. these payments are
consistent with market practice for us executives.
54 Boral limited annual report 2010
CoMPaNY PerforMaNCe
outCoMes
Company performance
the chart below demonstrates how the Company’s total shareholder return (tsr), which includes
share price movements and dividends, has performed relative to the asx 100 accumulation Index.
In the ten years to 30 June 2010, Boral has achieved an annual tsr of 14.1% which is above the
median of asx 100 companies over the same period.
strong earnings improvement in the 2000 to 2006 period established a platform upon which the
Company has been able to maintain high long term returns for shareholders despite the global economic
downturn and the significant decline in us housing activity experienced subsequently.
BLD vs ASX 100 Accumulation Index TSR
10 years to 30 June 2010
R
S
T
%
500
400
300
200
100
0
–100
1
6
2
,
2
0
0
n
u
J
0
0
c
e
D
1
0
n
u
J
1
0
c
e
D
2
0
n
u
J
2
0
c
e
D
3
0
n
u
J
3
0
c
e
D
4
0
n
u
J
4
0
c
e
D
5
0
n
u
J
5
0
c
e
D
6
0
n
u
J
6
0
c
e
D
7
0
n
u
J
7
0
c
e
D
8
0
n
u
J
8
0
c
e
D
9
0
n
u
J
9
0
c
e
D
0
1
n
u
J
1
6
2
,
2
Boral Ltd
ASX 100 Accumulation Index
the effect of the business cycle is demonstrated in the charts below which reflect the Company’s
earnings Per share, return on equity and full year dividends since 2000.
earnings per share1
(cents)
return on equity1
(percent)
9
0
dividends per share
(cents)
4
6
3
6
2
6
0
5
1
4
9
4
4
3
7
2
7
.
5
1
4
.
5
1
2
.
3
1
.
2
3
1
9
.
9
3
.
8
0
.
0
1
5
.
8
9
8 1
1
4
3
4
3
4
3
4
3
0
3
3
2
2
2
2
2
8
.
4
0
.
5
3
1
5
.
3
1
1
0
2
0
3
0
4
0
5
0
6
0
7
0
8
0
9
0
0
1
1
0
2
0
3
0
4
0
5
0
6
0
7
0
8
0
9
0
0
1
1
0
2
0
3
0
4
0
5
0
6
0
7
0
8
0
9
0
0
1
1 excludes financial impact of significant items.
500
500
400
380
300
260
200
140
100
20
0
-100
-100
55
short term performance – 2009/10
the Company’s overall financial performance during the 2009/10 year (before significant items) was marginally higher than the prior year
despite a 5.7% reduction in revenue due to the ongoing impact of the poor market conditions in the usa, thailand and in the construction
related activities of Boral’s australian businesses.
despite these conditions, australian building products businesses delivered higher profits than in the prior year and more specifically Boral
performed well in the following areas:
• australian Construction Materials, Plasterboard and Clay & Concrete Products divisions performed above expectations due in part to
improved housing starts and infrastructure spend together with the benefit of efficiency gains;
• cost reduction programs delivered improved compressible costs;
• increased pricing outcomes in most businesses despite volume and economic pressures;
• improved cash flow performance and gearing levels; and
• continued improvement in sustainability performance.
short term Incentives reward current year performance and are based on both financial and non-financial outcomes.
2009/10 stI award payments for the Ceo and senior executives are shown in the table below expressed as a percentage of maximum stI
vested and forfeited. these stI awards reflect the fact that a number of businesses exceeded budgeted outcomes for the year. stI awards
are made in the form of a cash bonus and are being paid on 15 september, 2010.
short term incentive vested/forfeited
Executives
M W selway
W r Batstone
M g Beardsell
M P Kane
a d Poulter
N J Clark
former Executives
r t Pearse
K M Barton
e s severin
J M douglas
total
total
SHORT TERM INcENTIvE
cASH BONuS
A$000’S
% vESTED % FORFEITED
%
%
2010
2009
2010
2009
2010
2009
2010
2009
2010
2009
2010
2009
2010
2009
2010
2009
2010
2009
2010
2009
2010
2009
1,100.0
0.0
461.3
0.0
272.8
0.0
203.5
0.0
65.1
0.0
294.5
0.0
90%
0%
78%
0%
54%
0%
90%
0%
58%
0%
68%
0%
297.0
20%
0%
0%
0%
0%
0%
100%
0%
0.0
0.0
0.0
0.0
0.0
750.3
0.0
3,444.5
0.0
10%
0%
22%
100%
46%
100%
10%
0%
42%
0%
32%
100%
80%
100%
100%
100%
100%
100%
0%
100%
56 Boral limited annual report 2010
CoMPaNY PerforMaNCe outCoMes
CoNtINued
long term performance
Boral’s LtI grant in 2009 was awarded in the form of share acquisition rights as was its practice in 2008.
the primary conditions applying to these grants include a minimum vesting period of three years with a
total life of seven years and a market-based performance hurdle which measures Boral’s tsr relative to
the tsr of companies that comprise the asx 100 at grant date (the comparator group). testing against
the hurdle is on three specific dates after performance periods of three, five and seven years.
When measured over the long term, Boral’s tsr performance has been satisfactory; however,
economic conditions mostly relating to housing and construction in recent years have resulted in Boral’s
tsr underperforming the comparator group.
LtI grants in 2000, 2001 and 2002 all reached a relative tsr of greater than the 75th percentile and
100% have vested. these grants delivered benefits to executives at a time when shareholders also
benefited from substantial share price and dividend growth.
the 2003 grant has reached 58% vesting and the 2004, 2005 and 2006 grants have not yet reached
the minimum level required for vesting. the 2007, 2008 and 2009 grants have not yet reached a
measurement date.
the LtI grants from october 2003 onwards are within the seven year life and the performance hurdle
may still be reached before they lapse.
the table below demonstrates the level of performance achieved thus far for each of the LtI grants
still on foot.
gRANT DATE
EXPIRY DATE
OPTION
EXERcISE PRIcE MIX OF OPTIONS/RIgHTS
PERFORMANcE HuRDLE vESTINg LEvEL
oct 03
oct 04
oct 05
Nov 06
Nov 07
Nov 08
Nov 09
oct 10
oct 11
oct 12
Nov 13
Nov 14
Nov 15
Nov 16
$5.57
$6.60
$7.70
$7.32
$6.83
N/a
N/a
100% options
50% options 50% rights
50% options 50% rights
50% options 50% rights
58%
0%
0%
0%
50% options 50% rights
1st test date Nov 2010
100% rights
100% rights
1st test date Nov 2011
1st test date Nov 2012
57
long term incentives granted and movement during the year
details of options and rights granted and the movement of options and rights during the year held by the
Ceo and the senior executives are:
gRANTED
DuRINg THE
EXERcISED
vALuE OF
vALuE OF
OPTIONS
LAPSED/
OPTIONS cANcELLED AND RIgHTS
DuRINg
BALANcE AT
1 JuLY 2009 REMuNERATION a
YEAR AS vALuE OF
gRANT b
DuRINg AND RIgHTS
EXERcISED c
THE YEAR
LAPSED/ BALANcE AT
THE YEAR cANcELLED d 30 JuNE 2010
NuMBER
NuMBER
$
NuMBER
$
NuMBER
$
NuMBER
Executives
M W selway
options
rights
–
–
–
–
–
431,034e 1,749,998
W r Batstone
options
351,470
–
–
rights
153,637
82,463
334,800
M g Beardsell
options
131,500
–
–
rights
59,688
38,530
156,432
M P Kane
a d Poulter
N J Clark
options
rights
options
rights
options
rights
–
–
–
–
96,900
42,831
–
–
–
–
–
–
–
–
–
–
35,829
145,466
former Executives
r t Pearse
options
6,375,100
rights
367,036
K M Barton
options
390,000
–
–
–
–
–
–
rights
163,082
100,985
409,999
e s severin
options
621,200
–
–
rights
225,943
119,601
485,580
J M douglas
options
303,252
–
–
rights
177,502
102,661
416,804
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(3,828)f
2,220
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
431,034
351,470
236,100
131,500
98,218
–
–
–
–
93,072
–
78,660
– 6,375,100
–
–
–
–
–
–
–
367,036
390,000
264,067
621,200
345,544
303,252
280,163
a No options were granted to senior executives during the year. rights were granted to senior executives on 5 November 2009 with the earliest vesting date on 5 November
2012 and the last vesting date (expiry date) of the rights on 5 November 2016.
b the fair value of rights granted on 5 November 2009, calculated using a Monte Carlo simulation analysis, is $4.06 per right.
c Calculated per option or right as the last sale price of Boral shares on the date of exercise less the exercise price (if applicable).
d value is calculated at fair market value of option or right on date of grant.
e Initial grants of rights to M selway on 1 January 2010 in accordance with his service contract and subject to the same terms and conditions as the grant to senior executives
on 5 November 2009 (including the same performance hurdle and vesting period).
f relates to october 2003 options with an exercise price of $5.57 per option.
No options or rights vested or were forfeited during the year.
the number of options and rights included in the Balance at 1 July 2009 for current executives is:
Wr Batstone – 2003 – 53,970 options; 2004 – 56,800 options, 15,218 rights; 2005 – 71,700 options, 18,849 rights; 2006 – 74,900 options, 20,465 rights;
2007 – 94,100 options, 24,481 rights; 2008 – 74,624 rights.
Mg Beardsell – 2003 – 18,400 options; 2004 – 11,100 options, 2,976 rights; 2005 – 25,500 options, 6,714 rights; 2006 – 34,100 options, 9,310 rights;
2007 – 42,400 options, 11,034 rights; 2008 – 29,654 rights.
NJ Clark – 2003 – 6,600 options; 2004 – 18,900 options, 5,078 rights; 2005 – 21,300 options, 5,604 rights; 2006 – 22,200 options, 6,056 rights;
2007 – 27,900 options, 7,245 rights; 2008 – 18,848 rights.
the estimated minimum value of rights yet to vest is nil and the maximum value is the number of rights multiplied by the sale price of Boral shares at 30 June 2010 of $4.82.
58 Boral limited annual report 2010
exeCutIve
reMuNeratIoN taBLe
Executive total remuneration
A$000’S
cASH
SALARY
SHORT TERM
POST EMPLOYMENT
SHORT
NON
TERM MONETARY f
SuPER-
END OF
SHARE BASED
PAYMENT a
OTHER
LONg TERM
TOTAL
INcENTIvE BENEFITS ANNuATION SERvIcE OPTIONS RIgHTS
2010
2009
2010
2009
2010
2009
2010
2009
Executives
M W selway
Chief executive officer
(appointed 1 January 2010)
W r Batstone
Managing director,
Boral Building Products
M g Beardsell
Managing director,
Boral Cement
M P Kane
2010
President, Boral Industries Inc. 2009
(appointed 15 february 2010)
a d Poulter
Chief financial officer
(appointed 1 May 2010)
N J Clark
executive general Manager,
Clay and Concrete
former Executives
r t Pearse
Managing director and Ceo
(retired 31 december 2009)
K M Barton
Chief financial officer
(resigned 28 february 2010)
e s severin
2010
President, Boral Industries Inc. 2009
(resigned 5 March 2010)
J M douglas
executive general Manager,
australian Construction Materials
(resigned 9 July 2010)
total
total
2010
2009
2010
2009
2010
2009
2010
2009
2010
2009
1,022.6 g 1,100.0
0.0
0.0
636.1
629.0
461.3
0.0
617.0
138.9
272.8
0.0
170.0
0.0
203.5
0.0
122.6
0.0
65.1
0.0
560.5
222.1
294.5
0.0
1,248.0
2,461.3
297.0
0.0
537.0
787.5
474.4
791.8
0.0
0.0
0.0
0.0
0.0
0.0
19.0
19.0
19.0
4.3
26.8
0.0
0.0
0.0
0.0
0.0
9.5
19.0
12.7
19.0
7.2
0.0
107.9
106.6
14.5
3.1
0.0
0.0
2.4
0.0
14.5
5.8
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
173.6
0.0
17.0 2,320.4
0.0
0.0
64.9
72.5
164.1
109.0
10.6 1,463.9
946.6
10.5
26.6
6.4
69.0
9.7
10.3 1,029.2
164.7
2.3
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
19.4
9.0
52.4
12.8
0.0
0.0
2.0
0.0
9.3
3.7
400.3
0.0
192.1
0.0
950.6
253.4
252.0
449.2 b 1,352.9
497.0 4,043.2 3,927.9
181.4
522.1
10.4 3,800.4
41.0 11,511.5
9.6
13.9
0.0
0.0
40.6 d
71.6
–1.2 d
113.6
9.0
607.7
13.1 1,018.7
233.1
635.1
68.5
102.8
930.5 b
0.0
225.9 c 1,061.5 c
161.4
108.3
7.9 3,001.8
13.2 1,812.6
819.1
808.8
750.3
0.0
19.0
19.0
14.5
13.9
833.6 b
0.0
37.9 e
69.5
–12.6 e
120.1
13.7 2,475.5
13.5 1,044.8
6,207.3 3,444.5
0.0
5,839.4
339.1
715.4
491.1 2,213.3 1,768.2 1,688.2
743.1 4,043.2 4,265.2 1,048.7
90.2 16,241.9
97.3 16,752.3
a the fair value of the options and sars is calculated at the date of grant using the
Monte Carlo simulation analysis. the value is allocated to each reporting period
evenly over the period of five years from the grant date. the value disclosed
above is the portion of the fair value of the options and sars allocated to this
reporting period.
b Contractual payments to Mr r Pearse, Mr e severin and Mr J douglas payable
upon termination of employment.
c Includes an expense for Mr e severin for options $157,316 and rights $906,412
that would normally have been amortised over future years.
d Includes an adjustment for Mr K Barton for options $–4,090 and rights $–114,490
that lapsed on termination or would normally have been amortised over future years.
e Includes an adjustment for Mr J douglas for options $–28,118 and rights
$–209,837 that lapsed on termination or would normally have been amortised
over future years.
f Includes parking and expatriate costs.
g Includes pre-employment payments to M selway for duties undertaken prior
to 1 January 2010.
Proportion of remuneration which consists of options/rights is M selway 7%,W Batstone 16%, M Beardsell 9%, M Kane 0%, a Poulter 0%, N Clark 8%, r Pearse 40%,
K Barton 6%, e severin 43%, J douglas 1%.
Proportion of remuneration that is performance-based is M selway 55%, W Batstone 47%, M Beardsell 36%, M Kane 51%, a Poulter 34%, N Clark 39%, r Pearse 48%,
K Barton 6%, e severin 43%, J douglas 31%.
59
NoN-exeCutIve dIreCtors’
reMuNeratIoN
Non-executive directors’ remuneration is reviewed annually by the full Board. this review takes account
of the recommendations of the remuneration and Nomination Committee and external benchmarking
of remuneration for directors of comparable companies.
the non-executive directors receive fixed remuneration only which includes base remuneration (Board
fees) and Committee fees. It is structured on a total remuneration basis which is paid in the form of
cash and superannuation contributions. the directors do not receive any variable remuneration or
other performance related incentives such as options or rights to shares and no retirement benefits
are provided to non-executive directors other than superannuation contributions.
the current aggregate fee Limit of $1,250,000 pa was approved at the Company’s agM in
october 2006.
In line with the salary freeze for senior executives in Boral, the Board determined that no increase in
non-executive director fees should occur during the 2009/10 financial year. the current remuneration
of non-executive directors is:
POSITION
BASE REMuNERATION
cOMMITTEE FEES
TOTAL REMuNERATION
Chairman
Committee Chairman
director
$338,250
$123,000
$123,000
$13,500
$20,250
$13,500
$351,750
$143,250
$136,500
the total annual non-executive director remuneration for the current Board of seven non-executive
directors for the 2009/10 financial year was $1,199,733 which includes superannuation.
the Board intends to seek shareholder approval for an increase in the maximum aggregate amount
of non-executive directors’ remuneration at the 2011 annual general Meeting.
the remuneration of the non-executive directors is set out in the table below.
60 Boral limited annual report 2010
NoN-exeCutIve dIreCtors’ reMuNeratIoN
CoNtINued
non-executive directors’ total remuneration
A$000’S
directors
J B Clark
e J doyle
(appointed 16 March 2010)
r L every
Chairman (from 1 June 2010)
r a Longes
J Marlay
(appointed 1 december 2009)
P a rayner
J r Williams
former non-executive directors
e J Cloney
(retired 28 october 2009)
K J Moss
(retired 31 May 2010)
total
total
POST
EMPLOYMENT
SHARE BASED
TOTAL
PAYMENT REMuNERATION
SHORT TERM
BOARD AND
cOMMITTEE FEES SuPERANNuATION
SHARE PLAN
2010
2009
2010
2009
2010
2009
2010
2009
2010
2009
2010
2009
2010
2009
2010
2009
2010
2009
2010
2009
131.0
119.5
36.8
0.0
142.9
119.5
125.2
119.5
69.5
0.0
131.4
103.9
125.2
119.5
43.8
125.4
309.0
302.7
1,114.8
1,010.0
12.0
10.2
3.3
0.0
11.5
10.2
11.3
10.2
6.3
0.0
11.8
8.7
11.3
10.2
3.9
10.7
13.5
13.9
84.9
74.1
0.0
6.8
0.0
0.0
0.0
6.8
0.0
6.8
0.0
0.0
0.0
4.6
0.0
6.8
0.0
7.2
0.0
35.2
0.0
74.2
143.0
136.5
40.1
0.0
154.4
136.5
136.5
136.5
75.8
0.0
143.2
117.2
136.5
136.5
47.7
143.3
322.5
351.8
1,199.7
1,158.3
FINaNcIal statemeNts
Boral Limited Annual Report 2010
61
Income Statement
Statement of
comprehenSIve Income
BaLance Sheet
Statement of
changeS In equIty
caSh fLow Statement
62
63
64
65
66
noteS to the fInancIaL
StatementS
1 Significant accounting policies
2 Segments
3 Profit for the period
4 Significant items
5
Discontinued operations
and assets held for sale
6
Income tax expense
7 Dividends
8 Earnings per share
9 Cash and cash equivalents
10 Receivables
11 Inventories
12 Investments accounted
for using the equity method
13 Other financial assets
14 Property, plant and equipment
15 Intangible assets
16 Other assets
17 Payables
18 Interest bearing loans
and borrowings
19 Current tax liabilities
20 Deferred tax assets
and liabilities
21 Provisions
22 Issued capital
23 Reserves
24 Contingent liabilities
25 Commitments
26 Employee benefits
27 Loans and borrowings
28 Financial instruments
29 Key management
personnel disclosures
30 Auditors’ remuneration
31 Acquisition/disposal of
controlled entities
32 Controlled entities
33 Related party disclosures
34 Notes to cash flow statement
35 Parent entity disclosures
36 Deed of cross guarantee
37 Subsequent events
Statutory StatementS
67
73
76
78
80
81
82
83
84
84
85
86
88
88
90
91
92
92
92
93
95
97
97
99
100
100
106
107
115
120
120
122
125
126
127
129
131
132
62
Boral Limited Annual Report 2010
INcome statemeNt
Boral Limited and Controlled Entities
For the year ended 30 June
continuing operations
Revenue
Cost of sales
Distribution expenses
Selling and marketing expenses
Administrative expenses
Other income
Other expenses
Share of net profit/(loss) of associates
profit before net financing costs and income tax expense
Financial income
Financial expenses
Net financing costs
profit/(loss) before income tax expense
Income tax benefit
profit/(loss) from continuing operations
Discontinued operations
Profit/(loss) from discontinued operations (net of income tax)
net profit/(loss)
attributable to:
Members of the parent entity
Non-controlling interest
net profit/(loss)
Basic earnings per share
Diluted earnings per share
continuing operations
Basic earnings per share
Diluted earnings per share
CONSOLIDAtED
Note
2010
$ millions
2009
$ millions
3
4,493.8
4,727.7
(3,050.8)
(3,144.1)
(706.6)
(162.6)
(347.3)
(777.8)
(190.6)
(366.7)
(4,267.3)
(4,479.2)
3
3
3, 12
3
3
6
5
8
8
8
8
25.8
(169.6)
(21.5)
61.2
5.3
(102.3)
(97.0)
(35.8)
18.3
(17.5)
61.4
(81.9)
0.5
228.5
37.5
(135.2)
(97.7)
130.8
32.5
163.3
(71.8)
(89.3)
(21.1)
142.2
(90.5)
1.2
(89.3)
(15.2c)
(15.2c)
(3.1c)
(3.1c)
142.0
0.2
142.2
24.1c
24.0c
27.7c
27.6c
the income statement should be read in conjunction with the accompanying notes which form an integral part of the financial statements.
statemeNt oF compreheNsIve INcome
Boral Limited and Controlled Entities
Boral Limited Annual Report 2010
63
For the year ended 30 June
net profit/(loss)
other comprehensive income
Actuarial loss on defined benefit plans
Exchange differences from translation of foreign operations taken to equity
Fair value adjustment on cash flow hedges
Fair value adjustment on available for sale financial assets
Income tax relating to components of other comprehensive income
total comprehensive income
total comprehensive income is attributable to:
Members of the parent entity
Non-controlling interest
total comprehensive income
CONSOLIDAtED
Note
2010
$ millions
2009
$ millions
(89.3)
142.2
26
23
23
23
(1.6)
11.1
10.7
–
(25.8)
(94.9)
(96.1)
1.2
(94.9)
(22.6)
(47.3)
(20.6)
(237.2)
144.9
(40.6)
(40.8)
0.2
(40.6)
the statement of comprehensive income should be read in conjunction with the accompanying notes which form an integral part of the financial statements.
64
Boral Limited Annual Report 2010
BalaNce sheet
Boral Limited and Controlled Entities
As at 30 June
current aSSetS
Cash and cash equivalents
Receivables
Inventories
Other
Assets classified as held for sale
totaL current aSSetS
non-current aSSetS
Receivables
Inventories
Investments accounted for using the equity method
Other financial assets
Property, plant and equipment
Intangible assets
Deferred tax asset
Other
totaL non-current aSSetS
totaL aSSetS
current LIaBILItIeS
Payables
Interest bearing loans and borrowings
Current tax liabilities
Provisions
Liabilities classified as held for sale
totaL current LIaBILItIeS
non-current LIaBILItIeS
Payables
Interest bearing loans and borrowings
Deferred tax liabilities
Provisions
totaL non-current LIaBILItIeS
totaL LIaBILItIeS
net aSSetS
equIty
Issued capital
Reserves
Retained earnings
total parent entity interest
Non-controlling interest
totaL equIty
the balance sheet should be read in conjunction with the accompanying notes which form an integral part of the financial statements.
CONSOLIDAtED
Note
2010
$ millions
2009
$ millions
9
10
11
16
5
10
11
12
13
14
15
20
16
17
18
19
21
5
17
18
20
21
22
23
157.0
783.7
548.5
63.3
59.5 –
100.5
776.9
632.6
67.0
1,612.0
1,577.0
19.2
85.3
294.1
26.8
33.2
61.7
298.9
30.0
2,785.1
3,104.0
277.6
307.8
43.3 –
66.0
3,597.4
5,209.4
640.9
8.9
98.9
246.0
9.9 –
78.6
3,914.2
5,491.2
608.9
6.7
28.5
200.2
1,004.6
844.3
22.1
33.3
1,330.7
1,607.4
118.9
107.0
1,578.7
2,583.3
2,626.1
170.6
82.0
1,893.3
2,737.6
2,753.6
1,724.0
1,691.4
(38.9)
938.4
2,623.5
2.6
(43.2)
1,104.2
2,752.4
1.2
2,626.1
2,753.6
statemeNt oF chaNges IN equIty
Boral Limited and Controlled Entities
Boral Limited Annual Report 2010
65
Balance at end of the year
1,724.0
(38.9)
938.4
2,623.5
For the year ended 30 June 2010
Balance at the beginning of the year
Net profit/(loss)
other comprehensive income
translation of assets and liabilities
of overseas controlled entities
translation of long-term borrowings and
foreign currency forward contracts
Fair value adjustment on cash flow hedges
Actuarial loss on defined benefit plans
Income tax relating to components of
other comprehensive income
total comprehensive income
transactions with owners in their capacity as owners
Shares issued under the dividend reinvestment plan
Shares issued upon the exercise of executive options
Dividend paid
Share-based payments
total transactions with owners in their capacity as owners
Other changes in non-controlling interest
For the year ended 30 June 2009
Balance at the beginning of the year
Net profit
Other comprehensive income
translation of assets and liabilities
of overseas controlled entities
translation of long-term borrowings and
foreign currency forward contracts
Fair value adjustment on available for sale financial assets
Fair value adjustment on cash flow hedges
Actuarial loss on defined benefit plans
Income tax relating to components of
other comprehensive income
total comprehensive income
transactions with owners in their capacity as owners
Shares issued under the dividend reinvestment plan
Shares issued upon the exercise of executive options
On-market share buy-back
Dividend paid
Share-based payments
total transactions with owners in their capacity as owners
Other changes in non-controlling interest
CONSOLIDAtED
Issued capital
$ millions
reserves
$ millions
retained total parent non-controlling
interest
earnings entity interest
$ millions
$ millions
$ millions
total equity
$ millions
1,691.4
–
(43.2)
–
1,104.2
(90.5)
2,752.4
(90.5)
1.2
1.2
2,753.6
(89.3)
CONSOLIDAtED
Issued capital
$ millions
Reserves
$ millions
Retained
earnings entity interest
$ millions
$ millions
total parent Non-controlling
interest
$ millions
total equity
$ millions
1,673.1
–
113.0
–
1,121.5
142.0
2,907.6
142.0
2.0
0.2
2,909.6
142.2
–
–
–
–
–
–
31.9
0.7
–
–
32.6
–
(66.3)
–
(66.3)
77.4
10.7
–
(26.4)
(4.6)
–
–
–
8.9
8.9
–
–
–
(1.6)
0.6
(91.5)
–
–
(74.3)
–
(74.3)
–
77.4
10.7
(1.6)
(25.8)
(96.1)
31.9
0.7
(74.3)
8.9
(32.8)
–
–
–
–
–
–
–
–
49.7
0.1
(31.5)
–
–
18.3
–
154.6
–
154.6
(201.9)
(237.2)
(20.6)
–
138.0
(167.1)
–
–
–
–
10.9
10.9
–
–
–
–
(22.6)
6.9
126.3
–
–
–
(143.6)
–
(143.6)
–
(201.9)
(237.2)
(20.6)
(22.6)
144.9
(40.8)
49.7
0.1
(31.5)
(143.6)
10.9
(114.4)
–
–
–
–
–
–
1.2
–
–
–
–
–
0.2
2.6
(66.3)
77.4
10.7
(1.6)
(25.8)
(94.9)
31.9
0.7
(74.3)
8.9
(32.8)
0.2
2,626.1
–
–
–
–
–
–
0.2
–
–
–
–
–
–
(1.0)
1.2
154.6
(201.9)
(237.2)
(20.6)
(22.6)
144.9
(40.6)
49.7
0.1
(31.5)
(143.6)
10.9
(114.4)
(1.0)
2,753.6
Balance at end of the year
1,691.4
(43.2)
1,104.2
2,752.4
the statement of changes in equity should be read in conjunction with the accompanying notes which form an integral part of the financial statements.
66
Boral Limited Annual Report 2010
cash Flow statemeNt
Boral Limited and Controlled Entities
For the year ended 30 June
caSh fLowS from operatIng actIvItIeS
Receipts from customers
Payments to suppliers and employees
Dividends received
Interest received
Borrowing costs paid
Income taxes paid
net caSh provIDeD By operatIng actIvItIeS
34
caSh fLowS from InveStIng actIvItIeS
Purchase of property, plant and equipment
Purchase of intangibles
Purchase of controlled entities and businesses (net of cash acquired)
Purchase of other investments
Loans to associates
Proceeds from sale of investments
Proceeds on disposal of non-current assets
net caSh uSeD In InveStIng actIvItIeS
caSh fLowS from fInancIng actIvItIeS
Proceeds from issue of shares
On-market share buy-back
Dividends paid (net of dividends reinvested under the Dividend Reinvestment Plan
of $31.9 million (2009: $49.7 million))
Proceeds from borrowings
Repayment of borrowings
net caSh uSeD In fInancIng actIvItIeS
net change In caSh anD caSh equIvaLentS
Cash and cash equivalents at the beginning of the year
Effects of exchange rate fluctuations on the balances of cash
and cash equivalents held in foreign currencies
Cash and cash equivalents at the end of the year
34
the cash flow statement should be read in conjunction with the accompanying notes which form an integral part of the financial statements.
CONSOLIDAtED
Note
2010
$ millions
2009
$ millions
4,967.9
5,403.6
(4,422.2)
(4,861.2)
545.7
26.6
6.4
(107.9)
(11.7)
459.1
542.4
49.5
4.9
(130.9)
(47.1)
418.8
(179.9)
(230.8)
–
–
(0.1)
(1.5)
–
44.8
(136.7)
0.7
–
(42.4)
8.4
(232.5)
(265.8)
56.6
100.5
(0.1)
157.0
(0.7)
(7.1)
(0.9)
(22.9)
205.5
49.2
(7.7)
0.1
(31.5)
(93.9)
188.6
(424.4)
(361.1)
50.0
47.4
3.1
100.5
Notes to the FINaNcIal statemeNts
Boral Limited and Controlled Entities
Boral Limited Annual Report 2010
67
1. Significant accounting policies
Boral Limited (the “Company”) is a company limited by shares
incorporated and domiciled in Australia whose shares are publicly
traded on the Australian Securities Exchange.
the consolidated financial report for the year ended 30 June 2010
comprises Boral Limited and its controlled entities (the “Group”).
the financial report was authorised for issue by the Directors on
3 September 2010.
a. Basis of preparation
the financial report is a general purpose financial report which has
been prepared in accordance with Australian Accounting Standards
adopted by the Australian Accounting Standards Board (AASB)
and the Corporations Act 2001. the financial report of the Group
complies with International Financial Reporting Standards (IFRS) and
interpretations adopted by the International Standards Board.
the financial report is presented in Australian dollars. the functional
currency is the principal currency in which subsidiaries and
associates operate.
the financial report has been prepared on the basis of historical cost,
except for derivative financial assets and financial assets classified
as available for sale which have been measured at fair value. the
carrying value of recognised assets and liabilities that are hedged
with fair value hedges are adjusted to record changes in the fair value
attributable to the risks that are being hedged.
Significant accounting judgements, estimates and assumptions:
the preparation of a financial report in conformity with Australian
Accounting Standards requires management to make judgements,
estimates and assumptions that affect the application of policies
and reported amounts of assets and liabilities, income and
expenses. the estimates and associated assumptions are based
on historical experience and various other factors that are believed
to be reasonable under the circumstances, the results of which
form the basis of making the judgements about carrying values of
assets and liabilities. Actual results may differ from these estimates.
the estimates and underlying assumptions are reviewed on an
ongoing basis. Revisions to accounting estimates are recognised
in the period in which the estimate is revised and in any future
periods affected.
In particular, information about significant areas of estimation,
uncertainty and critical judgements in applying accounting policies
that have the most significant effect on the amount recognised in the
financial statements relate to the following areas:
goodwill and intangibles: Judgements are made with respect
to identifying and valuing intangible assets on acquisition of new
businesses. the Group determines whether goodwill and intangibles
with indefinite useful lives are impaired at each balance date. these
calculations involve an estimation of the recoverable amount of a
cash generating unit to which goodwill and intangibles with indefinite
useful lives are allocated.
provision for restoration and environmental rehabilitation:
Restoration and environmental rehabilitation costs are part of
the Group’s operations where natural resources are extracted.
Provisions represent estimates of future costs associated with
closure and rehabilitation of various sites. the provision calculation
requires assumptions on closure dates, application of environmental
legislation, available technologies and consultant cost estimates.
the ultimate costs remain uncertain and costs may vary in response
to a number of factors including changes to relevant legislation and
ultimate use of the site.
Income taxes: the Group is subject to income taxes in Australia and
other jurisdictions in which Boral operates. Significant judgement
is required in determining the Group’s provision for income taxes.
Judgement is also required in assessing whether deferred tax assets
and deferred tax liabilities are recognised on the balance sheet.
Assumptions about the generation of future taxable profits depend
on management’s estimates of future cash flows. Changes in
circumstances will alter expectations, which may impact the amount
recognised on the balance sheet and the amount of other tax losses
and temporary differences not yet recognised.
Share-based payments: the Group measures the cost of equity-
settled transactions by reference to the fair value of the equity
instruments at the date at which they are granted. the fair value is
determined by an external valuer using a Monte Carlo simulation
option-pricing model.
estimation of useful lives of assets: Estimation for useful lives
of assets has been based on historical experience. In addition, the
condition of assets is assessed at least annually and considered
against the remaining useful life. Adjustments to useful lives are made
when considered necessary.
Defined benefit plans: Various actuarial assumptions are required
when determining the Group’s pension schemes and other post-
employment benefit obligations. these assumptions and the related
carrying amounts are disclosed in the employee benefits note.
changes in accounting policies: Starting as of 1 July 2009 the
Group has adopted the following new and amended Australian
Accounting Standards and AASB interpretations:
•
•
•
AASB 8 Operating Segments and AASB 2007-3 consequential
amendments to other accounting standards resulting from
this issue.
AASB 123 Borrowing Costs (revised) and AASB 2007-6
consequential amendments to other accounting standards
resulting from this issue.
AASB 101 Presentation of Financial Statements (revised
September 2007) and AASB 2007-8 consequential amendments
to other accounting standards resulting from this issue.
•
AASB 3 Business Combinations (revised).
•
AASB 127 Consolidated and Separate Financial Statements (revised).
Adoption of these standards has not resulted in any material
changes to the Group’s financial reports.
68
Boral Limited Annual Report 2010
Notes to the FINaNcIal statemeNts
Boral Limited and Controlled Entities
1. Significant accounting policies (continued)
accounting standards not yet effective: the AASB has issued
additional standards and interpretations that are effective for periods
commencing after the date of this financial report. the following
standards have been identified as those which are relevant to the
Group. these standards are available for early adoption at 30 June
2010, but have not yet been adopted by the Group:
•
•
AASB 9 Financial Instruments
periods beginning on/or after 1 January 2013. the standard
addresses the classification and measurement of financial assets.
– applicable to annual reporting
AASB 2009-8 Amendments to Australian Accounting Standards
– Group Cash-Settled Share-based Payment Transactions
[AASB 2] – applicable to reporting periods beginning on/or after
1 January 2010.
the Group has not yet assessed the impact of adoption of these
standards on its financial reports.
the accounting policies set out below have been applied consistently
to all periods presented in the consolidated financial report.
B. principles of consolidation
Subsidiaries: Subsidiaries are entities controlled by the Group.
Control exists when the Group has the power, directly or indirectly, to
govern the financial and operating policies of an entity so as to obtain
benefits from its activities. In assessing control, potential voting rights
that presently are exercisable or convertible are taken into account.
the financial statements of subsidiaries are included in the financial
report from the date that control commences until the date that
control ceases.
associates: Associates are those entities for which the Group
has significant influence, but not control, over the financial and
operating policies. the financial statements include the Group’s
share of the total recognised gains and losses of associates
on an equity accounted basis, from the date that significant
influence commences until the date that significant influence
ceases. When the Group’s share of losses exceeds its interest in
an associate, the Group’s carrying amount is reduced to nil and
recognition of further losses is discontinued except to the extent that
the Group has incurred legal or constructive obligations or made
payments on behalf of an associate.
Jointly controlled entities and assets: the interests of the Group
in unincorporated joint ventures and jointly controlled assets are
brought to account by recognising in its financial statements the
assets it controls and the liabilities that it incurs, and the expenses
it incurs and its share of income that it earns from the sale of goods
or services by the joint venture.
transactions eliminated on consolidation: Intragroup balances
and transactions, and any unrealised gains and losses arising from
intragroup transactions, are eliminated in preparing the consolidated
financial statements. Unrealised gains arising from transactions
with associates and jointly controlled entities are eliminated to
the extent of the Group’s interest in the entity. Unrealised losses
arising from transactions with associates are eliminated in the same
way as unrealised gains, but only to the extent that there is no
evidence of impairment.
c. revenue recognition
Revenue is recognised at fair value of the consideration received net
of the amount of goods and services tax (GSt).
Sale of goods revenue: Sale of goods revenue is recognised (net
of returns, discounts and allowances) when the significant risks and
rewards of ownership have been transferred to the buyer and the
amount of revenue can be reliably measured. Risks and rewards of
ownership are considered passed to the buyer at the time of delivery
of the goods.
rendering of services revenue: Revenue from rendering services
is recognised in proportion to the stage of completion of the contract
when the stage of contract completion can be reliably measured.
An expected loss is recognised immediately as an expense.
Land development projects: Revenue from the sale of land
development projects is recognised when all of the following
conditions have been met: contracts are exchanged; a significant
non-refundable deposit is received; and material conditions
contained within the contract are met.
Dividends: Revenue from dividends from other investments is
recognised once the right to payment is established.
D. government grants
Grants from the government are recognised at their fair value where
there is reasonable assurance that the grant will be received and the
Group will comply with all attached conditions.
Government grants relating to the purchase of property, plant and
equipment are included in non-current liabilities as deferred income
and are credited to the income statement on a straight-line basis
over the expected lives of the related assets.
e. Income tax
Income tax disclosed in the income statement comprises current
and deferred tax. Income tax is recognised in the income statement
except to the extent that it relates to items recognised directly in
equity, in which case it is recognised in equity.
Current tax is the expected tax payable on the taxable income for
the year, using tax rates enacted or substantively enacted at the
balance sheet date, and any adjustments to tax payable in respect to
previous years.
Deferred tax is provided using the balance sheet liability method,
providing for temporary differences between the carrying amounts of
assets and liabilities for financial reporting purposes and the amounts
used for taxation purposes. the following temporary differences are
not provided for: goodwill not deductible for tax purposes, the initial
recognition of assets or liabilities that affect neither accounting nor
taxable profits and differences relating to investments in subsidiaries
to the extent that they will probably not reverse in the foreseeable
future. the amount of deferred tax provided is based on the
expected manner of realisation or settlement of the carrying amount
of assets and liabilities, using tax rates enacted or substantively
enacted at the balance sheet date.
A deferred tax asset is recognised only to the extent that it is
probable that future taxable profits will be available against which
the asset can be utilised. Deferred tax assets are reduced to the
extent that it is no longer probable that the related tax benefit will
be realised.
Boral Limited Annual Report 2010
69
1. Significant accounting policies (continued)
tax consolidation: Boral Limited and its wholly owned Australian
controlled entities have elected to enter into tax consolidation
effective 1 July 2002.
the head entity, Boral Limited, and its wholly owned Australian
controlled entities continue to account for their own current and
deferred tax amounts. these tax amounts are measured as if each
entity in the tax consolidated group continues to be a stand alone
tax payer in its own right. Entities within the tax consolidated group
have entered into a tax sharing agreement with the head entity.
Under the terms of the tax sharing agreement, each of the entities in
the tax consolidated group has agreed to pay to or receive from the
head entity its current year tax liability or tax asset. Such amounts
are recorded in the balance sheet of the head entity in amounts
receivable from or payable to controlled entities.
taxation of financial arrangements (tofa): the Tax Law
Amendment (Taxation of Financial Arrangements) Act 2009
(tOFA legislation) has an application date of 1 July 2010.
tOFA changes the tax treatment of financial arrangements
including the tax treatment of hedging transactions. the Group
has not yet determined the potential effect of the tOFA legislation
on the financial statements.
f. 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 Australian taxation Office (AtO).
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 AtO is included as a current asset or liability in the balance sheet.
Cash flows are included in the cash flow statement on a gross basis.
the GSt components of cash flows arising from investing and
financing activities which are recoverable from, or payable to, the
AtO are classified as operating cash flows.
g. net financing costs
Financing costs include interest payable on borrowings calculated
using the effective interest rate method, finance charges in respect
of finance leases, exchange differences arising from foreign currency
borrowings to the extent that they are regarded as an adjustment
to interest costs and differences relating to the unwinding of the
discount of assets and liabilities measured at amortised cost.
Financing costs are recognised as an expense in the period in which
they are incurred, unless they relate to a qualifying asset. Financing
costs incurred for the construction of any qualifying asset are
capitalised during the period of time that is required to complete and
prepare the asset for its intended use or sale.
Financial income is recognised as it accrues taking into account the
effective yield on the financial asset.
h. foreign currencies
transactions: transactions in foreign currencies are translated
at the foreign exchange rate ruling at the date of the transaction.
Monetary assets and liabilities denominated in foreign currencies
at the balance sheet date are translated to Australian dollars at
the foreign exchange rate ruling at that date. Foreign exchange
differences arising on translation are recognised in the income
statement. Non-monetary assets and liabilities that are measured
in terms of historical cost in a foreign currency are translated using
the exchange rate at the date of the transaction.
translation: the financial statements of foreign operations are
translated to Australian dollars as follows:
•
assets (including goodwill) and liabilities for each balance sheet are
translated at the closing rate at the date of that balance sheet;
•
all resulting exchange differences are recognised as a separate
component of equity (foreign currency translation reserve); and
•
income and expenses for each income statement are translated at
average exchange rates approximating the rates prevailing on the
transaction dates.
On consolidation, exchange differences arising from the translation
of any net investment in foreign entities, and of borrowings
and other currency instruments designated as hedges of such
investments, are taken to foreign currency translation reserve.
When a foreign operation is sold, a proportionate share of such
exchange differences are recognised in the income statement
as part of the gain or loss on sale.
I. receivables
trade receivables are recognised initially at fair value and
subsequently measured at amortised cost, less allowance for
impairment. An allowance for impairment is established when
there is objective evidence that the Group will not be able
to collect all amounts due according to the original terms of
receivables. the amount of the allowance is the difference between
the asset’s carrying amount and the present value of estimated
future cash flows. the amount of the allowance is recognised in
the income statement.
J. Inventories
Inventories and work in progress are valued at the lower of cost
(including materials, labour and appropriate overheads) and net
realisable value. Cost is determined predominantly on the first-in-
first-out basis of valuation. Net realisable value is determined on the
basis of each entity’s normal selling pattern. Expenses of marketing,
selling and distribution to customers are estimated and are
deducted to establish net realisable value.
Land development projects: Land development projects are
stated at the lower of cost and net realisable value. Cost includes
the cost of acquisition, development and holding costs during
development. Costs incurred after completion of development
are expensed as incurred.
70
Boral Limited Annual Report 2010
Notes to the FINaNcIal statemeNts
Boral Limited and Controlled Entities
1. Significant accounting policies (continued)
K. non-current assets held for sale and discontinued operations
Non-current assets are classified as held for sale and stated at
the lower of their carrying amount and fair value less costs to sell
if their carrying amount will be recovered principally through a sale
transaction rather than through continuing use. An impairment loss
is recognised for any initial or subsequent write down of the asset to
fair value less costs to sell. A gain is recognised for any subsequent
increase in fair value less costs to sell of an asset, but not in excess
of any cumulative impairment loss.
m. Intangible assets
goodwill: All business combinations are accounted for by applying
the purchase method. Goodwill represents the difference between
the cost of the acquisition and the fair value of the net identifiable
assets acquired.
Goodwill is stated at cost less any accumulated impairment losses.
Goodwill is allocated to cash-generating units and is not amortised
but is tested annually for impairment. In respect of associates, the
carrying amount of goodwill is included in the carrying amount of the
investment in the associate.
Non-current assets are not depreciated or amortised while they are
classified as held for sale.
Negative goodwill arising on an acquisition is recognised directly in
the income statement.
A discontinued operation is a component of the entity that has been
disposed of or is classified as held for sale and that represents a
separate major line of business or geographical area of operations, is
part of a single coordinated plan to dispose of such a line of business
or area of operations, or is a subsidiary acquired exclusively with a
view to resale. the results of discontinued operations are presented
separately on the face of the income statement.
L. Impairment
the carrying value of the Group’s assets other than inventories and
deferred tax assets, are reviewed at each balance sheet date to
determine whether there is any indication of impairment. If any such
indication exists, the asset’s recoverable amount is estimated. For
goodwill, the recoverable amount is assessed at each balance date.
An impairment loss is recognised whenever the carrying amount
of an asset or its cash generating unit exceeds its recoverable
amount. Impairment losses are recognised in the income statement,
unless the asset has previously been revalued, in which case the
impairment loss is recognised as a reversal to the extent of that
previous revaluation with any excess recognised through the
income statement. Impairment losses recognised in respect of cash
generating units are allocated first to reduce the carrying amount of
any goodwill allocated to the cash generating units (group of units)
and then, to reduce the carrying amount of the other assets in the
unit (group of units) on a pro rata basis.
the recoverable amount of other assets is the greater of their fair
value less costs to sell and value in use. In assessing value in use,
the estimated future cash flows are discounted to their present value
of money using a pre-tax discount rate that reflects current market
assessments of the time value of money and the risks specific to
the asset. For an asset that does not generate largely independent
cash inflows, the recoverable amount is determined for the cash
generating unit to which the asset belongs.
reversals of impairment: An impairment loss in respect of goodwill
is not reversed. In respect of other assets, an impairment loss is
reversed if there is an indication that the impairment loss may no
longer exist and there has been a change in the estimates used to
determine the recoverable amount.
An impairment loss is reversed only to the extent of the asset’s
carrying amount net of depreciation or amortisation, as if no
impairment loss has been recognised.
other intangible assets: Other intangible assets that are acquired
by the Group are stated at cost less accumulated amortisation and
impairment losses.
amortisation: Amortisation is charged to the income statement
on a straight-line basis over the estimated useful lives of intangible
assets unless such lives are indefinite. Goodwill and intangible assets
with an indefinite useful life are systematically tested for impairment
at each annual balance sheet date. Other intangible assets are
amortised from the date that they are available for use.
n. Deferred expenses
Expenditure is deferred to the extent that it is considered probable
that future economic benefits embodied in the expenditure will
eventuate and can be reliably measured. Deferred expenses are
amortised over the period in which the related benefits are expected
to be realised. the carrying value of deferred expenditure is reviewed
in accordance with the policy set out under impairment.
o. Investments
All investments are initially recognised at cost being the fair value of
consideration given and include acquisition costs associated with the
investment.
After initial recognition, investments which are classified as available
for sale are measured at fair value. Gains and losses on available for
sale investments are recognised as a separate component of equity
until the investment is sold, or until the investment is determined to
be impaired, at which time the cumulative gain or loss previously
recognised in equity is included in the income statement.
For investments that are actively traded in organised financial
markets the fair value is determined by reference to the Stock
Exchange quoted market bid prices at the close of business at the
balance sheet date.
p. property, plant and equipment
owned assets: Items of property, plant and equipment are stated at
cost or deemed cost less accumulated depreciation and impairment
losses. the cost of self-constructed assets includes the cost of
materials, direct labour and an appropriate proportion of production
overheads. Assessment of impairment loss is made in accordance
with the impairment policy.
the cost of property, plant and equipment includes the cost of
decommissioning and restoration costs at the end of their economic
lives if a present legal or constructive obligation exists.
Boral Limited Annual Report 2010
71
1. Significant accounting policies (continued)
When an item of property, plant and equipment comprises major
components having different useful lives, they are accounted for as
separate items of property, plant and equipment.
Leased plant and equipment: Leases under which the Group
assumes substantially all the risk and rewards of ownership are
classified as finance leases. Other leases are classified as operating
leases. Finance leases are capitalised. A lease asset and a lease
liability equal to the present value of the minimum lease payments
are recorded at the inception of the lease. Lease liabilities are
reduced by repayments of principal. the interest components of
the lease payments are expensed. Contingent rentals are expensed
as incurred.
Operating leases are not capitalised and lease costs are expensed.
Depreciation: Items of property, plant and equipment, including
buildings and leasehold property but excluding freehold land, are
depreciated using the straight line method over their expected
useful lives. Assets are depreciated from the date of acquisition or,
in respect of internally constructed assets, from the time an asset is
completed and held ready for use.
the depreciation and amortisation rates used for each class of asset
are as follows:
2010
2009
Provisions for employee entitlements which are not due to be settled
within twelve months are calculated using expected future increases
in wage and salary rates, including related on-costs and expected
settlement dates based on turnover history and are discounted using
the rates attached to national government securities at balance
date, which most closely match the terms of maturity of the related
liabilities.
Superannuation: the Group contributes to several defined benefit
and defined contribution superannuation plans.
Defined contribution plan obligations are recognised as an expense
in the income statement as incurred.
the Group’s net obligation in respect of defined benefit pension
plans is calculated separately for each plan by estimating the
amount of future benefit that employees have earned in return
for their service in the current and prior periods; that benefit is
discounted to determine the present value, and the fair value of
any plan assets is deducted.
All actuarial gains and losses that arise in calculating the Group’s
obligation in respect of the plan are recognised directly in
retained earnings.
When the calculation results in plan assets exceeding liabilities for
the Group, the recognised asset is limited to the present value of
any future refunds from the plan or reductions in future contributions
to the plan.
Buildings
timber licences and mineral reserves
Plant and equipment
1–10%
0–5%
1–10%
0–5%
5–33.3%
5–33.3%
Share-based payments: the Group provides benefits to senior
executives in the form of share-based payment transactions,
whereby senior executives render services in exchange for options
and/or rights over shares.
q. payables
trade payables and other accounts payable are recognised when
the Group becomes obliged to make future payments resulting from
the purchase of goods and services. Payables are stated at their
amortised cost.
r. Borrowings
Borrowings are initially recognised at fair value, net of transaction
costs incurred. Subsequent to initial recognition, borrowings are
stated at amortised cost, with any difference between cost and
redemption value being recognised in the income statement over
the period of the borrowings on an effective interest basis.
S. employee benefits
wages and salaries: the provision for employee entitlement to
wages and salaries represents the amount which the Group has
a present obligation to pay resulting from employees’ services
provided up to the balance date.
annual leave, long service leave and retirement benefits:
the provision for employee entitlements to long service leave and
retirement benefits represents the present value of the estimated
future cash outflows to be made by the employer resulting from
employees’ services provided up to balance date.
the cost of the share-based payments with employees is measured
by reference to the fair value at the date at which they are granted.
the fair value is measured at grant date and recognised as an
expense over the expected vesting period with a corresponding
increase in equity. the amount recognised is adjusted to reflect the
actual number of options that vest, except for those that fail to vest
due to market conditions not being achieved.
the fair value at grant date is independently determined using a
pricing model that takes into account the exercise price, the terms
of the share-based payment, the vesting and market performance
criteria, the impact of dilution, the non-tradeable nature of the
payment, the share price at grant date and expected price volatility
of the underlying share, the expected dividend yield and the risk-free
interest rate for the term of the share-based payment.
For shares issued under the Employee Share Plan, the difference
between the market value of shares and the discount price issued
to employees is recognised as an employee benefits expense with
a corresponding increase in equity.
72
Boral Limited Annual Report 2010
Notes to the FINaNcIal statemeNts
Boral Limited and Controlled Entities
1. Significant accounting policies (continued)
t. provisions
A provision is recognised in the balance sheet when the Group
has a present legal or constructive obligation as a result of a past
event, and it is probable that an outflow of economic benefits will be
required to settle the obligation. If the effect is material, provisions
are determined by discounting the expected future cash flows at
a pre-tax rate that reflects current market assessments of the time
value of money and, where appropriate, the risks specific to the
liability. Where discounting is applied, increases in the balance of
provisions attributable to the passage of time are recognised as
an interest expense.
restoration and environmental rehabilitation: Provision is
made to recognise the fair value of the liability for restoration
and environmental rehabilitation of areas from which natural
resources are extracted. the associated asset retirement costs are
capitalised as part of the carrying amount of the related long-lived
asset and amortised over the life of the related asset. At the end
of each year, the liability is increased to reflect the passage of time
and adjusted to reflect changes in the estimated future cash flows
underlying the initial fair value measurement. Provisions are also
made for the expected cost of environmental rehabilitation of sites
identified as being contaminated as a result of prior activities at the
time when the exposure is identified and estimated clean up costs
can be reliably assessed.
onerous contracts: An onerous contract is considered to exist
where the Group has a contract under which the unavoidable costs
of meeting the obligations under the contract exceed the economic
benefits expected to be received under it. Present obligations
arising under onerous contracts are recognised and measured
as a provision.
u. Derivative financial instruments
the Group is exposed to changes in interest rates, foreign exchange
rates and commodity prices from its activities. the Group uses
the following derivative financial instruments to hedge these risks:
interest rate swaps, forward rate agreements, interest rate options,
forward foreign exchange contracts and futures commodity fixed
price swap contracts.
the Group does not enter into derivative financial instrument
transactions for trading purposes. However, financial instruments
entered into to hedge an underlying exposure which does not qualify
for hedge accounting are accounted for as trading instruments.
Derivatives are initially recognised at fair value on the date a derivative
contract is entered into and are subsequently remeasured to their fair
value. the method of recognising the resulting gain or loss depends
on whether the derivative is designated as a hedging instrument, and
if so, the nature of the item being hedged. the Group designates
certain derivatives as either; hedges of the fair value of recognised
assets or liabilities or a firm commitment (fair value hedge), hedges of
highly probable forecast transactions (cash flow hedge), and hedges
of net investment in foreign operations.
the Group documents at the inception of the transaction the
relationship between hedging instruments and hedged items, as
well as its risk management objective and strategy for undertaking
various hedge transactions. the Group also documents its
assessment, both at hedge inception and on an ongoing basis, of
whether the derivatives that are used in hedging transactions have
been and will continue to be highly effective in offsetting changes in
fair values of cash flows or hedged items.
fair value hedge: Changes in the fair value of derivatives that are
designated and qualify as fair value hedges are recorded in the
income statement, together with any changes in the fair value of the
hedged asset or liability that are attributable to the hedged risk.
cash flow hedge: the effective portion of changes in the fair value
of derivatives that are designated and qualify as cash flow hedges
is recognised in equity in the hedging reserve. the gain or loss
relating to the ineffective portion is recognised immediately in the
income statement.
Amounts accumulated in equity are recycled in the income
statement in the periods when the hedged item will affect profit or
loss. However, when the forecast transaction that is hedged results
in the recognition of a non-financial asset or a non-financial liability,
the gains and losses previously deferred in equity are transferred
from equity and included in the measurement of the initial cost and
carrying amount of the asset or liability.
When a hedging instrument expires or is sold or terminated, or
when a hedge no longer meets the criteria for hedge accounting,
any cumulative gain or loss existing in equity at that time remains
in equity and is recognised when the forecast transaction is
ultimately recognised in the income statement. When a forecast
transaction is no longer expected to occur, the cumulative gain or
loss that was reported in equity is immediately transferred to the
income statement.
hedge of net investment in foreign operation: the portion of
the gain or loss on an instrument used to hedge a net investment
in a foreign operation that is determined to be an effective hedge is
recognised directly in equity. the ineffective portion is recognised
immediately in the income statement.
Derivatives that do not qualify for hedge accounting:
Certain derivative instruments do not qualify for hedge accounting.
Changes in the fair value of any derivative instrument that do not
qualify for hedge accounting are recognised immediately in the
income statement.
v. Share capital
Issued and paid up capital is recognised at the fair value of the
consideration received by the company. transaction costs directly
attributable to the issue of ordinary shares are recognised directly
into equity as a reduction of the share proceeds received, net
of any tax.
w. earnings per Share
Basic Earnings Per Share (“EPS”) is calculated by dividing the net
profit attributable to members of the parent entity for the reporting
period, by the weighted average number of ordinary shares of Boral
Limited, adjusted for any bonus issue.
Boral Limited Annual Report 2010
73
1. Significant accounting policies (continued)
Diluted EPS is calculated by dividing the basic EPS earnings, adjusted by the effect on revenues and expenses of conversion to ordinary
shares associated with dilutive potential ordinary shares, by the weighted average number of ordinary shares and dilutive potential ordinary
shares adjusted for any bonus issue.
X. comparative figures
Where necessary to facilitate comparison, comparative figures have been adjusted to conform with changes in presentation in the current
financial year.
y. rounding of amounts to the nearest $100,000
Boral Limited is an entity of a kind referred to in ASIC Class Order 98/100 dated 10 July 1998 and, in accordance with the Class Order,
amounts in the financial report and Directors’ Report have been rounded off to the nearest one hundred thousand dollars, unless
otherwise stated.
2. Segments
the adoption of AASB 8 Operating Segments has resulted in a revision of the Group’s reportable segments. AASB 8 requires a
“management approach” under which operating segments are presented on the same basis as that used for internal reporting, and is
reviewed by the chief operating decision maker being the CEO. Previously segments were presented by business and geographical
segments determined using a risk and rewards approach. Comparatives have been restated.
the Group’s reportable segments are described below. the Building Products segment reflects the operations of the Clay and Concrete
products, Plasterboard and timber divisions which satisfy the aggregation criteria as defined in the standard.
the following summary describes the operations of the Group’s reportable segments:
Boral Construction Materials
– Quarries, concrete, asphalt, transport and quarry end use.
Cement Division
– Cement, Asian concrete, quarries and pipes.
Boral Building Products
– Australian plasterboard, bricks, timber products, roof tiles, masonry and Asian plasterboard.
United States of America
– Bricks, roof tiles, fly ash, concrete, quarries and masonry.
Other
– Concrete placing and windows.
Discontinued Operations
– Scaffolding and precast panels.
Unallocated
– Non-trading operations and unallocated corporate costs.
the major end use markets for Boral’s products include residential and non-residential construction and the engineering and
infrastructure markets.
Inter-segment pricing is determined on an arm’s-length basis.
Segment results, assets and liabilities includes items directly attributable to a segment as well as those that can be allocated on a
reasonable basis.
74
Boral Limited Annual Report 2010
Notes to the FINaNcIal statemeNts
Boral Limited and Controlled Entities
2. Segments (continued)
reconciliations of reportable segment revenues and profits
External revenue
Less revenue from discontinued operations
Revenue from continuing operations
profit before tax
Profit/(loss) before net financing costs and income tax expense from reportable segments
Losses from discontinued operations
Significant items applicable to discontinued operations
Net financing costs
Profit/(loss) before tax from continuing operations
CONSOLIDAtED
2010
$ millions
2009
$ millions
4,599.3
4,875.1
(105.5)
(147.4)
4,493.8
4,727.7
(33.1)
18.6
75.7
61.2
(97.0)
(35.8)
206.4
4.9
17.2
228.5
(97.7)
130.8
Boral Construction Materials
Cement Division
Boral Building Products
United States of America
Other
Discontinued Operations
Dividend income
Boral Construction Materials
Cement Division
Boral Building Products
United States of America
Other
Discontinued Operations
Dividend income
Unallocated
Significant items (refer note 4)
tOtAL REVENUE
INtERNAL REVENUE
ExtERNAL REVENUE
2010
$ millions
2009
$ millions
2010
$ millions
2009
$ millions
2010
$ millions
2009
$ millions
2,266.2
2,411.8
706.3
701.0
1,212.6
1,144.6
363.7
293.8
108.0
–
545.2
260.0
151.9
16.2
147.7
194.1
7.0
–
–
2.5
–
150.8
192.5
2,118.5
2,261.0
512.2
508.5
7.8
1,205.6
1,136.8
–
–
4.5
–
363.7
293.8
105.5
–
545.2
260.0
147.4
16.2
4,950.6
5,230.7
351.3
355.6
4,599.3
4,875.1
OPERAtING PROFIt
(ExCLUDING ASSOCIAtES)
EQUIty ACCOUNtED
RESULtS OF ASSOCIAtES
PROFIt BEFORE NEt
FINANCING COStS AND
INCOME tAx ExPENSE
2010
$ millions
2009
$ millions
2010
$ millions
2009
$ millions
2010
$ millions
2009
$ millions
203.3
75.3
72.6
(85.6)
6.3
(18.6)
–
(21.7)
231.6
(243.2)
(11.6)
231.2
92.2
28.9
(79.9)
1.6
(4.9)
16.2
(21.1)
264.2
(58.3)
205.9
(2.3)
12.6
28.1
(18.1)
–
–
–
–
20.3
(41.8)
(21.5)
0.1
16.2
24.1
201.0
87.9
100.7
231.3
108.4
53.0
(28.9)
(103.7)
(108.8)
–
–
–
–
11.5
(11.0)
0.5
6.3
(18.6)
–
(21.7)
251.9
(285.0)
(33.1)
1.6
(4.9)
16.2
(21.1)
275.7
(69.3)
206.4
Boral Limited Annual Report 2010
75
2. Segments (continued)
Boral Construction Materials
Cement Division
Boral Building Products
United States of America
Other
Discontinued Operations
Unallocated
Cash and cash equivalents
tax assets
Boral Construction Materials
Cement Division
Boral Building Products
United States of America
Other
Discontinued Operations
Unallocated
Interest bearing loans and borrowings
tax liabilities
SEGMENt ASSEtS
(ExCLUDING INVEStMENtS
IN ASSOCIAtES)
EQUIty ACCOUNtED
INVEStMENtS IN ASSOCIAtES
tOtAL ASSEtS
2010
$ millions
2009
$ millions
2010
$ millions
2009
$ millions
2010
$ millions
2009
$ millions
1,634.0
1,728.4
832.2
873.2
1,297.8
1,343.9
775.1
90.8
59.5
25.6
886.4
81.5
146.1
32.3
1.4
18.8
232.3
41.6
–
–
–
1.1
12.6
219.6
65.6
–
–
–
1,635.4
1,729.5
851.0
885.8
1,530.1
1,563.5
816.7
90.8
59.5
25.6
952.0
81.5
146.1
32.3
4,715.0
5,091.8
294.1
298.9
5,009.1
5,390.7
157.0
43.3
100.5
–
–
–
–
–
157.0
43.3 –
100.5
4,915.3
5,192.3
294.1
298.9
5,209.4
5,491.2
LIABILItIES
ACQUISItION OF
SEGMENt ASSEtS
DEPRECIAtION AND
AMORtISAtION
2010
$ millions
2009
$ millions
2010
$ millions
2009
$ millions
2010
$ millions
2009
$ millions
358.1
126.3
216.4
134.2
58.1
9.9
122.9
1,025.9
1,339.6
217.8
342.9
93.0
195.6
139.6
30.8
18.7
103.8
924.4
1,614.1
199.1
80.9
25.6
59.1
9.4
2.5
2.3
0.1
95.3
36.4
60.8
26.3
5.1
7.3
0.3
95.5
52.7
57.4
36.8
3.6
5.8
0.8
99.3
48.2
56.8
48.3
3.1
6.8
0.8
179.9
231.5
252.6
263.3
–
–
–
–
– –
– –
2,583.3
2,737.6
179.9
231.5
252.6
263.3
geographical information
For the year ended 30 June 2010, the Group’s trading revenue from external customers in Australia amounted to $4,007.6 million
(2009: $4,094.3 million), with $228.0 million (2009: $219.4 million) from the Asian operations and $363.7 million (2009: $545.2 million)
relating to the operations in the USA. the Group’s non-current assets (excluding deferred tax assets and other financial assets) in
Australia amounted to $2,584.3 million (2009: $2,833.1 million), with $310.3 million (2009: $295.1 million) in Asia and $632.7 million
(2009: $756.0 million) in the USA.
76
Boral Limited Annual Report 2010
Notes to the FINaNcIal statemeNts
Boral Limited and Controlled Entities
For the year ended 30 June
3. profit for the period
revenue from contInuIng operatIonS
Sale of goods
Rendering of services
other revenue
Dividends from other parties
Revenue from continuing operations
other Income
Significant item
Net profit on sale of assets
Other income
Other income from continuing operations
other eXpenSeS
Significant item
Net foreign exchange loss
Other expenses from continuing operations
Share of net profIt of aSSocIateS
Share of associates’ underlying net profit
Significant item
DeprecIatIon anD amortISatIon eXpenSeS
Land and buildings
Plant and equipment
timber licences and mineral reserves
Leased assets capitalised
Other intangibles
CONSOLIDAtED
Note
2010
$ millions
2009
$ millions
4
4
4
4,448.2
4,666.5
45.6
45.0
4,493.8
4,711.5
–
16.2
4,493.8
4,727.7
–
18.5
7.3
25.8
167.5
2.1
169.6
20.3
(41.8)
(21.5)
12.8
230.8
4.2
–
4.8
38.3
14.6
8.5
61.4
79.4
2.5
81.9
11.5
(11.0)
0.5
13.2
241.7
1.4
0.2
6.8
252.6
263.3
Boral Limited Annual Report 2010
77
CONSOLIDAtED
Note
2010
$ millions
2009
$ millions
4
4
2.0
3.3
–
–
5.3
99.4
–
2.9
102.3
(97.0)
2.6
3.2
2.2
29.5
37.5
133.9
0.1
1.2
135.2
(97.7)
(97.0)
(127.2)
–
(97.0)
29.5
(97.7)
1,020.2
1,076.8
104.3
8.2
109.1
18.2
For the year ended 30 June
3. profit for the period (continued)
net fInancIng coStS
Interest income received or receivable from:
Associated entities
Other parties (cash at bank and bank short-term deposits)
Unwinding of discount
Significant item – interest recoveries
Interest expense paid or payable to:
Other parties (bank overdrafts, bank loans and other loans)
Finance charges on capitalised leases
Unwinding of discount
Net financing costs
Net financing costs (excluding significant item)
Significant item – interest recoveries
Net financing costs
other chargeS
Employee benefits expense*
Operating lease rental charges
Bad and doubtful debts expense
* Employee benefits expense includes salaries and wages, defined benefit and defined contribution expenses together with share-based payments and other entitlements.
78
Boral Limited Annual Report 2010
Notes to the FINaNcIal statemeNts
Boral Limited and Controlled Entities
For the year ended 30 June
4. Significant Items
Net profit/(loss) includes the following items whose disclosure is relevant in
explaining the financial performance of the Group:
continuing operations
Disposal of investment
Profit on sale of shares in Adelaide Brighton Limited
Impairment of assets, businesses and demolition costs
Goodwill
Property, plant and equipment
Other intangible assets
Investments accounted for using the equity method
Inventory
Demolition costs
Other
organisational restructure
Corporate and divisional restructure and simplification
onerous contract
US contractual obligations
total significant items before interest and tax, from continuing operations
tax related matters
Interest recoveries
Summary of significant items from continuing operations
Profit/(loss) before interest and tax
Interest recoveries
Income tax (expense)/benefit
Income tax benefit – resolution of tax matters
net significant items from continuing operations
Discontinued operations
Impairment of businesses
Goodwill
Property, plant and equipment
Other
Summary of significant items from discontinued operations
Profit/(loss) before interest and tax
Income tax (expense)/benefit
net significant items from discontinued operations
Summary of significant items
Profit/(loss) before interest and tax
Interest recoveries
Income tax (expense)/benefit
Income tax benefit – resolution of tax matters
net significant items
CONSOLIDAtED
2010
$ millions
2009
$ millions
–
–
(4.3)
(92.3)
(3.3) –
(41.8)
(30.6) –
(22.8) –
(0.5) –
(195.6)
(13.7) –
(13.7) –
–
–
(209.3)
–
–
(209.3)
–
46.1
–
(163.2)
–
(70.4) –
(5.3) –
(75.7)
(75.7)
16.8 –
(58.9)
(285.0)
–
62.9
–
(222.1)
38.3
38.3
(30.8)
(21.4)
(11.0)
(63.2)
(27.2)
(27.2)
(52.1)
29.5
29.5
(52.1)
29.5
7.2
43.4
28.0
(17.2)
(17.2)
(17.2)
(17.2)
(69.3)
29.5
7.2
43.4
10.8
Boral Limited Annual Report 2010
79
4. Significant Items (continued)
2010 Significant Items
Impairment of assets, businesses and demolition costs
During the year the Group completed a comprehensive strategic review of Boral’s portfolio of businesses, operations and structures.
the strategic review identified a number of poorer performing assets and assets which could derive greater value from alternative ownership.
As a result the Group has reviewed the carrying value of its underperforming businesses, reviewed slow moving inventories and under-utilised
and redundant plant. this resulted in a write-down of $16.9 million in respect of the thailand Construction Materials business, $43.1 million in
respect of US mothballed brick and tile plants, closure costs and associated obsolete and slow moving inventory, $41.8 million in respect of
the write-down of the Group’s share of urban land development costs of an associate, Penrith Lakes Development Corporation Limited, and
$93.8 million in respect of Australian mothballed and obsolete assets, closure costs and write off of slow moving inventories.
Organisational restructure
As part of the strategic review the Group announced a number of initiatives to simplify the business and improve the operational effectiveness
of the Group. As part of this review a new structure comprising of five divisions report to the Chief Executive Officer.
2009 Significant Items
Disposal of investment
the Group recognised a profit of $38.3 million from the sale of 107.8 million shares in Adelaide Brighton Limited for net consideration of
$205.5 million.
Impairment of assets
the Group reviewed the carrying value of its assets including goodwill having regard to the current and anticipated future market conditions
which resulted in a write-down of the value of the goodwill and assets by $80.4 million. In the USA, goodwill arising on the acquisition of
construction materials businesses in Colorado and Oklahoma was written down by $30.8 million due to weak market volumes. the Group
had also written down the value of goodwill by $17.2 million relating to the precast panels business in the Construction Related Businesses.
Penrith Lakes Development Corporation Limited, an associate, assessed the carrying value of freehold land acquired for quarrying and urban
development and capitalised acquisition and development costs and recorded an impairment charge in its accounts. the net impact of
this impairment charge included in equity income of the Group is $11.0 million. At 30 June 2009, the Group wrote down the value of assets
other than goodwill by $21.4 million. this related to idle brick plants in the USA ($13.1 million) and in Boral Building Products – Australia
($4.0 million) as well as previously capitalised project costs in Asia ($4.3 million).
Onerous contract
the Group recognised an amount of $27.2 million, reflecting expected future losses on contractual obligations in the fly ash operations
in the USA.
Tax related matters
Ongoing enquiries were made by the Australian taxation Office (AtO) relating to a transaction occurring at the time of the demerger.
the AtO advised the Group that it no longer intended to pursue this matter. In the USA, the Internal Revenue Service (IRS) was reviewing
two transactions which occurred prior to the demerger which it believed may have resulted in additional assessable income to the Group.
Agreement was reached with the IRS in relation to both of these matters.
Summary of significant items
For the year ended 30 June
Boral Construction Materials
Cement Division
Boral Building Products
United States of America
Discontinued Operations
Unallocated
CONSOLIDAtED
2010
$ millions
2009
$ millions
(59.5)
(38.7)
(67.0)
(43.1)
(75.7)
(1.0)
(285.0)
(11.0)
(4.3)
(4.0)
(71.1)
(17.2)
38.3
(69.3)
80
Boral Limited Annual Report 2010
Notes to the FINaNcIal statemeNts
Boral Limited and Controlled Entities
5. Discontinued operations and assets held for sale
During the year the Group completed a review of underperforming businesses as part of its Strategic Review Process. As a result the Group
commenced an active program to divest both its Precast Panels and Scaffolding businesses. the comparative income statement has been
re-presented to show the discontinued operations separately from continuing operations.
For the year ended 30 June
results of discontinued operations
Revenue
Expenses
profit/(loss) before income tax expense (excluding significant items)
Income tax benefit (excluding significant items)
profit/(loss) before significant items
Impairment of assets
Income tax benefit, significant items
Net significant items
net profit/(loss)
Basic earnings/(loss) per share
Diluted earnings/(loss) per share
the profit/(loss) from discontinued operations is attributable entirely to the Group.
cash flows from/(used in) discontinued operations
Net cash from/(used in) operating activities
Net cash from/(used in) investing activities
Net cash from/(used in) financing activities
net cash from/(used in) discontinued operations
assets classified as held for sale
Property, plant and equipment
Intangible assets
Inventories
trade and other receivables
Other assets
Liabilities classified as held for sale
Payables
Interest bearing loans and borrowings
Provisions
net assets
CONSOLIDAtED
2010
$ millions
2009
$ millions
147.4
(152.3)
(4.9)
1.0
(3.9)
(17.2)
(17.2)
(21.1)
(3.6c)
(3.6c)
18.2
(5.6)
12.6
105.5
(124.1)
(18.6)
5.7
(12.9)
(75.7)
16.8 –
(58.9)
(71.8)
(12.1c)
(12.1c)
0.8
(2.2)
– –
(1.4)
33.1 –
8.3 –
6.8 –
11.0 –
0.3 –
59.5 –
4.6 –
0.1 –
5.2 –
9.9 –
49.6 –
the Construction Related Businesses of Precast Panels and Scaffolding have been presented as discontinued operations held for sale
following the Group’s commencement of an active sale process. Subsequent to year end, sale and purchase agreements have been signed.
An impairment loss of $58.9 million after tax on the remeasurement of the Discontinued Businesses to the lower of their carrying values and
their fair values less costs to sell has been recognised in the results of the discontinued operations for the year ended 30 June 2010.
Boral Limited Annual Report 2010
81
For the year ended 30 June
6. Income tax expense
(i) Income tax expense
Current income tax expense/(benefit)
Deferred income tax expense/(benefit)
Over provision for tax in previous years
Income tax expense/(benefit) attributable to profit
(ii) reconciliation of income tax expense to prima facie tax
Income tax expense on profit:
– at Australian tax rate 30% (2009: 30%)
– adjustment for difference between Australian and overseas tax rates
Income tax expense/(benefit) on pre-tax profit at standard rates
tax effect of amounts which are not deductible/(taxable) in calculating taxable income:
tax losses not recognised
Non-deductible depreciation and amortisation
Capital gains/(losses) brought to account
Share of associates’ net profit and franked dividends (excluding significant items)
Share of associates’ net profit – significant item
Franked dividends from other entities
Non-deductible impairment of assets
Other items
Income tax expense/(benefit) on resolution of matters with Australian and US taxation authorities
4
Income tax expense/(benefit) on profit
Over provision for tax in previous years
Income tax expense/(benefit) attributable to profit
Income tax expense/(benefit) from continuing operations
Income tax expense/(benefit) excluding significant items
Income tax expense/(benefit) significant items
Income tax expense/(benefit) from discontinued operations
Income tax expense/(benefit) excluding significant items
Income tax expense/(benefit) significant items
(iii) tax amounts recognised directly in other comprehensive income
the following deferred tax amounts were charged/(credited) directly to equity during the year in respect of:
Actuarial adjustment on defined benefit plans
Net exchange differences taken to equity
Fair value adjustment on cash flow hedges
Fair value adjustment on available for sale financial assets
CONSOLIDAtED
2010
$ millions
2009
$ millions
81.3
(117.7)
(4.4)
(40.8)
(39.0)
(16.7)
(55.7)
2.9
2.7
0.1
(11.3)
12.5
–
13.8
(1.4)
–
(36.4)
(4.4)
(40.8)
27.8
(46.1)
(18.3)
(5.7)
(16.8) –
(22.5)
(40.8)
(0.6)
23.2
3.2
–
25.8
(17.8)
(12.1)
(3.6)
(33.5)
32.6
(15.1)
17.5
1.1
2.3
1.0
(12.4)
3.3
(4.8)
6.4
(0.9)
(43.4)
(29.9)
(3.6)
(33.5)
18.1
(50.6)
(32.5)
(1.0)
(1.0)
(33.5)
(6.9)
(60.6)
(6.2)
(71.2)
(144.9)
82
Boral Limited Annual Report 2010
Notes to the FINaNcIal statemeNts
Boral Limited and Controlled Entities
7. Dividends
Dividends recognised by the Group are:
2010
2009 final – ordinary
2010 interim – ordinary
total
2009
2008 final – ordinary
2009 interim – ordinary
total
Amount per share
total amount
$ millions
Franked amount
per share
Date of payment
5.5 cents
7.0 cents
17.0 cents
7.5 cents
32.6
41.7
74.3
99.6
44.0
143.6
5.5 cents
28 September 2009
7.0 cents
23 march 2010
17.0 cents
18 September 2008
7.5 cents
3 April 2009
Subsequent event
Since the end of the financial year, the Directors declared the following dividend:
2010 final – ordinary
6.5 cents
46.7
6.5 cents
28 September 2010
the final dividend is based on shares on issue as at 11 August 2010, which includes shares issued under the recent capital raising. the
financial effect of the final dividend for the year ended 30 June 2010 has not been brought to account in the financial statements for the year
but will be recognised in subsequent financial reports.
Dividend franking account
the balance of the franking account of Boral Limited as at 30 June 2010 is $151.1 million (2009: $104.6 million) after adjusting for franking
credits/(debits) that will arise from:
– the payment/refund of the amount of the current tax liability;
– the receipt of dividends recognised as receivables at year end; and
– before taking into account the franking credits associated with payment of the final dividend declared subsequent to year end.
the impact on the franking account of the dividend recommended by the Directors since year end, but not recognised as a liability at year
end, will be a reduction in the franking account of $20.0 million (2009: $14.0 million).
Dividend reinvestment plan
the Company’s Dividend Reinvestment Plan will operate in respect of the payment of the final dividend and the last date for the receipt of
an election notice for participation in the plan is 30 August 2010.
Boral Limited Annual Report 2010
83
8. earnings per Share
classification of securities as ordinary shares
Only ordinary shares have been included in basic earnings per share.
classification of securities as potential ordinary shares
Options outstanding under the Executive Share Option Plan and Share Performance Rights have been classified as potential ordinary shares
and are included in diluted earnings per share only.
earnings reconciliation
Net profit before significant items and non-controlling interests
Attributable to non-controlling interests
net profit before significant items
Net significant items
net profit/(loss) attributable to members of the parent entity
weighted average number of ordinary shares used as the denominator
Number for basic earnings per share
Effect of potential ordinary shares
Number for diluted earnings per share
Basic earnings per share
Diluted earnings per share
Basic earnings per share (excluding significant items)
Diluted earnings per share (excluding significant items)
Basic earnings per share (continuing operations)
Diluted earnings per share (continuing operations)
CONSOLIDAtED
2010
$ millions
2009
$ millions
132.8
(1.2)
131.6
(222.1)
(90.5)
131.4
(0.2)
131.2
10.8
142.0
CONSOLIDAtED
2010
2009
595,848,789
589,679,255
3,660,323
2,466,892
599,509,112
592,146,147
(15.2c)
(15.2c)
22.1c
22.0c
(3.1c)
(3.1c)
24.1c
24.0c
22.2c
22.2c
27.7c
27.6c
the average market value of the Company’s shares for the purpose of calculating the dilutive effect of share options was based on quoted
market prices for the period that the options were outstanding.
84
Boral Limited Annual Report 2010
Notes to the FINaNcIal statemeNts
Boral Limited and Controlled Entities
9. cash and cash equivalents
Cash at bank and on hand
Bank short-term deposits
the bank short-term deposits mature within 30 days and pay interest at a weighted average interest rate
of 3.1% (2009: 1.71%).
10. receivables
current
trade receivables
Associated entities
Less: Allowance for impairment
Other receivables
Less: Allowance for impairment
the Group requires all customers to pay in accordance with agreed payment terms. Included in the Group’s
trade receivables are debtors with a carrying value of $119.5 million (2009: $99.8 million) which are past due
but not impaired. these relate to a number of debtors with no significant change in credit quality or history
of default. the ageing analysis is as follows:
trade receivables – past due 0–60 days
trade receivables – past due > 60 days
allowance for impairment
An allowance for impairment of trade receivables is raised when there is objective evidence that an
individual receivable is impaired. Indicators of impairment would include significant financial difficulties of
the debtor, the probability that the debtor will enter bankruptcy or financial reorganisation and default or
delinquency in payments.
the movement in the allowance for impairment in respect to trade receivables during the year was as follows:
Balance at the beginning of the year
Amounts written off during the year
Increase recognised in income statement
Net foreign currency exchange differences
Balance at the end of the year
non-current
Loans to associated entities
Other receivables
No amounts owing by associates or included in other receivables were past due as at 30 June 2010.
CONSOLIDAtED
2010
$ millions
2009
$ millions
74.1
82.9
157.0
73.0
27.5
100.5
676.7
77.8
754.5
(23.5)
731.0
57.0
(4.3)
52.7
652.1
83.3
735.4
(24.6)
710.8
70.4
(4.3)
66.1
783.7
776.9
104.2
15.3
85.1
14.7
(24.6)
9.4
(8.2)
(0.1)
(23.5)
9.0
10.2
19.2
(16.6)
13.0
(19.9)
(1.1)
(24.6)
24.4
8.8
33.2
Boral Limited Annual Report 2010
85
CONSOLIDAtED
2010
$ millions
2009
$ millions
169.3
64.4
298.5
16.3
548.5
187.3
81.5
344.3
19.5
632.6
85.3
61.7
19.5
82.1
101.6
20.4
60.8
81.2
11. Inventories
current
Raw materials and consumable stores
Work in progress
Finished goods
Land development projects
non-current
Land development projects
Land development projects comprises:
Cost of acquisition
Development costs capitalised
86
Boral Limited Annual Report 2010
Notes to the FINaNcIal statemeNts
Boral Limited and Controlled Entities
12. Investments accounted for using the equity method
Name
Principal
activity
Country of
incorporation
Balance
date
2010
%
2009
%
2010
$ millions
2009
$ millions
OWNERSHIP
INtERESt
INVEStMENt
CARRyING AMOUNt
CONSOLIDAtED
CONSOLIDAtED
Details of investments in associates are as follows:
Bitumen Importers Australia Pty Ltd
Caribbean Roof tile Company Limited
Non trading
Roof tiles
Australia
30-Jun
trinidad
31-Dec
Flyash Australia Pty Ltd
Fly ash collection
Australia
31-Dec
Gypsum Resources Australia Pty Ltd
Gypsum mining
Australia
30-Jun
Highland Pine Products Pty Ltd
timber
Australia
30-Jun
Lafarge Boral Gypsum in Asia Ltd
Plasterboard
Malaysia
31-Dec
MonierLifetile LLC
MonierLifetile S.R.L. de C.V.
Roof tiles
Roof tiles
Penrith Lakes Development Corporation Ltd
Quarrying
USA
31-Dec
Mexico
31-Dec
Australia
30-Jun
Rondo Building Services Pty Ltd
Rollform systems
Australia
30-Jun
South East Asphalt Pty Ltd
Sunstate Cement Ltd
tile Service Company LLC
US tile LLC
total
Asphalt
Australia
30-Jun
Cement manufacturer Australia
30-Jun
Roof tiles
Roof tiles
USA
USA
31-Dec
31-Dec
50
50
50
50
50
50
50
50
40
50
50
50
50
50
–
50
50
50
50
50
50
50
40
50
50
50
50
50
–
6.0
2.6
–
–
–
7.1
2.4
–
–
226.8
212.0
33.8
1.8
–
5.5
1.4
55.8
2.7
–
7.6
1.1
16.2
10.2
–
–
–
–
294.1
298.9
CONSOLIDAtED
2010
$ millions
2009
$ millions
movements in carrying amount of investments in associates:
Carrying amount of investments in associates at the beginning of the year
298.9
298.2
Investments in associates during the year
Share of associates’ net profit
Share of associates’ impairment of assets
Dividends from associates
Losses from associates recognised against non-current receivables/provisions
Share of associates’ movement in currency reserve
Effect of exchange rate and other changes
Balance of investments in associates at the end of the year
0.1
20.3
(41.8)
(26.6)
45.1
15.1
(17.0)
294.1
0.9
11.5
(11.0)
(33.3)
12.3
(33.7)
54.0
298.9
When the Group’s share of losses from an associate exceed the Group’s investment in the relevant associate the losses are taken against
any long-term receivables relating to the associate and to the extent that the Group’s obligation for losses exceeds this amount they are
recorded as a provision in the Group financial statements to the extent that the Group has an obligation to fund the liability.
Boral Limited Annual Report 2010
87
CONSOLIDAtED
2010
$ millions
2009
$ millions
95.5
(5.4)
(21.5)
(26.6)
42.0
(6.4)
15.1
8.7
107.0
21.3
0.5
(33.3)
95.5
27.3
(33.7)
(6.4)
12. Investments accounted for using the equity method (continued)
Share of post-acquisition retained earnings attributable to associates:
Share of associates’ retained earnings at the beginning of the year
Net foreign currency exchange differences
Share of associates’ net profit/(loss)
Dividends from associates
Balance at the end of the year
Share of post-acquisition reserves attributable to associates:
Share of associates’ reserves at the beginning of the year
Share of associates’ movement in reserves
Balance at the end of the year
Summary of performance and financial position of associates:
the Group’s share of aggregate revenue, profits, assets and liabilities of associates are as follows:
Share of associates’ revenue
467.7
540.8
Share of associates’ underlying profit before income tax expense
Share of associates’ underlying income tax expense
Share of associates’ non-controlling interest
Significant item
Share of associates’ net profit/(loss) – equity accounted
Share of associates’ net assets
Current assets
Non-current assets
total assets
Current liabilities
Non-current liabilities
total liabilities
Net assets
42.2
(19.7)
(2.2)
20.3
(41.8)
(21.5)
184.4
491.9
676.3
188.6
193.6
382.2
294.1
31.0
(17.6)
(1.9)
11.5
(11.0)
0.5
218.2
504.1
722.3
241.6
181.8
423.4
298.9
88
Boral Limited Annual Report 2010
Notes to the FINaNcIal statemeNts
Boral Limited and Controlled Entities
12. Investments accounted for using the equity method (continued)
Share of associates’ commitments:
Share of associates’ capital expenditure commitments contracted but not provided for:
Not later than one year
Share of associates’ operating lease commitments payable:
Not later than one year
Later than one year but not later than five years
Later than five years
13. other financial assets
non-current
Derivative financial assets
14. property, plant and equipment
Land and buildings
At cost
At recoverable amount
Less: Accumulated depreciation, amortisation and impairment
timber licences and mineral reserves
At cost
Less: Accumulated amortisation and impairment
plant and equipment
At cost
Less: Accumulated depreciation and impairment
Leased plant and equipment capitalised
Less: Accumulated amortisation
total
CONSOLIDAtED
2010
$ millions
2009
$ millions
1.1
15.5
4.8
12.9
8.2
25.9
4.9
9.2
3.7
17.8
26.8
26.8
30.0
30.0
1,104.8
1,139.0
10.1
(105.0)
10.1
(83.7)
1,009.9
1,065.4
96.4
(15.4)
81.0
97.8
(6.4)
91.4
4,040.7
4,252.0
(2,346.6)
(2,305.3)
1,694.1
1,946.7
0.3
(0.2)
0.1
1.4
(0.9)
0.5
1,694.2
2,785.1
1,947.2
3,104.0
the carrying value of the thailand Construction Materials business was reviewed as part of the Group’s annual impairment testing taking into
account the current performance of the business and the challenging market conditions experienced in the thailand construction materials
market. this resulted in a write down of assets of $16.9 million based on a value in use calculation using a discount rate of 15% (2009: 14%).
Boral Limited Annual Report 2010
89
CONSOLIDAtED
2010
$ millions
2009
$ millions
1,065.4
1,018.8
1.3
(10.7)
6.4 –
(23.2) –
(6.1) –
(12.8)
(10.4)
36.5
(12.6)
(13.2)
35.9
1,009.9
1,065.4
91.4
–
(4.8) –
(4.2)
(1.4)
81.0
77.3
14.5
(1.4)
1.0
91.4
1,947.2
1,992.8
178.6
(17.2)
–
(6.4) –
179.8
(23.1)
1.4
(134.7)
(21.4)
(27.0) –
(2.9)
(230.8)
(12.6)
–
(241.9)
59.6
1,694.2
1,947.2
14. property, plant and equipment (continued)
reconcILIatIonS
Land and buildings
Balance at the beginning of the year
Additions
Disposals
transferred from plant and equipment
Impairment disclosed as significant items
transferred to assets held for sale
Depreciation expense
Net foreign currency exchange differences
Balance at the end of the year
timber licences and mineral reserves
Balance at the beginning of the year
Additions
Impairment disclosed as significant items
Amortisation expense
Net foreign currency exchange differences
Balance at the end of the year
plant and equipment
Balance at the beginning of the year
Additions
Disposals
Acquisitions of entities or operations
transferred to land and buildings
Impairment disclosed as significant items
transferred to assets held for sale
Write-down of plant and equipment
Depreciation expense
Net foreign currency exchange differences
Balance at the end of the year
90
Boral Limited Annual Report 2010
Notes to the FINaNcIal statemeNts
Boral Limited and Controlled Entities
15. Intangible assets
Goodwill
Other intangible assets
Less: Accumulated amortisation
reconciliation of movements in goodwill
Balance at the beginning of the year
Acquisitions of entities or operations
Impairment disclosed as significant items
transferred to assets held for sale
Other write-downs
Net foreign currency exchange differences
Balance at the end of the year
CONSOLIDAtED
2010
$ millions
2009
$ millions
275.0
30.0
(27.4)
277.6
292.0
–
(4.3)
(3.0) –
(1.6) –
(8.1)
275.0
292.0
40.9
(25.1)
307.8
304.5
3.8
(48.0)
31.7
292.0
Impairment tests for goodwill
Goodwill and other intangible assets that have an indefinite useful life are not subject to amortisation but are tested annually for impairment.
Goodwill is allocated to the Group’s Cash Generating Units (CGUs) identified according to business type and Country of operation.
Key assumptions
the recoverable amount of CGUs is the higher of the asset’s fair value less costs to sell and its value in use. Value in use calculations use
pre-tax cash flow projections based on financial budgets and plans approved by management covering a five year period. Recognising
that the Group operates in cyclical markets, cash flow projections covering periods of up to 10 years are used where this period more
appropriately reflects a full business cycle. Cash flows beyond the projection period are extrapolated using growth rates of between 0.8%
and 2.5% which do not exceed the long-term average growth rate for the industry in which the CGU operates.
the Group’s weighted cost of capital is used as a starting point for determining the discount rate with appropriate adjustments for the risk
profile relating to the relevant segments and the countries in which they operate. the discount rates applied to pre-tax cash flows range from
12% to 14%.
the key assumptions relate to housing starts and market share, with the most sensitive assumption arising from forecast housing starts.
these assumptions have been determined with reference to current performance and taking into account external forecasts. Housing starts
forecasts utilised in the cash flow projections do not exceed historical experiences in the relevant geographies.
Certain US businesses recoverable amounts have been determined based on fair value less costs to sell based on external information.
the recoverable amount of CGUs exceeds their carrying values as at 30 June 2010. Management believes that any reasonable change
in the key assumptions on which the estimates are based would not cause the aggregate carrying amount to exceed the recoverable amount
of these CGUs.
write-Down of goodwill
At 30 June 2009, the Group wrote down the value of goodwill by $48.0 million. In the United States of America, goodwill arising on the
acquisition of construction materials businesses in Colorado and Oklahoma was written down by $30.8 million due to weak market volumes.
the write-down was calculated on a value in use basis utilising a pre-tax discount rate of 13.9%. the Group also wrote down the value of
goodwill by $17.2 million relating to the precast panels business. the write-down was calculated on a value in use basis utilising a pre-tax
discount rate of 12.0%.
Boral Limited Annual Report 2010
91
CONSOLIDAtED
2010
$ millions
2009
$ millions
67.9
2.3
43.4
161.4
275.0
76.8
2.3
43.4
169.5
292.0
CONSOLIDAtED
2010
$ millions
2009
$ millions
15.8
–
(3.3) –
(4.8)
(5.3) –
0.2
2.6
129.7
(91.0)
38.7
24.6
63.3
66.0
66.0
21.6
0.7
(6.8)
0.3
15.8
110.9
(71.2)
39.7
27.3
67.0
78.6
78.6
15. Intangible assets (continued)
Segment summary of goodwill
Boral Construction Materials
Cement Division
Boral Building Products
United States of America
reconciliation of movements in other Intangible assets
Balance at the beginning of the year
Additions
Impairment disclosed as significant item
Amortisation expense
transferred to assets held for sale
Net foreign currency exchange differences
Balance at the end of the year
other Intangible assets
Other intangible assets relate predominantly to software development and are amortised at rates around
20%. Amortisation expense is included in “depreciation and amortisation” as disclosed in note 3.
16. other assets
current
Deferred expenses
Less: Accumulated amortisation
Prepayments
non-current
Deferred expenses
amortisation rates
Deferred expenses are generally amortised at rates between 20% and 60%, although some minor
amounts of deferred expenses, including development of quarry infrastructure, are amortised at rates
between 5% and 10%.
92
Boral Limited Annual Report 2010
Notes to the FINaNcIal statemeNts
Boral Limited and Controlled Entities
17. payables
current
trade creditors
Due to associated entities
non-current
Deferred income
Derivative financial liabilities
18. Interest bearing loans and borrowings
current
Bank loans – unsecured
Other loans – unsecured
Finance lease liabilities
non-current
Bank loans – unsecured
Other loans – unsecured
For more information about the Group’s financing arrangements, refer note 27.
19. current tax liabilities
current
Current tax liability
CONSOLIDAtED
2010
$ millions
2009
$ millions
634.1
6.8
640.9
14.1
8.0
22.1
8.4
0.4
0.1
8.9
603.2
5.7
608.9
15.6
17.7
33.3
5.8
0.6
0.3
6.7
58.5
1,272.2
1,330.7
223.0
1,384.4
1,607.4
98.9
28.5
Boral Limited Annual Report 2010
93
CONSOLIDAtED
2010
$ millions
2009
$ millions
43.3 –
(118.9)
(75.6)
7.1
(32.3)
(162.3)
(21.4)
8.0
1.0
117.3
(17.2)
(74.8)
99.0
(75.6)
(170.6)
(170.6)
5.7
(35.4)
(193.3)
(17.5)
6.3
3.8
100.4
(27.9)
(56.5)
43.8
(170.6)
34.2
42.4
20. Deferred tax assets and liabilities
recognISeD DeferreD taX BaLanceS
Deferred tax asset
Deferred tax liability
Receivables
Inventories
Property, plant and equipment
Intangible assets
Payables
Interest bearing loans and borrowings
Provisions
Other
Unrealised foreign exchange
tax losses carried forward
unrecognISeD DeferreD taX aSSetS
Deferred tax assets not recognised:
the potential deferred tax asset has not been taken into account
in respect of tax losses where recovery is not probable*
* the potential benefit of the deferred tax asset will only be obtained if:
(i)
the relevant entities derive future assessable income of a nature and an amount sufficient to enable the benefit to be realised,
or the benefit can be utilised by another company in the Group in accordance with tax law in the jurisdiction in which
the company operates;
(ii)
the relevant Group entities continue to comply with the conditions for deductibility imposed by the law;
(iii) no changes in tax legislation adversely affect the relevant entities in realising the asset.
the gross amount of capital and revenue tax losses carried forward that have not been recognised and the range of expiry dates for recovery
by tax jurisdiction are as follows:
tax jurisdiction
Germany
Singapore
thailand
United Kingdom*
* Unbooked capital losses.
CONSOLIDAtED
Expiry date
2010
$ millions
2009
$ millions
No restriction
No restriction
31 Dec 2010 – 30 Jun 2014
No restriction
53.4
2.0
21.4
41.0
66.8
2.1
18.5
47.8
94
Boral Limited Annual Report 2010
Notes to the FINaNcIal statemeNts
Boral Limited and Controlled Entities
20. Deferred tax assets and liabilities (continued)
movement in temporary differences during the year
as at 30 June 2010
Receivables
Inventories
Property, plant and equipment
Intangible assets
Payables
Interest bearing loans and borrowings
Provisions
Other
Unrealised foreign exchange
tax losses carried forward
As at 30 June 2009
Receivables
Inventories
Other financial assets
Property, plant and equipment
Intangible assets
Payables
Interest bearing loans and borrowings
Provisions
Other
Unrealised foreign exchange
tax losses carried forward
CONSOLIDAtED
Balance
1 July 2009
$ millions
recognised
in income
$ millions
recognised
in equity
$ millions
other
movements
$ millions
Balance
30 June 2010
$ millions
5.7
(35.4)
(193.3)
(17.5)
6.3
3.8
100.4
(27.9)
(56.5)
43.8
1.5
3.1
26.4
(5.5)
1.8
0.4
18.7
10.7
5.2
55.4
(170.6)
117.7
–
–
–
–
–
(3.2)
–
0.6
(23.2)
–
(25.8)
(0.1)
–
4.6
1.6
(0.1)
–
(1.8)
(0.6)
(0.3)
(0.2)
3.1
7.1
(32.3)
(162.3)
(21.4)
8.0
1.0
117.3
(17.2)
(74.8)
99.0
(75.6)
CONSOLIDAtED
Balance
1 July 2008
$ millions
Recognised
in income
$ millions
Recognised
in equity
$ millions
Other
movements
$ millions
Balance
30 June 2009
$ millions
4.4
(38.5)
(71.2)
(169.2)
(15.4)
6.3
(3.1)
96.8
(32.6)
(105.5)
11.1
(316.9)
1.3
3.1
–
(11.3)
(0.1)
(0.2)
0.7
(1.2)
(2.0)
(11.6)
33.4
12.1
–
–
71.2
–
–
–
6.2
–
6.9
60.6
–
144.9
–
–
–
(12.8)
(2.0)
0.2
–
4.8
(0.2)
–
(0.7)
(10.7)
5.7
(35.4)
–
(193.3)
(17.5)
6.3
3.8
100.4
(27.9)
(56.5)
43.8
(170.6)
Boral Limited Annual Report 2010
95
CONSOLIDAtED
2010
$ millions
2009
$ millions
176.1
163.8
14.1
5.0
34.9
15.9
0.5
6.1
13.1
16.7
246.0
200.2
26.3
5.1
30.9
44.7
107.0
29.4
4.3
27.6
20.7
82.0
0.5
13.8
(0.2) –
14.1
0.4
0.1
0.5
21. provisions
current
Employee benefits
Rationalisation and restructuring
Claims
Restoration and environmental rehabilitation
Other
non-current
Employee benefits
Claims
Restoration and environmental rehabilitation
Other
rationalisation and restructuring
Provisions for rationalisation and restructuring are recognised when a detailed plan has been approved
and the restructuring has either commenced or been publicly announced, or firm contracts related to the
restructuring have been entered into. Costs related to ongoing activities are not provided for.
claims
Provisions are raised for liabilities arising from the ordinary course of business, in relation to claims against
the entity, including insurance, legal and other claims. Where recoveries are expected in respect of such
claims these are included in other receivables.
restoration and environmental rehabilitation
Provisions are made for the fair value of the liability for restoration and rehabilitation of areas from which
natural resources are extracted. the basis for accounting is set out in note 1. Provisions are also made for
the expected cost of environmental rehabilitation of sites identified as being contaminated as a result of
prior activities. the liability is recognised when the environmental exposure is identified and the estimated
clean-up costs can be reliably assessed.
other
Other provisions includes provision for onerous contracts and the Group’s share of an associate’s equity
accounted losses. the provision relating to onerous contracts reflects the expected future losses on
contractual obligations in the fly ash operations in the USA.
reconcILIatIonS
rationalisation and restructuring – current
Balance at the beginning of the year
Provisions made during the year
Payments made during the year
Balance at the end of the year
96
Boral Limited Annual Report 2010
Notes to the FINaNcIal statemeNts
Boral Limited and Controlled Entities
21. provisions (continued)
reconcILIatIonS (continued)
claims – current
Balance at the beginning of the year
Provisions made during the year
transfer to liabilities held for sale
Payments made during the year
transfer from non-current provisions
Net foreign currency exchange differences
Balance at the end of the year
claims – non-current
Balance at the beginning of the year
Provisions made during the year
transfer to current provisions
Balance at the end of the year
restoration and environmental rehabilitation – current
Balance at the beginning of the year
Provisions made during the year
Payments made during the year
Net foreign currency exchange differences
Balance at the end of the year
restoration and environmental rehabilitation – non-current
Balance at the beginning of the year
Provisions made during the year
Unwind of discount
Balance at the end of the year
other – current
Balance at the beginning of the year
Provisions made during the year
transfer to liabilities held for sale
Payments made during the year
transfer from non-current provisions
Net foreign currency exchange differences
Balance at the end of the year
other – non-current
Balance at the beginning of the year
Provisions made during the year
Payments made during the year
transfer to current provisions
transferred from investments accounted for using the equity method
Net foreign currency exchange differences
Balance at the end of the year
CONSOLIDAtED
2010
$ millions
2009
$ millions
6.1
1.1
(0.2) –
(1.9)
–
(0.1)
5.0
4.3
0.8
–
5.1
13.1
22.9
(0.9)
(0.2)
34.9
27.6
0.4
2.9
30.9
16.7
–
(0.5) –
(7.5)
7.6
(0.4)
15.9
20.7
9.2
(0.5)
(7.6)
23.6 –
(0.7)
44.7
8.8
1.3
(4.6)
0.2
0.4
6.1
3.8
0.7
(0.2)
4.3
14.7
1.7
(4.5)
1.2
13.1
26.1
0.3
1.2
27.6
5.8
11.8
(0.2)
0.2
(0.9)
16.7
2.5
21.5
(1.5)
(0.2)
(1.6)
20.7
Boral Limited Annual Report 2010
97
CONSOLIDAtED
2010
$ millions
2009
$ millions
22. Issued capital
Issued and paid-up capital
598,952,998 (2009: 592,890,530) ordinary shares, fully paid
1,724.0
1,691.4
movements in ordinary issued capital
Balance at the beginning of the year
5,895,282 (2009: 12,083,777) shares issued under the Dividend Reinvestment Plan
167,186 (2009: 21,692) shares issued upon the exercise of executive options
Nil (2009: 4,950,202) on-market share buy-back
Balance at the end of the year
Holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to
one vote per share at shareholders’ meetings.
In the event of a winding up of Boral Limited, ordinary shareholders rank after creditors and are fully entitled
to any proceeds of liquidation.
23. reserves
Foreign currency translation reserve
Hedging reserve – cash flow hedges
Fair value reserve
Share-based payments reserve
1,691.4
1,673.1
31.9
0.7
–
49.7
0.1
(31.5)
1,724.0
1,691.4
(75.0)
(1.1)
– –
37.2
(38.9)
(62.9)
(8.6)
28.3
(43.2)
98
Boral Limited Annual Report 2010
Notes to the FINaNcIal statemeNts
Boral Limited and Controlled Entities
23. reserves (continued)
reconcILIatIonS
foreign currency translation reserve
Balance at the beginning of the year
Net gain/(loss) on translation of assets and liabilities of overseas entities
Net gain/(loss) on translation of long-term borrowings and foreign currency forward
contracts net of tax expense/(benefit) $23.2 million (2009: ($60.6) million)
Balance at the end of the year
hedging reserve
Balance at the beginning of the year
transferred to the income statement
transferred to initial carrying amount of hedged item
Gains/(losses) taken directly to equity
tax (expense)/benefit
Balance at the end of the year
fair value reserve
Balance at the beginning of the year
Gain transferred to the income statement on sale of financial asset
Changes in fair value
tax (expense)/benefit
Balance at the end of the year
Share-based payments reserve
Balance at the beginning of the year
Option/rights expense
Balance at the end of the year
CONSOLIDAtED
2010
$ millions
2009
$ millions
(62.9)
(66.3)
54.2
(75.0)
(8.6)
6.5
3.4
0.8
(3.2)
(1.1)
–
–
–
–
– –
(76.2)
154.6
(141.3)
(62.9)
5.8
2.2
(14.6)
(8.2)
6.2
(8.6)
166.0
(38.3)
(198.9)
71.2
28.3
8.9
37.2
17.4
10.9
28.3
nature anD purpoSe of reServeS
foreign currency translation reserve
the translation reserve comprises all foreign exchange differences arising from the translation of the financial statements of foreign operations
where their functional currency is different to the presentation currency of the Group, together with foreign exchange differences from the
translation of liabilities that hedge the Group’s net investment in a foreign subsidiary.
hedging reserve
the hedging reserve comprises the effective portion of the cumulative net change in the fair value of cash flow hedging instruments related to
hedged transactions that have not yet occurred.
fair value reserve
the fair value reserve reflects the cumulative changes in fair value of investments classified as available for sale financial instruments until
the investment is sold or derecognised. During the prior year, the Group disposed of its investment in Adelaide Brighton Limited for a net
consideration of $205.5 million.
Share-based payments reserve
the share-based payments reserve is used to recognise the fair value of options and rights issued.
Boral Limited Annual Report 2010
99
CONSOLIDAtED
2010
$ millions
2009
$ millions
8.4
1.6
10.0
8.4
1.6
10.0
24. contingent liabilities
Details of contingent liabilities and contingent assets where the probability of
future payments/receipts is not considered remote are set out below.
Unsecured contingent liabilities:
Bank guarantees
Other items
Boral Limited has given to its bankers letters of responsibility in respect of accommodation provided from time to time by the banks to
controlled entities.
A number of sites within the Group have been identified as contaminated, generally as a result of prior activities conducted at the sites, and
review and appropriate implementation of clean-up requirements for these is ongoing. For sites where the requirements can be assessed,
estimated clean-up costs have been expensed or provided for. For some sites, the requirements cannot be reliably assessed at this stage.
Certain entities within the Group are subject to various lawsuits and claims in the ordinary course of business.
Consistent with other companies of the size and diversity of Boral, the Group is the subject of periodic information requests, investigations
and audit activity by the Australian taxation Office (AtO) and taxation authorities in other jurisdictions in which Boral operates.
A deed was entered into at the time of the demerger which contained certain indemnities and other agreements between Boral Limited and
Origin Energy Limited (Origin) and their respective controlled entities covering the transfer of the businesses, investments, tax, other liabilities,
debt and assets of the Group and some temporary shared arrangements. A number of matters were resolved with both the Australian
and United States taxation authorities which are likely to give rise to claims by the Group under the demerger deed. A settlement has been
reached with the AtO in relation to this matter. As the settlement resulted in a payment to the AtO, Origin is likely to rely on indemnities
contained in the demerger deed.
the Group has considered all of the above claims and, where appropriate, sought independent advice and believes it holds appropriate provisions.
Deed of cross guarantee
Under the terms of ASIC Class Order 98/1418, certain wholly owned controlled entities have been granted relief from the requirement to
prepare audited financial reports. Boral Limited has entered into an approved deed of indemnity for the cross guarantee of liabilities with
those controlled entities identified in note 32.
the consolidated statement of comprehensive income and consolidated balance sheet, comprising Boral Limited and controlled entities
which are a party to the Deed of Cross Guarantee, after eliminating all transactions between parties to the Deed, at 30 June 2010 are set out
in note 36.
100
Boral Limited Annual Report 2010
Notes to the FINaNcIal statemeNts
Boral Limited and Controlled Entities
25. commitments
capItaL eXpenDIture commItmentS
Contracted but not provided for are payable as follows:
Not later than one year
Later than one year but not later than five years
the capital expenditure commitments are in respect of the purchase of plant and equipment.
fInance LeaSeS
Lease commitments in respect of finance leases are payable as follows:
Not later than one year
operatIng LeaSeS
Lease commitments in respect of operating leases are payable as follows:
Not later than one year
Later than one year but not later than five years
Later than five years
CONSOLIDAtED
2010
$ millions
2009
$ millions
12.2
0.1
12.3
27.1
3.1
30.2
0.1
0.1
0.3
0.3
90.4
173.8
55.8
320.0
86.0
163.1
67.2
316.3
the Group leases property, equipment and vehicles under operating leases expiring from one to fifteen years. Leases generally provide the
consolidated entity with a right of renewal at which time all terms are renegotiated. Some leases involve lease payments comprising a base
amount plus an incremental contingent rental. Contingent rentals are based on the Consumer Price Index or operating criteria.
26. employee benefits
empLoyee Share pLan
Offers under the Boral Employee Share Plan (ESP) entitle employees to apply for a fixed number of Boral Limited shares not exceeding 500.
Permanent Australian and US employees of the Group are eligible to participate.
the price for ESP shares is determined by the Directors. the shares can be paid for by cash or an interest free loan. Subject to the ESP rules
and provided the loan has been repaid in full, the shares may be sold by the employee upon the earlier of three years after acquisition or
cessation of his/her employment.
Boral Limited Annual Report 2010
101
26. employee benefits (continued)
BoraL SenIor eXecutIve optIon pLan
the Boral senior executive option plan provides for executives to receive options over ordinary shares.
Each option entitles the holder to subscribe for one fully paid ordinary share in the capital of the Company.
Certain further details of the options granted are given in the Directors’ Report.
the options are only exercisable to the extent to which the exercise hurdle is satisfied. Different exercise hurdles apply to the various tranches
of options and satisfaction of these hurdles is dependent on increases in the Boral share price and dividends which affect the Boral total
Shareholder Return (tSR). the performance of the tSR of Boral Limited, is compared to the tSR of a reference group of companies from
time to time comprising the ASx top 100 to determine how many options are exercisable.
Set out below are summaries of options granted under the plan.
tranche
grant date
expiry date
exercise
price
Balance at
beginning
of the year
Issued
during
the year
cancelled
during
the year
exercised
during
the year
Balance
at end
of the year
vested and
exercisable
number
number
number
number
number
number
consolidated – 2010
(xii)
(xiii)
(xiv)
(xv)
(xvi)
4/11/2002
4/11/2009
$4.12
143,000
29/10/2003 29/10/2010
$5.57
2,443,280
29/10/2004 29/10/2011
$6.60
1,894,300
31/10/2005 31/10/2012
$7.70
3,114,000
6/11/2006
6/11/2013
$7.32
4,486,000
(xvii)
6/11/2007
6/11/2014
$6.83
5,854,400
17,934,980
Consolidated – 2009
(xii)
(xiii)
(xiv)
(xv)
(xvi)
4/11/2002
4/11/2009
$4.12
143,000
29/10/2003 29/10/2010
$5.57
2,614,428
29/10/2004 29/10/2011
$6.60
1,949,700
31/10/2005 31/10/2012
$7.70
3,195,000
6/11/2006
6/11/2013
$7.32
4,580,900
(xvii)
6/11/2007
6/11/2014
$6.83
5,938,700
18,421,728
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
143,000
–
–
150,084
152,100
208,400
256,900
316,300
24,186
2,269,010
651,296
–
–
–
–
1,742,200
2,905,600
4,229,100
5,538,100
–
–
–
–
1,083,784
167,186 16,684,010
651,296
–
–
143,000
149,456
21,692
2,443,280
143,000
625,371
55,400
81,000
94,900
84,300
–
–
–
–
1,894,300
3,114,000
4,486,000
5,854,400
–
–
–
–
465,056
21,692 17,934,980
768,371
Details of options exercised during the financial year and number of shares issued to employees on the exercise of options were as follows:
tranche
consolidated – 2010
(xii)
(xiii)
Consolidated – 2009
(xiii)
proceeds
$’000
number
of shares
Issued
fair value
per share
fair value
aggregate
$’000
589
135
724
121
121
143,000
24,186
167,186
21,692
21,692
$5.75
$5.92
$6.50
822
143
965
141
141
102
Boral Limited Annual Report 2010
Notes to the FINaNcIal statemeNts
Boral Limited and Controlled Entities
26. employee benefits (continued)
BoraL SenIor eXecutIve performance Share pLan
Share acquisition rights (SARs) were introduced in October 2004 to provide an alternative Long term Incentive (LtI) to options. SARs are
granted to executives under the Performance Share Plan following similar principles to those of the Option Plan. SARs can be granted in lieu of
options, with the number granted calculated in the same way, ie based on a percentage of fixed remuneration and the fair market value of a SAR.
the SARs issued during the year were each valued at $4.06 using a Monte Carlo simulation option-pricing formula. the value of SARs
awarded has been independently determined at grant date after considering the likelihood of meeting performance hurdles.
the following represents the inputs to the pricing model used in estimating fair value:
Grant date share price
Risk free rate
Dividend yield
Volatility factor
2010
2009
$5.35
5.48%
4.00%
$4.85
5.04%
4.00%
40% 30% – 33%
Set out below are summaries of share acquisition rights granted under the plan.
tranche
grant date
expiry date
exercise
price
Balance at
beginning
of the year
Issued
during
the year
cancelled
during
the year
exercised
during
the year
Balance
at end
of the year
vested and
exercisable
number
number
number
number
number
number
consolidated – 2010
(i)
(ii)
(iii)
(iv)
(v)
(vi)
29/10/2004 29/10/2011
31/10/2005 31/10/2012
6/11/2006
6/11/2013
6/11/2007
6/11/2014
$0.00
$0.00
$0.00
$0.00
533,982
818,538
656,479
821,993
3/11/2008
3/11/2015
$0.00
2,090,899
–
–
–
–
–
5/11/2009
5/11/2016
$0.00
–
2,679,078
40,781
54,773
70,202
82,259
32,308
–
4,921,891
2,679,078
280,323
Consolidated – 2009
(i)
(ii)
(iii)
(iv)
(v)
29/10/2004 29/10/2011
31/10/2005 31/10/2012
6/11/2006
6/11/2013
6/11/2007
6/11/2014
3/11/2008
3/11/2015
$0.00
$0.00
$0.00
$0.00
$0.00
548,836
839,854
682,420
843,925
–
–
–
–
–
2,090,899
14,854
21,316
25,941
21,932
–
2,915,035
2,090,899
84,043
–
–
–
–
–
–
–
–
–
–
–
–
–
493,201
763,765
586,277
739,734
2,058,591
2,679,078
7,320,646
533,982
818,538
656,479
821,993
2,090,899
4,921,891
–
–
–
–
–
–
–
–
–
–
–
–
During the year ended 30 June 2010 the consolidated entity recognised an expense of $8.9 million (2009: $10.9 million) in relation to
share-based payments.
Boral Limited Annual Report 2010
103
26. employee benefits (continued)
SuperannuatIon
At 30 June 2010, there were in existence a number of superannuation plans in Australia and overseas established by the Group, or in which
the Group participates, for the benefit of employees.
the Boral Industries Inc. Pension Plan is a defined benefit plan. Boral Super is a sub-plan of the Plum Superannuation Fund; it has a defined
benefit plan and an accumulation plan.
the principal types of benefit provided for under the Plans are lump sums payable on retirement, termination, death or total disability.
Contributions to the Plans by both employees and entities in the Group are based on percentages of the salaries or wages of employees.
Entities in the Group contribute to the Plans in accordance with the governing trust Deeds subject to certain rights to vary, suspend or
terminate such contributions and thus are not legally obliged to contribute to those Plans. In the case of the two defined benefit Plans,
employer contributions are based on the advice of the Plans’ actuaries.
the Group make contributions to defined contribution plans. the amount recognised as an expense for the year ended 30 June 2010 was
$46.7 million (2009: $47.3 million).
the following sets out details in respect of the defined benefit plan only.
the amounts recognised in the balance sheet are determined as follows:
Net asset/(liability) for defined benefit obligation at the beginning of the year
Expense recognised in the income statement
Actuarial losses recognised in retained earnings
Employer contributions
Net foreign currency exchange differences
Net liability for defined benefit obligation at the end of the year
CONSOLIDAtED
2010
$ millions
2009
$ millions
(16.5)
(3.5)
(1.6)
8.1
0.1
(13.4)
2.2
(2.4)
(22.6)
6.7
(0.4)
(16.5)
the accrued benefits, fund assets and vested benefits have been determined based on amounts calculated by the actuary projected forward
to 30 June 2010.
Contributions to the Boral Super sub-plan and the Boral Industries Inc. plan have been based on actuarial advice. taking into account these
contribution levels, and based on the actuarial assessments and the market values of assets after meeting liabilities, funds are expected to be
available to satisfy all benefits that become vested under each of the major plans in the event of:
(i)
termination of the plan;
(ii) voluntary termination of the employment of each employee on the initiative of that employee; or
(iii) compulsory termination of the employment of each employee by an entity in the Group.
104
Boral Limited Annual Report 2010
Notes to the FINaNcIal statemeNts
Boral Limited and Controlled Entities
26. employee benefits (continued)
SuperannuatIon (continued)
reconciliation of the net asset recognised in the balance sheet
Defined benefit obligation
Fair value of plan assets
Net liability
movements in the present value of the defined benefit obligation
Balance at the beginning of the year
Current service cost
Interest cost
Contributions by plan participants
Actuarial losses
Benefits paid
Net foreign currency exchange differences
Balance at the end of the year
movements in the fair value of plan assets
Fair value of plan assets at the beginning of the year
Expected return on plan assets
Actuarial gains/(losses)
Employer contributions
Contributions by plan participants
Benefits paid
Net foreign currency exchange differences
Balance at the end of the year
expense recognised in the income statement
Current service cost
Interest cost
Expected return on plan assets
Defined benefit superannuation expense
cumulative amounts recognised in equity before tax
Balance at beginning of the year
Actuarial losses
Net foreign currency exchange differences
Cumulative actuarial losses
Actual return on plan assets
CONSOLIDAtED
2010
$ millions
2009
$ million
(82.5)
69.1
(13.4)
(83.8)
67.3
(16.5)
83.8
79.1
4.8
3.4
0.3
6.0
(15.1)
(0.7)
82.5
67.3
4.7
4.4
8.1
0.3
(15.1)
(0.6)
69.1
4.8
3.4
(4.7)
3.5
(25.1)
(1.6)
0.3
(26.4)
9.1
4.8
3.6
0.3
2.2
(8.2)
2.0
83.8
81.3
6.0
(20.4)
6.7
0.3
(8.2)
1.6
67.3
4.8
3.6
(6.0)
2.4
(2.0)
(22.6)
(0.5)
(25.1)
(14.4)
Boral Limited Annual Report 2010
105
26. employee benefits (continued)
SuperannuatIon (continued)
plan assets
the percentage invested in each class of the plan assets was:
Equity securities
Debt securities
Property securities
Other securities
BORAL SUPER
SUB-PLAN
BORAL INDUStRIES
INC PLAN
2010
2009
2010
2009
66.1%
29.5%
4.4%
–
67.0%
29.2%
3.6%
0.2%
50.7%
49.2%
– –
50.3%
39.4%
0.1%
10.3%
there are no amounts included in the fair value of plan assets relating to Boral Limited’s own financial instruments, or any property occupied
by, or other assets used by the Group.
total employer contributions expected to be paid by the Group for the year ending 30 June 2011 are $5.2 million.
principal actuarial assumptions at the balance sheet date
Discount rate
Expected rate of return on plan assets
Expected salary increase rate
BORAL SUPER
SUB-PLAN
BORAL INDUStRIES
INC PLAN
2010
2009
2010
2009
4.3%
6.6%
4.0%
4.7%
7.0%
4.0%
5.5%
7.5%
3.0%
6.5%
7.5%
3.0%
the expected return on assets assumption is determined by weighting the expected long-term return for each asset class by the target
allocation of assets to each asset class. the returns used for each class are net of investment tax and investment fees. the above
calculations are performed by a qualified actuary using the projected unit credit method.
historical information
Present value of defined benefit obligation
Fair value of plan assets
Net asset/(liability)
Experience adjustments on plan assets – gain/(loss)
Experience adjustments on plan liabilities – gain/(loss)
2010
$ millions
2009
$ millions
2008
$ millions
2007
$ millions
2006
$ millions
CONSOLIDAtED
(82.5)
69.1
(13.4)
4.4
(6.0)
(83.8)
(79.1)
(79.2)
(79.5)
67.3
(16.5)
(20.4)
(2.2)
81.3
2.2
(12.0)
(0.4)
91.2
12.0
6.3
(1.1)
83.6
4.1
5.1
(0.2)
106
Boral Limited Annual Report 2010
Notes to the FINaNcIal statemeNts
Boral Limited and Controlled Entities
27. Loans and borrowings
term anD DeBt repayment ScheDuLe
terms and conditions of outstanding loans were as follows:
Currency
Effective
interest
rate 2010
year of
maturity
carrying
amount
$ millions
fair value
$ millions
Carrying
amount
$ millions
Fair value
$ millions
CONSOLIDAtED
30 June 2010
30 JUNE 2009
tHB
AUD
AUD
3.30%
–
6.00%
2011
2011
2011
8.4
0.4
0.1
8.9
8.4
0.4
0.1
8.9
5.8
0.6
0.3
6.7
5.8
0.6
0.3
6.7
current
Bank loans – unsecured
Other loans – unsecured1
Finance lease liabilities
non-current
US senior notes – unsecured
USD
6.43%
2012-2020
1,271.2
1,349.0
1,323.2
1,347.8
Syndicated term credit facility – unsecured USD
Syndicated term credit facility – unsecured AUD
AUD notes – unsecured
Bank loans – unsecured
Other loans – unsecured1
total
AUD
tHB
AUD
–
–
–
3.60%
–
–
–
–
2012
2014
–
–
–
58.5
1.0
1,330.7
1,339.6
–
–
–
58.5
1.0
1,408.5
1,417.4
124.6
124.6
40.0
59.7
58.4
1.5
40.0
59.7
58.4
1.5
1,607.4
1,614.1
1,632.0
1,638.7
1 Vendor loan covering the purchase of plant and equipment where instalment repayments by the Boral Group do not include an interest component.
uS SenIor noteS – unSecureD
three separate placements for US$300 million (US$258 million outstanding; equivalent A$313 million), US$400 million (equivalent A$506 million)
and US$382.2 million (equivalent A$452 million) were undertaken in 2002, 2005 and 2008 respectively with financial institutions in the North
American Private Placement market. the notes are structured in seven tranches for amounts of US$152.5 million, US$52 million, US$53.5 million,
US$200 million, US$200 million, US$306 million and US$76.2 million that mature in two, four, five, seven (by two tranches), eight and ten years.
Fixed coupon interest rates of 6.91%, 7.01%, 7.11%, 5.42%, 5.52%, 7.12% and 7.22% per annum respectively apply to the seven tranches.
uS commercIaL paper – unSecureD
US$1,000 million (equivalent A$1,172 million) is available to be accessed through two non-underwritten facilities; a US$500 million limit
applies to each facility where Boral Limited and Boral International Holdings Inc. are the issuers under each facility. Issuance is conducted
through a two dealer arrangement, where placement is subject to acceptance by respective investors. Commercial paper is issued for
periods not exceeding 365 days from the date of issue, with the applicable interest rate benchmark being agreed to between the investor
and the issuer at the date notes are purchased by investors.
auD noteS – unSecureD
Australian dollar domestic note program – A$500 million non-underwritten facility whereby issuance by Boral Limited is conducted through
a panel of four dealers, where placement is subject to acceptance by respective investors. Notes can be issued for periods not exceeding
365 days from the date of issue with the applicable interest rate benchmark being referenced to the Bank Bill Swap Rate (BBSW).
BanK facILItIeS
SynDIcateD term creDIt facILIty
Syndicated term credit facility – a committed US$200 million and A$794 million (aggregate equivalent A$1,028 million) syndicated term credit
facility; its primary purpose being both to provide committed backup support for issuance of AUD/USD commercial paper by the Group
and liquidity for general corporate purposes. the maturity date for this facility is 13 August 2011 where the interest rate depending on the
currency of denomination is referenced to BBSW or LIBOR.
caSh aDvance facILIty
A committed line of credit for an amount equivalent A$15.7 million (total A$31.4 million) is available each to Boral Limited and Pt Boral
Indonesia. the facility supports financing requirements related to Boral’s operating activities located in Indonesia. A term of the cash advance
facility is that outstanding borrowings are set-off against a deposit lodged with the lender having an equivalent amount to the outstanding
loan balance.
Boral Limited Annual Report 2010
107
27. Loans and borrowings (continued)
BI-LateraL Loan facILItIeS
Committed tHB1,600 million (equivalent A$57.9 million) credit facility is available to Boral Concrete (thailand) Limited/Boral Quarry Products
(thailand) Limited respectively. the primary purpose of the tHB facility is to provide Boral’s thailand operations with funding for general
corporate purposes. the maturity date for this facility is 30 August 2012.
BanK overDraft, LeaSe LIaBILItIeS anD other
the Group operates unsecured bank overdraft facility arrangements in Australia and Asia that have combined limits of A$21.9 million. the
facilities within Australia are conducted on a set-off basis and all facilities are subject to variable rates of interest determined by the lending
bank’s benchmark interest rate. All facilities are subject to annual review where repayment can occur on demand by the lending bank.
Finance leases within Australia are subject to lease terms of various maturities.
For each of the above named facilities the Group has complied with the respective borrowing covenants throughout the year ended
30 June 2010.
28. financial instruments
fInancIaL rISK management
the Group’s business activities are exposed to a variety of financial risks, including those related to credit, liquidity, foreign currency, interest
rate and commodity price risks. Derivative instruments are utilised to manage the identified financial risks. the Group does not use derivative
or financial instruments for trading or speculative purposes.
Boral’s treasury provides technical assistance to the operating divisions, coordinates access to financial markets and manages financial risks
related to Boral’s operating divisions. the use of financial derivatives is controlled by policies approved by Boral’s Board of Directors. the
policies provide specific direction in relation to financial risk management, including foreign currency, interest rates, commodity price, credit,
financial instruments and liquidity management.
faIr vaLue
Certain estimates and judgements are required to calculate the fair values. the fair value amounts shown below are not necessarily indicative of the
amounts that the Group would realise upon disposal nor do they indicate the Group’s intent or ability to dispose the financial instrument.
the following describes the methodology adopted to derive fair values:
cash flow and fair value hedges
commodity swaps and options: the fair value is derived using conventional market formulae based on the closing market price applicable
to the respective commodity.
foreign currency contracts, foreign currency options, foreign currency swaps: the fair value is derived using conventional market
formulae based on the closing market price applicable to the respective currency.
Interest rate swaps: the present value of expected cash flows has been used to determine fair value using yield curves derived from market
sources that accurately reflect their term to maturity.
cash, deposits, loans and receivables, payables and short-term borrowings
the carrying value of these financial instruments approximate fair value given their short term duration.
Long-term borrowings
the present value of expected cash flows has been adopted to determine fair value using interest rates derived from market sources that
accurately reflect their term to maturity.
creDIt rISK
exposure to credit risk
Management has a credit policy in place and the exposure to credit risk is monitored on an ongoing basis. Credit evaluations are performed
on significant customers structured on delegated limits of authority.
Credit risk relating to derivative contracts is minimised through using internationally recognised financial counterparties; the exposure limit is
determined with reference to the credit rating assigned by the international credit rating agencies for each respective counterparty. the policy
of the Group generally requires that financial transactions are only entered into with institutions having been assigned a long-term credit rating
from the credit rating agencies that is at a minimum A-/A3.
At the balance sheet date there were no significant concentrations of credit risk. the maximum exposure to credit risk is represented by the
carrying amount of each financial asset, including derivative financial instruments, in the balance sheet.
108
Boral Limited Annual Report 2010
Notes to the FINaNcIal statemeNts
Boral Limited and Controlled Entities
28. financial instruments (continued)
creDIt rISK (continued)
the carrying amount of non derivative financial assets represents the maximum credit exposure and at the reporting date the maximum
exposure was:
Loans to and receivables from associates
trade and other receivables
Cash and cash equivalents
CONSOLIDAtED
carrying
amount
2010
$ millions
fair value
2010
$ millions
86.8
716.1
157.0
959.9
86.8
716.1
157.0
959.9
Carrying
amount
2009
$ millions
107.7
702.4
100.5
910.6
Fair value
2009
$ millions
107.7
702.4
100.5
910.6
the following table indicates, maximum credit exposure, the periods in which the cash flows associated with derivative financial assets are
expected to occur and the impact on profit or loss:
30 June 2010
Derivative financial assets
Foreign exchange contracts
designated as cash flow hedges
Interest rate swaps designated
as fair value hedges
Cross currency swaps designated
as fair value hedges
30 June 2009
Derivative financial assets
Interest rate swaps designated
as fair value hedges
Cross currency swaps designated
as fair value hedges
Commodity swaps/options
designated as cash flow hedges
Foreign exchange options
designated as cash flow hedges
Interest rate options not designated
as hedges for accounting purposes
carrying
amount
$ millions
fair value
$ millions
contractual
cash flows
$ millions
6 months
or less
$ millions
6-12 months
$ millions
1-2 years
$ millions
2-5 years
$ millions
more than
5 years
$ millions
CONSOLIDAtED
1.0
1.0
1.0
10.6
10.6
11.4
15.2
26.8
15.2
26.8
20.0
32.4
0.6
2.4
(0.3)
2.7
0.4
2.7
(0.1)
3.0
–
6.3
(0.1)
6.2
–
–
–
–
(1.0)
(1.0)
21.5
21.5
Carrying
amount
$ millions
Fair value
$ millions
Contractual
cash flows
$ millions
6 months
or less
$ millions
6-12 months
$ millions
1-2 years
$ millions
2-5 years
$ millions
More than
5 years
$ millions
CONSOLIDAtED
13.0
13.0
13.9
11.9
11.9
21.6
4.9
0.1
0.1
30.0
4.9
0.1
0.1
30.0
5.1
–
–
2.3
1.6
2.6
–
–
2.4
1.9
2.0
–
–
5.5
0.7
0.5
–
–
3.7
–
(11.7)
29.1
–
–
–
–
–
–
40.6
6.5
6.3
6.7
(8.0)
29.1
Boral Limited Annual Report 2010
109
28. financial instruments (continued)
LIquIDIty rISK
Policies have been implemented by the Group for the purpose of reducing exposure to liquidity risk. the result of this policy is that a
significant proportion of external borrowings have maturities that are greater than five years. the Group maintains committed bank
lines of credit that provide committed standby support for the issuance of AUD and USD denominated commercial paper (unutilised
at 30 June 2010) and liquidity support for general corporate purposes. the following are the contractual maturities of financial liabilities,
including estimated interest payments but excluding the impact of netting agreements:
30 June 2010
non-derivative financial liabilities
US senior notes – unsecured
Bank loans – unsecured
Other loans – unsecured
Finance lease liabilities
trade and other payables
Derivative financial liabilities
Foreign exchange contracts
designated as cash flow hedges
Commodity swaps designated
as cash flow hedges
Cross currency swaps designated
as cash flow hedges
Interest rate swaps not designated
as hedges for accounting purposes
30 June 2009
non-derivative financial liabilities
US senior notes – unsecured
Syndicated term credit facility – unsecured
Bank loans – unsecured
AUD notes – unsecured
Other loans – unsecured
Finance lease liabilities
trade and other payables
Derivative financial liabilities
Foreign exchange contracts designated
as cash flow hedges
Commodity swaps designated
as cash flow hedges
Interest rate swaps designated
as cash flow hedges
Cross currency swaps designated
as cash flow hedges
Interest rate swaps not designated
as hedges for accounting purposes
carrying
amount
$ millions
contractual
cash flows
$ millions
6 months
or less
$ millions
6-12 months
$ millions
1-2 years
$ millions
2-5 years
$ millions
more than
5 years
$ millions
CONSOLIDAtED
1,271.2
66.9
1.4
0.1
640.9
(1,714.6)
(70.8)
(1.5)
(0.1)
(640.9)
(39.4)
(1.1)
(0.6)
(0.1)
(640.9)
(39.4)
(9.5)
(0.6)
–
–
(257.3)
(2.1)
(0.3)
–
–
(490.1)
(58.1)
–
–
–
(888.4)
–
–
–
–
0.6
2.9
2.7
1.8
(0.6)
(0.6)
–
(3.0)
(1.8)
(1.2)
–
–
–
–
–
–
(3.3)
(0.2)
(0.3)
(0.6)
(1.5)
(0.7)
(1.8)
(0.9)
1,988.5
(2,436.6)
(685.6)
(0.5)
(51.5)
(0.4)
–
–
(260.7)
(549.7)
(889.1)
Carrying
amount
$ millions
Contractual
cash flows
$ millions
6 months
or less
$ millions
6-12 months
$ millions
1-2 years
$ millions
2-5 years
$ millions
CONSOLIDAtED
1,323.2
164.6
64.2
59.7
2.1
0.3
608.9
(1,882.8)
(175.2)
(67.2)
(65.6)
(2.1)
(0.3)
(608.9)
(41.2)
(2.1)
(3.0)
(1.3)
(0.4)
(0.2)
(608.9)
5.7
4.3
4.7
2.9
0.1
(5.7)
(4.3)
(4.8)
(3.4)
(0.1)
(4.4)
(3.5)
(1.8)
(0.2)
(0.1)
(41.2)
(2.6)
(4.5)
(1.3)
(0.2)
(0.1)
–
(1.1)
(0.5)
(1.3)
(0.3)
–
(82.8)
(5.5)
(1.7)
(2.7)
(0.5)
–
–
(0.2)
(0.3)
(1.5)
(0.5)
–
(473.4)
(165.0)
(58.0)
(60.3)
(1.0)
–
–
–
–
(0.2)
(1.4)
–
More than
5 years
$ millions
(1,244.2)
–
–
–
–
–
–
–
–
–
(1.0)
–
2,240.7
(2,820.4)
(667.1)
(53.1)
(95.7)
(759.3)
(1,245.2)
110
Boral Limited Annual Report 2010
Notes to the FINaNcIal statemeNts
Boral Limited and Controlled Entities
28. financial instruments (continued)
capital risk management
the capital management objectives of the Group are directed towards ensuring that the Group continues as a financial going concern
together with generating maximum returns to shareholders by the adoption of an appropriate capital structure.
the Group has a stated ratio of net debt to shareholder funds of between 40% and 70%. As at 30 June 2010 the Group was within this range.
On an ongoing basis the capital structure is reviewed to ensure that the capital components comprising equity and debt are balanced
through payments of dividends, new share issuance, share buy-backs and issue of new debt or redemption of existing debt.
marKet rISK
currency risk
the Group is exposed to foreign currency risk. this occurs as a result of firstly, purchases of materials, some plant and equipment and the
sale of products denominated in foreign currencies; secondly, the translation of its investment in overseas domiciled operations and thirdly,
interest expense related to certain foreign currency denominated borrowings.
the Group adopts policies that ensure exposures to:
(a)
forecast purchases of materials and sale of products denominated in foreign currencies having an aggregate half yearly value in excess
of equivalent A$0.5 million are at a minimum 50% hedged;
(b) forecast purchases of plant and equipment denominated in foreign currencies having a value in excess of equivalent A$0.5 million are
100% hedged; and
(c)
net investments, including net intercompany loans, in overseas domiciled investments are hedged, regulatory conditions and available
hedge instruments permitting.
the Group uses forward foreign exchange and currency option contracts to assist with hedging foreign exchange risk. Most of the forward
exchange and option contracts have maturities of less than one year following the balance sheet date. Where necessary and in accordance
with policy compliance, forward exchange contracts can be rolled over at maturity.
foreign currency exposure
the Group primarily uses external foreign currency denominated borrowings and forward rate agreements to hedge the Group’s net
investment in overseas domiciled assets. the carrying amounts of external loans and forward rate agreements designated for the purpose of
net investment hedges was A$122.7 million at 30 June 2010 (2009: A$433 million).
the ineffective portion of cash flow hedges transferred to the income statement was A$0.1 million in 2010 (2009: A$0.1 million).
the Group’s exposure to foreign currency risk at balance date was as follows, based on notional amounts:
currency
30 June 2010
Balance sheet
Net investment in overseas domiciled
Boral subsidiaries
Forward rate agreements
Foreign currency borrowings
Cross currency swaps
overseas denominated interest payments, purchase
and sale contracts
Estimated forecast interest payments
and purchases
Forward exchange contracts
CONSOLIDAtED
uSD
euro
gBp
nZD
thB
IDr
equivalent to a$ millions
127.0
171.4
(596.2)
302.1
4.3
2.4
(1.8)
3.7
(25.4)
59.8
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
2.4
(1.8)
3.7
(25.4)
59.8
(63.2)
35.0
(28.2)
(3.5)
3.5
–
–
–
–
–
–
–
–
–
–
–
–
–
Boral Limited Annual Report 2010
111
CONSOLIDAtED
USD
Euro
GBP
NZD
tHB
IDR
Equivalent to A$ millions
28. financial instruments (continued)
Currency
30 June 2009
Balance sheet
Net investment in overseas domiciled
Boral subsidiaries
Foreign currency borrowings
Cross currency swaps
Overseas denominated interest payments, purchase and sale contracts
Estimated forecast interest payments
and purchases
Forward exchange contracts
(66.0)
41.2
(24.8)
(21.4)
21.4
–
420.6
(736.5)
303.1
(12.8)
2.5
–
–
2.5
(2.4)
–
–
(2.4)
–
–
–
3.8
–
–
3.8
–
–
–
(20.4)
51.5
–
–
–
–
(20.4)
51.5
–
–
–
–
–
–
the following table shows the foreign currency risk on the net financial assets and liabilities of the Group’s operations denominated in
currencies other than the functional currency of the operations. the related exchange gains/losses on foreign currency movements are taken
primarily to the Foreign Currency translation Reserve.
net fInancIaL aSSetS/(LIaBILItIeS)
30 June 2010
NEt FINANCIAL ASSEtS/(LIABILItIES)
30 JUNE 2009
currency
uSD
euro
total
USD
Euro
total
equivalent to a$ millions
Equivalent to A$ millions
functional currency of the group’s operation
AUD
IDR
(145.6)
15.7
(129.9)
0.6
–
0.6
(145.0)
(485.5)
15.7
18.3
(129.3)
(467.2)
–
–
–
(485.5)
18.3
(467.2)
Sensitivity
At 30 June 2010, had the Australian dollar weakened/strengthened by 10% against the respective foreign currencies where all other
variables remain constant, the Group’s pre-tax change to earnings would have been a (loss)/gain respectively of around equivalent
A$0.4 million (2009: equivalent A$1.5 million) and equity would have increased/decreased respectively by around equivalent
A$29.2 million (2009: equivalent A$9.7 million).
the following significant exchange rates applied during the year:
USD
Euro
GBP
NZD
tHB
IDR
AVERAGE RAtE
REPORtING DAtE SPOt RAtE
2010
2009
2010
2009
0.8822
0.6362
0.5567
1.2483
0.7449
0.5424
0.4647
1.2329
0.8535
0.6981
0.5670
1.2295
0.8128
0.5756
0.4862
1.2434
29.0267
25.8158
27.6400
27.6400
8,260
7,821
7,733
8,278
112
Boral Limited Annual Report 2010
Notes to the FINaNcIal statemeNts
Boral Limited and Controlled Entities
28. financial instruments (continued)
IntereSt rate rISK
the Group adopts a policy that ensures between 30% and 70% of its net borrowings are subject to interest rates based on fixed rates
greater than twelve months in duration. Implementation of interest rate derivative instruments provides the Group with the flexibility to raise
term borrowings at fixed or variable interest rates where subsequently these borrowings can be converted to either variable or fixed rates of
interest. this achieves fixed interest rate borrowings consistent with the target range of between 30% and 70% of net borrowings.
For the Group, interest rate swaps denominated in US dollars and cross currency swaps denominated in Australian and US dollars have been
transacted to assist with achieving an appropriate mix of fixed and floating interest rate borrowings. the interest rate derivative instruments
mature progressively over the next seven years where the duration applicable to the interest rate and cross currency swaps is consistent with
maturities applicable to the underlying borrowings.
At the reporting date the interest rate profile of the Group’s interest bearing financial instruments was:
CONSOLIDAtED
2010
2009
carrying amount Carrying amount
$ millions
$ millions
fixed rate instruments
US senior notes – unsecured
Other loans – unsecured
Finance lease liabilities
variable rate instruments
Syndicated term credit facility – unsecured
AUD notes – unsecured
Bank loans – unsecured
Bank overdraft – unsecured
Interests rate derivatives
Pay fixed interest rate derivatives
Pay fixed against A$ bank bills
Pay fixed against US$ LIBOR
Pay variable interest rate derivatives
Pay floating against US$ LIBOR
Cross currency swap pay floating US$ LIBOR
1,271.2
1,323.2
1.4
0.1
2.1
0.3
1,272.7
1,325.6
–
–
66.9
– –
66.9
164.6
59.7
64.2
288.5
1,339.6
1,614.1
–
1.8
1.8
(10.6)
(12.5)
(23.1)
0.1
4.7
4.8
(13.0)
(9.0)
(22.0)
Sensitivity
At 30 June 2010 if interest rates had changed by +/- 1% p.a. from the year end rates with all other variables held constant, the Group’s
pre-tax profit for the year would have been A$0.7 million higher/lower (2009: A$0.5 million) and the change in equity would have been
A$0.8 million (2009: A$1.3 million) mainly as a result of a higher interest cost applying to interest rate derivatives.
Boral Limited Annual Report 2010
113
28. financial instruments (continued)
IntereSt rateS uSeD for DetermInIng faIr vaLue
Where appropriate, the Group uses BBSW, LIBOR and treasury Bond yield curves as of 30 June 2010 plus an adequate credit spread to
discount financial instruments. the interest rates used are as follows:
Derivatives
Interest bearing loans and borrowings
Finance leases
2010
% pa
2009
% pa
0.54–5.50
0.60–3.79
0.00–7.22
0.00–8.83
6.00
6.00–7.33
commoDIty prIce rISK
the Group is exposed to commodity price risk that is associated with the purchase of petroleum, natural gas and aluminium purchases under
variable price contract arrangements. the Group adopts a policy that seeks to hedge at least 50% of the price risk exposure covering the
forthcoming six months purchases where the underlying commodity purchase exceeds an annualised amount of equivalent A$10 million.
the Group uses fixed price forward and option contracts to assist with hedging commodity price risk. All of the fixed price forward and option
contracts have maturities of less than two years following the balance sheet date.
commodities hedging activities
Notional value of commodity derivative instruments at year end is as follows:
Singapore gasoil 0.5%
Natural gas (NyMEx)
Aluminium – LME
Details of balance sheet carrying value of instruments hedging commodities price risk:
assets
Commodity swaps designated as cash flow hedges
Liabilities
Commodity swaps designated as cash flow hedges
2010
$ millions
2009
$ millions
35.6
5.6
4.6
–
(2.9)
(2.9)
34.8
15.6
5.9
4.9
(4.3)
0.6
Sensitivity
At 30 June 2010 if commodity price had changed by +/- 10% from the year end prices with all other variables held constant, the
Group’s pre-tax earnings for the year would be unchanged (2009: unchanged) and the change in equity would have been A$4.2 million
(2009: A$5.6 million).
114
Boral Limited Annual Report 2010
Notes to the FINaNcIal statemeNts
Boral Limited and Controlled Entities
28. financial instruments (continued)
the faIr vaLue hIerarchy
As of 1 July 2009, the Group has adopted the AASB 7 amendments, which require disclosure of how the following fair value measurements
fit within the fair value measurement hierarchy:
Level 1 – Quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2 – Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (ie. as prices) or
indirectly (ie. derived from prices).
Level 3 – Inputs for the asset or liability that are not based on observable market data.
the Group’s financial instruments that are measured and recognised at fair value include:
– financial assets, including derivatives used for hedging (forward exchange contracts, interest rate swaps, cross currency swaps)
– financial liabilities at fair value through profit or loss (Interest rate swaps not designated as hedges for accounting purpose)
– financial liabilities, including derivatives used for hedging (forward exchange contracts, commodity swaps, cross currency swaps).
the following table presents the Group’s financial assets and liabilities that are measured at fair value:
30 June 2010
assets
Derivatives used for hedging
total assets
Liabilities
Financial liabilities at fair value through profit or loss
Derivatives used for hedging
total Liabilities
30 June 2009
Assets
Financial assets at fair value through profit or loss
Derivatives used for hedging
total Assets
Liabilities
Financial liabilities at fair value through profit or loss
Derivatives used for hedging
total Liabilities
Level 1
$ millions
Level 2
$ millions
Level 3
$ millions
total
$ millions
–
–
–
–
–
26.8
26.8
1.8
6.2
8.0
–
–
–
–
–
26.8
26.8
1.8
6.2
8.0
Level 1
$ millions
Level 2
$ millions
Level 3
$ millions
total
$ millions
–
–
–
–
–
–
0.1
29.9
30.0
0.1
17.6
17.7
–
–
–
–
–
–
0.1
29.9
30.0
0.1
17.6
17.7
Boral Limited Annual Report 2010
115
29. Key management personnel disclosures
the following were key management personnel of the Group during the reporting period and unless otherwise indicated for the entire period:
DIrectorS
current Directors
J B Clark
E J Doyle
R L Every
Non-Executive Director
Non-Executive Director (appointed 16 March 2010)
Chairman (appointed Chairman 1 June 2010)
R A Longes
Non-Executive Director
J Marlay
Non-Executive Director (appointed 1 December 2009)
P A Rayner
Non-Executive Director
J R Williams
Non-Executive Director
M W Selway
CEO and Managing Director (appointed 1 January 2010)
former Directors
Mr E J Cloney held the position of Director from 1 July 2009 to 28 October 2009 on which date he retired from the Board.
Mr R t Pearse held the position of CEO and Managing Director until he retired on 31 December 2009.
Dr K J Moss held the position of Chairman from 1 July 2009 to 31 May 2010 on which date he retired from the Board.
eXecutIveS
current executives
M G Beardsell
Divisional Managing Director – Cement Division
W R Batstone
Divisional Managing Director – Boral Building Products Division
M Kane
President Boral Industries – USA (appointed 15 February 2010)
A D Poulter
Chief Financial Officer (appointed 1 May 2010)
N J Clark
Executive General Manager – Clay & Concrete Products Division
former executives
Mr K M Barton held the position of Chief Financial Officer until his resignation effective 28 February 2010.
Mr J M Douglas held the position of Executive General Manager – Australian Construction Materials Division until his resignation
effective 9 July 2010.
Mr E S Severin held the position of President Boral Industries – USA until his resignation effective 5 March 2010.
Key management perSonneL compenSatIon
the key management personnel compensation included in “employee benefit expense” in note 3 is as follows:
Short-term employee benefits
Post-employment benefits
Share-based payments
Long-term employee benefits
June 2009 comparatives include key management personnel for that year.
CONSOLIDAtED
2010
$’000
2009
$’000
11,105.7
10,915.1
2,789.3
5,043.7
3,456.4
6,289.0
90.2
151.1
17,441.6
22,398.9
116
Boral Limited Annual Report 2010
Notes to the FINaNcIal statemeNts
Boral Limited and Controlled Entities
29. Key management personnel disclosures (continued)
InDIvIDuaL DIrectorS’ anD eXecutIveS’ compenSatIon DIScLoSureS
Information regarding individual Directors’ and executives’ compensation is provided in the Remuneration Report section of the
Directors’ Report.
LoanS to Key management perSonneL
there were no loans made or outstanding to key management personnel.
equIty InStrumentS
(i) options provided as remuneration and shares issued on exercise of such options
Details of options provided as remuneration and shares issued on the exercise of such options, together with terms and conditions of the
options, can be found in the Remuneration Report that forms part of the Directors’ Report.
(ii) option holdings
the number of options (being executive options) over ordinary shares in Boral Limited held during the financial year by each Director of Boral
Limited and each of the key management personnel of the Group are set out below:
Balance at
beginning of
the year
Granted during
the year as
remuneration
Exercised
during the year
Lapsed/
cancelled
during the year
Balance at
end of the year
Vested and
exercisable at
end of the year
Number
Number
Number
Number
Number
Number
current Director
M W Selwaya
former Director
R t Pearseb
current executives
M G Beardsell
W R Batstone
M Kanea
A D Poultera
N J Clark
former executives
K M Bartonb
J M Douglasb
E S Severinb
2010
2009
–
–
2010
6,375,100
2009
6,375,100
2010
2009
2010
2009
2010
2009
2010
2009
2010
2009
2010
2009
2010
2009
2010
2009
131,500
131,500
351,470
351,470
–
–
–
–
96,900
96,900
390,000
390,000
303,252
303,252
621,200
621,200
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(3,828)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
6,375,100
6,375,100
14,000
14,000
131,500
131,500
351,470
351,470
–
–
–
–
93,072
96,900
390,000
390,000
303,252
303,252
592
592
–
–
–
–
–
–
–
3,828
57,130
57,130
1,066
1,066
621,200
103,588
621,200
103,588
a Initial shareholding at the date of commencing as an executive included in key management personnel.
b Option holding to the date of ceasing to be an executive included in key management personnel.
Boral Limited Annual Report 2010
117
29. Key management personnel disclosures (continued)
equIty InStrumentS (continued)
(ii) option holdings (continued)
Shares provided on exercise of options
During the year the following shares were issued on the exercise of options granted as compensation:
30 June 2010
30 June 2009
Date option
granted
Number of Paid per share
$
shares
Date option
granted
Number of
shares
Paid per share
$
executives
N J Clark
29 Oct 03
3,828
$5.57
–
–
–
(iii) Share acquisition rights
the number of Share Acquisition Rights (SAR) in the Company held during the financial year by each Director of Boral Limited and each of the
key management personnel of the Group are set out below:
Balance at
beginning of
the year
Rights granted
during the year
Exercised
during the year
Lapsed/
cancelled
during the year
Balance at
end of the year
Vested and
exercisable at
end of the year
Number
Number
Number
Number
Number
Number
current Director
M W Selwaya
former Director
R t Pearseb
current executives
M G Beardsell
W R Batstone
M Kanea
A D Poultera
N J Clark
former executives
J M Douglasb
E S Severinb
K M Bartonb
2010
2009
2010
2009
2010
2009
2010
2009
2010
2009
2010
2009
2010
2009
2010
2009
2010
2009
2010
2009
–
–
367,036
367,036
431,034
–
–
–
59,688
38,530
59,688
153,637
79,013
–
82,463
74,624
–
–
–
–
–
–
–
–
42,831
42,831
35,829
–
177,502
102,661
74,235
103,267
225,943
119,601
117,610
108,333
163,082
100,985
77,388
85,694
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
431,034
–
367,036
367,036
98,218
59,688
236,100
153,637
–
–
–
–
78,660
42,831
280,163
177,502
345,544
225,943
264,067
163,082
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
a Initial holding at the date of commencing as an executive included in key management personnel.
b Final rights holding as at the date of ceasing to be an executive.
118
Boral Limited Annual Report 2010
Notes to the FINaNcIal statemeNts
Boral Limited and Controlled Entities
29. Key management personnel disclosures (continued)
equIty InStrumentS (continued)
(iv) Share holdings
the number of shares held in Boral Limited during the financial year by each Director of Boral Limited and each of the key management
personnel of the Group, including their personally related entities, are set out below:
current Directors
J B Clark
E J Doyleb
R L Every
R A Longes
J Marlayb
P A Rayner
M W Selwayb
J R Williams
former Directors
E J Cloneyc
K J Mossc
R t Pearsec
Balance at
beginning of
the year
Received during
the year on
the exercise
of options
Allocation in
Non Executive
Directors’
Share Plana
Other changes
during the year
Balance at
end of the year
Number
Number
Number
Number
Number
2010
2009
2010
2009
2010
2009
2010
2009
2010
2009
2010
2009
2010
2009
2010
2009
2010
2009
2010
2009
63,914
57,242
–
–
16,851
13,573
22,447
18,554
–
–
7,670
–
–
–
74,942
67,673
41,641
38,115
64,328
47,429
2010
4,103,555
2009
4,101,178
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
3,278
–
–
–
3,278
–
3,278
–
–
–
1,491
–
–
–
3,279
–
3,441
707
3,394
1,000
–
25,000
–
288
615
2,000
–
2,675
6,179
8,800
–
1,738
3,990
15
85
–
15,000
16,899
–
64,621
63,914
1,000
–
41,851
16,851
22,735
22,447
2,000
–
10,345
7,670
8,800
–
76,680
74,942
41,656
41,641
79,328
64,328
–
–
434
4,103,989
2,377
4,103,555
a Directors will only be entitled to a transfer of the shares in accordance with the terms and conditions of the plan.
b Initial shareholding at the date of commencing as a Director.
c Shareholding as at the date of ceasing to be a Director.
Boral Limited Annual Report 2010
119
Balance at
beginning of
the year
Received during
the year on
the exercise
of options
Other changes
during the year
Balance at
end of the year
Number
Number
Number
Number
2010
2009
2010
2009
2010
2009
2010
2009
2010
2009
2010
2009
2010
2009
2010
2009
60,685
60,685
561,991
760,221
–
–
–
–
1,873
1,819
126,032
126,032
242,417
239,700
204,840
204,771
–
–
–
–
–
–
–
–
3,828
–
–
–
–
–
–
–
–
–
–
60,685
60,685
561,991
(198,230)
561,991
–
–
–
–
94
54
–
–
–
–
5,795
1,873
–
–
126,032
126,032
(235,129)
7,288
2,717
242,417
29
69
204,869
204,840
29. Key management personnel disclosures (continued)
equIty InStrumentS (continued)
(iv) Shareholdings (continued)
current executives
M G Beardsell
W R Batstone
M Kanea
A D Poultera
N J Clark
former executives
J M Douglasb
E S Severinb
K M Bartonb
a Initial shareholding at the date of commencing as an executive included in key management personnel.
b Final shareholding at the date of ceasing to be an executive.
120
Boral Limited Annual Report 2010
Notes to the FINaNcIal statemeNts
Boral Limited and Controlled Entities
30. auditors’ remuneration
audit services:
KPMG Australia – audit and review of financial reports
Overseas KPMG firms – audit and review of financial reports
other services:
KPMG Australia – other assurance services
KPMG Australia – taxation services
KPMG Australia – due diligence
KPMG Australia – other
Overseas KPMG firms – other assurance services
Overseas KPMG firms – due diligence
Overseas KPMG firms – taxation services
31. acquisition/disposal of controlled entities
the following controlled entities were acquired or disposed of during the financial year ended 30 June 2010:
entities acquired:
there were no material acquisitions of entities during the reporting period.
entities deregistered:
Entity
Australian Chemical Company Pty Ltd (in liquidation)
Boral B Products Pty Ltd (in liquidation)
Boral Concrete Products Pty Ltd (in liquidation)
Boral Windows Pty Ltd (in liquidation)
Erinbrook Pty Ltd (in liquidation)
Hi-Quality Concrete Industries Pty Ltd (in liquidation)
Mainland Cement Pty Limited (in liquidation)
Mount Lyell Investments Ltd (in liquidation)
CONSOLIDAtED
2010
$’000
2009
$’000
1,395
461
1,856
185
148
515 –
10 –
– 6
59 –
161
1,078
2,934
1,346
623
1,969
157
74
183
420
2,389
Date of loss of control
Mar 2010
Mar 2010
Mar 2010
Mar 2010
Mar 2010
Mar 2010
Mar 2010
Mar 2010
Boral Limited Annual Report 2010
121
31. acquisition/disposal of controlled entities (continued)
the following controlled entities were acquired or disposed of during the financial year ended 30 June 2009:
entities acquired:
Business
Minor acquisitions
entities deregistered:
Entity
BEC Pty Ltd (in liquidation)
Boral Bricks (NSW) Pty Ltd (in liquidation)
Boral Bricks (Vic) Pty Ltd (in liquidation)
Boral Mills Ltd (in liquidation)
Boral timber tasmania Ltd (in liquidation)
BR tiles Pty Ltd (in liquidation)
Brandon timbers Pty Ltd (in liquidation)
Citywide Ready Mixed Concrete Pty Ltd (in liquidation)
Contest Pty Ltd (in liquidation)
Duncan’s (Eden) Pty Ltd (in liquidation)
EPM Concrete Pty Ltd (in liquidation)
Hardy’s Properties Pty Ltd (in liquidation)
Hardy’s Pty Ltd (in liquidation)
Haxton Haulage Pty Ltd (in liquidation)
Herons Creek timber Mills Pty Ltd (in liquidation)
Mavis Properties Pty Ltd (in liquidation)
Miners Rest Quarries Pty Ltd (in liquidation)
Ramsay Dredging Co Pty Ltd (in liquidation)
SPC timber Ltd (in liquidation)
Standard Properties Pty Ltd (in liquidation)
timber Industries Ltd (in liquidation)
trisamba Pty Ltd (in liquidation)
Wagga Wagga Holdings Pty Ltd (in liquidation)
Wunderlich Windows Pty Ltd (in liquidation)
Acquisition
date
total
purchase
consideration
$ millions
Fair value
of identifiable
assets acquired
$ millions
Goodwill
$ millions
–
7.1
3.3
3.8
Date of loss of control
Jun 2009
Jun 2009
Jun 2009
Jun 2009
Jun 2009
Jun 2009
Jun 2009
Jun 2009
Jun 2009
Jun 2009
Jun 2009
Jun 2009
Jun 2009
Jun 2009
Jun 2009
Jun 2009
Jun 2009
Jun 2009
Jun 2009
Jun 2009
Jun 2009
Jun 2009
Jun 2009
Jun 2009
122
Boral Limited Annual Report 2010
Notes to the FINaNcIal statemeNts
Boral Limited and Controlled Entities
32. controlled entities
the financial statements of the following entities have been consolidated to determine the results of the consolidated entity.
Boral Limited
Erinbrook Pty Ltd (in liquidation)**
Hi-Quality Concrete Industries Pty Ltd (in liquidation)**
Blue Circle Southern Cement Ltd >*
Mainland Cement Pty Ltd (in liquidation)**
Barnu Pty Ltd*
Boral Building Materials Pty Ltd >*
Boral International Pty Ltd >*
Pt Jaya Readymix
Pt Pion Quarry Nusantara
Pt Boral Pipe and Precast Indonesia
Pt Boral Indonesia
MJI (thailand) Ltd
Boral Concrete (thailand) Ltd
Boral Quarry Products (thailand) Ltd
Ratchiburi Enterprise Company Ltd
Boral International Holdings Inc.
Boral Asia Pacific Pte Ltd
Boral Building Services Pte Ltd
Boral Construction Materials LLC
Ready Mixed Concrete Company
Boral Best Block LLC
Sprat-Platte Ranch Co. LLLP
Aggregate Investments LLC
BCM Oklahoma LLC
Boral Industries Inc.
Boral Finance Inc.
Boral timber Inc.
Boral Lifetile Inc.
United States tile Co.
Boral tile LLC
Boral Bricks Inc.
Boral Bricks Holdings Inc.
Boral Bricks of texas LP
Boral Benefits Management Inc.
Boral Composites Inc.
Boral Material technologies Inc.
BMt Holdings Inc.
Boral Material technologies of texas LP
Beneficial ownership by
consolidated
entity
2010
%
Consolidated
entity
2009
%
–
–
100
–
100
100
100
90
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
89.47
100
100
100
100
100
100
100
100
100
100
100
90
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
89.47
100
100
100
100
Country of
incorporation
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Indonesia
Indonesia
Indonesia
Indonesia
thailand
thailand
thailand
thailand
USA
Singapore
Singapore
USA
USA
USA
USA
USA
USA
USA
USA
USA
USA
USA
USA
USA
USA
USA
USA
USA
USA
USA
USA
Boral Limited Annual Report 2010
123
Beneficial ownership by
consolidated
entity
2010
%
Consolidated
entity
2009
%
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
–
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
Country of
incorporation
UK
Jersey
Netherlands
Germany
Germany
Germany
NZ
NZ
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
32. controlled entities (continued)
Boral (UK) Ltd
Boral Investments Ltd
Boral Investments BV
Boral Industrie GmbH
Boral Keramik Wand Und Boden GmbH
Boral Mecklenburger Ziegel GmbH
Boral Industries Ltd
Boral Building Products (NZ) Ltd
Boral Australian Gypsum Ltd >*
Waratah Gypsum Pty Ltd (in liquidation)
Boral Plaster Fixing Pty Ltd*
Lympike Pty Ltd*
Boral Investments Pty Ltd >*
Boral Construction Materials Ltd >*
Boral Resources (WA) Ltd >*
Boral Contracting Pty Ltd*
Go Crete Pty Ltd >*
Boral Resources (Vic) Pty Ltd >*
Bayview Quarries Pty Ltd*
Boral Resources (Qld) Pty Ltd >*
Australian Chemical Company Pty Ltd (in liquidation)**
Allen’s Asphalt Pty Ltd >*
Boral Resources (NSW) Pty Ltd >*
Dunmore Sand & Soil Pty Ltd*
Boral Recycling Pty Ltd >*
De Martin & Gasparini Pty Ltd >*
De Martin & Gasparini Concrete Placers Pty Ltd*
De Martin & Gasparini Pumping Pty Ltd*
De Martin & Gasparini Contractors Pty Ltd*
Girotto Precast Pty Ltd >*
Boral Construction Materials Group Ltd >*
Concrite Pty Ltd >*
Concrite Holdings Pty Ltd (in liquidation)
Boral Resources (SA) Ltd >*
Bitumax Pty Ltd >*
Road Surfaces Group Pty Ltd >*
Boral Formwork and Scaffolding Pty Ltd >*
Alsafe Premix Concrete Pty Ltd >*
Boral transport Ltd >*
124
Boral Limited Annual Report 2010
Notes to the FINaNcIal statemeNts
Boral Limited and Controlled Entities
32. controlled entities (continued)
Leo N. Dunn & Sons Pty Ltd (in liquidation)*
Boral Corporate Services Pty Ltd
Bitupave Ltd >*
Boral Resources (Country) Pty Ltd >*
MLOP Pty Ltd (in liquidation)
Bayview Pty Ltd*
Dandenong Quarries Pty Ltd*
Mount Lyell Investments Ltd (in liquidation)**
Boral Insurance Pty Ltd
Boral Johns Perry Ltd (in liquidation)
Boral Concrete Products Pty Ltd (in liquidation)**
Allen taylor & Company Ltd >*
Oberon Softwood Holdings Pty Ltd >*
Duncan’s Holding Ltd >*
Boral Bricks Pty Ltd >*
Boral Masonry Ltd >*
Boral Hollostone Masonry (South Aust) Pty Ltd >*
Boral Montoro Pty Ltd >*
Boral Windows Systems Ltd >*
Dowell Australia Ltd (in liquidation)
Boral Windows Pty Ltd (in liquidation)**
Sawmillers Exports Pty Ltd >*
Boral Shared Business Services Pty Ltd >*
Boral Building Products Ltd >*
Midland Brick Company Pty Ltd >*
Boral B Products Pty Ltd (in liquidation) **
Beneficial ownership by
consolidated
entity
2010
%
Consolidated
entity
2009
%
Country of
incorporation
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
100
100
100
100
100
100
100
–
100
100
–
100
100
100
100
100
100
100
100
100
–
100
100
100
100
–
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
> Granted relief by the Australian Securities and Investments Commission from specified accounting requirements in accordance with Class Order
(refer note 36).
* Entered into cross guarantee with Boral Limited (refer note 36).
** Deregistered during the year.
All the shares held by Boral Limited in controlled entities are ordinary shares.
Boral Limited Annual Report 2010
125
33. related party disclosures
controLLeD entItIeS
Interests held in controlled entities are set out in note 32.
aSSocIateD entItIeS
Interests held in associated entities are set out in note 12. the business activities of a number of these entities are conducted under joint
venture arrangements. Associated entities conduct business transactions with various controlled entities. Such transactions include
purchases and sales of certain products, dividends and interest. All such transactions are conducted on the basis of normal commercial
terms and conditions.
DIrector tranSactIonS wIth the group
transactions entered into during the year with Directors of Boral Limited and the Group are within normal employee, customer or supplier
relationships on terms and conditions no more favourable than dealings in the same circumstances on an arm’s length basis and include:
– the receipt of dividends from Boral Limited;
– participation in the Senior Executive Performance Share Plan;
– terms and conditions of employment;
– reimbursement of expenses; and
– purchases of goods and services.
Mr E J Cloney was Chairman of QBE Insurance Group Limited during the year. During the year, Boral Limited and its controlled entities
entered into various workers compensation insurance arrangements with controlled entities of QBE Insurance Group Limited on terms and
conditions no more favourable than those available on an arm’s length basis.
Dr E J Doyle is a Director of OneSteel Limited. During the year, Boral Limited and its controlled entities purchased steel from OneSteel Limited
on terms and conditions no more favourable than those available on an arm’s length basis.
Dr R L Every is Chairman of Wesfarmers Limited. During the year, the Group supplied timber and other products to and purchased products
and services from the Wesfarmers Limited Group on terms and conditions no more favourable than those available on an arm’s length basis.
Dr K J Moss is Chairman of Centennial Coal Company Limited. During the year, controlled entities of Centennial Coal Company Limited
supplied coal and services to the Group’s Berrima and Maldon cement works on terms and conditions no more favourable than those
available on an arm’s length basis.
Mr R t Pearse is Chairman of Outward Bound Australia. During the year, Boral Limited made payments to Outward Bound Australia
principally for the purchase of training courses on terms and conditions no more favourable than those available on an arm’s length basis.
Mr P A Rayner is a Director of Qantas Airways Limited. During the year, Boral Limited and its controlled entities purchased flights and other
travel services from Qantas Airways Limited on terms and conditions no more favourable than those available on an arm’s length basis.
Mr M W Selway was a Director of Lend Lease Corporation Ltd during the year. During the year, Boral Limited and its controlled entities
supplied products to the Lend Lease Group on terms and conditions no more favourable than those available on an arm’s length basis.
Dr J R Williams is a Director of Origin Energy Limited. During the year, Boral Limited and its controlled entities purchased energy supplies from
controlled entities of Origin Energy Limited on terms and conditions no more favourable than those available on an arm’s length basis.
126
Boral Limited Annual Report 2010
Notes to the FINaNcIal statemeNts
Boral Limited and Controlled Entities
34. notes to cash flow statement
(i) Cash includes cash on hand, at bank and short-term deposits at call, net of
outstanding bank overdrafts. Cash as at the end of the year as shown in the cash
flow statement is reconciled to the related items in the balance sheet as follows:
Cash and cash equivalents
(ii) Reconciliation of net profit/(loss) to net cash provided by operating activities:
Net profit/(loss)
Adjustments for non-cash items:
Depreciation and amortisation
Gain on sale of assets
Gain on sale of investments
Impairment of assets
Share-based payment expense
Non-cash equity income
Net cash provided by operating activities before change in assets and liabilities
Changes in assets and liabilities net of effects from acquisitions/disposals
– Receivables
– Inventories
– Payables
– Provisions
– Other
Net cash provided by operating activities
(iii) the following non-cash financing and investing activities have not been
included in the cash flow statements:
CONSOLIDAtED
Note
2010
$ millions
2009
$ millions
9
157.0
157.0
100.5
100.5
(89.3)
142.2
252.6
(16.9)
–
247.9
8.9
48.1
451.3
(27.4)
18.3
33.5
(37.6)
21.0
459.1
263.3
(13.5)
(38.3)
69.4
10.9
32.8
466.8
145.1
(15.2)
(93.6)
(64.7)
(19.6)
418.8
Dividends reinvested under the dividend reinvestment plan
31.9
49.7
(iv) Details of credit standby arrangements and loan facilities are included in note 27.
Boral Limited Annual Report 2010
127
BORAL LIMItED
2010
$ millions
2009
$ millions
69.0
7.4
76.4
137.1
(182.5)
(45.4)
6,428.7
6,251.2
568.5
601.2
6,997.2
6,852.4
3,565.5
3,216.2
703.6
4,269.1
2,728.1
951.7
4,167.9
2,684.5
1,724.0
1,691.4
38.1
966.0
22.2
970.9
2,728.1
2,684.5
8.4
8.4
8.4
8.4
For the year ended 30 June
35. parent entity disclosures
result of the parent entity
Profit after tax
Other comprehensive income after tax
total comprehensive income for the period
financial position of parent entity
Current assets
Non-current assets
total assets
Current liabilities
Non-current liabilities
total liabilities
net assets
Issued capital
Reserves
Retained earnings
total equity
parent entity contingencies
Details of contingent liabilities and contingent assets where the probability of future
payments/receipts is not considered remote are set out below.
Unsecured contingent liabilities:
Bank guarantees
128
Boral Limited Annual Report 2010
Notes to the FINaNcIal statemeNts
Boral Limited and Controlled Entities
35. parent entity disclosures (continued)
parent entity contingencies (continued)
the Company has given to its bankers letters of responsibility in respect of accommodation provided from time to time by the banks to
controlled entities.
Certain entities within the Company are subject to various lawsuits and claims in the ordinary course of business.
Consistent with other companies of the size and diversity of Boral, the Company is the subject of periodic information requests, investigations
and audit activity by the Australian taxation Office (AtO) and taxation authorities in other jurisdictions in which Boral operates.
A deed was entered into at the time of the demerger which contained certain indemnities and other agreements between the Company and
Origin Energy Limited (Origin) and their respective controlled entities covering the transfer of the businesses, investments, tax, other liabilities,
debt and assets of the Company and some temporary shared arrangements. A number of matters were resolved with both the Australian
and United States taxation authorities which are likely to give rise to claims by the Group under the demerger deed. A settlement has been
reached with the AtO in relation to this matter. As the settlement resulted in a payment to the AtO, Origin is likely to rely on indemnities
contained in the demerger deed.
the Company has considered all of the above claims and, where appropriate, sought independent advice and believes it holds
appropriate provisions.
parent entity guarantees in respect of debts of its subsidiaries
Under the terms of ASIC Class Order 98/1418, certain wholly owned controlled entities have been granted relief from the requirement to
prepare audited financial reports. the Company has entered into an approved deed of indemnity for the cross-guarantee of liabilities with
those controlled entities identified in note 32.
parent entity capital commitments
the parent entity does not have any capital commitments for acquisition of property plant and equipment at 30 June 2010 (2009: nil).
Boral Limited Annual Report 2010
129
36. Deed of cross guarantee
the following consolidated statement of comprehensive income and balance sheet comprises Boral Limited and its controlled entities which
are party to the Deed of Cross Guarantee (refer note 32), after eliminating all transactions between parties to the Deed.
Statement of comprehenSIve Income
continuing operations
Revenue
profit/(loss) before income tax expense
Income tax (expense)/benefit
profit/(loss) from continuing operations
Discontinued operations
Profit/(loss) from discontinued operations (net of income tax)
net profit/(loss)
other comprehensive income
Actuarial gain/(loss) on defined benefit plans
Exchange differences from translation of foreign operations taken to equity
Fair value adjustment on cash flow hedges
Fair value adjustment on available for sale financial assets
Income tax relating to components of other comprehensive income
total comprehensive income
attributable to:
Members of the parent entity
Non-controlling interest
reconciliation of movements in retained earnings
Retained earnings at the beginning of the year
Net profit attributable to members of the parent entity
Retained earnings of controlled entities added/(removed) from cross guarantee group
Dividends recognised during the year
Actuarial gain/(loss) on defined benefit plans, net of tax
retained earnings at the end of the year
CONSOLIDAtED
2010
$ millions
2009
$ millions
3,893.5
4,214.8
203.6
(75.4)
128.2
(71.8)
56.4
0.5
11.6
10.7
–
(3.4)
75.8
75.8
–
75.8
271.2
35.6
306.8
(21.1)
285.7
(20.2)
21.0
(20.6)
(237.2)
83.5
112.2
112.5
(0.3)
112.2
1,383.1
1,263.2
56.4
–
(74.3)
0.3
285.7
(8.1)
(143.6)
(14.1)
1,365.5
1,383.1
130
Boral Limited Annual Report 2010
Notes to the FINaNcIal statemeNts
Boral Limited and Controlled Entities
36. Deed of cross guarantee (continued)
BaLance Sheet
current aSSetS
Cash and cash equivalents
Receivables
Inventories
Other
Assets classified as held for sale
totaL current aSSetS
non-current aSSetS
Receivables
Inventories
Investments accounted for using the equity method
Other financial assets
Property, plant and equipment
Intangible assets
Other
totaL non-current aSSetS
totaL aSSetS
current LIaBILItIeS
Payables
Interest bearing loans and borrowings
Current tax liabilities
Provisions
Liabilities classified as held for sale
totaL current LIaBILItIeS
non-current LIaBILItIeS
Payables
Interest bearing loans and borrowings
Deferred tax liabilities
Provisions
totaL non-current LIaBILItIeS
totaL LIaBILItIeS
net aSSetS
equIty
Issued capital
Reserves
Retained earnings
totaL equIty
CONSOLIDAtED
2010
$ millions
2009
$ millions
114.7
636.5
449.6
55.8
59.5 –
32.5
687.0
518.8
62.0
1,316.1
1,300.3
106.3
87.6
141.5
2,294.4
2,309.9
112.6
61.7
5,114.0
6,430.1
70.7
61.7
198.5
2,437.4
2,512.6
134.2
74.6
5,489.7
6,790.0
1,534.3
1,684.8
16.4
101.1
220.0
9.9 –
19.2
88.2
175.1
1,881.7
1,967.3
22.1
33.3
1,272.1
1,549.0
120.1
49.4
1,463.7
3,345.4
152.5
46.2
1,781.0
3,748.3
3,084.7
3,041.7
1,724.0
1,691.4
(4.8)
(32.8)
1,365.5
3,084.7
1,383.1
3,041.7
Boral Limited Annual Report 2010
131
37. Subsequent events
(i) acquisition
During July 2010 the Group acquired the remaining 50% interest in MonierLifetile for US$75 million which approximated the net asset value
as at 30 June 2010.
(ii) capital raising
During July the Group announced a capital raising of approximately $490 million before costs. the capital raising consisted of a 1 for 5
accelerated renounceable entitlement offer at an offer price of $4.10 per share. the capital raising resulted in the issue of 68,332,173 ordinary
shares under the Institutional Entitlement offer and 51,568,446 ordinary shares under the Retail Entitlement offer.
(iii) Disposal of businesses
In August 2010 the Group announced the disposal of its Scaffolding and Precast Panels businesses for consideration of around $50 million
which approximated the carrying value of net assets as at 30 June 2010.
Refer to note 5 for further details.
132
Boral Limited Annual Report 2010
statutory statemeNts
Boral Limited and Controlled Entities
Directors’ Declaration
1. In the opinion of the Directors of Boral Limited:
(a) the consolidated financial statements and notes set out on pages 62 to 131 and the Remuneration Report in the Directors’ Report,
set out on pages 45 to 60, are in accordance with the Corporations Act 2001, including:
(i)
giving a true and fair view of the Group’s financial position as at 30 June 2010 and of its performance for the financial year ended
on that date; and
(ii) complying with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations
Regulations 2001;
(b) there are reasonable grounds to believe that the Group will be able to pay its debts as and when they become due and payable.
2. there are reasonable grounds to believe that Boral Limited and the controlled entities identified in note 32 will be able to meet any
obligations or liabilities to which they are or may become subject by virtue of the Deed of Cross Guarantee between Boral Limited and
those controlled entities pursuant to ASIC Class Order 98/1418.
3. the Directors have been given the declarations required by section 295A of the Corporations Act 2001 from the chief executive officer and
chief financial officer for the financial year ended 30 June 2010.
4. the Directors draw attention to note 1 to the consolidated financial statements, which includes a statement of compliance with
International Financial Reporting Standards.
Signed in accordance with a resolution of the Directors:
Bob every
Director
mark Selway
Director
Sydney, 3 September 2010
Boral Limited Annual Report 2010
133
Independent auditor’s report to the members of Boral Limited
report on the financial report
We have audited the accompanying financial report of the Group comprising Boral Limited (the “Company”) and the entities it controlled at
the year’s end or from time to time during the financial year , which comprises the balance sheet as at 30 June 2010, and income statement
and statement of comprehensive income, statement of changes in equity and statement of cash flows for the year ended on that date, a
description of significant accounting policies and other explanatory notes 1 to 37 and the Directors’ Declaration.
Directors’ responsibility for the financial report
the Directors of the company are responsible for the preparation and fair presentation of the financial report in accordance with Australian
Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Act 2001. this responsibility includes
establishing and maintaining internal control relevant to the preparation and fair presentation of the financial report that is free from material
misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates
that are reasonable in the circumstances. In note 1, the Directors also state, in accordance with Australian Accounting Standard AASB 101
Presentation of Financial Statements, that the financial report, comprising the financial statements and notes, complies with International
Financial Reporting Standards.
Auditor’s responsibility
Our responsibility is to express an opinion on the financial report based on our audit. We conducted our audit in accordance with Australian
Auditing Standards. these Auditing Standards require that we comply with relevant ethical requirements relating to audit engagements and
plan and perform the audit to obtain reasonable assurance whether the financial report is free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial report. the procedures
selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the financial report, whether
due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair
presentation of the financial report 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 entity’s internal control. An audit also includes evaluating the appropriateness of accounting
policies used and the reasonableness of accounting estimates made by the Directors, as well as evaluating the overall presentation of the
financial report.
We performed the procedures to assess whether in all material respects the financial report presents fairly, in accordance with the
Corporations Act 2001 and Australian Accounting Standards (including the Australian Accounting Interpretations), a view which is consistent
with our understanding of the Group’s financial position and of its performance.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Independence
In conducting our audit, we have complied with the independence requirements of the Corporations Act 2001.
Auditor’s opinion
In our opinion:
(a) the 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 30 June 2010 and of its performance for the year ended on that date;
and
complying with Australian Accounting Standards (including the Australian Accounting Interpretations) and the
Corporations Regulations 2001.
(b) the financial report also complies with International Financial Reporting Standards as disclosed in note 1.
report on the remuneration report
We have audited the Remuneration Report included in clause 19 of the Directors’ Report for the year ended 30 June 2010. 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 auditing standards.
Auditor’s opinion
In our opinion, the remuneration report of Boral Limited for the year ended 30 June 2010, complies with Section 300A of the
Corporations Act 2001.
Kpmg
Sydney 3 September 2010
David rogers
Partner
134
Boral Limited Annual Report 2010
shareholder INFormatIoN
Boral Limited and Controlled Entities
Shareholder communications
Enquiries or notifications by shareholders
regarding their shareholdings or dividends
should be directed to Boral’s share registry:
Link Market Services Limited
Locked Bag A14
Sydney South NSW 1235 Australia
Hand deliveries to:
Level 12, 680 George Street,
Sydney NSW 2000
telephone (02) 8280 7133
International +61 2 8280 7133
Facsimile (02) 9287 0303
International +61 2 9287 0303
Shareholders can also send questions
to the share registry via email.
Internet
www.linkmarketservices.com.au
email
registrars@linkmarketservices.com.au
online services
you can access information and update
information about your holdings in
Boral Limited via the Internet by visiting
Link Market Services’ website
www.linkmarketservices.com.au or
Boral’s website www.boral.com.au
Some of the services available online
include: check current and previous holding
balances, choose your preferred Annual
Report option, update address details,
update bank details, confirm whether you
have lodged your tFN, ABN or exemption,
check the share prices and graphs or
download a variety of forms.
Dividends
the final dividend for the 2009/10 year
of 6.5 cents per share will be paid by Boral
on 28 September 2010. the dividend will be
fully franked.
Dividend reinvestment plan (Drp)
As an alternative to receiving cash dividends,
shareholders may elect to participate in
the DRP. the DRP enables shareholders
to use cash dividends to acquire additional
fully paid Boral shares. If a shareholder
wishes to participate in the DRP or alter
their participation, they must notify the share
registry in writing. DRP election forms can
be obtained by contacting Link Market
Services. Features of the DRP can be found
on Boral’s website.
tax file number, australian Business
number (aBn) or exemption
you are strongly advised to lodge your tFN,
ABN or exemption. If you choose not to
lodge these details with the share registry,
then Boral Limited is obliged to deduct
tax at the highest marginal rate (plus the
Medicare levy) from the unfranked portion of
any dividend payment. Certain pensioners
are exempt from supplying their tFNs. you
can confirm whether you have lodged your
tFN, ABN or exemption via the Internet at
www.linkmarketservices.com.au
Shareholders are reminded to bank dividend
cheques as soon as possible. Dividend
cheques that are not banked are required to
be handed over to the State trustee under
the Unclaimed Monies Act.
If you wish your dividends to be paid directly
to a bank, building society or credit union
account in Australia or New Zealand,
contact the share registry or visit their
website at www.linkmarketservices.com.au
for an application form. the payments
are electronically credited on the dividend
payment date and confirmed by payment
advices mailed to the shareholder’s
registered address. All instructions received
remain in force until amended or cancelled
in writing.
uncertificated forms
of shareholding
two forms of uncertificated holdings are
available to Boral shareholders:
Issuer Sponsored holdings: this type of
holding is sponsored by Boral and provides
shareholders with the advantages of
uncertificated holdings without the need to
be sponsored by any particular stockbroker.
Broker Sponsored holdings (cheSS):
Shareholders may arrange to be sponsored
by a stockbroker (or certain other financial
institutions) and are required to sign a
sponsorship agreement appointing the
sponsor as their “controlling participant” for
the purposes of CHESS. this type of holding
is likely to attract regular stock market
traders or those shareholders who have their
share portfolio managed by a stockbroker.
Holding statements are issued to
shareholders not later than five business
days after the end of any month in which
transactions alter the balance of a holding.
Shareholders requiring replacement holding
statements should be directed to their
controlling participant.
Shareholders communicating with the share
registry should have to hand their Security
Holder Reference Number (SRN) or Holder
Identification Number (HIN) as it appears on the
Issuer Sponsored/CHESS holding statements
or dividend advices. For security reasons,
shareholders should keep their Security
Holder Reference Numbers confidential.
annual report mailing list
Shareholders (whether Issuer or Broker
Sponsored) not wishing to receive the
Annual Report should advise the share
registry in writing so that their names can be
removed from the mailing list. Shareholders
are also able to update their preference via
the Link Market Services or Boral websites.
Unless shareholders have advised the share
registry that they require no Annual Report or
the full Annual Report, they will be sent the
Shareholder Review.
Alternatively, shareholders can nominate to
receive email notification of the release of
the Annual Report and then access it via a
link. the share registry can provide forms for
making annual report delivery elections.
change of address
Shareholders who are Issuer Sponsored
should notify any change of address to
the share registry promptly. this can be
done via the Link Market Services website
or in writing quoting their Security Holder
Reference Number, previous address
and new address. Application forms for
Change of Address are also available for
download via the Link Market Services or
Boral websites. Broker Sponsored (CHESS)
holders must advise their sponsoring broker
of the change.
Information on Boral
Boral has a comprehensive Internet site
featuring news items, announcements,
corporate information and a wide range of
product and service information. Boral’s
Internet address is www.boral.com.au
the Annual Report is the main source of
information for shareholders. Other sources
of information include:
February – the interim results announcement
for the December half year.
August – the annual results announcement
for the year ended 30 June.
November – the Annual General Meeting.
shareholder INFormatIoN
Boral Limited and Controlled Entities
Boral Limited Annual Report 2010
135
Distribution Schedule of Shareholders as at 30 August 2010
Size of shareholding
(a) in the categories –
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 and over
(b) holding less than a marketable parcel (113 shares)
Number of
shareholders
% of ordinary
shares
39,208
32,579
5,888
3,411
146
81,232
6,665
2.50
10.42
5.77
9.77
71.54
100.00
0.04
Voting Rights – Ordinary Shares
On a show of hands every person present, who is a member or proxy, attorney or
representative of a member, shall have one vote and on a poll every member who is present
in person or by proxy, attorney or representative shall have one vote for each share held by
him or her.
On-Market Buy Back
there is no current on-market buy-back of ordinary shares.
Twenty Largest Shareholders as at 30 August 2010
Ordinary shares
shares
% of ordinary
AMP Life Limited
National Nominees Limited
1
HSBC Custody Nominees (Australia) Limited
2
JP Morgan Nominees Australia
3
Citicorp Nominees Pty Limited
4
Cogent Nominees Pty Limited
5
6
ANZ Nominees Limited
7 Warbont Nominees Pty Ltd
8
9 Merrill Lynch (Australia) Nominees Pty Limited
10 CS Fourth Nominees Pty Ltd
11 Citicorp Nominees Pty Limited
12 FEtA Nominees Pty Limited
13 Cogent Nominees Pty Limited
14 ANZ Nominees Limited
15 Australian Reward Investment Alliance
16 Bainpro Nominees Pty Limited
17 Australian Foundation Investment Company Limited
18 Cogent Nominees Pty Limited
19 Equitas Nominees Pty Limited
20 HSBC Custody Nominees (Australia) Limited
– GSCO ECA
109,344,084
108,274,650
88,216,070
34,389,367
19,317,377
9,461,348
9,265,453
8,564,379
7,876,115
7,508,077
7,345,347
7,011,177
6,275,000
5,657,424
5,415,254
5,411,742
4,572,472
4,143,877
3,489,345
3,375,521
15.21%
15.06%
12.27%
4.78%
2.69%
1.32%
1.29%
1.19%
1.10%
1.04%
1.02%
0.98%
0.87%
0.79%
0.75%
0.75%
0.64%
0.58%
0.49%
0.47%
Requests for publications and other
enquiries about Boral’s affairs should be
addressed to:
the Manager, Corporate Affairs
Boral Limited
GPO Box 910
Sydney NSW 2001
Enquiries can also be made via
email: info@boral.com.au or visit
Boral’s website at www.boral.com.au
Share trading and price
Boral shares are traded on the Australian
Securities Exchange Limited (ASx). the
stock code under which they are traded is
“BLD” and the details of trading activity are
published in most daily newspapers under
that abbreviation.
Share sale facility
A means for Issuer Sponsored shareholders,
particularly small shareholders, to sell their
entire Boral shareholding is to use the
share registry’s sale facility by contacting
Link Market Services’ Share Sale Centre
on (02) 8280 7133.
american depositary receipts
In the USA, Boral shares are traded in the
over-the-counter market in the form of ADRs
issued by the depositary, the Bank of New
york. Each ADR represents four ordinary
Boral shares.
Share Information
as at 30 august 2010
Substantial Shareholders
National Australia Bank, by a notice of initial
substantial holder dated 2 September 2010,
advised that it and its associates were
entitled to 68,247,213 ordinary shares
(effective 30 August 2010).
Commonwealth Bank of Australia, by a
notice of initial substantial holder dated
1 September 2010, advised that it and its
associates were entitled to 36,089,693
ordinary shares (effective 27 August 2010).
Ausbil Dexia, by a notice of change of
interests of substantial holder dated
23 July 2010, advised that it and its
associates were entitled to 48,254,293
ordinary shares.
Balanced Equity Management, by a notice
of change of interests of substantial holder
dated 13 July 2010, advised that it and its
associates were entitled to 41,365,899
ordinary shares.
136
Boral Limited Annual Report 2010
FINaNcIal hIstory
Boral Limited and Controlled Entities
451
189
262
39
301
(70)
232
(78)
–
As at 30 June
Revenue
Earnings before interest, tax, depreciation
and amortisation (EBItDA)1
Depreciation and amortisation
Earnings before interest and tax1
2010
2001
$ millions $ millions $ millions $ millions $ millions $ millions $ millions $ millions $ millions $ millions
2007
2009
2002
2005
2006
2003
2008
2004
4,599 4,875 5,199 4,909 4,767 4,305 4,150 3,831 3,489 3,280
505
253
252
539
263
276
688
240
448
762
231
531
823
209
614
794
191
603
794
195
600
672
194
478
531
188
343
Profit/(loss) from disposal of businesses
–
–
–
–
–
–
–
–
–
Profit before interest and tax1
252
276
448
531
614
603
600
478
343
Net financing costs1
Profit before tax1
Income tax expense1
Non–controlling interest
Net profit after tax1
(97)
(127)
(112)
(111)
(98)
(71)
(66)
(68)
(63)
155
(22)
(1)
149
336
420
516
532
534
410
280
(17)
–
(90)
(122)
(153)
(162)
(163)
(126)
1
–
–
(1)
(1)
(1)
(87)
–
132
131
247
298
362
370
370
283
192
153
Significant items – net of tax
(222)
11
(4)
–
–
–
–
–
–
–
Net profit attributable to members of Boral Limited
(91)
142
243
298
362
370
370
283
192
153
total assets
total liabilities
Net assets
5,209 5,491 5,895 5,817 5,587 5,001 4,511 4,038 3,915 3,950
2,583 2,738 2,985 2,829 2,832 2,594 2,151 1,898 1,966 2,096
2,626 2,754 2,910 2,987 2,755 2,407 2,360 2,140 1,950 1,855
Shareholders’ funds
2,626 2,754 2,910 2,987 2,755 2,407 2,360 2,140 1,950 1,855
Net debt
Funds employed
1,183 1,514 1,515 1,482 1,578 1,394
938
764
881
983
3,809 4,268 4,425 4,470 4,333 3,800 3,298 2,904 2,831 2,837
Dividends paid or declared
88
77
202
203
200
197
175
133
109
102
Statistics
Dividend per ordinary share
13.5c
13c
34c
34c
34c
34c
30c
23c
19c
18c
Dividend payout ratio1
Dividend cover1
67%
59%
82%
68%
55%
53%
47%
47%
57%
67%
1.5
1.7
1.2
1.5
1.8
1.9
2.1
2.1
1.8
1.5
Earnings per ordinary share1
22.1c 22.2c 41.4c 50.0c 61.7c 63.4c 63.8c 49.1c 33.7c 27.0c
Return on equity1
EBIt to sales1
EBIt to funds employed1
Net interest cover (times)1
Gearing (net debt to equity)
Gearing (net debt to net debt plus equity)
5.0%
4.8%
8.5% 10.0% 13.2% 15.4% 15.7% 13.2%
9.9%
8.3%
5.5%
5.7%
8.6% 10.8% 12.9% 14.0% 14.4% 12.5%
9.8%
8.0%
6.6%
6.5% 10.1% 11.9% 14.2% 15.9% 18.2% 16.4% 12.1%
9.2%
2.6
45%
31%
2.2
55%
35%
4.0
52%
34%
4.8
50%
33%
6.3
57%
36%
8.5
58%
37%
9.1
40%
28%
7.1
36%
26%
5.4
45%
31%
4.3
53%
35%
Net tangible asset backing per share
$3.92 $4.12 $4.41 $4.41 $4.07 $3.57 $3.65 $3.27 $3.02 $2.89
1 Excludes the impact of significant items in 2010, 2009 and 2008.
Results for the years ended 2005 to 2010 have been prepared under Australian equivalents to International Financial Reporting Standards (A-IFRS).
the years prior to June 2005 represent results under previous Australian Generally Accepted Accounting Principles (AGAAP).
Figures may not add due to roundings.
137
The Annual General Meeting of Boral Limited will be held at the City Recital
Hall, Angel Place, Sydney on Thursday 4 November 2010 at 10.30am.
Financial calendar*
Ex dividend share trading commences
Record date for final dividend
Final dividend payable
Annual General Meeting
half year
half year profit announcement
Ex dividend share trading commences
Record date for interim dividend
Interim dividend payable
Year end
* Timing of events is subject to change.
24 August 2010
30 August 2010
28 September 2010
4 November 2010
31 December 2010
9 February 2011
18 February 2011
24 February 2011
24 March 2011
30 June 2011
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