Boral Limited
Annual Report 2011
Reinforcing the core
CONTENT
BORAL
LIMITED
Financial highlights 2011
Group overview
Chairman’s review 2011
Chief Executive’s review 2011
The Building Blocks of Growth
Sales and Marketing Excellence
Boral Production System
Innovation
Construction Materials
Building Products
Cement
USA
Financial review 2011
Sustainability in Boral
Board of Directors
Corporate Governance Statement
Directors’ Report
2011 Remuneration Report
Financial statements
Shareholder information
Financial history
1
2
4
6
10
12
14
15
16
18
20
22
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28
34
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43
48
63
138
140
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
FINANCIAL HIGHLIGHTS
2011
01
01
• Full year revenue2 up 4% to $4.7 billion
• Underlying profit after tax1, 2 up 20% to $173 million
•
•
•
•
•
Net profit after tax2 increased to $166 million from
$19 million loss last year
Strong second half recovery from Construction
Materials
Agreed to acquire Wagners quarry and concrete
operations for $173 million
Agreed to acquire Sunshine Coast Quarries
for $81.5 million
August 2011 announcement of agreement to
acquire Lafarge’s 50% interest in LBGA for equity
value $530 million
“I am pleased to announce
results at the top end of
previous guidance, especially
in light of weather related
difficulties and the second
half softening of residential
building in the United States
and Australia.”
• Reported earnings per share1 up 10% to 24.4 cents
Mark Selway, Chief Executive
•
Increased dividend to 14.5 cents
Revenue2
$4.7b
Up 4%
Profit after tax1,2
$173m
Up 20%
Revenue2 breakdown by division
Construction
Materials
49%
Other
Businesses
6%
USA
9%
Cement
12%
Building
Products
25%
1. Excluding significant items.
2. From continuing operations.
02
Review of operating divisions
Boral Limited Annual Report 2011
GROUP OVERVIEW
CONSTRUCTION
MATERIALS
CEMENT
BUILDING PRODUCTS
Core business
Boral Construction Materials (BCM) is
an integrated business supplying quarry
materials, concrete and asphalt. BCM
also manages a property operation 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 of plasterboard, bricks, roofing
and masonry products and timber in
Australia, and of plasterboard in Asia
through a 50% owned joint venture, LBGA.
■ Concrete
■ Asphalt
■ Quarries
■ Other
■ Cement
■ Asian Construction Materials
■ Clay & Concrete Products
■ Plasterboard
■ 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
are derived from the Australian dwelling
and non-dwelling building segments.
Achievements of the year
BCM successfully supplied several large
infrastructure projects, with record profits
delivered in the year. Strong cost and price
disciplines resulted in improved profits.
The Dunnstown quarry investment 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.
Integration and successful development of
Wagners Construction Materials business
and Sunshine Coast Concrete and
Quarries, assuming ACCC approvals, will
be a significant FY2012 priority.
Main markets
More than half of Cement division revenues
are derived from the Australian residential,
non-dwelling and infrastructure markets.
The remaining part of the business is
reliant on construction materials markets
in Indonesia and Thailand.
Main markets
The Building Products division relies
primarily on new housing construction
in Australia, 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
Full year revenue was above last year’s
reflecting improved market conditions in
Thailand and Indonesia and increased
construction activity in Australia. EBIT
was up 9%, reflecting a normal cycle of
production following kiln shutdowns for
inventory reduction in the prior year.
Strategic priorities
Priorities are to maximise the
potential of the Asian Construction
Materials businesses. The division will
strengthen the business through LEAN
manufacturing initiatives and innovative
product development.
Achievements of the year
Building Products was impacted by
declines in residential construction, and
reduced government stimulus work in
FY2011. The Queensland plasterboard
plant performed strongly, and the new
masonry plant in Perth is substantially
commissioned. LBGA started new
production lines at Baoshan (China) and
Saraburi (Thailand).
Strategic priorities
Focus is on completing the implementation
of a new streamlined organisational
structure and maximising the potential of
all businesses, particularly Clay & Concrete
Products. Investment priorities include an
$80m upgrade of Boral’s Plasterboard
facility in Victoria and the successful
integration of Lafarge’s share of LBGA.
1
.
4
4
.
3
1
.
4
Construction Materials
Revenue and earnings
1
.
4
1
.
4
Cement
Revenue and earnings
1
.
4
1
.
4
Building Products
Revenue and earnings
4
.
3
Sales
revenue
$m
5
7
2
,
2
9
1
1
,
2
EBIT1
$m
1
0
2
4
0
2
4
.
3
4
.
3
Sales
revenue
$m
4
.
3
EBIT1
$m
0
4
5
2
1
5
6
9
8
8
4
.
3
Sales
revenue
$m
6
0
2
,
1
0
5
1
,
1
EBIT1
$m
1
0
1
4
8
0
1
1
1
0
1
1
1
0
1
1
1
0
1
1
1
0
1
1
1
0
1
1
1
1. Before significant items.
03
USA
OTHER
BUSINESSES
Core business
Boral today enjoys the number one position
in bricks, and in clay and concrete roof tiles
and has leading positions in construction
materials in Oklahoma and Colorado and in
stone veneer.
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.
■ Cladding
■ Construction Materials & Flyash
■ Roofing
■ Windows
■ De Martin & Gasparini
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 consists
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 operational
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 integrated
in the year, with synergies exceeding
expectations.
Strategic priorities
Boral will continue to invest in the US
business in preparation for market recovery
and growth. Concrete and Clay Roof Tiles
have been consolidated to form Boral
Roofing, with plans to deliver benefits from a
One Boral strategy. Maximising the potential
of US Construction Materials and Fly Ash
is a strategic priority as is the successful
integration of Boral’s 50% share in
Cultured Stone.
Achievements of the year
Revenue was 3% below last year’s, with
Windows revenue and profits down due
to a second half slow-down in residential
housing. In DMG, revenue was lower, while
profitability remained equivalent 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 successfully
commercialising our new range of energy
conserving window designs is a key
Windows priority.
1
.
4
4
.
3
1
.
4
USA
Revenue and earnings
1
.
4
1
.
4
Other Businesses
Revenue and earnings
4
.
3
EBIT1
$m
1
3
4
0
1
1
1
4
.
3
Sales
revenue
$m
4
6
3
4
.
3
Sales
revenue
$m
4
9
2
6
8
2
EBIT1
$m
6
8
0
1
1
1
)
4
0
1
(
)
9
9
(
0
1
1
1
0
1
1
1
New branding features on a Construction
Materials vehicle, Boral Plasterboard, a
new Boral Cement tanker, a US product
display centre featuring Cultured Stone,
house project using Dowell thermally-
efficient window and door products.
04
Review of operating divisions
Boral Limited Annual Report 2011
REINFORCING THE CORE
CHAIRMAN’S REVIEW 2011
Dr Bob Every, Chairman
Despite difficult weather, economic and market
conditions experienced throughout the year, Boral made
good progress during FY2011. Our strategy is focused
on improving the productivity of our existing operations,
developing best in class products and concentrating on
those markets where we can establish leading positions.
FY2011 was a year of building on the
established foundations of the Group, with
an overarching objective and strategy tied
to transforming Boral’s business portfolio
to highly focused leadership positions in
attractive growth markets.
Overview
FY2011 again reflected the impact of global
economic conditions on the performance
of the Group. Continued uncertainty in the
United States and a dramatic slow-down in
residential housing in Australia, combined
with adverse weather conditions throughout
much of the east coast of Australia had an
impact, particularly on the second half of
the year.
The Group’s strategy, which was
announced to the market in July 2010,
continued to take form and, despite
difficult market conditions, productivity
improvements were implemented and
had a positive impact on the Group’s
performance in the year.
During the year, my Board and I have
visited many of the Group’s operations,
and I am pleased to report that there is a
great deal of progress and enthusiasm for
our program to improve the manufacturing
and sales activities of the Group. The
fundamentals are being reinforced by
a structured program of improvement
methods aimed at growing productivity
and customer services.
Financial performance
Revenue from continuing operations was
4% up at A$4.7b ($4.5b in FY2010).
Underlying earnings from continuing
operations (before significant items)
showed a 20% increase to $173m
($145m in FY2010). Earnings per share
increased to 24.4c (22.1c in 2010).
There were several separate items with a
net pre-tax cost totalling $43m which were
classified as significant in FY2011. Charges
of $53m arose from the write-down of the
asset values of several poorly performing
FY2011 key announcements
6 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.
4 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.
6 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.
21 December 2010
Boral announces that it has reached
an agreement for the acquisition in
two stages of Cultured Stone, the
leading stone veneer company in
North America. The first stage is
the acquisition of a 50% interest for
US$45m with management control.
The second stage, acquiring the
remaining 50% interest not owned
by Boral, will be completed in early
2014 for a multiple of 7.0 times 50%
of CY2013 EBITDA, subject to a
minimum of US$45m.
05
People
On behalf of the Board, I want to thank
the Chief Executive, Mark Selway, his
executive team and our 15,227 employees
around the world for their commitment,
tireless energy and focus in what has been
another tough year.
I am confident they will show continued
dedication to our operational initiatives
and that their significant achievements
in FY2011 will grow to deliver further
progress in the year ahead as we continue
to improve our competitiveness and forge
new and stronger customer relationships.
Finally, I would like to thank our
shareholders who continue to support our
strategy and potential. The Group has in
place the right strategy and the required
depth of expertise to deliver progressively
improving returns as our planned initiatives
move forward.
Dr Bob Every
Chairman
businesses and $9m of costs associated
with the Group’s recent acquisitions. These
costs were largely offset by favourable tax
and insurance outcomes related to the
Group’s Australian activities.
In Australia, we announced two quarry
and concrete acquisitions which, subject
to regulatory approvals, will position the
Group’s Construction Materials division
as the leading supplier in the Queensland
market.
Cash flow from operations at $351m was
$108m lower than that of the previous
year, including a $97m increase in working
capital. The year ended with a net debt
position of $505m, showing a $678m
improvement from the previous year (net
debt $1.2b in FY2010) due to the July
2010 capital raising and the benefits of
favourable exchange translation of the
Group’s US borrowings.
The Board has resolved to pay a final
dividend of 7.0c per share making a total
distribution for the year of 14.5c (13.5c in
FY2010).
Strategy and structure
In its first full year, our program of
operational and strategic change is making
good progress. The initial work from our
LEAN and Sales and Marketing Excellence
programs is being used to focus our efforts
on improvements which provide the best
short term opportunity to deliver margin,
earnings and cash flow improvement
in the face of the current uncertain
market conditions. In August 2010, we
announced the divestments of non-core
Panels and Scaffolding businesses, which
helped improve the focus of the Group
and released financial and management
resources to concentrate on the operational
and strategic development of the business.
Growth investments included the acquisition
of the remaining 50% of Boral’s US
concrete roof tile business, MonierLifetile,
and a 50% share of Cultured Stone, which
has a leading position in the United States
housing and commercial construction
markets. The balance of 50% of Cultured
Stone will be acquired following the close of
calendar year 2013.
After the financial year end, in August, we
announced the acquisition of Lafarge’s 50%
share of our Asian plasterboard business,
LBGA. The business commands leadership
positions throughout Asia and includes
20 modern, well equipped facilities with
sufficient installed capacity to support
further growth. We are excited about the
prospects for this acquisition and expect
to close the transaction prior to the end of
December 2011.
Our focus for FY2012 is to ensure that the
changes we have initiated are successfully
implemented to yield their full potential.
The Group’s operating strategies and new
acquisitions provide good prospects for
profitable growth, and our immediate focus
must be to integrate the new businesses
and deliver promised improvements from
our existing operations. Shareholders can
be confident that our recent acquisition
work is absolutely aligned with the business
strategy outlined in July 2010 and that our
portfolio is significantly more focused as
a result.
The Board
Roland Williams, who had been a non-
executive Director since 1999, chose not
to seek re-election at the Annual General
Meeting in November 2010. His wise and
helpful counsel during his time in office
was of immense value to the Group and I
would like to personally thank Roland for
his contribution.
In September 2010, Catherine Brenner
joined the Board as a non-executive
Director. Ms Brenner’s career has included
working as a solicitor, followed by 10 years
at ABN Amro, where she was Managing
Director, Investment Banking.
Post year end announcements
9 February 2011
Boral announces a net profit after tax
from continuing operations for the
six months to 31 December 2010
of $94m, a 28% increase on the
prior year, in light of weather related
difficulties. Boral expects its full year
net profit after tax to be between
$160m and $175m.
15 April 2011
Boral announces it has reached
an agreement to acquire Wagners
Construction Materials assets in
Queensland for $173m. Completion
remains subject to clearance from the
ACCC and the finalisation of remaining
due diligence and procedural issues.
The transaction is expected to be
completed in the second half of
calendar year 2011.
19 July 2011
Boral announces it has reached an
agreement to acquire the quarry
and concrete assets of Sunshine
Coast Quarries in Queensland for
$81.5m. Completion remains subject
to clearance from the ACCC and
the finalisation of certain procedural
issues. The transaction is expected
to be completed in the second half of
calendar year 2011.
17 August 2011
Boral announces it has agreed to
acquire Lafarge’s 50% interest in the
joint venture Lafarge Boral Gypsum
in Asia Sdn Bhd (LBGA) for €429m
(A$598m) on an enterprise value basis.
After adjusting for net debt and non-
controlling interests, the acquisition
equity value is €380m (A$530m). The
transaction is expected to be completed
by the end of calendar year 2011 and is
subject to finalisation of arrangements
relating to intellectual property and
transitional services.
06
Review of operating divisions
Boral Limited Annual Report 2011
BUILDING SOMETHING GREAT
CHIEF EXECUTIVE’S REVIEW 2011
All of the Group’s businesses were robustly managed
during the year with the implementation of actions to
improve competitiveness and grow shareholder returns.
One of the Group’s great strengths is the spirit and
determination of our people.
Group Executive (pictured)
From left to right: Murray Read (Construction Materials),
Mike Kane (USA), Ross Batstone (Building Products),
Mark Selway (Chief Executive), Mike Beardsell (Cement),
Warren Davison (Construction Related Businesses).
07
I remain pleased with the Group’s progress in FY2011 as our clearly defined
strategy for operational excellence and sector leading performance progressed
with increasing purpose and determination.
The decisive steps taken by our management team to improve productivity and
focus attention on attractive and growing sectors produced stronger results
despite the economic uncertainties and acute weather conditions experienced in
the year.
All of the Group’s businesses were robustly managed during the year with the
implementation of actions to improve our competitiveness and grow shareholder
returns.
One of the Group’s great strengths is the spirit and determination of our people.
We recognise that each of our employees makes a real difference in our ability
to satisfy customers and deliver growing returns to our shareholders, and I thank
them all for their significant contribution in the year.
Laying the Foundations
In 2010, the Group took a fresh look at our longer term vision and developed
strategies to become a leading global supplier of building and construction
materials while producing consistent financial performance in products and
geographies which offer superior growth and financial returns.
Since then, we have reorganised the business into four core divisions, each
with a clearly defined roadmap to achieve and progressively deliver Sector Best
Performance and superior customer service.
Our Construction Materials and Cement divisions performed well, growing
their already significant market positions while moving forward with operational
improvements and internally generated synergies which produced increased
earnings despite considerable weather related difficulties experienced in the year.
Our Building Products businesses experienced demanding weather and
residential building declines which necessitated the closure and rationalisation of
a number of under-utilised and lower growth operations. The division is now well
positioned to deliver improved returns and performance as and when market
conditions improve. New product launches, improved operational efficiencies and
more focused product portfolios aimed at the most attractive markets provide
solid foundations to deliver stronger financial performance in the year ahead.
I remain pleased with the
Group’s progress in FY2011
as our clearly defined strategy
for operational excellence and
sector leading performance
progressed with increasing
purpose and determination.
As predicted, the United States market continued to experience a tough trading
environment due to the continued deterioration in the United States residential
housing market. Actions taken by our management team to control costs and
deliver acquisition synergies ahead of expectations, combined with a more
favourable translation of US losses, contributed to an improved performance when
compared to the prior year.
Revenue2
$4.7b
Up 4%
Our joint venture Plasterboard operations, LBGA, performed well in FY2011, with
increased turnover and equivalent operating profit despite unfavourable currency
impacts during the year. The leadership position in the supply of plasterboard and
associated interior lining products places the business well for continued progress
in the future.
Reinforcing the Core
The Group’s success across a large number of key operational, financial, health
and safety and business development measures in FY2011 reinforces our core
belief that operational improvements provide the best short term potential to
deliver the earnings and competitive improvements which are key to our future
financial objectives and aspirations for growth.
Profit after tax1,2
$173m
Up 20%
1. Excluding significant items.
2. From continuing operations.
08
Review of operating divisions
Boral Limited Annual Report 2011
Building Something Great
Chief Executive’s review 2011
Continued
In FY2011, we initiated actions
to improve productivity in our
existing operations and to focus
on those activities and markets
where Boral has a realistic
ambition to lead.
Pursuing operational excellence
During the year, we were able to move forward with our objective for operational
excellence, building on the foundations laid in 2010. The Boral Production System
includes a range of tools targeted at eliminating inefficiencies, reducing downtime
and sharing best practice across the Group.
The Group made good progress in the year and delivered significant benefits
across our operations with plant utilisation, downtime reductions and reduced
scrap, while engaging employees in our ambition to streamline our processes
and deliver world class products to our customers.
Pursuit of sales and marketing excellence
The Boral Sales and Marketing Excellence program aims to build the commercial
capabilities and leverage the products and geographic scale of the Group.
By providing closer interdivisional linkages, it allows the Group to provide more
integrated and comprehensive solutions to our customers.
During the year, we made sound progress, with cross divisional sales forums
generating significant actions and bringing greater clarity and discipline to
pricing across the Group.
Building an innovation culture
The Boral Innovation program was fully developed and rolled out through the
United States, which has historically delivered more breakthrough technology than
we have achieved in Australia.
The Innovation program now provides increased discipline in the selection and
review of new innovation projects, prioritising those which provide the most
significant impact on our markets and financials. In the United States, we piloted
a program to train employees in the skills associated with deliberate, innovative
thinking, and following its success in that region, will roll it out in Australia and Asia.
In Australia, we completed a review of our current projects and prioritised those
with the most potential using the same tools and processes which were created
in North America. This work now forms the basis for an improved structure and a
more disciplined approach in our research activities.
Health, safety and environment
During the year and despite a net improvement in the Group’s Lost Time Injury
statistic, the Group recognised the need to develop the tools to take the next
steps in an ambition for a zero accident workplace.
The Executive formed a health and safety committee including all the Divisional
Managing Directors and chaired by myself. This committee has worked to oversee
the development of a new national health and safety system which will initially be
rolled out across New South Wales before a wider launch through the Group.
The Group will also capitalise on the excellent work undertaken in the United
States (which radically improved its Lost Time Injury results in the year), to use its
foundations to introduce iCARE across the Australian operations. iCARE involves a
structured program to engage employees in the active pursuit of improvement
in the Group’s safety cultures.
09
Now in its second year,
the Group’s operational
excellence initiative gained
significant momentum, with
the cornerstones of LEAN now
firmly embedded throughout
Boral operations.
Pursuing growth
The achievement of our goals starts with strong leadership positions in attractive
and growing markets, and the Group’s corporate activities continued to pursue
opportunities to align the portfolio with those activities which underpin the future
of the Group.
In FY2011, the Group made significant progress in these activities, including
the appointment of Matt Coren, who now heads up our business development
activities. Matt has considerable experience in deal making, with specific skills in
the building materials sector, and brings terrific commercial talent to the Group.
During the year, the Group undertook a number of significant transactions which
will all contribute to the future success of Boral. We divested the non-core
scaffolding and concrete panel businesses in the first quarter of FY2011, and
used the proceeds to help fund a number of acquisitions in areas which are core
to the Group.
In July 2010, we acquired the balance of shares in MonierLifetile and in December
added a 50% share of Cultured Stone, which has a leading position in the United
States residential stone market.
In Australia, we announced the acquisition, subject to regulatory approval, of
Wagners Construction Materials business and Sunshine Coast Quarries, both
excellent additions to our Australian construction materials in the high growth
Queensland markets.
Our 17 August announcement of the acquisition of Lafarge’s 50% share of LBGA,
our joint venture plasterboard business in Asia, was a further exciting development
for the Group, and I am confident it will have a meaningful positive impact on the
growth and financial performance of Boral.
Prospects
The Group’s strategy remains on track with an ambition to deliver Sector
Best Performance while investing in great new products and expanding into
strategically important markets.
The current global economic outlook provides an uncertain platform for the year
ahead, with poor housing statistics evident in both Australia and the United States.
In contrast, both Construction Materials and Cement in Australia are expecting
major projects from the resource, commercial construction and infrastructure
markets to provide a positive flow of new work during FY2012.
While the sluggish residential market conditions particularly in the second half of
FY2011 are expected to continue into FY2012, the Group is well positioned even
in these difficult market conditions. The actions taken in FY2011 provide a strong
platform for increased growth and earnings when external conditions improve.
Mark Selway
Chief Executive
10
Boral Limited Annual Report 2011
THE BUILDING BLOCKS
OF GROWTH
In FY2010, we reorganised the business into
four core divisions to capitalise on the Group’s
capabilities and to better address the markets in
which we operate.
In FY2011, we initiated actions to improve
productivity in our existing operations and to
focus on those activities and markets where Boral
has a realistic ambition to lead.
1.
LAyING THE
FOUNDATIONS
Review and respond, creating a
strong platform for growth
Key activities
• Sale of non-core scaffolding and panels
businesses delivers improved results in
FY2011.
• Closure and consolidation of
non-profitable brick and masonry
operations in New South Wales
and Queensland.
• Closure of lower growth, low return
country New South Wales concrete and
quarry operations.
• Permanent closure of two high cost,
lower efficiency mothballed brick plants
in the United States.
• Closure of flood damaged plywood
timber operation in Ipswich, Queensland.
11
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 portfolio
development worldwide
Realising Sector Best
Performance and market
leading returns
Key achievements
• Delivered improved profit and returns,
despite economic and market head-
winds.
• Boral Production System gaining
momentum and leading to improved
operational performance across the
Group’s operations.
• Change Action Network introduced
to provide a Group-wide structure to
leverage scale and drive improvements
across geographic and divisional
boundaries.
• Sales and Marketing Excellence
initiative delivers record orders from
inter-divisional collaboration.
Key achievements
• Boral Production System implemented
across all Group operations, engaging
the entire workforce in a structured
program to improve productivity and
increase competitiveness.
Key achievements
• Successful on-time and on-budget
commissioning of Boral’s Dunnstown
quarry in Victoria, Australia, delivering
lower cost, higher yield resources in a
market gearing for growth.
• The Group’s Sales and Marketing
Excellence program provides closer
inter-divisional links to allow Boral
to provide more integrated and
comprehensive solutions to customers.
• The Group introduced improved
structure to its innovation framework.
In the United States and Australia,
significant advances were achieved,
including prioritising key projects and
resourcing to those opportunities with
the greatest potential for success.
• The Group’s systems and control
environment were significantly enhanced
in the year. A new Internal Audit team,
improved site-based risk monitoring
and Group-wide health and safety
procedures are fundamental to the
Group’s continued success.
• Plasterboard’s $80m expansion in
Victoria continued on plan and on
budget for volume production in the first
half of 2013.
• The Board approved the investment
of $200m in the Group’s greenfield
Peppertree quarry in New South Wales.
Production is planned for the first half of
FY2014.
• In July 2010, the Group acquired the
balance of shares in MonierLifetile and
delivered synergies and results ahead of
planned expectations.
• In December 2010, the Group acquired
management control of and a 50%
interest in Cultured Stone, the United
States’ leading synthetic stone product.
• In the final quarter of FY2011, the
Group announced, subject to regulatory
approvals, the acquisition of Wagner’s
concrete and quarry businesses and
in July 2011 the acquisition of
Sunshine Coast concrete and
quarry operations.
• August 2011 announcement
of acquisition of Lafarge
share of LBGA.
12
Boral Limited Annual Report 2011
SALES AND MARKETING
EXCELLENCE
In FY2011, the Group’s Sales and Marketing Excellence
program gathered significant momentum and is building
a strong foundation to achieve leadership positions in our
chosen markets.
Better products
Boral products and systems for the
building and construction industry
are designed in collaboration with our
customers, and driven by their needs
and priorities. The Group’s extensive
product range offers a wide choice of
specification and specialisation, giving
customers more flexibility to respond to
new opportunities, the latest trends and
changing regulations. Boral products
are environmentally certified where
appropriate and backed by excellent
technical and support services.
BUILD
The development of Boral’s BUILD program
will form the centre stage for increasing
the awareness of capabilities of the Group
and building a common framework for
communication.
SALES AND MARKETING
EXCELLENCE
13
The Sales and Marketing Excellence
Committee is chaired by Murray Read,
Divisional Managing Director of the Group’s
Construction Materials division, and
includes representatives from each division
and regional executives who are focused
on building channels for collaboration
across the Group.
In FY2011, this team developed the
framework to improve the effectiveness
and efficiency of the Group’s sales and
marketing organisations. We started
the year by benchmarking our current
capabilities and developing a skills and
training plan to improve customer service
and leverage the scale and geographic
breadth of the Group.
Interdivisional regional forums were
introduced to improve collaboration and
better service markets where multiple
products and solutions provide a
competitive advantage to the Group.
The Group’s Customer Relations
Management System was also a focus
for FY2011, and significant improvements
were achieved in its accessibility and
relevance to the organisation as a whole.
Our ambition in FY2012 is to leverage
the improvements achieved to date and
introduce Group-wide monitoring of our
sales effectiveness and training initiatives
to ensure that the benefits are fully
exploited and results delivered.
Key achievements
• Established interdivisional and regional
sales and marketing forums to improve
collaboration.
• Completed Group-wide benchmarking
of sales effectiveness and established
roadmap for improvement.
• Substantial upgrade to Boral’s Customer
Relations Management System to better
service customers.
• Introduced Group-wide Boral branding
and marketing standards to improve
alignment and encourage collaboration.
• Significantly increased orders resulting
from interdivisional leads and across-
Group collaboration.
Unrivalled value
We are committed to helping
our customers do more for less
and compete more effectively
in a challenging and contracting
environment. Our focus on
affordability is central to achieving
this. At a time when the building
and construction industry is facing
higher costs in many areas, we are
determined to demonstrate that
by cutting waste and focusing on
efficiency we can provide solutions
that save time, reduce both capital
cost and total cost of ownership, and
minimise the risks to your business.
Investing for growth
Boral’s track record for investing
on behalf of our customers goes
beyond product development
to include the way in which our
solutions are marketed, packaged
and delivered worldwide. We
work jointly with academic and
commercial researchers, as well as
with our customers, to develop the
next generation of materials and
technologies that underpin growth in
your industry. If you have a problem
that is holding you back, or a specific
technical challenge requiring a new
solution, why not talk to Boral?
Lifelong solutions
Today’s building and construction
industry is under increasing pressure
to take responsibility for the
ecological and social impacts of its
operations, as well as to take a lead
in delivering a more sustainable built
environment for the future. From
lower carbon products to life cycle
assessment, community engagement
and a genuine commitment to
recycling and re-use, we are rising to
the challenge, helping our customers
and their clients respond to change,
both regulatory and climatic.
Delighted customers
Boral has a reputation for successful
long term relationships with some of
the leading building and construction
companies in Australia and the rest
of the world. We have a terrific,
customer-facing workforce, who
work on a daily basis to satisfy our
customers. We aim to be easy to do
business with, open, approachable
and honest, and we have invested
in e-commerce and credit systems
that simplify ordering, invoicing
and logistics. Most importantly, our
actions are based on listening to our
customers, both in our own backyard
and around the world. Together, we
can build something great.
14
Boral Limited Annual Report 2011
LEAN
BUILDING OPERATIONAL
EXCELLENCE
Now in its second year, the Group’s operational excellence
initiative gained significant momentum, with the cornerstones
of LEAN now firmly embedded throughout the Group’s
businesses.
The Group put in place the necessary
systems and structure to monitor the
Group’s Overall Equipment Effectiveness
(OEE), which combines the available
uptime of the plant, the achieved quality
and the plant’s efficiency, and measures
it against established standards.
In FY2011, the Group’s OEE improved
across each of Boral’s divisions, and
huge progress was made in the uptime,
maintenance and housekeeping
standards of the Group’s lead sites.
The Group now has the tools to ensure
that our considerable investment in
operational excellence is providing
measurable and ambitious improvements
across all our operations.
Improvement tool kit
To supplement the benchmarking
and efficiency monitoring programs,
LEAN facilitators work to train the
workforce and apply the basic skills to
solve problems in areas of inefficiency
and utilise the available tools to drive
improvements.
FY2012 objectives
Operational objectives for FY2012
are ambitious and include continued
improvements in the Group’s existing
initiatives and focused attention on
improving inventory management through
the application of LEAN principles to our
ordering and plant scheduling processes.
Our benchmarking work will extend to
include external companies where the
Group can compare our performance to
relevant businesses outside of the Group.
Achievements:
• Established OEE measurement and
monitoring structure across the Group’s
operations.
• Built LEAN toolbox and employed
LEAN facilitators.
• Achieved significant improvement
in operational performance across
the Group.
Improvements
The Group has developed a
toolbox of proven improvement
tools which are being progressively
rolled out throughout the Group.
The Group’s program of operational
excellence made solid progress in the
year, with the systems and training
introduced in 2010 now providing the
catalyst for Group-wide improvements
in productivity.
The Boral Production System includes
a variety of management tools targeted
at eliminating the causes of waste and
inefficiency, reducing errors and sharing
best practice across the Group.
Benchmarking
The Group’s benchmarking regime is used
to monitor the progress of the cultural and
operational improvements throughout
the Group.
During the year, the majority of the Group’s
sites were re-audited, with significant
improvements registered across many
operations.
The audit scores are used as a basis
for comparing our operations and
encouraging healthy competition for
them to be the best within their respective
region, product area and divisional
performance.
Each company is required to build and
execute plans to improve their Boral
Production System score, and progress is
reported at bi-weekly meetings including
representatives from the Group’s
global operations.
Operational efficiency
The true measure of the success of the
Group’s efficiency program must ultimately
translate to improved productivity and
lower operating costs.
15
INNOVATION
BUILDING SOMETHING
GREAT
Boral is dramatically increasing its focus on innovation, with a
goal of becoming one of the leading innovative companies in
our industry.
From product developments to ground-
breaking new solutions, Boral has placed
innovation high on the agenda. Over
the next five years, the Group intends
to outperform its peers through the
number and value of new products and
improvements brought to the market place.
The Boral Innovation program has been
developed and rolled out through the
United States operations and is now
gaining momentum across the rest of
the Group.
Boral has increased research funding
to deliver new building materials which
respond to changing customer needs
and market trends. Interaction with
retailers, home builders, contractors and
commercial builders helps to steer the
new product development program.
Extra resources have been added during
the year, adding further dynamism to
Boral’s research activities and driving
product development to commercialise
successful innovations faster.
Some highlights of the US Innovation
program are:
Boral TruExterior™ Trim: A multi-year
program has seen the development of
a new product category to compete
in the US$2b US trim market. The
product satisfies customer performance
requirements and outperforms the existing
competitive products. The US$15m
investment in the first commercial line
in Salisbury, NC is a first of its kind, with
technology unique to the industry.
Powder Activated Carbon Treatment
(PACT™): Due to a new regulation in the
utility industry requiring mercury removal
from coal burning power plants, utilities
will have to introduce activated carbon
to remediate mercury. This presented
an opportunity for Boral to develop a
system that would neutralise the effect of
activated carbon in ready mix concrete.
This technology positions Boral’s BMTI
operation as a leading partner of choice
with the utility industry. As federal regulation
comes into effect in the US, we will continue
to capitalise on the technology and be
positioned to grow our market share.
BoralPure™ Smog-Eating Tile: Our
product incorporates a photocatalyst
coating that reduces nitrogen oxide (NOx)
a major component of smog. This product
helps address the problem of poor air
quality found in many American cities.
When new large “Masterplan” communities
are being developed, the NOx reduction
can be taken as on offset to the air quality
impact. The greatest advantage will come
from its wide application, and incentives
are being sought to provide assistance
to builders who are keen to promote
the advantages to their customers.
In Australia, a review of current innovation
projects has been completed and those
with the most potential have been
identified as priorities using the successful
US developed model. An example of
one of these projects within the Cement
division includes innovation focusing on
reducing our CO2 footprint by increasing
the level of substitution of blast furnace
slag and limestone in our products.
Boral now has a much improved structure
and a more disciplined approach to its
research activities.
Improvements
Boral US has increased its scientific and
engineering capabilities through the recruitment
of more than 15 new scientists, engineers and
support staff. The company’s technical facilities
have been expanded by 30% to accommodate
new product development requirements and over
US$1m has been invested in pilot lines and new
durability testing equipment.
Boral TruExterior™ Trim
Technology Centre progressed the Boral Trim
product from prototype to market seed, and
to full scale plant technology transfer and
commercialisation. Further long range material
substitution and green enhancement initiatives
are underway through our newly implemented
Innovation programs.
16
Review of operating divisions
Boral Limited Annual Report 2011
CONSTRUCTION MATERIALS
Boral Construction Materials is one of Australia’s leading
integrated quarry, concrete and asphalt manufacturing
businesses, with outstanding long term resource
positions in attractive, high growth regions.
Despite the impact of adverse weather
conditions, the division performed strongly,
underpinned by improved pricing which
took effect in the final quarter of the
financial year and a strong contribution
from major projects.
Performance
Construction Materials full year revenue
of $2.3b increased 7% when compared
to the prior year due to improved quarry
and asphalt volumes and improved pricing
outcomes across all businesses, particularly
in the final quarter. Concrete volumes
were in line with those of the prior year.
EBIT of $204m was 1% above the prior
year due largely to the impact of improved
pricing outcomes offset by the absence
of high margin major asphalt projects that
occurred in the prior year. Results in the
first half year were significantly impacted by
adverse weather conditions, particularly in
Queensland, while the second half featured
drier conditions and increased demand
from project work in New South Wales
and Victoria.
The Quarries business benefited from major
projects in the Hunter region in New South
Wales and the Peninsula Link and Dilston
Bypass projects in Victoria and Tasmania,
while volumes in Western Australia increased
substantially in the first half due to strong
underlying infrastructure demand.
The Concrete business full year results
were underpinned by several major projects
including the Cadia Mine, the Bulahdelah
Bypass and the Oxley Highway projects
in New South Wales and the desalination
plant project in Victoria. Residential demand
remained strong, and mobile batch plant
work in Western Australia contributed to a
strong first half performance.
Revenue from the Asphalt business was up
7% and reflected strong volume growth,
with key projects including the Sydney
Airport Re-sheeting and the Ballina Bypass
in New South Wales and the South Road
early works in South Australia. Asphalt
Queensland was significantly impacted
by the effects of flooding and weather
throughout the year.
Construction Materials results have been
buoyed by the price increases which took
effect in October 2010 and April 2011.
Improved quarry, asphalt and concrete
selling prices were evident particularly in
the final quarter.
The Property Group completed 27
transactions and contributed $27.5m EBIT,
compared with $24.5m in the prior year.
Sales of buffer land at Wollert and Montrose
in Victoria underpinned this result.
While our South Australian operations
were successful in achieving no lost time
accidents in the year, the balance of
Construction Materials disappointed with
the number of lost time accidents increasing
to 43 against 42 in the prior year. The full
year LTIFR increased to 2.8 against 2.7 in
FY2010 and an increased focus on safety
behaviours and training is expected to
significantly improve the results in the
year ahead.
Murray Read, Divisional Managing Director
Market review and outlook
In the year ahead, we expect a continued
recovery in the underlying concrete and
quarry markets, fuelled by improved activity
in New South Wales and Queensland, and
a strong backlog of infrastructure projects
across our most important regions. The
pricing related Concrete market share decline
which was experienced in the final quarter
of FY2011 is expected to recover through
targeted market share recovery strategies
and as secured projects come on stream.
Our asphalt business is expected to deliver
a strong result as flood recovery activity
accelerates in Queensland, and supply
commences to the Peninsula Link project
in Victoria.
The recent acquisition of the Wagners
concrete and quarry businesses together
with Sunshine Coast Quarries, both of
which are awaiting ACCC clearance, will
provide increased exposure to attractive
and growing Queensland markets.
The continued implementation of LEAN
through the roll-out of the Boral Production
System is already having a noticeable
impact on productivity and downtime and
will supplement our ongoing efforts to
remove cost and waste from the business.
Our Sales and Marketing Excellence
program promises significant benefit
through leveraging our strong market
positions and driving margin improvement.
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 materials industry.
Concrete
Boral’s market leading network
of 250 premix concrete plants
produces a wide range of specialist
concrete mixes throughout Australia.
The Group’s geographic cover
and responsiveness to customer
needs provide a strong, sustainable
competitive advantage.
Asphalt
Boral is the 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 road building and critical
public and private construction
projects performance.
Logistics and Property
Construction Materials’ logistics
operations include an integrated fleet
of company-owned and contracted
vehicles. Boral Property Group’s core
function is to develop opportunities
for end uses of operational sites and
maximise the value of Boral’s land assets.
17
Employees
4,157
No change
Capital expenditure
$160m
Up 98%
Delivery of major projects
During FY2011 the division supplied materials
for the Port Botany expansion (Sydney), Cadia
Gold Mine (Western New South Wales), the
Sydney Airport Runway safety upgrade and
the Melbourne desalination plant. Our forward
pipeline remains strong, with the Macarthur wind
farm and Peninsula Link interchange in Victoria
providing a solid platform for the year ahead.
KEy
ACHIEVEMENTS
We are leveraging our leading positions in the Australian concrete, quarry and asphalt
markets to improve returns and enhance shareholder returns.
Divisional results
Revenue
$2,275m
Up 7%
EBIT
$204m
Up 1%
Revenue breakdown
Boral Production System
The implementation of LEAN in Construction
Materials is delivering significant benefits,
particularly in quarries. As an example,
improvements at Orange Grove quarry in Western
Australia have reduced costs by 23% while
increasing throughput by 25%. During the year,
the division’s OEE results increased across every
product area and LEAN audit scores were up 25%.
Quarry resource and capacity
During the year, Construction Materials invested
considerably to expand consented resource
positions and quarry capacity close to key higher
growth markets. A new 400t/hr crushing plant
was commissioned at the Dunnstown quarry near
Ballarat, and the development of the Peppertree
Quarry in New South Wales was approved by
the Board.
■ Concrete and Quarries
■ Asphalt
■ Other
Liquefied natural gas (LNG) projects
The division was awarded contracts for the supply
of 250,000 m³ of concrete to the Queensland
Curtis Island LNG (QCLNG) and Gladstone LNG
(GLNG) projects in Queensland and is focused
and well positioned to secure further LNG
projects across Australia.
Growth
The Construction Materials division is focused on
acquiring leading assets in high growth regions
and strengthening our integrated positions. During
FY2011 the acquisitions of Wagners Construction
Materials and Sunshine Coast Quarries were
announced. Both acquisitions, which are awaiting
ACCC clearance, have high quality assets, with
strong market positions in attractive growth areas.
18
Review of operating divisions
Boral Limited Annual Report 2011
BUILDING PRODUCTS
Boral Building Products in Australia holds leading
positions in plasterboard, bricks, roof tiles, masonry
blocks and pavers, and hardwood and softwood timber
products. LBGA, the Group’s 50% owned joint venture,
holds leading positions in plasterboard and associated
products throughout Asia.
Performance
A strong start to the year, helped by
government stimulus works, was impacted
in the second half by severe weather
conditions and slowing new housing
construction, particularly in Queensland.
The employee Lost Time Injury Frequency
Rate improved to 1.7 from 2.0 in the prior
year. The Clay and Concrete Products
and Timber businesses each recorded
significantly lower lost time injuries, with the
brick plant at Scoresby, Victoria achieving
10 years without a lost time injury.
Revenue of $1,150m was 5% below that of
the same period last year and reflected much
weaker market conditions in Australia in the
second half year ended June 2011. Australian
revenues in this half year fell 16% below the
December half year as a result of weaker new
housing construction in Queensland, South
Australia and Western Australia, which was
further impacted by severe, abnormal wet
weather conditions, particularly in New South
Wales and Queensland.
EBIT of $84m was 16% below last
year. Government stimulus works,
which benefited the half year ended
December 2010, ceased in the second
half. This second half saw a weaker
trading environment, devastatingly so
in Queensland, combined with a further
strengthening of the Australian dollar.
Our timber, brick, block, paver and tile
businesses operating in Queensland
were hit particularly hard. The plywood
manufacturing plant at Ipswich was
inundated by the January flood event,
which led to our decision to close this
business, announced in June. At year end,
we announced the decision to close a 60
million piece per annum clay brick plant in
Brisbane, to cease exports of clay bricks
and pavers and to close our masonry block
plant at Somersby in New South Wales,
all in the light of the more difficult trading
environment.
In Australia, all businesses focused on
improving safety, reducing operating costs
and working capital, and on improving
pricing structures. The Boral Production
System (LEAN manufacturing) helped
to deliver better productivity outcomes
throughout our operations with fewer
injuries, through an emphasis on training,
housekeeping, equipment enhancement
and waste reduction.
In Western Australia, we completed
construction of a masonry block and
paver plant on our Midland (Perth) site at
an investment cost of $44m. At year end,
this new facility was being commissioned
and supplying high quality products to
customers. In Victoria, we commenced the
$80m upgrade of our plasterboard plant
and distribution site at Port Melbourne. We
expect this project to be completed before
June 2012, and result in reduced operating
costs and energy consumption, whilst
enhancing waste recycling capability and
lifting capacity for future growth.
In Asia, the demand for plasterboard
continued to grow strongly in key countries.
Capacity projects commissioned in South
Korea, Thailand and China benefited sales
volumes and returns from our plasterboard
joint venture, LBGA. During the year, LBGA
Ross Batstone, Divisional Managing Director
benefited from new plasterboard capacity at
its Saraburi site near Bangkok in Thailand and
at Baoshan near Shanghai in China. Further
projects were announced which added to
plasterboard and/or associated product
capacity in China, Indonesia and Vietnam.
Market review and outlook
In Australia, poor housing affordability
combined with low levels of consumer
confidence are expected to constrain the
construction of new dwellings over the
next 12 months. Nationally, we expect the
number of commencements to be below
145,000. Non-residential demand is also
expected to be weaker, reflecting reduced
public works as stimulus activities complete.
Renovation activity is expected to
grow modestly.
In the difficult trading environment, our
emphasis will be to focus on cost reduction
initiatives, further reducing working capital
and strengthening pricing outcomes. Our
LEAN journey is continuing, and returns
in the next year will benefit from the
restructuring which is already underway and
from price rises notified to customers for
implementation in the first half of FY2012. We
are also planning further inventory reductions
in our brick, block and paver businesses
which will impact EBIT outcomes from that
division in the next 12 months.
In Asia, we are experiencing continued
strong growth in construction activity in key
countries, which is expected to underpin
growth in plasterboard consumption. LBGA
is well positioned to take advantage of
the resulting uplift in plasterboard demand
through existing plant capacity.
Plasterboard Australia
Boral is a leading integrated supplier
of plasterboard and operates six
production plants and 51 distribution
centres across Australia. The division
is the largest plasterboard installer to
the new housing sector.
Plasterboard Asia
Lafarge Boral Gypsum Asia (LBGA) is
the leading supplier of plasterboard
and internal linings products across
Asia. The 50% owned joint venture
operates production plants in eight
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 18 production plants
and over 30 distribution centres
across Australia.
Timber
Boral operates wholly owned
hardwood businesses on the East
Coast of Australia and a 50% share of
Highland Pine, a leading New South
Wales-based softwood manufacturer.
19
Employees
2,747
Down 7%
Capital expenditure
$83m
Up 40%
Timber Design Award
Richard Cole Architecture’s Hilltop House at
Pittwater won the Timber Design Award for
2010 in the “Residential Class 1 – New Building”
category. The design used an extensive range of
Boral Hardwood products to enhance the natural
attributes of a picturesque bushland dwelling.
KEy
ACHIEVEMENTS
We have resized with better focus, standardisation and efficiency, which is helping to
respond to the unexpectedly weak market environment, particularly in Queensland.
Divisional results
Revenue
$1,150m
Down 5%
EBIT
$84m
Down 16%
Revenue breakdown
Plasterboard Victoria plant upgrade
The $80m upgrade of the Boral plasterboard
plant at Port Melbourne in Victoria is now well
underway and on track for completion by June
2012. It will deliver substantially reduced operating
costs, improved energy efficiency, enhanced
waste recycling capability and increased capacity
for future growth.
LBGA successfully commissions two new
plasterboard facilities
In the half year ended June 2010, our Asian
joint venture, LBGA, commissioned a second
plasterboard line at Saraburi near Bangkok,
Thailand and a new greenfields plasterboard
factory in Shanghai, East China. Both facilities
are now operating at design capacity, which has
helped LBGA plasterboard sales volume increase
by 11% during the year.
■ Clay & Concrete Products
■ Plasterboard Australia
■ Timber
Towards LEAN leadership
Plasterboard
Our 40m m2 plasterboard plant at Pinkenba,
Queensland is working to achieve LEAN showcase
status across the Boral Group. Already, it is
approaching world’s best practice with Overall
Equipment Effectiveness (a measure of uptime,
primary waste minimisation and throughput rate
compared to design) and has achieved “top 5”
ranking in Group-wide LEAN auditing.
Australian Apprentice and Trainee
of the Year Awards
James Mondinos from Boral Timber’s South
Coast Hardwoods business was awarded
National Apprentice of the Year and the National
Encouragement Award at the Australian Apprentice
and Trainee of the Year Awards in 2011. James
was a participant in a Boral led training partnership
also involving recruitment company Skilled and
Creswick Training College in Victoria.
20
Review of operating divisions
Boral Limited Annual Report 2011
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 FY2011 the division enjoyed
strong infrastructure markets in Australia and continued
growth in Asia.
Mike Beardsell, Divisional Managing Director
Performance
Cement revenue at $540m was 5% above
that of the same period last year (prior year
$512m), reflecting improved pricing and mix
in Australia and continued growth in Asian
markets. EBIT at $96m was $8m above last
year’s with strong gains in Australia and the
continuing turnaround in Thailand offsetting
a very competitive market in Indonesia.
In Australia the premixed concrete market
was up modestly, and New South Wales
and Victoria, which are key states for
Boral Cement, performed better than
the national average. New South Wales
also had an exceptionally strong year for
infrastructure projects which benefited
the business, including duplication of the
Hume Highway and port developments in
Newcastle. Lime sales improved markedly
as the steel industry returned to more
normal operating patterns following the
global financial crisis.
Production costs improved in Australia
as volumes increased, following
stock reductions in the prior year. The
business focused on gaining sustainable
improvements in operating effectiveness
and the removal of legacy plant. The LEAN
score achieved a 37% improvement, which
translated into a 3.2% gain in the OEE of
the major cement kilns.
The Thailand Construction Materials
business was a standout performer, with
the turnaround which began in the prior
year gaining further momentum. Concrete
volumes increased by 8% and a focus on
price improvement and costs substantially
improved margins. Market conditions in
Indonesia were more challenging. Strong
market growth resulted in increased raw
materials costs and consequent margin
compression.
appears less pronounced in New South
Wales and Victoria, where Boral Cement
has greatest exposure.
Opportunities to displace imports in supply
to competitors are anticipated and this will
increase kiln utilisation levels.
The outlook for the Asian businesses
remains positive as these economies
continue to grow strongly.
The employee Lost Time Injury Frequency
Rate of 0.95 was in line with the prior
year, with a change in reporting standards
masking a modest underlying improvement.
There was a strong focus on improving the
standard of equipment guarding throughout
the business.
The Innovation agenda has seen the
introduction of a new cement chemistry
in NSW, designed to improve utilisation of
raw materials, and trials of a new product
which promises to reduce greenhouse gas
emissions through increased substitution of
blast furnace slag.
Market review and outlook
The outlook for Boral Cement is mixed.
Infrastructure project work is expected to be
strong in FY2012, but below the exceptional
activity in FY2011. Housing activity is
softening across Australia, but to date this
Cement division
The Cement division has operations
based in both Australia and Asia. In
Australia, we operate Boral Cement,
which is a leading Australian cement
producer, and in Asia we have
operations in Indonesia and Thailand,
supplying concrete, quarry and pipe
products.
Boral Cement
Boral Cement is headquartered in
Sydney, Australia, and has offices
and operations in Victoria, New South
Wales and Queensland, supplying
bulk cements and cement blends,
bagged cements and drymixes.
Quality control, innovation and an
ongoing program for continuous
improvement have led Boral Cement
to the forefront of the Australian
cement industry.
Indonesia
PT Jaya Readymix is the number 1
supplier of concrete in Indonesia,
employing around 2,600 people.
With 44 fixed and mobile concrete
plants, two quarries and two pipe
and precast operations, the business
is developing markets in the rapidly
growing regions outside Western
Java.
Thailand
Thailand Construction Materials
operates a network of 43 concrete
plants across regional Thailand,
with approximately 430 owned and
operated concrete trucks servicing all
areas. Boral Thailand employs over
1,200 people and has production
capacity for the sand and aggregates
that are required to produce
consistent quality concrete.
21
Employees
4,551
Up 1%
Capital expenditure
$53m
Up 107%
Boral Cement is integral to major
infrastructure development
Boral Cement secured supply for the Hunter River
remediation project and the Kooragang Coal
Loader by improving its total delivery capability.
We can now satisfy a delivery promise that is
the benchmark for cement and fly ash supply to
major projects.
KEy
ACHIEVEMENTS
Major infrastructure supply capability was a highlight
for the year in both Australia and Asia.
Divisional results
Revenue
$540m
Up 5%
EBIT
$96m
Up 9%
Revenue breakdown
Rebranding
The rebranding of Blue Circle to Boral Cement
occurred with minimal disruption to our business
and with no loss of customers. With a new name,
we are now more visibly part of the Boral range of
products, which strengthens the Boral brand.
Demolition project
Boral Cement Engineering Services and site
personnel are addressing obsolete plant and
equipment at both the Berrima and Maldon sites.
The project is expected to take six months to
complete and will remove potential chemical
and structural risks associated with the
redundant plant.
■ Cement
■ Asian Construction Materials
Thailand turnaround
The successful turnaround of Thailand
Construction Materials continues with a strong
return to profit for the full year. The FY2011
yearly profit results are the best recorded since
FY2006, with the month of June showing the
highest monthly sales volumes since the
business commenced in 1992.
Indonesia
In 2011, PT Jaya Readymix will see the historic
completion of a 90 Megawatt compacted
concrete dam for owner International Nickel
Indonesia (INCO) in remote Central Sulawesi,
in which PT Jaya played a major role. The
exceptional logistical challenges made this one
of the most complex and prestigious projects in
Jaya’s 39 year history.
22
Review of operating divisions
Boral Limited Annual Report 2011
USA
Boral USA has industry leading positions in bricks,
concrete and clay roof tiles, and manufactured stone
veneer for residential and midrise commercial buildings.
The construction materials business has leading
positions in Oklahoma and Colorado, and the
fly ash processing and distribution business operates
on a national basis.
Mike Kane, President, Boral Industries
Performance
Housing starts remain at historically low
levels, and our focus is on reducing costs
while readying the business for the upside
in the cycle.
The USA operations reported revenue of
A$431m, 19% above that of last year (prior
year: A$364m), reflecting the full integration
of MonierLifetile into Boral Roofing and
the half year inclusion of the Cultured
Stone joint venture. The revenue gain was
partially offset by a continued deterioration
in housing starts and construction
activity and the strengthening of the
Australian dollar. At the EBIT level, the
USA operations reported a loss of A$99m
against a A$104m loss last year.
US dollar losses increased to US$99m
against US$91m in the prior year, primarily
due to acquisitions of loss making
businesses. Favourable exchange rate
movements, lower head count, cost
reductions driven by the early benefits
of LEAN implementation and other cost
containment activities largely mitigated the
effects of the newly acquired businesses.
The US continued to experience significant
challenges during the year as housing
activity resulted in declines in demand
offsetting underlying cost containment
performance across all areas of the
US business.
Boral Brick and Cladding revenue was
A$178m, including Bricks, Stone (six
months of activity), and Trim. Revenue
from Bricks was down 8% to US$142m
due to a 7% decline in volumes coupled
with a small decrease in pricing driven by
product mix and competitive pressures.
Plant utilisation averaged 26%, requiring
continuation of cost cutting initiatives.
Boral Roofing achieved revenues of
US$89m, 2% (100% MonierLifetile) lower
than the prior year on a like for like basis
driven by a 5% reduction in volume partially
offset by consolidated sales.
Market review and outlook
It continues to remain unclear when and
how rapidly a turnaround in US housing
and construction 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 increase slightly throughout the year.
The US division’s emphasis on safety,
LEAN and Sales and Marketing Excellence,
combined with the integration of Tile and
Stone and the introduction of Trim and an
enhanced commercial offering positions
Boral well to improve on prior cycle returns.
Revenues for Fly Ash and Construction
Materials increased 5% to US$164m due
to a 21% increase in concrete volumes
partially offset by a 3% decrease in
aggregate volumes.
The employee Lost Time Injury Frequency
rate improved significantly, dropping from
3.1% last year to 0.6% this year. The
US division has embedded a system-
wide LEAN 5S (Sort, Set in order, Shine,
Standardise and Sustain) capability,
personalised safety interventions by
Division Presidents, and a behaviour
based safety observation program
across all operations.
Boral Brick and Cladding
Boral has industry leading brick
and stone positions complemented
by both the market seed and
commercialisation launch of
the Boral Trim product and the
enhanced commercial focus of the
Boral Building Products distribution
business.
Boral Roofing
Boral’s high end roofing solutions
consist of a market leading range of
concrete and clay tile products. The
integration of MonierLifetile into Boral
Roofing has provided synergy and
market opportunities that the division
continues to exploit fully.
Construction Materials and
Fly Ash
With national fly ash and regional
concrete and aggregate offerings,
Boral is well positioned to satisfy
growing demand as the US
economy returns to more normalised
construction spending levels in
the future.
Technology
Boral’s newly implemented Innovation
program enhances product
development opportunities across all
businesses while reducing the time to
commercialisation. The development
of green sustainable products is fully
underway as evidenced by the Trim
launch and several new product
initiatives moving beyond the proof
of concept stage.
23
Employees
2,572
Up 70%
Capital expenditure
$43m
Up 361%
Integration of MonierLifetile
Acquired and fully integrated the remaining
50% of MonierLifetile; combined with clay roof
tile division to form Boral Roofing and achieved
synergies exceeding the expectations of the
business case. Launched new products including
BoralPure™ SMOG-EATING Tile.
KEy
ACHIEVEMENTS
The Boral US Team is building momentum in safety, LEAN operations and
new product development to take full advantage of a market recovery.
Divisional results
Revenue
$431m
Up 19%
EBIT
$(99)m
Up 5%
Revenue breakdown
Safety improvement
Safety improved significantly in FY2011 as a
result of expanded focus on behaviour based
safety processes, near miss reporting, driver
and fleet safety initiatives, and leadership safety
interventions across all locations.
Cultured Stone acquisition
Acquired a 50% interest, with management
control, in the nation’s leading manufactured
veneer stone business (Cultured Stone).
Integration is underway to maximise synergies
with Boral Cladding.
■ Cladding
■ Roofing
■ Construction Materials and Fly Ash
Creation of a Cladding Division
Created a Cladding Division comprising Brick,
Stone, Trim, and Boral Building Products
Distribution designed to further advance our
residential, commercial and expanded channel
strategy. Launched complementary products
including a leading stucco and EIFS wall system
across distribution network.
Implementation of Sales and Marketing
Excellence and LEAN
Implemented both commercial and operational
programs including Sales and Marketing
Excellence and LEAN. The roll out establishes
the commercial and operating foundation on
which the company will satisfy customer demand,
increase share, minimise waste and inventory
levels, improve margin and improve efficiencies
going forward.
24
Review of operating divisions
Boral Limited Annual Report 2011
FINANCIAL REVIEW 2011
Andrew Poulter, Chief Financial Officer
Revenue
As a result of the full consolidation of the US MonierLifetile and Cultured Stone
businesses acquired in July and December 2010 respectively, revenue from continuing
operations at $4.7b increased 4% over the prior year. Normalising for these acquisitions,
underlying Group sales revenues were level with those of the prior year, though at a
divisional level there were several key factors which influenced both the first and second
half year performances and the year’s earnings outcome.
The Australian operations, which accounted for 86% of consolidated Group revenues,
were significantly influenced by two key demand constraints: the adverse weather in
the eastern states throughout the second quarter which culminated in the January
Queensland flooding, and the steep decline in housing starts which began in January
and continued through the second half year. The latter weakness was principally in the
resource sector states of Queensland, Western Australia and South Australia, giving
credence to the two-speed economy currently prevailing in Australia.
Following a strong second half recovery, Australian Construction Materials reported a 7%
increase in revenues on the prior year. Despite weather impacts, first half year revenues
were in line with the prior year; the final quarter benefited from a return to normal trading
conditions, together with an increase in project and infrastructure demand. Whilst the
division took some benefit from road reconstruction activity following the Queensland
flooding, the key revenue drivers were the continued robust demand in Victoria and an
increase in demand in New South Wales.
After a strong start to the year where first half year revenues were 3% ahead of FY2010,
Building Products’ second half revenues were significantly impacted by the decline
in residential housing, resulting in full year revenues closing at 5% below those of the
prior year. This second half weakness directly impacted the brick, roof tile and masonry
products businesses, which have a greater exposure to residential demand. Plasterboard
demand was also impacted by a weaker Queensland residential market, which has yet to
see any significant increase from reconstruction activity following the January floods.
Sales revenue
$m
EBITDA1
$m
9
9
1
,
5
9
0
9
,
4
5
7
8
,
4
1
1
7
,
4
9
9
5
,
4
7
6
7
,
5 4
0
3
,
4
0
5
1
,
4
1
3
8
,
3
9
8
4
,
3
4
9
7
4
9
7
3
2
8
2
6
7
8
8
6
2
7
6
1
3
5
9
3
5
5
0
5
2
2
5
2
0
3
0
4
0
5
0
6
0
7
0
8
0
9
0
0
1
1
1
2
0
3
0
4
0
5
0
6
0
7
0
8
0
9
0
0
1
1
1
1. Excluding significant items.
25
Net profit after tax before
significant items from
continuing operations was
$173m, a 20% increase over
the prior year.
While not consolidated into the Group results, LBGA, the Asian plasterboard joint venture,
continues to show consistent growth, having exposure to the core plasterboard markets
in China, South Korea, Malaysia, Thailand, the Philippines, Vietnam and the emerging
plasterboard markets in India. Revenues grew by 16% over the prior year, with increases
in all markets led by India 67% and China 28%. The self-funded investment in plant
capacity to satisfy forecast growth has been a key factor in the continued success
of the joint venture.
The Cement division reported a 5% improvement in revenues, with good progress
in Australia due to sustained demand across the New South Wales and Victoria
construction markets and increased lime sales into the steel sector. Revenues also
increased in both Thailand and Indonesia, underpinned by an increase in construction
activity, though margins came under pressure due to increases in cement, raw materials
and labour costs.
In the US, housing demand continued to run at cyclical lows, and the anticipated second
half recovery failed to materialise, resulting in annual, seasonally adjusted housing starts
of 571k, 3.5% below the prior year. As a result, underlying revenues, normalised for the
Monier and Cultured Stone acquisitions, were flat with the prior year as higher sales
revenue in clay tiles and construction materials offset an 8% decline in brick revenues.
Bricks continue to be exposed to the weaker performing eastern states.
Earnings
Net profit after tax before significant items from continuing operations was $173m,
a 20% increase over the prior year, predominantly due to a $33m reduction in interest
expense and a $12m favourable exchange rate benefit arising from the translation of the
US losses.
Income statement
For the year ended 30 June
2011
2010
$ millions
Group
Discontinued
operations
Continuing
operations
Group
Discontinued
operations
Continuing
operations
Sales revenue
4,710.5
28.8
4,681.7
4,599.3
105.5
4,493.8
EBITDA1
EBIT/(loss)1
Interest1
Income tax1
Non-controlling interest
Underlying profit/(loss)
after tax1
522.2
277.2
(63.7)
(40.4)
2.3
2.6
2.6
(0.7)
519.6
274.6
(63.7)
(39.7)
2.3
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)
175.4
1.9
173.5
131.6
(12.9)
144.5
Net significant items
(7.7)
(7.7)
(222.1)
(58.9)
(163.2)
167.7
1.9
165.8
(90.5)
(71.8)
(18.7)
24.4
23.3
22.1
(15.2)
Net profit/(loss) after
tax
Earnings per share1
(cents)
Earnings per share
(cents)
EBIT1
$m
0
0
6
3
0
6
4
1
6
1
3
5
8
4
4
8
7
4
3
4
3
6
7
2
7
7
2
2
5
2
Profit after tax1
$m
0
7
3
0
7
3
2
6
3
8
9
2
7
4
2
3
8
2
2
9
1
5
7
1
1
3
1
2
3
1
Earnings per share1
cents
8
.
3
6
4
.
3
6
7
.
1
6
0
.
0
5
4
.
1
4
1
.
9
4
7
.
3
3
2
.
2
2
1
.
2
2
4
.
4
2
2
0
3
0
4
0
5
0
6
0
7
0
8
0
9
0
0
1
1
1
2
0
3
0
4
0
5
0
6
0
7
0
8
0
9
0
0
1
1
1
2
0
3
0
4
0
5
0
6
0
7
0
8
0
9
0
0
1
1
1
1. Excluding significant items.
26
Review of operating divisions
Boral Limited Annual Report 2011
Financial review 2011
Continued
The segmental earnings before
interest and tax (EBIT) by
division, reflect the impact of the
first and second half revenue
variations which had a major
influence on the performance of
the Construction Materials and
Building Products divisions.
Earnings before interest and tax from continuing operations was $275m, 2% ahead
of the prior year, though underlying gross margins dipped slightly from 6.0% to 5.9%.
This margin decline occurred primarily due to the change in geographical mix in sales in
the Construction Materials division where at the product level, concrete and aggregate
margins improved following the rigorous implementation of the 1 April price increase.
The segmental earnings before interest and tax (EBIT) by division reflect the impact of the
first and second half revenue variations which had a major influence on the performance
of the Construction Materials and Building Products divisions.
Construction Materials reported an EBIT of $204m, a 1% increase over the prior year as
a result of a significant improvement in second half revenues due to improved market
demand and a return to normal weather patterns. Second half earnings showed a 20%
improvement over the first half year and a 19% improvement over the prior corresponding
period. The second half year result was also assisted by the 1 April concrete and
aggregates price increase which improved second half margins to 9.5% from 8.4% in
the first half. Construction Materials’ annual EBIT margins declined to 9.0% versus 9.5%
in the prior year due to the change in mix of sales from Queensland to Victoria and New
South Wales and lower asphalt demand in Queensland following the completion of major
road projects in 2010.
Building Products’ EBIT showed a reversal in the second half year following a strong
first half performance where EBIT was up 22% over the prior corresponding period.
The second half year was impacted by an acute decline in the residential sector in
Queensland, Western Australia and South Australia together with the conclusion of the
Government stimulus programs in the first half year. Second half EBIT declined 47% to
$29m, bringing the full year to $84m, a 16% decline over the prior year.
Following a review of east coast bricks, roof tile, concrete and masonry operations with
specific focus on projected plant capacities and medium term market demand, the
decision was taken to reduce the overall operating capacity. The impact and resulting
impairments were incorporated in the FY2011 significant item expense.
The Cement division reported a 9% improvement in EBIT to $96m as stronger sales
and plant operating performance in Australian Cement and a return to profitability in
Thailand were partially offset by EBIT margin declines in Indonesia. Cement plant overall
equipment effectiveness improved consistently throughout the year, with Waurn Ponds
achieving record clinker output following the major annual shutdown in March.
The United States businesses delivered 5% reduced EBIT loss to ($99m) primarily due
to a $12m foreign exchange conversion benefit arising from the increase in strength of
the Australian dollar. The result included the first time full year consolidated results of the
MonierLifetile business, which was acquired on 1 July 2010 and the half year consolidated
results of the Cultured Stone joint venture following the December acquisition of a 50%
controlling share from Owens Corning. Despite the underlying market weakness, US
dollar losses in the bricks business were reduced by 6%, and the BMTI fly ash operations
returned to profit. These improvements were achieved through continued focus on
operating efficiency and optimisation of the brick plant operating configuration.
The Group reported net profit after tax of $167.7m after recognising $7.7m of net
significant items with regard to manufacturing capacity rationalisation, insurance claims
recovery, acquisition and due diligence expenditures and resolution of prior year tax
matters. The significant items are summarised in the table below.
Reconciliation of underlying results to reported results
$millions
EBIT
Interest
Non-controlling
interest
Tax
Profit
after tax
Underlying results
Significant items
Plywood closure
Asset write-downs
Acquisition expenditure
Tax benefits
Total
Reported results
277.2
(63.7)
(40.4)
2.3
175.4
19.6
(53.1)
(9.3)
(42.8)
234.4
35.1
35.1
(5.3)
(63.7)
19.6
(53.1)
(9.3)
35.1
(7.7)
2.3
167.7
27
Following a review of the capacity of the east coast Australian operations and projected
future market demand, the Group undertook an evaluation of our future operating
capacity requirements. This review took into account the future investment returns
on projected capital needs for the existing capital base and the current and projected
efficiency benefits now being realised from investment in LEAN. The review concluded
that the Group has excess operating capacity in its Queensland and New South Wales
operations and the decision was taken to close several plants in order to optimise future
earnings and the return on capital employed. These, together with the closure of two
US brick plants in the south east, amounted to a $53m write-down of asset values and
site remediation costs.
The Queensland floods in January inundated a large part of Timber’s Ipswich plywood
operations, rendering future investment on the site unviable. Following a critical review
of the cost and investment returns from establishing the factory on an alternate site, it
became clear that such an investment could not return the cost of capital, and a decision
was made to exit the plywood business in June 2011. The settlement of the insurance
claim net of the write-off of the assets employed required the recognition of a $19.6m
book profit which has been taken as part of the significant items.
Operating cash flow was $351m versus $459m in the prior year. This reduction was due
to a $97m adverse movement in working capital versus a $44m favourable movement in
the prior year. The increase in working capital during 2011 was due to higher receivables
following a strong final quarter’s sales in Construction Materials, and an increase in
closing inventory levels. The latter occurred due to the weaker final quarter sales in the
US and Building Products when inventories had been built to meet forecast demand and
the need to increase the Australian Cement clinker inventories in advance of the Berrima
shutdown which was undertaken in June and July of 2011. Second half cash flows,
however, increased from $81m in the half year to the closing $351m.
Free cash flow showed a net outflow $34m due to the $166m increase in capital
expenditure and the $146m acquisition investment associated the MonierLifetile and
Cultured Stone businesses in the US and the deposit on the Wagners acquisition.
Capital expenditure at $346m included $235m of stay-in-business expenditure,
representing 96% of depreciation. This increase was planned and followed two years of
unsustainably low stay-in-business expenditure, which comprised 47% in 2010 and 62%
of depreciation in 2009.
2011 also included the investment in major growth expenditure with the commencement
of the $200m Peppertree Sydney aggregates quarry construction at Marulan in New
South Wales, the completion of the $35m Dunnstown quarry upgrade in Victoria and
the commencement of the $80m Port Melbourne plasterboard operations upgrade.
In addition, in the US the investments in the Ione clay tile plant upgrade and construction
of the new North Carolina composite trim factory were completed, with both plants due
for commissioning during the first half of FY2012.
Net debt reduced from $1,183m to $505m due to the 2010 equity raising and also the
strengthening of the Australian dollar versus the US dollar; the latter creating a favourable
$274m reduction on the conversion of the Group’s US$1.1b private placement long
term debt. Gearing, net debt to equity, reduced to 16% versus 45% in the prior year,
positioning the Group’s balance sheet in good shape for organic and strategic growth
opportunities and specifically the completion of the recently announced Wagners and
Sunshine Coast quarry acquisitions, which are awaiting clearance by the ACCC.
In February 2011, the Group replaced its $1b syndicated term credit facility, which was
due to expire in August 2011, with a four year $700m facility syndicated with the current
banking group.
Earnings per share, before significant items, increased 10% to 24.4 cents from 22.1 cents
which supported a 7% increase in the total dividends to 14.5 cents per share
in FY2011.
28
Boral Limited Annual Report 2011
SUSTAINABILITy IN BORAL
Together, we can design and build a better future.
Over the past decade, Boral has continued to demonstrate a clear commitment to
sustainable development and to improve performance to a level of industry best practice.
These efforts are evident by the external recognition that the Group has received, including
membership of the FTSE4Good Index and the Dow Jones Sustainability Index.
The Group’s sustainability initiatives have
provided a strong foundation for the future,
and our businesses are well equipped to
respond to increased regulatory reporting
and business-specific requirements.
At Boral we have prioritised our efforts
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,
sustainable product development, and
community partnerships. We are confident
that these priorities will grow the Group’s
sustainable competitive advantage and
represent the critical levers in terms
of business continuity and present
opportunities to continually
lower our costs.
Boral Timber products have full Chain of Custody
certification aligned with the Australian Forestry
Standard (AFS). This certification verifies that
Boral Timber products are sourced from certified,
legal and sustainable resources. With specifiers
and builders increasingly seeking certified
products sourced from sustainable forest for
projects, certification is an important issue for
the industry.
Boral Envirocrete is a concrete mix that replaces
virgin materials with recycled and waste materials
in a range from 20% to 60% and is produced
using 40% alternative fuels. With a variety of uses
including foundations, paving, slabs and higher
strength applications, the product has a high
thermal mass for more energy efficient buildings.
Leading safety is Boral’s number one priority,
and this requires an immediate zero tolerance to
poor safety practices from every employee. We
are cleaning up the operations, getting on with
maintenance and investing in our facilities. Best
practice is being consolidated across the Group
into a single Boral approach to leading safety.
Boral is celebrating 10 years of partnership with
the Juvenile Diabetes Research Foundation (JDRF)
in 2011. In this time Boral and its employees have
raised over $2.8m to support JDRF, and over
7,000 employees have taken part in fundraising
activities such as the Walk, Spin and Ride to
Cure Diabetes.
29
29
Establishing and maintaining
strong relationships with our
stakeholders is critical to
Boral’s business success.
ENVIRONMENT
Energy use and GHG emissions
The Group’s operations consume a
significant amount of energy and some
businesses are particularly emissions
intensive. In FY2011, greenhouse gas
(GHG) emissions from Boral’s fully owned
businesses in Australia, the USA and Asia
totalled 3.2 million tonnes of CO2, a 5%
increase on the prior year. The increase
primarily reflects increased production.
Emissions from Boral’s US operations were
down by around 2% on a comparable
basis, reflecting the continued housing
downturn and Boral’s associated reduction
in production. In Australia, emissions were
up around 6%, reflecting increased clinker
production and increased production
across our more intensive operations.
In Asia, Boral’s GHG emissions were up
2% on the prior year, reflecting increased
activity in Thailand.
During FY2011, Boral incurred five Penalty
Infringement Notices (PINs) related to
environmental contraventions in Australia
(resulting in $12,473 in fines). Three were
issued in Queensland, one for a technical
non-compliance and two relating to failure
to adequately control sawdust emissions.
An infringement for failing to maintain silt
dams at a quarry in New South Wales and
in Victoria an infringement occurred for the
overflow of cement sludge into a creek.
There were no infringements in the
USA or Asia.
At a glance
Water management
Boral’s operations consume water
for manufacturing and maintenance
processes.
GHG emissions (million T CO2e)
Boral operations
Share of JV operations
Mains water (million litres)
FY2011
FY2010
3.2
0.1
2,130
3.1
0.2
2,270
Mains and town water are Boral’s most
significant water source, with a total of
2,130 million litres of mains water used
in our wholly owned and controlled
businesses in Australia, the USA and Asia
in FY2011. Mains water use reduced by
140 million litres on the prior year due
to lower levels in Australia being partially
offset by increases in the USA. The high
level of rainfall across the east coast of
Australia during the period reduced mains
water required for dust suppression within
the quarry business, and ensured a much
greater abundance of rainwater being
available for concrete batching.
PINs
Number
Fines
5
$12,473
2
$4,000
Boral’s Australian
GHG emissions
■ Calcination 39%
■ Electricity 18%
■ Coal 17%
■ Natural gas 15%
■ Diesel and liquid fuels 9%
■ Other 2%
30
Boral Limited Annual Report 2011
COMMUNITY PARTNERSHIPS
Boral’s community partnership model is supported by a
rigorous selection process and helps the Group identify
and support the most meaningful partnerships for the
company. The core objective of Boral’s partnership
program is to make a valued and sustainable contribution
to the communities in which we operate.
Bangarra Dance Theatre
Supporting local communities
In FY2011, Boral had seven key
community partnerships to which the
Group contributed a total of $522,705.
In addition, a further $306,112 was
donated to the Juvenile Diabetes Research
Foundation (JDRF) through employee
fundraising efforts throughout Australia.
The Group also contributed $50,000 to
the Disaster Relief Appeal and extensive
resources, transport and materials to
support community progress following
the floods in early 2011 in Queensland,
Australia.
Boral’s longest standing community
partnership with Conservation Volunteers
Australia funded 549 volunteer days across
13 conservation projects which resulted
in the planting of 5,216 trees/stems and
an area of 40,520 m2 being weeded and
regenerated. In addition, over 120 kg of
rubbish was removed from these sites,
2,000 m2 of mulching was carried out and
1,000 m of fence was constructed and
maintained.
The Group has partnered with
Bangarra Dance Theatre, Australia’s
leading Indigenous dance company,
since 2002 and in FY2011, 320 Boral
employees, customers and suppliers saw
Bangarra perform.
Partnering with the Taronga Conservation
Society Australia since 2003, Boral
sponsors Youth at the Zoo (YATZ) and
engages employees and customers.
230 Boral employees, customers and
suppliers attended Twilight Concerts and
150 were at Boral’s Family Day. Boral
products are widely used in Taronga’s
redevelopment work.
Boral continued to offer Outward Bound
Family Re-discovery Scholarships to Boral
employees with high school aged sons
and daughters. Since 2003, a total of 100
family groups have participated in the
program across five states. Four families
received Boral scholarships in FY2011.
In FY2011 Boral contributed $40,000 to
Building Communities in Asia to support
students, teachers and local clinic staff as
well as to provide agricultural assistance.
Boral also contributed $30,000 to continue
funding an educational scholarship
program for children of our Indonesian
employees.
In addition to the Group’s corporate
partnerships, Boral’s local businesses
support the Group’s local community
activities, including charities, emergency
services, sporting and environmental
groups.
As a matter of policy, the Group does not
participate in or donate to any political or
politically associated organisations.
JDRF has been Boral’s preferred charity
since 2001, and the Group has contributed
over $2.8m since 2001 with around 85%
from employee fundraising in Australia
and the USA. In 2010, Boral won JDRF’s
Freedom Award for the highest performing
corporate fundraising team for the second
consecutive year.
During the year Boral continued its
partnership, initially established in 2006,
with HomeAid in the United States with
contributions of US$25,000 in cash and
US$25,000 of in-kind product to provide
shelter for the homeless. Through this
program Boral works with customers,
showcases our products and engages
employees.
CUSTOMERS AND SUPPLIERS
31
Boral’s investment in a state-of-the-art manufacturing
plant in North Carolina uses patented bio-based
polymer chemistry together with Boral’s own Celceram®
technology to produce lighter weight, higher durability
and lower emission trim products for the residential
building sector.
Delivering high levels of customer service
is critical to our success. Call centres with
improved technology are contributing to
improved performance.
Sustainable products
Through our Innovation Excellence
program, Boral is capitalising on the use
of fly ash and other recycled materials to
produce products that are recognised
for their environmental credentials. In the
USA, the restructured development team
is focusing on more efficient and effective
commercialisation of product innovation.
The US$15m facility is due to commence
volume production late in 2011 for the
US$3b US housing trim market.
With increasing pressure on the building and
construction industry to take responsibility
for the ecological and social impacts of
its operations, finding solutions for a more
sustainable environment is high on the
agenda. From lower carbon products, to life
cycle assessment, community engagement
and a genuine commitment to recycling and
re-use, Boral is assisting customers and
their clients in responding to regulatory and
climatic change.
Extensive market research was conducted
in FY2011, asking builders, architects,
designers and academics what they
believe is required to meet the sustainability
needs of the future. This has helped
to inform the direction of up to 60 new
products currently in development across
Boral Building Products, ranging from
small product enhancements and product
improvements to ground-breaking new
building solutions.
Boral Timber has championed a new
solid flooring product offering that will
significantly increase the yield from the
nation’s highly valuable and scarce
hardwood resource while at the same
time filling a gap in the budget-conscious,
quick installation market. Boral 10 mm
overlay flooring employs a unique cutting
technique that enables production of a
straighter and higher quality hardwood
board at half the thickness. This solution
offers a terrific environmental benefit
by making better use of scarce timber
resources.
Product life cycle
A “Life Cycle Assessment Report” for
Boral products was completed in July
2010 and subsequently peer reviewed by
the Centre for Design at RMIT University.
The report aimed to assess the energy
and greenhouse impact of Boral products
in Australian residential housing. Among
the key conclusions, it highlighted that
“getting the design right or wrong has a
greater effect on life cycle greenhouse
gas emissions than the choice of building
materials”. It was also identified that
Boral can have and is having a positive
impact on emissions through improved
manufacturing processes and working
with suppliers to reduce emissions in their
processes.
Boral also worked closely with the Building
Products Innovation Council to assist in the
development of the Building Products Life
Cycle Inventory database. The database
is providing life cycle environmental
information for more than 100 building
materials categories and is designed to
help architects, designers, engineers,
builders, developers and regulators more
accurately assess the impact buildings will
have on the environment.
32
Boral Limited Annual Report 2011
OUR PEOPLE
Boral employees around the world are excited and
energised by the positive changes happening across the
Group. They are engaged with our updated purpose and
values which guide decision making and define how
we do business.
Boral has an active Indigenous
employment strategy, and in January 2011
the Group entered into an Indigenous
Employment Plan with the Department of
Education, Employment and Workplace
Relations (DEEWR), with an objective to
employ 50 Indigenous people over the next
two years. The Group is proud to highlight
the high level of retention amongst its
Indigenous employees.
Policies and values
Boral’s corporate values were updated
during the year to reinforce the essential
principles that guide our decision making
and our actions. The Group’s core values
of excellence, integrity, collaboration and
endurance are the essential elements of
the Group’s DNA.
In addition, the Group’s Code of Conduct
requires all employees to observe both the
letter and the spirit of the law and adhere to
the highest standards of business conduct
while striving for Sector Best Performance.
An all new twice yearly personal
development program has been instituted
across Boral to manage performance,
identify high potential employees and
improve succession planning. In 2011
a new executive leadership training
program was introduced with the principal
objective being to develop the next
generation of Boral leaders.
Workforce profile
As at 30 June 2011, Boral had 15,227
full-time equivalent (FTE) employees and
around 5,600 FTE contractors working
across its global operations. In addition,
approximately 4,900 employees were
working in joint venture operations. The
number of FTE employees increased
on the prior year, due to an increase in
employees in the USA from the purchase
of the MonierLifetile and Cultured Stone
businesses. This increase was partially
offset by decreases in Australia due mainly
to the sale of the Panels and Scaffolding
businesses.
The average length of service of Boral
employees was approximately 8.0 years.
In Australia and Asia, the average length
of service has remained largely constant
at 8.6 years and 5.0 years respectively;
however, it decreased in the USA to
7.5 years.
Employee turnover in Australia was 20% in
FY2011, slightly higher than last year due
to organisational changes and ongoing
competition across Australia for skilled
employees in Boral’s key operations. In
the USA, staff turnover of 15% was lower
than the prior year, while in Asia, turnover
reduced to 15%.
Diversity
Boral encourages gender diversity within the
workforce and in 2011 a number of gender-
specific programs were implemented
to underpin the Group’s commitment to
providing opportunities to female employees
including training, paid parental leave and
pay equity for women employees.
At a glance
FTE employees
JV employees
FTE contractors
Average length of service
Aus
USA
Asia
Women in Boral
Women in management
Women on the Board
FY2011
FY2010
15,227
~4,900
~5,600
14,806
~3,000
~6,000
8.7 yrs
8.6 yrs
7.5 yrs 11.8 yrs
4.8 yrs
5.0 yrs
13%
13%
9%
10%
13%
25%
Employees by region
■ Australia 60%
■ Asia 23%
■ USA 17%
HEALTH AND SAFETY
Mechanism of injury
33
The Group’s commitment to continuously
improve the rigour and progress of our
Health and Safety activities was further
reinforced by the formation of a Health,
Safety & Environment Committee of
the Board.
Dr Eileen Doyle has been appointed to
chair the Committee, and her previous
experience on large scale operations
throughout much of her executive career
is ideally suited to this important new role
at Boral.
Consistent with our ambitions to deliver a
safe and injury-free work environment for
all people who work on Boral sites or for
Boral, injury statistics for employees and
contractors are aggregated and reported
as a single metric. While lag indicators are
reported, the Group remains focused on
developing a robust suite of lead indicators
to enable a more proactive approach to
managing the Group’s safety outcomes.
Performance
During FY2011, Boral’s Lost Time Injury
Frequency Rate (LTIFR) for employees and
contractors reduced to 2.0 from 2.2 in the
prior year and represented a total of 90
lost time injuries.
The Group’s overarching strategy is
to continually reduce our LTIFR and
percentage hours lost and in 2011 our
LTIFR of 2.0 for employees and contractors
combined represented a 19% improvement
on the prior three year average. The
percentage hours lost of 0.06 for employees
and contractors combined is equal to the
average of the last three years.
During the year, two critical projects were
developed to assist the Group to move to
a “zero incident” culture: the introduction
of iCARE, an internally developed
behaviourally-based OH&S improvement
program, and the “one Boral” Safety
Management System, which standardises
the current five divisional systems into a
single whole-of-business system. These
initiatives will continue to be developed
and will be implemented across the
businesses in 2012.
Tragically, there was a fatality on a Boral
work site in November 2010 when a
contract traffic controller was struck by
a reversing truck at an asphalt repair site
in Queensland. The incident highlighted
a number of areas where the Group can
and must improve the robustness of our
procedures. Our condolences go out to
the family and friends of the young man
involved in this terrible incident.
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. Five
types of incidents made up almost three
quarters of injuries in Boral’s Australian
workplaces in FY2011. These were:
muscular stress (32%), hit by moving
objects (17%), hitting objects with part
of the body (13%), falls (9%), and vehicle
accidents (3%). Actions are being taken to
focus our OH&S efforts on the root causes
of these types of incidents going forward.
Employee health and wellbeing
Boral looks to all its employees to be fit for
work and equipped with the required level
of fitness to safely undertake their work.
Pre-employment medical examinations
are conducted for many of our employees,
to ensure that they are physically able to
meet the demands of the job, and in some
higher-risk roles, regular employment
medical examinations are also conducted.
1
.
4
Beyond ensuring that employees are
“fit for the job”, the Group is committed to
supporting the health and wellbeing of its
employees. Boral’s employee wellbeing
program, BWell, continues to be available
to employees throughout Australia. BWell
provides three core services: regular
health assessments, wellbeing awareness
seminars, and provision of educational
information on health issues for employees
and their families. The program aims
to improve the health and awareness
of employees through improvements in
lifestyle and diet.
6
0
■ Muscular stress
■ Hit by moving objects
■ Hitting objects with part of the body
■ Falls
■ Vehicles
■ Other
Consolidated employees’
and contractors’ LTIFR*
4
.
3
2
.
3
2
.
2
0
.
2
0
.
2
7
0
8
0
9
0
0
1
1
1
* Lost Time Injury Frequency Rate per million
hours worked
34
Boral Limited Annual Report 2011
BOARD OF DIRECTORS
Bob Every
Non-executive Chairman
age 66
Mark Selway
Chief Executive
age 52
Catherine Brenner
Non-executive Director
age 40
Brian Clark
Non-executive Director
age 62
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
a Director of O’Connell Street
Associates Pty Limited, OCA
Services Pty Ltd and Chairman of
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 and of the Health,
Safety & Environment 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
Director of Lend Lease. He has
an honorary doctorate from the
University of West Scotland.
Catherine Brenner was
appointed to the Boral Board on
15 September 2010. Ms Brenner
is a Director of Coca-Cola Amatil
Limited, AMP Limited and the
Australian Brandenburg Orchestra.
Ms Brenner was previously a
Director of Centennial Coal Limited.
Catherine is a member of the
Takeovers Panel and a Trustee of
the Sydney Opera House Trust. Ms
Brenner has extensive experience
in corporate finance, previously
holding the position of Managing
Director, Investment Banking of
ABN Amro Australia. Ms Brenner
holds an MBA from the Australian
Graduate School of Management,
and a Bachelor of Laws and
Bachelor of Economics from
Macquarie University
Ms Brenner is a member of the
Audit Committee.
Dr Brian Clark joined the Boral
Board in May 2007. He has
experience as a 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.
35
Eileen Doyle
Non-executive Director
age 56
Richard Longes
Non-executive Director
age 66
John Marlay
Non-executive Director
age 62
Paul Rayner
Non-executive Director
age 57
Richard Longes joined the Boral
Board in 2004. He is the Chairman
of Austbrokers Holdings Limited,
a Director of Metcash Limited,
Investec Bank (Australia) Limited
and Voyages Indigenous Tourism
Australia Pty Ltd. He was previously
an executive of Investec Bank, a
principal of Wentworth Associates,
the corporate advisory and private
equity group, and a partner of the
law firm Freehills. 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.
Dr Eileen Doyle joined the Boral
Board in March 2010. She is a
Board member of the CSIRO and
a Director of GPT Group Limited
and Bradken Limited. She is
also Chairman of Hunter Valley
Research Foundation and Director
of Hunter Founders Forum, which
are two non-profit organisations.
Dr Doyle was previously a
Director of OneSteel 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 Chairman of the Health,
Safety & Environment Committee
and a member of the Audit
Committee.
Paul Rayner joined the Boral
Board in 2008. He is a Director
of Qantas Airways Limited,
Treasury Wine Estates Limited
and Centrica plc, a UK listed
company. He is also a member of
the Rotary Aboriginal and Torres
Strait Islander Tertiary Scholarship
Advisory Board. 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.
John Marlay joined the Boral Board
in December 2009. He is a Director
of Incitec Pivot Limited. He is
Chairman of the Emissions-Intensive
Trade-Exposed (EITE) Expert
Advisory Panel to the Australian
Government Minister for Climate
Change and Energy Efficiency.
He is the Independent Chairman
of the Tomago Aluminium Company
Pty Ltd (a joint venture between
Rio Tinto, Alcan, Gove Aluminium
Finance Ltd (CSR and AMP) and
Hydro Aluminium). He was the Chief
Executive Officer and Managing
Director of Alumina Limited from
December 2002 until his retirement
from that 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 and of the Health, Safety
& Environment Committee.
36
Boral Limited Annual Report 2011
CORPORATE GOVERNANCE STATEMENT
Introduction
This section of the Annual Report outlines Boral’s governance
framework.
• considering and making decisions about key management
recommendations (such as major capital expenditure,
acquisitions, divestments, restructuring and funding);
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
Group to enhance shareholder value.
Throughout FY2011, Boral’s governance arrangements
were consistent with the Corporate Governance Principles
and Recommendations released by the ASX Corporate
Governance Council.
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.asp.
Principle 1: Lay solid foundations for management
and oversight
Responsibilities of the Board and management
The Board
Directors are accountable to the shareholders for the Company’s
performance and governance. Management is responsible for
implementing the Company’s strategy and objectives, and for
carrying out the day-to-day management and control of the
Company’s affairs.
The Board has adopted a Board Charter which sets out those
functions reserved for the Board and those delegated to
management.
Copies of the Company’s Board Charter and Constitution are
available on Boral’s website.
The Board’s responsibilities, as set out in the Board Charter, include:
• oversight of the Company including its control and
accountability systems;
• 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 and approving overall financial goals for the Company;
• monitoring implementation of strategy, business performance
and results and ensuring appropriate resources are available;
• approving the Company’s financial statements, annual budget
and monitoring financial performance against approved budget;
• reviewing, ratifying and monitoring systems of risk management
and internal control, codes of conduct and legal compliance
(including in respect of matters of sustainability, safety, health
and environment);
• determining dividend policy and the amount, nature and timing
of dividends to be paid;
• monitoring Board composition, processes and performance;
• monitoring the effectiveness of systems in place for keeping the
market informed, including shareholder and community relations.
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 Australia, including operations
at Penrith Lakes and Emu Plains in Western Sydney, and Orange
Grove Quarry and the Welshpool asphalt plant in Western
Australia. The Chairman and the Chief Executive also visited sites
in Indonesia, Korea and China.
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.
Senior executives reporting to the Chief Executive have their roles
and responsibilities defined in position descriptions, as set out in
relevant letters of appointment.
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 & 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.
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 & 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.
37
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
pages 34 and 35 of the Annual Report.
The Constitution provides that there will be a minimum of three
Directors and a maximum of 12 Directors on the Board.
During FY2011, Roland Williams retired from the Board (in
November 2010).
One new non-executive Director was appointed during FY2011,
being Catherine Brenner (in September 2010).
The period of office held by each current Director is:
Richard Longes
Bob Every
Brian Clark
Paul Rayner
John Marlay
Catherine Brenner
Eileen Doyle
Mark Selway, Chief Executive
Appointed
Last Elected at an Annual
General Meeting
2004
2007
2007
2008
2009
2010
2010
2010
4 November 2010
4 November 2010
4 November 2010
24 October 2008
4 November 2010
4 November 2010
4 November 2010
Not applicable
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.
Board Committees are discussed further below under Principle 4
(Audit Committee) and Principle 8 (Remuneration & 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;
Details of the number of meetings attended by each Director are
set out on page 45 of the Directors’ Report.
• the Director has no material contractual relationship with a Boral
company other than as a Director.
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.
Committees
To assist the Board to carry out its responsibilities, the Board has
established an Audit Committee, a Remuneration & Nomination
Committee and in July 2011, a Health, Safety & Environment
Committee. The qualifications of each Committee member are
set out on pages 34 and 35, and the number of meetings they
attended during the reporting period are set out on page 45
of the Directors’ Report.
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.
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.
38
Boral Limited Annual Report 2011
Corporate Governance Statement
Continued
The appointment of Catherine Brenner as a non-executive Director
in September 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.
The Remuneration & Nomination Committee 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 performance of the Board and of individual
Directors took place in FY2011 in accordance with the process
described above. An evaluation of the performance of the Board
Committees will be undertaken in FY2012.
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 2001, 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.
39
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
excellence, integrity, collaboration and endurance.
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
Eileen Doyle
Catherine Brenner (from 15 September 2010)
The Committee met six times during FY2011.
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 financial reports 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 2001 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’
Declaration accompanying the financial reports be signed.
40
Boral Limited Annual Report 2011
Corporate Governance Statement
Continued
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 the 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 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.
Shareholders may elect to receive annual reports electronically or
to receive notifications via email when reports are available online.
Hardcopy annual reports are provided to those shareholders who
elect to receive them. 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.
The Audit Committee monitors procedures to ensure the rotation
of external audit engagement partners every five years as required
by the Corporations Act 2001.
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 47.
Internal audit
The internal audit function is a co-sourced arrangement consisting
of a dedicated Boral team and PricewaterhouseCoopers. 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.
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.
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.
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.
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.
41
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, safety, environment, competition and
consumer 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 the 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.
Chief Executive and Chief Financial Officer declaration
The Chief Executive and the Chief Financial Officer have provided
the Directors with a declaration in accordance with section 295A
of the Corporations Act 2001 for FY2011. The Board confirms
that it has received assurance from the Chief Executive and the
Chief Financial Officer that the above declaration 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.
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 FY2011.
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 site, business and
divisional basis and rolled up on a Group-wide basis and
reported to the Directors;
• policies, standards and procedures in relation to health, safety
and environment matters;
• training programs in relation to legal and compliance issues
such as competition law, intellectual property protection,
occupational health and safety and environment matters;
• 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.
42
Boral Limited Annual Report 2011
Corporate Governance Statement
Continued
Principle 8: Remunerate fairly and responsibly
Remuneration & Nomination Committee
The Board has a Remuneration & Nomination Committee which
comprises three independent non-executive Directors.
The members of the Committee are:
Brian Clark (Chairman)
Bob Every
John Marlay
The Committee met on six occasions during FY2011.
The Remuneration & Nomination Committee has a formal Charter
which sets out its role and responsibilities, composition structure
and membership requirements.
A copy of the Remuneration & 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 & 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.
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, the Remuneration & Nomination Committee
will annually review and report to the Board on gender diversity in
Boral’s workforce. Boral’s approach to diversity is set out in the
sustainability section of the Annual Report on page 32.
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 62.
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.
DIRECTORS’ REPORT
The Directors of Boral Limited (‘Company’) report on the
consolidated entity, being the Company and its controlled entities
(‘Group’or ‘Boral’), for the financial year ended 30 June 2011:
(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 Group undertook a capital raising of $479.8 million net of
transaction costs of $11.8 million. 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;
• Roland Williams retired as a non-executive Director of the Board of
Directors at the Annual General Meeting on 4 November 2010 and
Catherine Brenner was appointed a non-executive Director of the
Board of Directors, effective 15 September 2010; and
• the Group reported net profit after tax of $167.7m after
recognising $7.7m of net significant items related to
manufacturing capacity rationalisation, insurance claims
recovery, acquisition and due diligence expenditures and
resolution of prior year tax matters.
(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:
• entering into an agreement (which is subject to ACCC clearance)
to acquire the construction materials assets and operations of the
Sunshine Coast Quarries Group for $81.5 million;
• entering into an agreement to acquire Lafarge’s 50% interest in the
joint venture Lafarge Boral Gypsum in Asia Sdn Bhd (LBGA) for
consideration of €429 million (AUD $598 m) on an enterprise value
basis. After adjusting for net debt and non-controlling interests,
the acquisition equity value is €380 million (AUD $530 million). As
part of the acquisition the Group will be required to fair value its
existing investment in LBGA.
43
(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 29 of
this Report.
(7) Other information
Other than information in the Annual Report, there is no
information that shareholders 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 shareholders during the year were:
the final dividend of 6.5 cents per ordinary share
(fully franked at the 30% corporate tax rate)
for the year ended 30 June 2010 was paid on
28 September 2010
the interim dividend of 7.5 cents per ordinary share
(fully franked at the 30% corporate tax rate) for the
year was paid on 24 March 2011
Total Dividend
$m
46.7
54.3
The Directors have resolved to pay a final dividend of 7.0 cents
per ordinary share (fully franked at the 30% corporate tax rate) for
FY2011. The dividend will be paid on 27 September 2011.
(9) Names of Directors
The names of persons who have been Directors of the Company
during or since the end of the year are:
Bob Every
Mark Selway
Catherine Brenner
Brian Clark
Eileen Doyle
Richard Longes
John Marlay
Paul Rayner
Roland Williams
Dr Clark, Dr Doyle, Dr Every, Mr Longes, Mr Marlay, Mr Rayner
and Mr Selway have been Directors at all times during and since
the end of the year. Ms Brenner was appointed a Director on
15 September 2010 and has been a Director at all times
since that date.
Dr Williams was a Director from 1 July 2010 to 4 November 2010,
on which date he retired from the Board.
44
Boral Limited Annual Report 2011
Directors’ Report
Continued
(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:
Grant date
Expiry date
29/10/2003
29/10/2010
29/10/2004
29/10/2011
31/10/2005
31/10/2012
06/11/2006
06/11/2013
06/11/2007
06/11/2014
Exercise
price
$5.52
$6.55
$7.65
$7.27
$6.78
Balance at
beginning
of year
Number
2,269,010
1,742,200
2,905,600
4,229,100
5,538,100
16,684,010
Options
issued
during
the year
Number
Options
lapsed
during
the year
Number
–
–
–
–
–
–
2,269,010
205,500
352,900
405,200
548,300
3,780,910
Shares issued
during the year
as a result of
exercise
of options
Options at
end of year
Options
exerciseable
Number
Number
Number
–
–
–
–
–
–
–
1,536,700
2,552,700
–
–
–
3,823,900
1,911,950
4,989,800
4,291,228
12,903,100
6,203,178
The options referred to above were held by 129 individuals.
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.
The exercise price of options issued in respect of the 2003 to
2007 tranches have been amended in accordance with the terms
of the Boral Senior Executive Option Plan to allow for the impact
of the capital raising undertaken during the year, which resulted in
a five cent reduction in the exercise price.
(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 2011 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 2012. The insurance contracts insure
against certain liability (subject to exclusions) in respect of 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 34 to 35 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
Wesfarmers Limited from February 2006 (current)
Mark Selway
Lend Lease Corporation Limited from June 2008 until
February 2010
Catherine Brenner
Coca-Cola Amatil Limited from April 2008 (current)
AMP Limited from June 2010 (current)
Centennial Coal Limited from 2005 to September 2010
Cryosite Limited from 2006 to October 2008
Brian Clark
AMP Limited from January 2008 (current)
Eileen Doyle
GPT Group Limited from March 2010 (current)
Bradken Limited from July 2011 (current)
Ross Human Directions Limited from July 2005 to
December 2010
OneSteel Limited from October 2000 to November 2010
Richard Longes
Austbrokers Holdings Limited from November 2005 (current)
Metcash Limited from April 2005 (current)
John Marlay
Incitec Pivot Limited from December 2006 (current)
Paul Rayner
Centrica plc from September 2004 (current)
Qantas Airways Limited from July 2008 (current)
Treasury Wine Estates Limited from May 2011 (current)
Roland Williams
Origin Energy Limited from 2000 until October 2010
45
(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:
Board of Directors
Audit Committee
Remuneration &
Nomination Committee
Meetings held
while a Director
Meetings
attended
Meetings held
while a member
Meetings
attended
Meetings held
while a member
Meetings
attended
Catherine Brenner
Brian Clark
Eileen Doyle
Bob Every
Richard Longes
John Marlay
Mark Selway
Paul Rayner
Roland Williams
8
12
12
12
12
12
12
12
5
8
12
11
12
12
11
12
11
4
3
–
6
–
6
–
–
6
3
3
–
5
–
5
–
–
6
3
–
6
–
6
–
6
–
–
–
–
6
–
5
–
6
–
–
–
Mark Selway, Chief Executive, is not a member of the Audit Committee or Remuneration & Nomination Committee, but attended all of
the Meetings held by those Committees from 1 July 2010 to 30 June 2011.
Bob Every is not a member of the Audit Committee but attended four of the six meetings held by that Committee from 1 July 2010 to
30 June 2011.
(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.
Dominic Millgate was appointed Assistant Company Secretary of Boral Limited in November 2010. He has previously been legal
counsel and company secretary for listed entities in Australia and Singapore, and has held legal roles in London and Sydney. He is a
Fellow of the Institute of Chartered Secretaries, and holds a finance degree from the University of New England and a law degree from
the University of Sydney.
46
Boral Limited Annual Report 2011
Directors’ Report
Continued
(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 2011 (or,
in the case of Roland Williams, as at the date on which he ceased to be a Director):
Catherine Brenner
Brian Clark
Eileen Doyle
Bob Every
Richard Longes
John Marlay
Paul Rayner
Mark Selway
Roland Williams
Shares
5,000
66,608
1,234
65,605
17,581
4,781
26,366
21,864
55,405
Non-executive Directors’
Share Plan a
Options
Share Acquisition
Rights (SARs) b
–
5,329
–
4,616
10,144
–
1,790
–
26,916
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
734,853 c
–
c The SARs held by Mark Selway as at 26 August 2011 are
as follows:
Number of SARs
431,034
303,819
Expiry Date
1 January 2017
12 November 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 $1,875,000.
These services consisted of:
Taxation compliance in Australia
Taxation compliance/due diligence related services
in jurisdictions other than in Australia
$115,000
$1,222,000
Australian due diligence and other services
$538,000
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.
The shares are held in the name of the Director except in the
case of:
• Brian Clark, 43,934 shares are held by MCG Wealth
Management Australia Nominees Pty Limited – and 21,004 shares are held by MCG Wealth
Management Australia Nominees Pty Limited – JBC Investment
Holdings Pty Ltd ;
• Bob Every, 30,000 shares are held by RBC Dexia Investor
Service Australia Nominees Pty Ltd ;
• Richard Longes, 12,000 shares are held by Gemnet Pty Limited
for Richard Longes Superannuation Fund;
• John Marlay, 1,028 shares are held by The Marlay
Superannuation Fund; and
• Paul Rayner, 25,115 shares are held by Yarradale Investments
Pty Ltd.
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.
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 FY2011.
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.
47
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;
Lead Auditor’s Independence Declaration
under Section 307C of the Corporations Act 2001
To: the Directors of Boral Limited
I declare that, to the best of my knowledge and belief, in relation
to the audit for the financial year ended 30 June 2011 there have
been:
• the nature of the non-audit services provided is not inconsistent
(i) no contraventions of the auditor independence requirements
with the requirements of the Corporations Act 2001; 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.
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.
(18) Auditor’s Independence Declaration
The auditor’s independence declaration made under section 307C
of the Corporations Act 2001 is set out on page 47 of the Annual
Report and forms part of this Report.
(19) Remuneration Report
The Remuneration Report is set out on pages 48 to 62 of the
Annual Report and forms part of this Report.
KPMG
(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.
Greg Boydell
PARTNER
(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.
Signed in accordance with a resolution of the Directors.
Sydney, 5 September 2011
Bob Every
Director
Mark Selway
Director
Sydney, 5 September 2011
48
Boral Limited Annual Report 2011
2011 REMUNERATION REPORT
MESSAGE FROM THE BOARD
The Board remains committed to ensuring that Boral’s remuneration practices are
properly aligned with shareholder value creation over the short and long term, and that
these practices work to appropriately motivate, reward and retain executives.
CONTENTS
MESSAGE FROM THE BOARD
2011 REMUNERATION IN BRIEF
REMUNERATION REPORT
INTRODUCTION
48
49
51
SENIOR EXECUTIVE REMUNERATION 52
COMPANY PERFORMANCE
OUTCOMES
57
EXECUTIVE REMUNERATION TABLE 61
NON-EXECUTIVE DIRECTORS’
REMUNERATION
62
Our remuneration policies and practices are focused on linking
performance and reward while taking into consideration the challenges
that face companies, such as Boral, in cyclical industries.
During the year, the Board confirmed its appointment of
PricewaterhouseCoopers as its remuneration adviser to provide
independent remuneration consulting services. They have been appointed
for a three year term, and the scope of individual assignments is agreed
when advice is sought.
PricewaterhouseCoopers assisted with reviews and benchmarking of
the Company’s short term and long term incentive programs, the Chief
Executive’s remuneration and non-executive Director remuneration.
The aim of these reviews has been to pursue ongoing improvements
in Boral’s remuneration practices to ensure that they align with the
Company’s strategic objectives, market expectations and regulatory
requirements.
We have retained the format of last year’s Remuneration Report,
including a brief overview which provides shareholders with a “plain
English” version of our remuneration practices. The detailed report which
follows has been prepared in accordance with statutory obligations and
accounting standards.
The Board encourages input from Boral’s shareholders; it helps to shape
our decision making.
We commend Boral’s 2011 Remuneration Report to you.
Bob Every
Chairman of the Board
Brian Clark
Chairman of the Remuneration
& Nomination Committee
49
2011 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 FY2011. The full Remuneration Report
provides greater detail regarding the remuneration structures,
decisions and outcomes for Boral in FY2011.
The main changes include fewer performance measures which
are now entirely focused on the achievement of the financial
outcomes, which in FY2011 included earnings and working
capital management. In previous years, a number of non-financial
measures were also included.
Particular events and actions that impacted Boral’s remuneration
structure and outcomes for FY2011 were:
• revised performance conditions for the Short Term Incentive
(STI) which focus wholly on achievement of financial
outcomes including earnings before interest and tax (EBIT)
and improvement in working capital management; important
non-financial measures continue to be managed rigorously
but separately from the STI Plan through the performance
management process;
• despite improved financial performance relative to last year,
outcomes in many businesses have been lower than budget;
the impact of lower than budget performance has resulted in
much reduced Short Term Incentive across the Group;
• a comprehensive review of the structure and provisions of the
Long Term Incentive Plan including independent advice from
PricewaterhouseCoopers;
• review of executive remuneration arrangements and
independent remuneration advice in light of legislative changes.
Each of these matters is discussed in this snapshot and in more
detail in the full Remuneration Report.
Revised performance conditions for the Short Term
Incentive Plan
A strategic review of Boral’s portfolio of businesses was
completed in the second half of FY2010. Boral’s new divisional
structure now includes Boral Building Products, Boral
Construction Materials, Cement, USA and Construction Related
Businesses. Each of these divisions is focused on manufacturing
and sales and marketing excellence, working together and
reducing complexity.
The Company recognised that introducing these organisational
changes required a fundamental change to STI Plan performance
measures to better align them with the Company’s purpose
of creating sustainable solutions for a worldwide building
and construction industry. The Remuneration & Nomination
Committee, with advice from independent advisers and
consultation with management, supported an STI approach
which aligns management reward more closely to the interests
of shareholders.
Financial performance and the STI outcome
For FY2011, Group net profit after tax of $173.5m before
significant items exceeded the previous year’s net profit after
tax by 20% but was below the internal budgeted level and, as a
consequence, STI levels for FY2011 are 58% lower than those
in the previous year.
Review of the Long Term Incentive Plan
The Board conducted an extensive review of the Company’s
Long Term Incentive (LTI) Plan during the year to ensure it
remains effective and continues to meet the purpose of the
plan, being to promote alignment of senior executive decision
making with the longer term interests of shareholders, attract
and retain high quality executives and reward executives for
the achievement of performance conditions which underpin
sustainable long term growth.
In addition to a survey of LTI Plan participants and an
extensive analysis of the building and construction industry
cycles in Australia and the USA, the Board engaged
PricewaterhouseCoopers to conduct an independent review of
the LTI Plan structure and provisions.
The Board agreed to maintain all the principal aspects of the plan.
The timing of the annual grant will be moved to September to
better align with the Company’s financial year end.
Legislative changes to executive remuneration
The Federal Government has introduced legislative changes to
improve the governance of executive remuneration arrangements.
The main aspects of the legislation concern the appointment
process and recommendations of independent remuneration
adviser/s. The Board has appointed PricewaterhouseCoopers
as its independent remuneration adviser.
The Board has adopted a protocol governing:
• the appointment of remuneration consultants; and
• the manner in which any recommendations made by those
consultants concerning the remuneration of key management
personnel of the Company are to be provided to the Company,
and in particular the circumstances in which management may
be given access to those recommendations.
The purpose of the protocol is to ensure that any remuneration
recommendations provided by consultants are provided without
undue influence by key management personnel.
50
Boral Limited Annual Report 2011
2011 REMUNERATION
IN BRIEF CONTINUED
Remuneration outcomes for Chief Executive and senior executives
Details of the Chief Executive and senior executive remuneration, prepared in accordance with statutory obligations and accounting
standards, are contained on page 61 of the Remuneration Report.
The table below sets out the cash and other benefits received by the Chief Executive and senior executives who were key management
personnel in FY2011.
The STI awards made for FY2011 reflect achievement of the revised financial performance objectives against budgeted outcomes for
the Group and Boral businesses.
Cash and other benefits received by the current Chief Executive and senior executives in FY2011 are lower than the amounts shown
in the remuneration table on page 61 of the Remuneration Report. This is because the full remuneration table includes amounts in
respect of options and rights which are amortised over a five year period and may not have delivered value to executives in FY2011. For
example, it includes accounting values for current and prior years’ 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 Selway
Ross Batstone
Mike Beardsell
Mike Kane
Andrew Poulter
Murray Read
FIXED
STI
LTIa
OTHER b
TOTAL
1,808.3
182.0
850.0
649.8
515.1
756.2
720.0
0.0
143.8
220.4
34.1
145.8
0.0
160.1
72.4
0.0
0.0
68.9
29.9
31.1
29.6
37.1
12.4
10.4
2,020.2
1,041.2
895.6
772.6
802.7
945.1
a The LTI value represents the number of options and rights vested and exercised during the year calculated using the market price of Boral shares on the date of exercise
less the exercise price (if applicable).
b Other includes parking and long service leave accruals.
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 2011. This Remuneration Report forms part of the
Directors’ Report and has been audited in accordance with
the Corporations Act.
The Remuneration Report sets out remuneration information
for the Company’s non-executive Directors, the Chief Executive
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 FY2011.
51
The people currently in these positions are listed in the table below.
Non-executive Directors
Bob Every
Chairman
Catherine Brenner
Brian Clark
Eileen Doyle
Richard Longes
John Marlay
Paul Rayner
Director
Director
Director
Director
Director
Director
Senior executives (including the Chief Executive)
Mark Selway
Ross Batstone
Mike Beardsell
Mike Kane
Andrew Poulter
Murray Read
Chief Executive
Divisional Managing Director,
Building Products
Divisional Managing Director,
Boral Cement
President Boral Industries USA
Chief Financial Officer
Divisional Managing Director,
Construction Materials
During the FY2011 year, the Remuneration & Nomination
Committee comprised three independent non-executive Directors
– Brian Clark (Committee Chairman), Bob Every and John Marlay.
52
Boral Limited Annual Report 2011
SENIOR EXECUTIVE
REMUNERATION
Remuneration strategy
The Board has established a remuneration strategy that supports and drives the achievement of Boral’s strategic objectives. Having
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 with 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
BORAL’S REMUNERATION STRATEGY
Attract and retain high
calibre executives
• reward competitively
in the markets in which
Boral operates
• provide a balance of fixed
and at-risk remuneration
Align executive rewards
with Boral’s performance
• assess rewards against
objective financial measures
• make short term and
long term components
of remuneration ‘at-risk’
based on performance
REMUNERATION COMPONENTS
Fixed Annual Remuneration
Short Term Incentive
Long Term Incentive
• provides ‘predictable’ base level
• entirely focused on financial
of reward
outcomes
• 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 and improvements in working
capital management
• delivered in equity to align
executives with shareholder
interests
• tested three times after three, five
and seven years – reflecting the
typical building cycle
• no value unless returns to
shareholders exceed market median
• full vesting when Boral achieves top
quartile performance
53
Principles underpinning Boral’s remuneration strategy
Standardised vs. tailored remuneration arrangements
Remuneration strategy and frameworks are 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 Annual Remuneration (FAR): Remunerate executives
in line with market benchmarks for effective completion of
Company and specific objectives and behaving in accordance
with Boral’s values.
Short Term Incentives (STI): Reward executives for achieving
annual financial targets 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 are
Australian listed companies in the Industrials and Materials
sector. For the Chief Executive and senior executives, pay levels
for comparable roles in appropriate international jurisdictions are
also considered as a secondary reference to the Australian
market data. Consideration is given to sizing factors including
market capitalisation and business unit revenue. Complexity
(such as number of employees and geographies) is referenced
through the job grading system.
Remuneration mix
The variable remuneration mix for the Chief Executive 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 & Nomination Committee. The Committee seeks
advice from independent specialist remuneration advisers. During
the year, PricewaterhouseCoopers was confirmed by the Board
as Boral’s independent remuneration adviser.
PricewaterhouseCoopers has provided advice on various matters
including the Short Term Incentive Plan, the Long Term Incentive
Plan, Chief Executive remuneration, non-executive Director
remuneration and changes in legislation regarding Director and
executive remuneration.
PricewaterhouseCoopers has also calculated the fair market
valuation for the 2010 grant of rights under the Company’s
LTI Plan.
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 Chief Executive and senior executives the proportions are:
Fixed
FAR
At risk
STI
LTI
Focus on market vs. internal relativities
Consideration is given to both market and internal relativities.
Chief Executive
Senior executives 1
33.3%
33.3%
33.3%
50–54% 22–25% 24–26%
Market is the primary reference through its application to the
salary ranges attached to the job grading system.
1 Senior executive percentages vary between individuals.
This is a range for the Group.
The job grading system is 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.
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 (FAR)
FAR includes base salary, non-cash benefits such as provision
of a vehicle (including any fringe benefits tax charges) and
superannuation contributions.
Remuneration levels are reviewed annually by the Remuneration
& 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.
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 managers.
54
Boral Limited Annual Report 2011
SENIOR EXECUTIVE
REMUNERATION CONTINUED
Short Term Incentive (STI)
The STI Plan is an “at risk” cash payment awarded annually
based on performance against pre-set financial objectives.
The STI Plan is provided to employees who have significant
influence over the annual financial outcomes of business units.
Approximately 7% of Boral employees participated in the
STI plan in FY2011.
The Board considers that the STI is an appropriate incentive,
and it has been designed to put a proportion of executive
remuneration at risk against meeting financial targets linked
to annual budget performance metrics.
Minimum, target and stretch performance conditions are set
for each financial year. These performance conditions have
been designed to motivate and reward high performance; for
example, if performance exceeds the already challenging targets,
the STI will deliver higher rewards to executives. Conversely, if
performance falls below a minimum level, no reward is payable
to executives.
If the Chief Executive meets the target performance conditions,
then the STI reward will be payable at 100% of fixed remuneration.
If the stretch performance conditions are met, the STI reward will
be payable at 140%.
Similarly, if senior executives meet their target performance
conditions, their STI reward is set at 40–50% of fixed remuneration.
The STI reward for executives who achieve stretch performance
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.
The STI performance conditions were modified significantly
for FY2011 to be wholly focused on achievement of
financial measures.
In FY2011 earnings before interest and tax (EBIT) and working
capital performance were selected because they are directly linked
to the creation of shareholder value and the strategic direction of
the Company.
The EBIT target accounted for 85% of the financial measure in
FY2011. Executives’ targets are split over their own business
and one-up business. In FY2012 the EBIT target will account for
100% of the financial measure.
Performance against important non-financial measures continues
to be managed separately from the STI Plan through the
performance management process.
Performance at the completion of the financial year is measured
against pre-determined targets that were established as part of the
Group annual budget process. Abnormal or unanticipated factors
beyond the control of management which may have affected the
Company’s performance during the year are only considered in
extraordinary circumstances and following Board approval.
The Remuneration & Nomination Committee and the Board assess
the financial performance of the Group, divisions and business
units and approve the actual STI rewards to be paid to the Chief
Executive, his direct reports and other senior executives.
Long Term Incentive (LTI)
The purpose of the LTI Plan is to promote the alignment of
senior executive decision making with the longer term interests of
shareholders, to attract and retain high quality executives and to
reward executives for the achievement of performance conditions
which underpin sustainable long term growth.
The LTI is granted annually as rights and/or options over ordinary
Boral shares.
The participants in the LTI Plan include senior executives who are
deemed to have significant influence over the long term outcomes
of Boral. Only 1% of employees participate in the LTI Plan.
The number of rights and/or options offered annually to executives
is limited. The total number of shares which would be allocated
on vesting of those rights and exercise of those options, when
aggregated with:
• the number of shares issued under any Boral employee share
scheme; and
• the number of shares that would be allocated on the vesting of
all outstanding rights and the exercise of all outstanding options
under any Boral employee share scheme
may not exceed 5% of the total number of shares on issue at the
time of the offer.
The value of an executive’s annual LTI grant is a set percentage
of the executive’s FAR. This percentage is 100% for the Chief
Executive and 45–50% for senior executives.
The number of rights and/or options granted to an executive
is determined by dividing the value of their annual grant by the
fair market value of the right or option. PricewaterhouseCoopers
calculates the fair market value as at the date of grant using
a Monte Carlo simulation analysis in accordance with
accounting standards.
Participants in the LTI Plan will not derive any value from their LTI
grants unless pre-established performance hurdles are achieved.
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 after grant. 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 FY2011, the entire LTI award was
delivered in the form of rights.
55
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 for options is
determined at date of grant based on the average closing price
of Boral shares over the five trading days prior to the grant date.
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.
Rights and options granted as part of the LTI Plan 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.
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.
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 FY2011 will not be
measured until FY2014.
Remuneration outcomes for FY2011
Modest increases in fixed remuneration occurred in FY2011 year,
and there was no catch-up following the freeze on executive
remuneration in FY2010.
The Board determined that no increase in non-executive
Director fees should occur in FY2011 following a similar decision
in FY2010.
As reported, the STI performance conditions for the FY2011 were
100% focused on financial outcomes of EBIT and working capital
management. The target measures (budget) were set at higher
levels than in the prior year. FY2011 continued to be affected
by the weakness in USA economic activity, and in Australia bad
weather conditions, cyclones and flooding had a slowing affect on
sales growth. Despite tighter economic conditions toward the end
of the financial year, overall profitability for Boral was higher than
in the prior year, while STI awards reduced, reflecting financial
outcomes achieved compared to target measures.
Directors, officers and senior executives must comply with the
Company’s Share Trading Policy, which prohibits them from
entering into hedge and other derivative transactions regarding
options or rights granted as LTIs. Shares allocated to participants
upon vesting of their LTIs may only be dealt with in accordance
with the Share Trading Policy. Any contravention of this policy
would result in disciplinary action.
Unvested options or rights lapse when an executive leaves the
Company except where the executive ceases employment due to
death, permanent disablement, bona fide retirement, redundancy,
sale of subsidiary or business assets or when the Board at its sole
discretion determines otherwise. In these situations, a proportion
of rights and/or options granted within the three year period prior
to termination will remain in place only until the next test date,
when they will lapse if they do not meet the performance hurdle.
Unvested rights and/or options granted more than three years
prior to the date of termination will lapse at the next test date if the
performance hurdle is not met.
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.
The Board believes that relative TSR is an appropriate performance
hurdle for the LTI Plan because it provides a direct link between
shareholder return and executive reward. 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.
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 set 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
56
Boral Limited Annual Report 2011
SENIOR EXECUTIVE
REMUNERATION CONTINUED
During the year, Boral’s relative TSR performance for the 2006 and
2007 LTI grants recorded a result above the 50th percentile of the
ASX 100 companies, allowing partial vesting of rights and options.
The 2006 grant reached the 50th percentile on 1 March 2011 and
the 2007 grant reached the 68th percentile on 28 February 2011.
Rights have vested; however, no value has been derived from
options granted as the share price is well under 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 FY2010 and
changes to the Group’s organisational structure at both the
divisional level and within divisions were implemented in the first
quarter of FY2011.
The organisational changes introduced have been successful
in focusing management on LEAN manufacturing, innovation,
collaboration and sales and marketing initiatives. The changes
to the STI Plan measures have achieved a better alignment of
executive reward with the interests of shareholders.
The Remuneration & Nomination Committee will continue to
review all aspects of executive remuneration and the performance
management systems to facilitate delivery of business strategy
and non-financial objectives which are no longer tied to
STI outcomes.
Employment contract details
Chief Executive remuneration structure and contract terms
Mark Selway’s employment contract has been structured in such
a way as to account for the views of shareholders, governance
bodies and other stakeholders.
The basis of Mr Selway’s fixed and variable remuneration is
benchmarked to a comparator group which is 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 and revenue of between 33% and 300% of Boral’s.
The duration of the Chief Executive’s contract is a rolling
12 month term.
Mr Selway’s fixed remuneration is $1,820,000 per annum. His
annual STI entitlement is 100% of fixed remuneration for “target”
performance with a maximum of 140% of fixed remuneration
for “stretch” performance. STI measures are focused wholly on
achievement of financial outcomes mentioned earlier.
Mr Selway’s LTI entitlement is 100% of fixed remuneration granted
annually as options or share rights in accordance with the LTI
Plan Rules which are described in the Long Term Incentive
section above. At the 2010 Annual General Meeting shareholders
approved a grant of share rights to Mr Selway equivalent to 50%
of his fixed remuneration as disclosed in the table on page 60.
This is a six month pro-rata entitlement for FY2010 granted in
November 2010. Also approved by shareholders were grants of
share rights for 2011 and 2012 equivalent to 100% of Mr Selway’s
FAR. The number of equity units granted is 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.
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 his employment 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 by the Company for reasons other than resignation
or performance results in a termination payment of one year’s
fixed remuneration.
57
COMPANY PERFORMANCE
OUTCOMES
Company performance
The chart below demonstrates how the Company’s TSR, which includes share price movements and dividends, has performed relative
to the ASX 100 Accumulation Index.
In the 10 years to 30 June 2011, Boral has achieved an annual TSR of 9.3%, which is higher than that of the companies in the ASX 100
over the same period (as represented by the ASX 100 Accumulation Index).
BLD vs ASX 100 Accumulation Index TSR
10 years to 30 June 2011
R
S
T
%
350
300
250
200
150
100
50
0
–50
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
0
1
c
e
D
1
1
n
u
J
Boral Limited (BLD)
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 FY2002. The year on year change from 2010 to 2011 is shown in percentage terms below.
Earnings per share1
(cents)
10%➡
Return on equity1
(percent)
12%➡
Dividends per share
(cents)
7%➡
4
6
3
6
2
6
9
4
4
3
0
5
1
4
7
.
5
1
4
.
5
1
2
.
3
1
2
.
3
1
4
3
4
3
4
3
4
3
0
3
9
.
9
0
.
0
1
5
.
8
3
2
9
1
2
2
4
2 2
2
6
.
0 5
.
5
8
.
4
3
1
5
.
3
1
5
.
4
1
2
0
3
0
4
0
5
0
6
0
7
0
8
0
9
0
0
1
1
1
2
0
3
0
4
0
5
0
6
0
7
0
8
0
9
0
0
1
1
1
2
0
3
0
4
0
5
0
6
0
7
0
8
0
9
0
0
1
1
1
1. Excludes financial impact of significant items.
350
300
500
250
400
200
300
150
200
100
100
50
0
0
-100
500
500
400
380
300
260
200
140
100
20
0
-100
-100
58
Boral Limited Annual Report 2011
COMPANY PERFORMANCE
OUTCOMES CONTINUED
Short term performance – FY2011
Full year revenue from continuing operations was up 4% to $4.7b, reflecting a generally strong first half across the Australian Building
Products operations which helped offset tougher trading conditions in the United States, the impact of exceptionally wet weather and a
softening of residential building in Australia in the second half of the financial year.
Earnings before interest and tax (before significant items) for the year increased by 2% to $275m, with improvements in Construction
Materials, Cement and the USA offsetting declines in Building Products when compared with the prior year.
Profit after tax at $173.5m (before significant items) was 20% above that of the comparable period last year and was assisted by lower
interest and the year-to-year benefit from the translation of US losses against the stronger Australian dollar. The full year tax charge,
before significant items, was $12m higher, and earnings per share for the year also increased to 24.4c compared with 22.1c last year.
Short Term Incentive vested/forfeited
Executives
Mark Selway
Ross Batstone
Mike Beardsell
Mike Kane
Andrew Poulter
Murray Read (appointed 1 July 2010)
Total
2011
%
Vested
7%
0%
28%
49%
5%
23%
Cash bonus
A$000’s
182.0
0.0
143.8
220.4
34.1
145.8
726.1
% Cash bonus
A$000’s
Forfeited
2010
%
Vested
%
Forfeited
93%
1,100.0
100%
72%
51%
95%
77%
461.3
272.8
203.5
65.1
–
2,102.7
90%
78%
54%
90%
58%
–
10%
22%
46%
10%
42%
–
59
Long term performance
Boral’s LTI grant in November 2010 was awarded in the form of share acquisition rights. The primary conditions applying to Boral’s LTI
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 the housing and construction cycle in recent years have resulted in Boral’s TSR underperforming the comparator group.
The 2004 and 2005 grants have not yet reached the minimum level required for vesting. The 2006 grant has reached the
50th percentile and the 2007 grant has reached the 68th percentile. At this stage the 2008, 2009 and 2010 grants have not
yet reached a measurement date.
The LTI grants from October 2004 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 LTI grant up to 1 July 2011.
Grant date
Expiry date
Option
exercise price
Mix of options/rights
Relative TSR
performance
Vesting level
Oct 03
Oct 04
Oct 05
Nov 06
Nov 07
Nov 08
Nov 09
Nov 10
Oct 10
Oct 11
Oct 12
Nov 13
Nov 14
Nov 15
Nov 16
Nov 17
$5.52
$6.55
$7.65
$7.27
$6.78
N/A
N/A
N/A
100% options
50% options 50% rights
50% options 50% rights
50% options 50% rights
50% options 50% rights
54%
46%
38%
50%
68%
100% rights
100% rights
100% rights
1st test date Nov 2011
1st test date Nov 2012
1st test date Nov 2013
58%
0%
0%
50%
86%
N/A
N/A
N/A
The exercise price of options issued in respect of the 2003 to 2007 tranches have been amended in accordance with the terms of the
Boral Senior Executive Option Plan to allow for the impact of the capital raising undertaken during the year, which resulted in a 5c
reduction in the exercise price.
Executives who held rights were unable to participate in the capital raising. So as to take account of the impact of the capital raising
on those rights, the Company made a payment of 5c per right to the holder of rights which vested during the year. The intention of the
payment was to “keep whole” the executives in respect of rights which vested.
60
Boral Limited Annual Report 2011
COMPANY PERFORMANCE
OUTCOMES CONTINUED
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 Chief Executive and the senior
executives are:
Granted
during the
Balance at
year as
1 July 2010 remuneration a
Exercised/
vested
during
the year
Value of
grant b
Value of
options
and rights
exercised/
vested c
Lapsed/
cancelled
during
the year
Value of
options
and rights
lapsed/
cancelled d
Balance at
30 June
2011
Number
Number
$
Number
$
Number
$
Number
Executives
Mark Selway
Ross Batstone
Mike Beardsell
Mike Kane
Andrew Poulter
Murray Read
Options
Rights
Options
Rights
Options
Rights
Options
Rights
Options
Rights
Options
Rights
–
–
–
431,034
303,819 e 875,000
351,470
–
–
–
–
–
–
–
–
–
–
–
–
–
734,853
(53,970)
59,367
297,500
236,100
147,569
425,000
(31,287) 160,129
–
–
352,382
131,500
–
–
–
–
(18,400)
20,240
113,100
98,218
98,672
284,175
(14,144)
72,399
–
–
–
–
–
–
78,717
226,705
–
–
21,701
62,500
146,400
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
182,746
–
78,717
–
21,701
(23,200)
25,520
123,200
91,430
125,000
360,000
(13,495)
68,935
–
–
202,935
a No options were granted to senior executives during the year. Rights were granted to senior executives on 12 November 2010, with the earliest vesting date
on 12 November 2013 and the last vesting date (expiry date) of the rights on 12 November 2017.
b The fair value of rights granted on 12 November 2010, calculated using a Monte Carlo simulation analysis, is $2.88 per right.
c Calculated per option or right as the market 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 Grants of rights to Mark Selway on 12 November 2010 in accordance with his service contract and subject to the terms and conditions approved at the 2010
Annual General Meeting.
The number of options and rights included in the balance at 30 June 2011 for current executives is as set out below:
Executives
Mark Selway
Ross Batstone
Mike Beardsell
Mike Kane
Andrew Poulter
Murray Read
Options
Rights
Options
Rights
Options
Rights
Options
Rights
Options
Rights
Options
Rights
2004
2005
2006
2007
2008
2009
2010
Year of grant
Balance at
30 June
2011
–
–
–
–
–
–
–
–
56,800
71,700
74,900
94,100
–
–
–
–
–
–
431,034
303,819
734,853
–
–
297,500
15,218
18,849
10,232
3,427
74,624
82,463
147,569
352,382
11,100
25,500
34,100
42,400
–
–
–
113,100
2,976
6,714
4,655
1,545
29,654
38,530
98,672
182,746
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
24,200
27,300
29,300
42,400
–
–
–
–
–
–
–
–
–
–
–
–
78,717
78,717
–
–
21,701
21,701
–
123,200
6,495
7,175
4,008
1,544
29,538
29,175
125,000
202,935
The unvested rights have a minimum value of zero, if they do not reach the 50th percentile relative TSR measure. The maximum value of
unvested rights is the sale price of Boral shares at date of vesting.
EXECUTIVE
REMUNERATION TABLE
61
Short term
Post employment
Cash
salary
Short Term
Incentive
Non-
monetary
benefits b
Super-
annuation
End of
service
Share based
payment a
Other
long term
Total
Options
Rights
A$000’s
Executives
Mark Selway
Divisional Managing
Director,
Building Products
Mike Beardsell
Divisional Managing
Director,
Boral Cement
Mike Kane
President, Boral
Industries USA
2011 1,793.1
182.0
Chief Executive
2010 1,022.6
1,100.0
Ross Batstone
2011
729.3
0.0
2010
636.1
461.3
0.0
0.0
19.0
19.0
15.2
7.2
120.7
107.9
2011
634.6
2010
617.0
143.8
272.8
19.0
19.0
15.2
14.5
2011
440.9
2010
170.0
220.4
203.5
37.1
26.8
Andrew Poulter
2011
741.0
Chief Financial Officer
2010
122.6
34.1
65.1
Murray Read
2011
625.2
145.8
0.0
0.0
0.0
Divisional Managing
Director,
Construction Materials
(appointed 1 July 2010)
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
48.5
64.9
460.8
173.6
224.8
164.1
29.9
17.0
12.1
10.6
2,481.0
2,320.4
1,154.4
1,463.9
21.3
26.6
110.6
69.0
10.6
10.3
955.1
1,029.2
0.0
0.0
0.0
0.0
28.7
0.0
7.9
0.0
0.0
0.0
801.3
400.3
12.4
2.0
810.6
192.1
20.2
111.4
10.4
1,007.8
74.2
0.0
15.2
2.4
94.8
Total
Total
2011 4,964.1
726.1
2010 2,568.3
2,102.7
75.1
64.8
335.3
132.0
0.0
0.0
90.0
91.5
944.2
406.7
75.4
39.9
7,210.2
5,405.9
a The fair value of the options and rights 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 rights allocated to this reporting period.
b Includes parking for Australian executives, vehicle and medical costs for USA executives.
The 2010 total includes part-year remuneration for Mark Selway, Mike Kane, Andrew Poulter. Murray Read was not a key management
person prior to 1 July 2010. Rod Pearse, Ken Barton, Emery Severin and John Douglas were key management personnel for part or all
of 2010 with combined total remuneration of $9,885,400 including contractual payments and share-based payments on termination.
Former executive John Douglas resigned on 9 July 2010. His executive remuneration for FY2011 was expensed and disclosed in the
2010 Remuneration Report.
Proportion of remuneration which consists of options/rights is Mark Selway 19%, Ross Batstone 24%, Mike Beardsell 14%, Mike Kane
4%, Andrew Poulter 1%, Murray Read 13%.
Proportion of remuneration that is performance-based is Mark Selway 26%, Ross Batstone 24%, Mike Beardsell 29%, Mike Kane 31%,
Andrew Poulter 5%, Murray Read 28%.
62
Boral Limited Annual Report 2011
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 & Nomination Committee and external benchmarking of comparable companies. The Board took independent
advice from PricewaterhouseCoopers regarding non-executive Directors’ remuneration.
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 per annum was approved at the Company’s Annual General Meeting in October 2006.
The Board determined that no increase in non-executive Director fees should occur during FY2011 following a similar decision for
FY2010. The last increase in Directors’ fees took place on 1 July 2008. The current remuneration of non-executive Directors is:
Position
Chairman
Committee Chairman
Director
Base remuneration
Committee fees
Total remuneration
$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 FY2011 was
$1,203,900 including superannuation.
In accordance with current best practice, an additional Board Committee was constituted with effect from 1 July 2011 to deal with
Health, Safety & Environment (HSE) issues within the Company. Three existing non-executive Directors have been appointed to the new
committee. Membership of the new committee is in addition to these Directors’ existing committee duties.
The Board intends to seek shareholder approval for an increase in the maximum aggregate amount of non-executive Directors’
remuneration to $1,550,000 at the 2011 Annual General Meeting to create headroom for the costs associated with the newly created
HSE Committee and to provide for an increase in Directors’ fees. If shareholders approve the new fee cap as proposed, it is the
intention of the Board to review the fees payable to non-executive Directors.
The remuneration of the non-executive Directors is set out in the following table.
Non-executive Directors’ total remuneration
A$000’s
Directors
Short term
Board and
Committee fees
2011
Post
employment
super-
annuation
Short term
Board and
remuneration Committee fees
Total
2010
Post
employment
super-
annuation
Total
remuneration
Catherine Brenner (appointed 15 September 2010)
Brian Clark
Eileen Doyle
Robert Every, Chairman (from 1 June 2010)
Richard Longes
John Marlay
Paul Rayner
99.6
131.4
125.2
336.6
125.2
125.2
131.4
9.0
11.8
11.3
15.2
11.3
11.3
11.8
108.6
143.2
136.5
351.8
136.5
136.5
143.2
Former non-executive Director
Roland Williams (retired 4 November 2010)
Total
43.7
1,118.3
3.9
85.6
47.6
1,203.9
0.0
131.0
36.8
142.9
125.2
69.5
131.4
125.2
762.0
0.0
12.0
3.3
11.5
11.3
6.3
11.8
0.0
143.0
40.1
154.4
136.5
75.8
143.2
11.3
67.5
136.5
829.5
Ken Moss and John Cloney were Directors for part of 2010 with combined total remuneration of $370,200.
No share-based payments were made to non-executive Directors during 2010 or 2011.
FINANCIAL STATEMENTS
63
INCOME STATEMENT
STATEMENT OF
COMPREHENSIVE INCOME
BALANCE SHEET
STATEMENT OF
CHANGES IN EQUITY
CASH FLOW STATEMENT
64
65
66
67
68
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
Income tax expense
6
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 Loans and borrowings
19 Other financial liabilities
20 Current tax liabilities
21 Deferred tax assets
and liabilities
22 Provisions
23 Issued capital
24 Reserves
25 Contingent liabilities
26 Commitments
27 Employee benefits
28 Loans and borrowings
29 Financial instruments
30 Key management
personnel disclosures
31 Auditors’ remuneration
32 Acquisition/disposal of
controlled entities
33 Controlled entities
34 Related party disclosures
35 Notes to cash flow statement
36 Parent entity disclosures
37 Deed of cross guarantee
38 Subsequent events
STATUTORY STATEMENTS
69
69
76
78
80
82
83
84
85
86
86
87
88
90
90
92
93
94
94
94
94
95
97
99
99
101
102
103
108
109
118
122
123
127
130
131
132
133
135
136
64
Boral Limited Annual Report 2011
INCOME STATEMENT
Boral Limited and Controlled Entities
For the year ended 30 June
Continuing operations
Revenue
Cost of sales
Selling and distribution 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/(expense)
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
2011
$ millions
2010
$ millions
3
3
3
3, 12
3
3
6
5
8
8
8
8
4,681.7
(3,358.2)
(790.8)
(341.1)
4,493.8
(3,153.8)
(766.2)
(347.3)
(4,490.1)
(4,267.3)
75.5
(77.3)
42.0
231.8
24.0
(87.7)
(63.7)
168.1
(4.6)
163.5
1.9
165.4
167.7
(2.3)
165.4
23.3c
23.2c
23.1c
22.9c
25.8
(169.6)
(21.5)
61.2
5.3
(102.3)
(97.0)
(35.8)
18.3
(17.5)
(71.8)
(89.3)
(90.5)
1.2
(89.3)
(15.2c)
(15.2c)
(3.1c)
(3.1c)
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
65
For the year ended 30 June
Net profit/(loss)
Other comprehensive income
Actuarial gain/(loss) on defined benefit plans
Net exchange differences from translation of foreign operations taken to equity
Fair value adjustment on cash flow hedges
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
2011
$ millions
2010
$ millions
165.4
(89.3)
27
24
24
2.8
(28.1)
1.0
(29.7)
111.4
113.7
(2.3)
111.4
(1.6)
11.1
10.7
(25.8)
(94.9)
(96.1)
1.2
(94.9)
The statement of comprehensive income should be read in conjunction with the accompanying notes which form an integral part of the financial statements.
66
Boral Limited Annual Report 2011
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
Loans and borrowings
Current tax liabilities
Provisions
Liabilities classified as held for sale
TOTAL CURRENT LIABILITIES
NON-CURRENT LIABILITIES
Payables
Loans and borrowings
Other financial liabilities
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
CONSOLIDATED
Note
2011
$ millions
2010
$ millions
9
10
11
16
5
10
11
12
13
14
15
21
16
17
18
20
22
5
17
18
19
21
22
23
24
561.2
784.1
596.1
85.6
–
157.0
783.7
548.5
63.3
59.5
2,027.0
1,612.0
10.3
93.5
240.2
7.5
2,894.9
255.9
88.2
50.5
3,641.0
5,668.0
702.8
163.4
123.8
218.6
–
19.2
85.3
294.1
26.8
2,785.1
277.6
43.3
66.0
3,597.4
5,209.4
640.9
8.9
98.9
246.0
9.9
1,208.6
1,004.6
12.5
903.2
119.7
161.1
106.5
1,303.0
2,511.6
3,156.4
2,261.3
(159.5)
1,007.0
3,108.8
47.6
14.1
1,330.7
8.0
118.9
107.0
1,578.7
2,583.3
2,626.1
1,724.0
(38.9)
938.4
2,623.5
2.6
3,156.4
2,626.1
The balance sheet should be read in conjunction with the accompanying notes which form an integral part of the financial statements.
STATEMENT OF CHANGES IN EQUITY
Boral Limited and Controlled Entities
67
For the year ended 30 June 2011
Balance at the beginning of the year
Net profit/(loss)
Other comprehensive income
CONSOLIDATED
Reserves
$ millions
Retained
earnings
$ millions
Total
parent
entity
interest
Non-
controlling
interest
Total
equity
$ millions
$ millions
$ millions
(38.9)
–
938.4
167.7
2,623.5
167.7
2.6
(2.3)
2,626.1
165.4
Issued
capital
$ millions
1,724.0
–
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 gain 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 on vesting of rights
Dividends paid
Shares issued under capital raising net of costs
Purchase of employee compensation shares
Other – Cultured Stone (note 24)
Share-based payments
Income tax benefit on capital raising
Non-controlling interest in acquisition
Contributions by non-controlling interest
Other changes in non-controlling interest
Total transactions with owners in their capacity as owners
Balance at the end of the year
–
–
–
–
–
–
53.1
0.8
–
479.8
–
–
–
3.6
–
–
–
537.3
2,261.3
(123.0)
–
(123.0)
–
(123.0)
94.9
1.0
–
(28.8)
(55.9)
–
–
2.8
(0.9)
169.6
–
(0.8)
–
–
(3.4)
(66.3)
5.8
–
–
–
–
(64.7)
–
–
(101.0)
–
–
–
–
–
–
–
–
(101.0)
(159.5) 1,007.0
94.9
1.0
2.8
(29.7)
113.7
53.1
–
(101.0)
479.8
(3.4)
(66.3)
5.8
3.6
–
–
–
371.6
3,108.8
CONSOLIDATED
–
–
–
–
(2.3)
–
–
–
–
–
–
–
–
44.3
6.0
(3.0)
47.3
47.6
94.9
1.0
2.8
(29.7)
111.4
53.1
–
(101.0)
479.8
(3.4)
(66.3)
5.8
3.6
44.3
6.0
(3.0)
418.9
3,156.4
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
Dividends paid
Share-based payments
Other changes in non-controlling interest
Total transactions with owners in their capacity as owners
Balance at the end of the year
Reserves
$ millions
Retained
earnings
$ millions
Total
parent
entity
interest
$ millions
Non-
controlling
interest
$ millions
Total
equity
$ millions
(43.2)
–
1,104.2
(90.5)
2,752.4
(90.5)
1.2
1.2
2,753.6
(89.3)
Issued
capital
$ millions
1,691.4
–
–
–
–
–
–
–
31.9
0.7
–
–
–
32.6
1,724.0
(66.3)
77.4
10.7
–
(26.4)
(4.6)
–
–
–
8.9
–
8.9
(38.9)
–
(66.3)
–
(66.3)
–
–
(1.6)
0.6
(91.5)
–
–
(74.3)
–
–
(74.3)
938.4
77.4
10.7
(1.6)
(25.8)
(96.1)
31.9
0.7
(74.3)
8.9
–
(32.8)
2,623.5
–
–
–
–
1.2
–
–
–
–
0.2
0.2
2.6
77.4
10.7
(1.6)
(25.8)
(94.9)
31.9
0.7
(74.3)
8.9
0.2
(32.6)
2,626.1
The statement of changes in equity should be read in conjunction with the accompanying notes which form an integral part of the financial statements.
68
Boral Limited Annual Report 2011
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
CONSOLIDATED
Note
2011
$ millions
2010
$ millions
5,084.3
4,967.9
(4,696.2)
(4,422.2)
388.1
27.7
41.1
(84.7)
(21.5)
350.7
(345.0)
(0.8)
(146.0)
–
3.2
33.4
73.5
(381.7)
–
479.8
(3.4)
(47.9)
6.0
146.3
(136.6)
444.2
413.2
157.0
(9.0)
561.2
545.7
26.6
6.4
(107.9)
(11.7)
459.1
(179.9)
–
–
(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
NET CASH PROVIDED BY OPERATING ACTIVITIES
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property, plant and equipment
Purchase of intangibles
Purchase of controlled entities and businesses (net of cash acquired)
35
32
Purchase of other investments
Loans to associates
Insurance proceeds applied to asset disposal
Proceeds on disposal of non-current assets
NET CASH USED IN INVESTING ACTIVITIES
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issue of shares
Proceeds from capital raising
Purchase of employee compensation shares
Dividends paid (net of dividends reinvested under the Dividend Reinvestment Plan
of $53.1 million (2010: $31.9 million))
Contributions by non-controlling interests
Proceeds from borrowings
Repayment of borrowings
NET CASH PROVIDED BY (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
35
The cash flow statement should be read in conjunction with the accompanying notes which form an integral part of the financial statements.
NOTES TO THE FINANCIAL STATEMENTS
Boral Limited and Controlled Entities
69
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 statements for the year ended
30 June 2011 comprise Boral Limited and its controlled entities
(the “Group”).
The financial statements were authorised for issue by the Directors
on 5 September 2011.
A. Basis of preparation
The financial statements are a general purpose financial
statements which have been prepared in accordance with
Australian Accounting Standards adopted by the Australian
Accounting Standards Board (AASB) and the Corporations
Act 2001. The financial statements of the Group comply with
International Financial Reporting Standards (IFRS) adopted by the
International Accounting Standards Board.
The financial statements are presented in Australian dollars.
The functional currency is the principal currency in which
subsidiaries and associates operate.
The financial statements have 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 financial statements 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 of 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.
70
Boral Limited Annual Report 2011
NOTES TO THE FINANCIAL STATEMENTS
Boral Limited and Controlled Entities
1. Significant accounting policies (continued)
Changes in accounting policies: The Group has adopted
all new and amended Australian Accounting Standards and
Australian Accounting Standards Board (AASB) interpretations
that are mandatory for the current reporting period and relevant
to the Group. Adoption of these standards and interpretations
has not resulted in any material changes to the Group’s financial
statements.
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.
New standards and interpretations not yet adopted:
The following standards, amendments to standards and
interpretations have been identified as those which may impact
the entity in the period of initial application. They are available for
early adoption at 30 June 2011, but have not been applied in
preparing these financial statements:
• AASB 9 Financial Instruments includes requirements for the
classification and measurement of financial assets resulting from
the first part of Phase 1 of the project to replace AASB 139
Financial Instruments: Recognition and Measurement. AASB 9
will become mandatory for the Group’s financial statements at
30 June 2014. Retrospective application is generally required,
although there are exceptions, particularly if the Group adopts
the standard for the year ended 30 June 2012 or earlier.
The Group has not yet determined the potential effect of
the standard.
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 statements 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.
Business combinations: The acquisition method of accounting is
used to account for all business combinations.
The consideration transferred for the acquisition of a subsidiary
comprises the fair values of the assets transferred, the liabilities
incurred and the equity interests issued by the Group. The
consideration transferred also includes the fair value of any asset
or liability resulting from a contingent consideration arrangement
and the fair value of any pre-existing equity interest in the
subsidiary.
Acquisition related costs are expensed as incurred. Identifiable
assets acquired and liabilities and contingent liabilities assumed in
a business combination are initially measured at their fair values at
the acquisition date.
On an acquisition-by-acquisition basis the Group recognises any
non-controlling interest in the acquiree either at fair value or at the
non-controlling interest’s proportionate share of the acquiree’s net
identifiable assets.
The excess of consideration transferred, the amount of any non-
controlling interest in the acquiree and the acquisition date fair
value of any previous equity interest in the acquiree over the fair
value of the Group’s share of the net identifiable assets acquired
is recorded as goodwill. Where the excess is negative, a bargain
purchase gain is recognised immediately in the Income Statement.
Where settlement of any part of cash consideration is deferred,
the amounts payable in the future are discounted to their present
value as at the date of exchange. The discount rate used is the
entity’s incremental borrowing rate.
Contingent consideration is classified either as equity or a financial
liability. Amounts classified as a financial liability are subsequently
remeasured to fair value with changes in fair value recognised in
the Income Statement.
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.
71
1. Significant accounting policies (continued)
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.
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) applies to certain financial arrangements of a company
for income years commencing on or after 1 July 2010. TOFA
changes the tax treatment of financial arrangements, including the
treatment of hedging transactions. The Group has not made any
elections under the TOFA legislation and as a result there is no
material impact 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.
72
Boral Limited Annual Report 2011
NOTES TO THE FINANCIAL STATEMENTS
Boral Limited and Controlled Entities
1. Significant accounting policies (continued)
K. Non-current assets held for sale and discontinued
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 the 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.
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.
Non-current assets are not depreciated or amortised while they
are classified as held for sale.
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.
73
1. Significant accounting policies (continued)
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.
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.
Negative goodwill arising on an acquisition is recognised directly in
the income statement.
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.
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:
Buildings
1 – 10%
Timber licences and mineral reserves
1 – 5%
1 – 10%
1 – 5%
Plant and equipment
5 – 33.3% 5 – 33.3%
2011
2010
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.
74
Boral Limited Annual Report 2011
NOTES TO THE FINANCIAL STATEMENTS
Boral Limited and Controlled Entities
1. Significant accounting policies (continued)
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 employee’s services
provided up to the balance date.
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 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.
Annual leave, long service leave and retirement benefits:
The provision for employee entitlements in respect of 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 the balance date.
Provisions for employee entitlements which are not expected to
be settled within 12 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.
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.
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.
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.
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.
75
Hedge of net investment in a 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 does
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
to equity as a reduction of the share proceeds received, net of
any tax effects.
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.
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 statements and Directors’ Report
have been rounded off to the nearest one hundred thousand
dollars, unless otherwise stated.
1. Significant accounting policies (continued)
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.
76
Boral Limited Annual Report 2011
NOTES TO THE FINANCIAL STATEMENTS
Boral Limited and Controlled Entities
2. Segments
Operating segments are based on internal reporting to the Chief Executive in assessing performance and determining the allocation
of resources.
The following summary describes the operations of the Group’s reportable segments:
Boral Construction Materials
– Quarries, concrete, asphalt, transport and property development.
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, masonry and cultured stone.
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.
The Group has a large number of customers to which it provides products, with no single customer responsible for more than 10% of
the Group’s revenue.
Segment results, assets and liabilities includes items directly attributable to a segment as well as those that can be allocated on a
reasonable basis.
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
(Profit)/loss from discontinued operations
Significant items applicable to discontinued operations
Net financing costs
Profit/(loss) before tax from continuing operations
CONSOLIDATED
2011
$ millions
2010
$ millions
4,710.5
(28.8)
4,681.7
4,599.3
(105.5)
4,493.8
234.4
(2.6)
–
231.8
(63.7)
168.1
(33.1)
18.6
75.7
61.2
(97.0)
(35.8)
77
2. Segments (continued)
Boral Construction Materials
Cement Division
Boral Building Products
United States of America
Other
Discontinued Operations
Boral Construction Materials
Cement Division
Boral Building Products
United States of America
Other
Discontinued Operations
Unallocated
Significant items (refer note 4)
Boral Construction Materials
Cement Division
Boral Building Products
United States of America
Other
Discontinued Operations
Unallocated
Cash and cash equivalents
Tax assets
TOTAL REVENUE
INTERNAL REVENUE
EXTERNAL REVENUE
2011
$ millions
2010
$ millions
2011
$ millions
2010
$ millions
2011
$ millions
2010
$ millions
2,420.2
732.4
1,157.4
431.2
285.5
29.7
2,266.2
706.3
1,212.6
363.7
293.8
108.0
5,056.4
4,950.6
144.8
192.7
7.5
–
–
0.9
345.9
147.7
194.1
7.0
–
–
2.5
351.3
OPERATING PROFIT
(EXCLUDING ASSOCIATES)
EQUITY ACCOUNTED
RESULTS OF ASSOCIATES
2,275.4
539.7
1,149.9
431.2
285.5
28.8
2,118.5
512.2
1,205.6
363.7
293.8
105.5
4,710.5
4,599.3
PROFIT BEFORE NET
FINANCING COSTS AND
INCOME TAX EXPENSE
2011
$ millions
2010
$ millions
2011
$ millions
2010
$ millions
2011
$ millions
2010
$ millions
201.0
82.6
57.7
(98.0)
7.6
2.6
(18.3)
235.2
(42.8)
192.4
203.3
75.3
72.6
(85.6)
6.3
(18.6)
(21.7)
231.6
(243.2)
(11.6)
2.9
13.3
26.8
(1.0)
–
–
–
42.0
–
42.0
(2.3)
12.6
28.1
(18.1)
–
–
–
20.3
(41.8)
(21.5)
203.9
95.9
84.5
(99.0)
7.6
2.6
(18.3)
277.2
(42.8)
234.4
201.0
87.9
100.7
(103.7)
6.3
(18.6)
(21.7)
251.9
(285.0)
(33.1)
SEGMENT ASSETS
(EXCLUDING INVESTMENTS
IN ASSOCIATES)
EQUITY ACCOUNTED
INVESTMENTS IN ASSOCIATES
TOTAL ASSETS
2011
$ millions
2010
$ millions
2011
$ millions
2010
$ millions
2011
$ millions
2010
$ millions
1,800.0
785.4
1,261.9
828.8
78.8
–
23.5
1,634.0
832.2
1,297.8
775.1
90.8
59.5
25.6
0.8
20.5
214.8
4.1
–
–
–
1.4
18.8
232.3
41.6
–
–
–
1,800.8
805.9
1,476.7
832.9
78.8
–
23.5
1,635.4
851.0
1,530.1
816.7
90.8
59.5
25.6
4,778.4
4,715.0
240.2
294.1
5,018.6
5,009.1
561.2
88.2
157.0
43.3
–
–
–
–
561.2
88.2
157.0
43.3
5,427.8
4,915.3
240.2
294.1
5,668.0
5,209.4
78
Boral Limited Annual Report 2011
NOTES TO THE FINANCIAL STATEMENTS
Boral Limited and Controlled Entities
2. Segments (continued)
Boral Construction Materials
Cement Division
Boral Building Products
United States of America
Other
Discontinued Operations
Unallocated
Loans and borrowings
Tax liabilities
LIABILITIES
ACQUISITION OF SEGMENT
ASSETS
DEPRECIATION AND
AMORTISATION
2011
$ millions
2010
$ millions
2011
$ millions
2010
$ millions
2011
$ millions
2010
$ millions
416.7
129.5
207.0
139.4
38.0
–
229.5
1,160.1
1,066.6
284.9
2,511.6
358.1
126.3
216.4
134.2
58.1
9.9
122.9
1,025.9
1,339.6
217.8
2,583.3
160.0
52.9
82.7
43.3
5.4
0.6
0.9
80.9
25.6
59.1
9.4
2.5
2.3
0.1
90.4
54.3
54.0
41.9
3.5
–
0.9
95.5
52.7
57.4
36.8
3.6
5.8
0.8
345.8
179.9
245.0
252.6
–
–
–
–
–
–
–
–
345.8
179.9
245.0
252.6
Geographical information
For the year ended 30 June 2011, the Group’s trading revenue from external customers in Australia amounted to $4,051.2 million
(2010: $4,007.6 million), with $228.1 million (2010: $228.0 million) from the Asian operations and $431.2 million (2010: $363.7 million)
relating to operations in the USA. The Group’s non-current assets (excluding deferred tax assets and other financial assets) in
Australia amounted to $2,624.8 million (2010: $2,584.3 million), with $269.3 million (2010: $310.3 million) in Asia and $651.2 million
(2010: $632.7 million) in the USA.
For the year ended 30 June
3. Profit for the period
REVENUE FROM CONTINUING OPERATIONS
Sale of goods
Rendering of services
Revenue from continuing operations
OTHER INCOME
Significant item
Net profit on sale of assets
Other income
Other income from continuing operations
OTHER EXPENSES
Significant items
Net foreign exchange loss
Other expenses from continuing operations
SHARE OF NET PROFIT OF ASSOCIATES
Share of associates’ underlying net profit
Significant item
CONSOLIDATED
Note
2011
$ millions
2010
$ millions
4,618.8
4,448.2
62.9
45.6
4,681.7
4,493.8
33.4
25.8
16.3
75.5
76.2
1.1
77.3
42.0
–
42.0
–
18.5
7.3
25.8
167.5
2.1
169.6
20.3
(41.8)
(21.5)
4
4
4
79
CONSOLIDATED
Note
2011
$ millions
2010
$ millions
18.4
223.2
1.5
1.9
12.8
230.8
4.2
4.8
245.0
252.6
0.9
23.1
24.0
83.6
4.1
87.7
(63.7)
2.0
3.3
5.3
99.4
2.9
102.3
(97.0)
1,056.1
1,020.2
118.4
8.3
104.3
8.2
For the year ended 30 June
3. Profit for the period (continued)
DEPRECIATION AND AMORTISATION EXPENSES
Land and buildings
Plant and equipment
Timber licences and mineral reserves
Other intangibles
NET FINANCING COSTS
Interest income received or receivable from:
Associated entities
Other parties (cash at bank and bank short-term deposits)
Interest expense paid or payable to:
Other parties (bank overdrafts, bank loans and other loans)
Unwinding of discount
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.
80
Boral Limited Annual Report 2011
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
Closure of plywood operations
Net insurance proceeds
Impairment of assets
Closure costs
Excess of insurance proceeds over asset carrying values
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
Closure costs
Acquisition expenditure
Acquisition expenditure
Organisational restructure
Corporate and divisional restructure and simplification
Total significant items before interest and tax, from continuing operations
Summary of significant items from continuing operations
Loss before interest and tax
Income tax benefit
Income tax benefit – amended returns
Net significant items from continuing operations
Discontinued operations
Impairment of businesses
Property, plant and equipment
Other
Summary of significant items from discontinued operations
Loss before interest and tax
Income tax benefit
Net significant items from discontinued operations
Summary of significant items
Loss before interest and tax
Income tax benefit
Income tax benefit – amended returns
Net significant items
CONSOLIDATED
Note
2011
$ millions
2010
$ millions
(i)
(ii)
(iii)
33.4
(9.6)
(4.2)
19.6
–
(38.8)
–
–
(3.6)
(3.7)
(7.0)
(53.1)
(9.3)
(9.3)
–
–
(42.8)
(42.8)
17.1
18.0
(7.7)
–
–
–
–
–
–
(42.8)
17.1
18.0
(7.7)
–
–
–
–
(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)
81
4. Significant items (continued)
2011 Significant items
(i) Insurance recoveries
During January 2011, significant flooding occurred in Queensland and Northern New South Wales, which impacted a number of the
Group’s businesses, with the most severe impact occurring at the Group’s Plywood operation. Following an extensive review of the
feasibility of rebuilding the plant, a decision was taken in June 2011 to close the Plywood operation, resulting in the write-off of assets
and recognition of closure costs.
(ii) Manufacturing capacity rationalisation and impairment of assets
Deterioration in returns from a number of businesses resulted in a reassessment of manufacturing capacity in several of the Group’s
businesses. As a result of this review, closure of a number of manufacturing lines was announced relating predominantly to the Clay and
Concrete East Coast Bricks and Masonry operations, together with rationalisation of Brick plants in the USA and closure of a number of
small Country New South Wales Concrete and Quarry operations.
(iii) Tax benefit
During the year, the Group received amended assessments from the Australian Taxation Office, resulting in the recognition of benefits
relating predominantly to research and development activity.
2010 Significant items
Impairment of assets, businesses and demolition costs
In 2010, 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 simplified reporting structure to the Chief Executive was implemented.
Summary of significant items before interest and tax
Boral Construction Materials
Cement Division
Boral Building Products
United States of America
Discontinued Operations
Unallocated
CONSOLIDATED
2011
$ millions
2010
$ millions
(4.6)
–
(20.6)
(8.3)
–
(9.3)
(42.8)
(59.5)
(38.7)
(67.0)
(43.1)
(75.7)
(1.0)
(285.0)
82
Boral Limited Annual Report 2011
NOTES TO THE FINANCIAL STATEMENTS
Boral Limited and Controlled Entities
5. Discontinued operations and assets held for sale
During the year, the Group sold both its Precast Panels and Scaffolding businesses. The income statement shows the discontinued
operations separately from continuing operations.
The carrying values of both businesses were remeasured at 30 June 2010 to fair value less costs to sell.
Results of discontinued operations
Revenue
Expenses
Profit/(loss) before income tax expense (excluding significant items)
Income tax (expense)/benefit (excluding significant items)
Profit/(loss) before significant items
Net significant items
Net profit/(loss)
CONSOLIDATED
Note
2011
$ millions
2010
$ millions
28.8
(26.2)
2.6
(0.7)
1.9
–
1.9
105.5
(124.1)
(18.6)
5.7
(12.9)
(58.9)
(71.8)
4
Basic and diluted earnings/(loss) per share
0.3c
(12.1c)
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) discontinued operations
Assets and liabilities classified as held for sale
Property, plant and equipment
Intangible assets
Inventories
Trade and other receivables
Other assets
Assets classified as held for sale
Payables
Loans and borrowings
Provisions
Liabilities classified as held for sale
Net assets
Effect of disposal on the financial position of the Group
Property, plant and equipment
Intangible assets
Inventories
Trade and other receivables
Other assets
Deferred taxes
Payables
Provisions
Net assets disposed
Consideration received
8.5
47.5
56.0
–
–
–
–
–
–
–
–
–
–
–
33.6
8.2
7.6
12.5
0.4
0.2
(12.4)
(5.9)
44.2
48.1
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
–
–
–
–
–
–
–
–
–
–
83
CONSOLIDATED
Note
2011
$ millions
2010
$ millions
49.5
(40.6)
(3.6)
5.3
51.2
(11.7)
39.5
1.0
2.1
(5.2)
(12.7)
–
–
2.2
(18.0)
8.9
(3.6)
5.3
39.7
(35.1)
4.6
0.7
–
0.7
5.3
0.9
28.5
0.3
29.7
(3.6)
26.1
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
–
25.8
4
4
5
4
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/(benefit) on profit:
– at Australian tax rate 30% (2010: 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
Non-deductible impairment of assets
Other items
Significant item
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) relating to significant items
Income tax expense/(benefit) from discontinued operations
Income tax expense/(benefit) excluding significant items
Income tax expense/(benefit) relating to significant items
(iii) Tax amounts recognised directly in equity
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
Recognised in comprehensive income
Share issue expenses
Recognised directly in equity
84
Boral Limited Annual Report 2011
NOTES TO THE FINANCIAL STATEMENTS
Boral Limited and Controlled Entities
7. Dividends
Dividends recognised by the Group are:
2011
2010 final – ordinary
2011 interim – ordinary
Total
2010
2009 final – ordinary
2010 interim – ordinary
Total
Subsequent event
Amount per share
Total amount
$ millions
Franked amount
per share
Date of payment
6.5 cents
7.5 cents
5.5 cents
7.0 cents
46.7
54.3
101.0
32.6
41.7
74.3
6.5 cents
28 September 2010
7.5 cents
24 March 2011
5.5 cents
7.0 cents
28 September 2009
23 March 2010
Since the end of the financial year, the Directors declared the following dividend:
2011 final – ordinary
7.0 cents
51.1
7.0 cents
27 September 2011
The financial effect of the final dividend for the year ended 30 June 2011 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 2011 is $124.4 million (2010: $151.1 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 $21.9 million (2010: $20.0 million).
Dividend Reinvestment Plan
The Group’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 29 August 2011.
85
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
Loss/(profit) attributable to non-controlling interests
Net profit excluding 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
2011
$ millions
2010
$ millions
173.1
2.3
175.4
(7.7)
167.7
132.8
(1.2)
131.6
(222.1)
(90.5)
CONSOLIDATED
2011
2010
718,726,833 595,848,789
4,069,322
3,660,323
722,796,155 599,509,112
23.3c
23.2c
24.4c
24.3c
23.1c
22.9c
(15.2c)
(15.2c)
22.1c
22.0c
(3.1c)
(3.1c)
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.
86
Boral Limited Annual Report 2011
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 90 days and pay interest at a weighted average interest rate
of 5.25% (2010: 3.1%).
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 $112.3 million (2010: $119.5 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 2011.
CONSOLIDATED
2011
$ millions
2010
$ millions
127.0
434.2
561.2
74.1
82.9
157.0
720.5
27.6
748.1
(18.9)
729.2
58.4
(3.5)
54.9
676.7
77.8
754.5
(23.5)
731.0
57.0
(4.3)
52.7
784.1
783.7
98.4
13.9
104.2
15.3
(23.5)
10.1
(8.3)
2.8
(18.9)
0.6
9.7
10.3
(24.6)
9.4
(8.2)
(0.1)
(23.5)
9.0
10.2
19.2
87
CONSOLIDATED
2011
$ millions
2010
$ millions
176.8
57.6
346.3
15.4
596.1
169.3
64.4
298.5
16.3
548.5
93.5
85.3
23.4
85.5
108.9
19.5
82.1
101.6
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
88
Boral Limited Annual Report 2011
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
2011
%
2010
%
2011
$ millions
2010
$ millions
OWNERSHIP
INTEREST
INVESTMENT
CARRYING AMOUNT
CONSOLIDATED
CONSOLIDATED
Details of investments in associates
Bitumen Importers Australia Pty Ltd
Bitumen importer
Caribbean Roof Tile Company Limited
Roof tiles
Flyash Australia Pty Ltd
Fly ash collection
Gypsum Resources Australia Pty Ltd
Gypsum mining
Highland Pine Products Pty Ltd
Timber
Lafarge Boral Gypsum in Asia Sdn Bhd
Plasterboard
MonierLifetile LLC*
MonierLifetile S.R.L. de C.V.*
Roof tiles
Roof tiles
Penrith Lakes Development Corporation Ltd Quarrying
Rondo Building Services Pty Ltd
Rollform systems
South East Asphalt Pty Ltd
Asphalt
Australia
Trinidad
Australia
Australia
Australia
Malaysia
USA
Mexico
Australia
Australia
Australia
Sunstate Cement Ltd
Tile Service Company LLC*
US Tile LLC
Total
Cement manufacturer
Australia
Roof tiles
Roof tiles
USA
USA
30-Jun
31-Dec
31-Dec
30-Jun
30-Jun
31-Dec
31-Dec
31-Dec
30-Jun
30-Jun
30-Jun
30-Jun
31-Dec
31-Dec
50
50
50
50
50
50
-
-
40
50
50
50
-
50
* MonierLifetile LLC, MonierLifetile S.R.L. de C.V. and Tile Service Company LLC became controlled entities during the year.
Movements in carrying value of associates
Balance at the beginning of the year
Investments in associates during the year
Associates becoming controlled entities during the year
Share of associates’ net profit
Share of associates’ impairment of assets
Dividends from associates
Results from associates recognised against non-current receivables/provisions
Share of associates’ movement in currency reserve
Effect of exchange rate and other changes
Balance at the end of the year
50
50
50
50
50
50
50
50
40
50
50
50
50
50
–
4.1
2.6
–
–
–
6.0
2.6
–
–
201.8
226.8
–
–
–
13.0
0.8
17.9
–
–
33.8
1.8
–
5.5
1.4
16.2
–
–
240.2
294.1
CONSOLIDATED
2011
$ millions
2010
$ millions
294.1
–
(36.2)
42.0
–
(27.7)
(2.9)
18.0
(47.1)
240.2
298.9
0.1
–
20.3
(41.8)
(26.6)
45.1
15.1
(17.0)
294.1
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 if the Group’s obligation for losses exceeds this amount, they are
recorded as a provision in the Group’s financial statements to the extent that the Group has an obligation to fund the liability.
89
CONSOLIDATED
2011
$ millions
2010
$ millions
42.0
9.2
(24.8)
42.0
(27.7)
40.7
8.7
18.0
26.7
95.5
–
(5.4)
(21.5)
(26.6)
42.0
(6.4)
15.1
8.7
12. Investments accounted for using the equity method (continued)
Share of post acquisition retained earnings attributable to associates
Balance at the beginning of the year
Associates becoming controlled entities during 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
Balance 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 is as follows:
Share of associates’ revenue
429.4
467.7
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
60.3
(15.8)
(2.5)
42.0
–
42.0
158.6
333.1
491.7
109.6
141.9
251.5
240.2
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
90
Boral Limited Annual Report 2011
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
1.3
1.1
CONSOLIDATED
2011
$ millions
2010
$ millions
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
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
3.8
9.6
6.8
20.2
7.5
7.5
4.8
12.9
8.2
25.9
26.8
26.8
1,170.8
(134.9)
1,035.9
1,114.9
(105.0)
1,009.9
93.7
(19.3)
74.4
96.4
(15.4)
81.0
4,258.5
4,040.7
(2,475.3)
(2,346.6)
1,783.2
1,694.1
1.6
(0.2)
1.4
0.3
(0.2)
0.1
1,784.6
2,894.9
1,694.2
2,785.1
At 30 June 2010, 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 pre-tax discount rate of 15%.
91
CONSOLIDATED
2011
$ millions
2010
$ millions
1,009.9
1,065.4
20.4
(9.6)
70.9
33.8
(16.7)
–
(1.2)
(18.4)
(53.2)
1.3
(10.7)
–
6.4
(23.2)
(6.1)
–
(12.8)
(10.4)
1,035.9
1,009.9
81.0
–
(1.5)
(5.1)
74.4
91.4
(4.8)
(4.2)
(1.4)
81.0
1,694.2
1,947.2
324.6
(9.4)
137.6
(33.8)
(31.7)
–
1.0
–
(223.2)
(74.7)
178.6
(17.2)
–
(6.4)
(134.7)
(27.0)
–
(2.9)
(230.8)
(12.6)
1,784.6
1,694.2
14. Property, plant and equipment (continued)
RECONCILIATIONS
Land and buildings
Balance at the beginning of the year
Additions
Disposals
Acquisitions of entities or operations
Transferred from plant and equipment
Impairment disclosed as significant items
Transferred to assets held for sale
Transfer (to)/from other assets or liabilities
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
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
Transfer (to)/from other assets or liabilities
Write-down of plant and equipment
Depreciation expense
Net foreign currency exchange differences
Balance at the end of the year
92
Boral Limited Annual Report 2011
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
2011
$ millions
2010
$ millions
243.7
40.8
(28.6)
255.9
275.0
1.8
–
–
–
(33.1)
243.7
275.0
30.0
(27.4)
277.6
292.0
–
(4.3)
(3.0)
(1.6)
(8.1)
275.0
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 for the building products businesses in the USA and Australia;
– concrete demand and economic activity in the construction materials businesses in the USA and Australia.
These assumptions have been determined with reference to current performance and taking into account external forecasts.
Housing starts and concrete demand forecasts utilised in the cash flow projections are based on historical experiences in the
relevant geographies.
The recoverable amount of CGUs exceeds their carrying values as at 30 June 2011. A reduction of 15% in the forecast concrete
demand would reduce the recoverable amount of the US construction materials businesses to their carrying value. Management
believes no other reasonable changes in the key assumptions on which the estimates are based would cause the aggregate
carrying amount to exceed the recoverable amount of these CGUs.
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
Acquisitions of entities or operations
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
93
CONSOLIDATED
2011
$ millions
2010
$ millions
67.9
2.3
45.2
128.3
243.7
2.6
0.8
11.4
–
(1.9)
–
(0.7)
12.2
67.9
2.3
43.4
161.4
275.0
15.8
–
–
(3.3)
(4.8)
(5.3)
0.2
2.6
Other intangible assets
Other intangible assets relate predominantly to brand names, technology and software development and are amortised at rates from
5% to 20%. Amortisation expense is included in ‘depreciation and amortisation’ as disclosed in note 3.
16. Other assets
Current
Deferred expenses
Less: Accumulated amortisation
Deposits and prepayments
Non-current
Deferred expenses
CONSOLIDATED
2011
$ millions
2010
$ millions
145.0
(106.4)
38.6
47.0
85.6
50.5
50.5
129.7
(91.0)
38.7
24.6
63.3
66.0
66.0
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%.
94
Boral Limited Annual Report 2011
NOTES TO THE FINANCIAL STATEMENTS
Boral Limited and Controlled Entities
17. Payables
Current
Trade creditors
Due to associated entities
Non-current
Deferred income
18. 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 to note 28.
19. Other financial liabilities
Non-current
Derivative financial liabilities
Future purchase liability – Cultured Stone
20. Current tax liabilities
Current tax liability
CONSOLIDATED
2011
$ millions
2010
$ millions
697.8
5.0
702.8
12.5
12.5
16.4
146.8
0.2
163.4
49.2
854.0
903.2
55.8
63.9
119.7
634.1
6.8
640.9
14.1
14.1
8.4
0.4
0.1
8.9
58.5
1,272.2
1,330.7
8.0
–
8.0
123.8
98.9
95
CONSOLIDATED
2011
$ millions
2010
$ millions
88.2
(161.1)
(72.9)
43.3
(118.9)
(75.6)
47.9
34.2
21. Deferred tax assets and liabilities
Recognised deferred tax balances
Deferred tax asset
Deferred tax liability
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
Australia*
Germany
Singapore
Thailand
United Kingdom*
United States of America*
* Unbooked capital losses.
Expiry date
No restriction
No restriction
No restriction
30 Jun 2012 – 30 Jun 2016
No restriction
30 Jun 2016
CONSOLIDATED
2011
$ millions
2010
$ millions
53.9
50.0
1.8
18.0
34.9
6.0
–
53.4
2.0
21.4
41.0
–
96
Boral Limited Annual Report 2011
NOTES TO THE FINANCIAL STATEMENTS
Boral Limited and Controlled Entities
21. Deferred tax assets and liabilities (continued)
Movement in temporary differences during the year
As at 30 June 2011
Receivables
Inventories
Property, plant and equipment
Intangible assets
Payables
Loans and borrowings
Provisions
Other
Unrealised foreign exchange
Tax losses carried forward
As at 30 June 2010
Receivables
Inventories
Property, plant and equipment
Intangible assets
Payables
Loans and borrowings
Provisions
Other
Unrealised foreign exchange
Tax losses carried forward
CONSOLIDATED
Balance at
the beginning
of the year
$ millions
Recognised
in income
$ millions
Recognised
in equity
$ millions
Other
movements
$ millions
Balance at
the end
of the year
$ millions
7.1
(32.3)
(162.3)
(21.4)
8.0
1.0
117.3
(17.2)
(74.8)
99.0
(75.6)
(1.0)
(0.3)
(1.9)
(5.1)
(2.4)
(0.5)
(2.8)
(3.4)
(3.7)
61.7
40.6
–
–
–
–
–
(0.3)
–
2.7
(28.5)
–
(26.1)
(0.3)
–
19.3
4.7
(0.2)
–
(6.4)
(4.4)
(0.1)
(24.4)
(11.8)
5.8
(32.6)
(144.9)
(21.8)
5.4
0.2
108.1
(22.3)
(107.1)
136.3
(72.9)
CONSOLIDATED
Balance at
the beginning
of the year
$ millions
Recognised
in income
$ millions
Recognised
in equity
$ millions
Other
movements
$ millions
Balance at
the end
of the year
$ millions
5.7
(35.4)
(193.3)
(17.5)
6.3
3.8
100.4
(27.9)
(56.5)
43.8
(170.6)
1.5
3.1
26.4
(5.5)
1.8
0.4
18.7
10.7
5.2
55.4
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)
97
CONSOLIDATED
2011
$ millions
2010
$ millions
153.4
176.1
9.0
7.9
33.2
15.1
14.1
5.0
34.9
15.9
218.6
246.0
20.4
10.9
33.6
41.6
26.3
5.1
30.9
44.7
106.5
107.0
22. 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 Group, 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 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
14.1
5.4
(10.5)
9.0
0.5
13.8
(0.2)
14.1
98
Boral Limited Annual Report 2011
NOTES TO THE FINANCIAL STATEMENTS
Boral Limited and Controlled Entities
22. Provisions (continued)
Reconciliations (continued)
Claims – current
Balance at the beginning of the year
Provisions made during the year
Remeasurement of provision
Transfer to liabilities held for sale
Increase through acquisition of entity
Payments made during the year
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
Increase through acquisition of entity
Net foreign currency exchange differences
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
Unwind of discount
Payments made during the year
Transfer to current provisions
Transferred (to)/from investments accounted for using the equity method
Net foreign currency exchange differences
Balance at the end of the year
CONSOLIDATED
2011
$ millions
2010
$ millions
5.0
5.2
0.2
–
0.5
(2.6)
(0.4)
7.9
5.1
4.6
1.5
(0.3)
10.9
34.9
7.8
(8.7)
(0.8)
33.2
30.9
1.2
1.5
33.6
15.9
3.3
–
(10.1)
8.9
(2.9)
15.1
44.7
11.0
1.5
(0.2)
(8.9)
(2.6)
(3.9)
41.6
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
2.0
1.3
30.9
16.7
–
(0.5)
(7.5)
7.6
(0.4)
15.9
20.7
7.6
1.6
(0.5)
(7.6)
23.6
(0.7)
44.7
99
CONSOLIDATED
2011
$ millions
2010
$ millions
23. Issued capital
Issued and paid up capital
729,925,990 (2010: 598,952,998) ordinary shares, fully paid
2,261.3
1,724.0
Movements in ordinary issued capital
Balance at the beginning of the year
10,899,457 (2010: 5,895,282) shares issued under the Dividend Reinvestment Plan
Nil (2010: 167,186) shares issued upon the exercise of executive options
172,916 (2010: Nil) shares issued on vesting of rights
119,900,619 (2010: Nil) shares issued under capital raising net of costs
Income tax benefit on capital raising
Balance at the end of the year
1,724.0
1,691.4
53.1
–
0.8
479.8
3.6
31.9
0.7
–
–
–
2,261.3
1,724.0
During the period, the Group undertook a capital raising of $479.8 million net of transaction costs of
$11.8 million. 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.
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.
Movements in employee compensation shares
Balance at the beginning of the year
670,873 (2010: Nil) shares vested and transferred from share-based payments reserve
670,873 (2010: Nil) shares purchased on-market
Balance at the end of the year
–
3.4
(3.4)
–
–
–
–
–
The employee equity compensation account represents the balance of Boral shares held by the Group which as at the end of the year
have not vested to Group employees and therefore are controlled by the Group. These shares relate to the Boral Senior Executive
Performance Share Plan.
24. Reserves
Foreign currency translation reserve
Hedging reserve – cash flow hedges
Other reserve*
Share-based payments reserve
* Relates to future consideration on the Cultured Stone acquisition.
CONSOLIDATED
2011
$ millions
2010
$ millions
(131.6)
(0.4)
(66.3)
38.8
(159.5)
(75.0)
(1.1)
–
37.2
(38.9)
100
Boral Limited Annual Report 2011
NOTES TO THE FINANCIAL STATEMENTS
Boral Limited and Controlled Entities
24. Reserves (continued)
Reconciliations
Foreign currency translation reserve
Balance at the beginning of the year
Net loss on translation of assets and liabilities of overseas entities
Net gain on translation of long-term borrowings and foreign currency forward contracts net of tax
expense $28.5 million (2010: $23.2 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
Balance at the end of the year
Other reserve
Balance at the beginning of the year
Future consideration – Cultured Stone acquisition
Balance at the end of the year
Share-based payments reserve
Balance at the beginning of the year
Option/rights expense
Purchase of employee compensation shares
Transfer to share capital on vesting of rights
Balance at the end of the year
CONSOLIDATED
2011
$ millions
2010
$ millions
(75.0)
(123.0)
66.4
(131.6)
(1.1)
0.2
2.8
(2.0)
(0.3)
(0.4)
–
(66.3)
(66.3)
37.2
5.8
(3.4)
(0.8)
38.8
(62.9)
(66.3)
54.2
(75.0)
(8.6)
6.5
3.4
0.8
(3.2)
(1.1)
–
–
–
28.3
8.9
–
–
37.2
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.
Other reserve
The other reserve relates to future consideration on the Cultured Stone acquisition.
Share-based payments reserve
The share-based payments reserve is used to recognise the fair value of options and rights issued.
101
CONSOLIDATED
2011
$ millions
2010
$ millions
3.9
1.6
5.5
8.4
1.6
10.0
25. 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
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.
A number of sites within the Group and its associates 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.
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 33.
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 2011 are
set out in note 37.
102
Boral Limited Annual Report 2011
NOTES TO THE FINANCIAL STATEMENTS
Boral Limited and Controlled Entities
26. 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
2011
$ millions
2010
$ millions
32.6
–
32.6
12.2
0.1
12.3
0.2
0.2
0.1
0.1
83.2
168.2
30.5
281.9
90.4
173.8
55.8
320.0
The Group leases property, equipment and vehicles under operating leases expiring from one to 15 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.
103
27. Employee benefits
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
Consolidated – 2011
(xiii)
(xiv)
(xv)
(xvi)
(xvii)
29/10/2003 29/10/2010
29/10/2004 29/10/2011
31/10/2005 31/10/2012
6/11/2006
6/11/2013
6/11/2007
6/11/2014
Consolidated – 2010
(xii)
(xiii)
(xiv)
(xv)
(xvi)
(xvii)
4/11/2002
4/11/2009
29/10/2003 29/10/2010
29/10/2004 29/10/2011
31/10/2005 31/10/2012
6/11/2006
6/11/2013
6/11/2007
6/11/2014
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
$5.52
$6.55
$7.65
$7.27
$6.78
$4.12
$5.57
$6.60
$7.70
$7.32
$6.83
2,269,010
1,742,200
2,905,600
4,229,100
5,538,100
16,684,010
143,000
2,443,280
1,894,300
3,114,000
4,486,000
5,854,400
17,934,980
–
–
–
–
–
–
–
–
–
–
–
–
–
(2,269,010)
(205,500)
(352,900)
(405,200)
(548,300)
(3,780,910)
–
–
–
–
–
–
–
1,536,700
2,552,700
–
–
–
3,823,900
1,911,950
4,989,800
4,291,228
12,903,100
6,203,178
–
(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
* The exercise price of options issued in respect of tranches (xiii) to (xvii) have been amended in accordance with the terms of the Boral senior executive option plan to allow
for the impact of the capital raising undertaken during the year, which resulted in a five cent reduction in the exercise price.
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 – 2011
None
Consolidated – 2010
(xii)
(xiii)
Proceeds
$’000
Number
of shares
Issued
Fair value
per share
Fair value
aggregate
$’000
589
135
724
143,000
24,186
167,186
$5.75
$5.92
822
143
965
104
Boral Limited Annual Report 2011
NOTES TO THE FINANCIAL STATEMENTS
Boral Limited and Controlled Entities
27. Employee benefits (continued)
SHARE ACQUISITION RIGHTS
Share acquisition rights (SARs) were introduced in October 2004 to provide an alternative Long Term Incentive (LTI) to options. SARs
are granted to executives 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.
During the current year, SARs were issued under the Boral Long Term Incentive Plan. The SARs issued during the year were each
valued at $2.88 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
Set out below are summaries of share acquisition rights granted under the plans.
2011
2010
$4.30
5.26%
3.67%
30%
$5.35
5.48%
4.00%
40%
Tranche
Grant date
Expiry date
Consolidated – 2011
(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
3/11/2008
3/11/2015
5/11/2009
5/11/2016
(vii)
12/11/2010 12/11/2017
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
3/11/2008
3/11/2015
5/11/2009
5/11/2016
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
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
493,201
763,765
586,277
739,734
2,058,591
2,679,078
–
–
–
–
–
–
(55,080)
(92,726)
–
–
(87,725)
(260,776)
(73,127)
(583,013)
(472,311)
(503,022)
–
–
–
438,121
671,039
237,776
83,594
1,586,280
2,176,056
2,994,226
–
2,994,226
–
7,320,646
2,994,226
(1,283,991)
(843,789)
8,187,092
533,982
818,538
656,479
821,993
2,090,899
–
–
–
–
–
(40,781)
(54,773)
(70,202)
(82,259)
(32,308)
–
2,679,078
–
4,921,891
2,679,078
(280,323)
–
–
–
–
–
–
493,201
763,765
586,277
739,734
2,058,591
2,679,078
7,320,646
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Executives who held rights were unable to participate in the capital raising. So as to take account of the impact of the capital raising on
those rights, the Company made a payment of five cents per right to the holder of rights which vested during the year. The intention of
the payment was to ‘keep whole’ the executives in respect of rights which vested.
During the year ended 30 June 2011, the consolidated entity recognised an expense of $5.8 million (2010: $8.9 million) in relation to
share-based payments.
105
27. Employee benefits (continued)
SUPERANNUATION
At 30 June 2011, 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 makes contributions to defined contribution plans. The amount recognised as an expense for the year ended 30 June 2011
was $46.5 million (2010: $46.7 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 liability for defined benefit obligation at the beginning of the year
Expense recognised in the income statement
Actuarial gains/(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
2011
$ millions
2010
$ millions
(13.4)
(2.6)
2.8
5.5
0.4
(7.3)
(16.5)
(3.5)
(1.6)
8.1
0.1
(13.4)
The accrued benefits, fund assets and vested benefits have been determined based on amounts calculated by the actuary projected
forward to 30 June 2011.
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.
106
Boral Limited Annual Report 2011
NOTES TO THE FINANCIAL STATEMENTS
Boral Limited and Controlled Entities
27. 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 (gains)/losses
Benefits paid
Net foreign currency exchange differences
Balance at the end of the year
Movements in the fair value of plan assets
Balance 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 gains/(losses)
Net foreign currency exchange differences
Cumulative actuarial losses
Actual return on plan assets
CONSOLIDATED
2011
$ millions
2010
$ millions
(73.0)
65.7
(7.3)
82.5
3.9
3.0
0.3
(0.7)
(13.2)
(2.8)
73.0
69.1
4.3
2.1
5.5
0.3
(13.2)
(2.4)
65.7
3.9
3.0
(4.3)
2.6
(26.4)
2.8
1.5
(22.1)
6.4
(82.5)
69.1
(13.4)
83.8
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
107
27. 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
2011
2010
2011
2010
66.7%
29.1%
4.2%
–
66.1%
29.5%
4.4%
–
62.4%
37.6%
–
–
50.7%
49.2%
–
0.1%
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 2012 are $3.8 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
2011
2010
2011
2010
4.3%
4.5%
4.0%
4.3%
6.6%
4.0%
5.3%
7.5%
3.0%
5.5%
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)
CONSOLIDATED
2011
$ millions
2010
$ millions
2009
$ millions
2008
$ millions
2007
$ millions
(73.0)
65.7
(7.3)
2.1
0.7
(82.5)
69.1
(13.4)
4.4
(6.0)
(83.8)
67.3
(16.5)
(20.4)
(2.2)
(79.1)
(79.2)
81.3
2.2
(12.0)
(0.4)
91.2
12.0
6.3
(1.1)
108
Boral Limited Annual Report 2011
NOTES TO THE FINANCIAL STATEMENTS
Boral Limited and Controlled Entities
28. Loans and borrowings
TERM AND DEBT REPAYMENT SCHEDULE
Terms and conditions of outstanding loans were as follows:
CONSOLIDATED
30 June 2011
30 June 2010
Currency
Effective
interest rate
2011
Year
of
maturity
Carrying
amount
$ millions
Fair value
$ millions
Carrying
amount
$ millions
Fair value
$ millions
USD
USD
THB
AUD
AUD
USD
THB
AUD
6.91%
0.31%
4.47%
–
9.31%
2012
2011
2012
2012
2012
6.36% 2014-2020
4.91%
–
2012
2014
146.4
149.5
9.3
7.1
0.4
0.2
9.3
7.1
0.4
0.2
163.4
166.5
–
–
8.4
0.4
0.1
8.9
–
–
8.4
0.4
0.1
8.9
853.3
49.2
0.7
903.2
1,066.6
916.2
49.3
0.7
966.2
1,132.7
1,271.2
1,349.0
58.5
1.0
1,330.7
1,339.6
58.5
1.0
1,408.5
1,417.4
Current
US senior notes – unsecured
Bank loans – unsecured
Bank loans – unsecured
Other loans – unsecured 1
Finance lease liabilities
Non-current
US senior notes – unsecured
Bank loans – unsecured
Other loans – unsecured 1
Total
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
Borrower
Boral USA
Boral USA
Boral USA
Boral USA
Boral USA
Boral USA
Boral Limited
Boral Limited
Total
Notional
amount
US$ millions
152.5
52.0
200.0
53.5
30.0
76.2
200.0
276.0
1,040.2
Issue date
Interest rate
Maturity date
05/2002
05/2002
05/2005
05/2002
04/2008
04/2008
05/2005
04/2008
6.91%
7.01%
5.42%
7.11%
7.12%
7.22%
5.52%
7.12%
05/2012
05/2014
05/2015
05/2017
04/2018
04/2020
05/2017
04/2018
AUD
equivalent
$ millions
146.4
48.5
186.4
49.9
28.0
71.0
208.8
260.7
999.7
BANK FACILITIES
Syndicated term credit facility
A committed US$195 million and A$500 million (aggregate equivalent A$682 million) syndicated term credit facility is primarily to provide
liquidity for general corporate purposes. The maturity date for this facility is 13 February 2015 where the interest rate depending on the
currency of denomination is referenced to BBSW or LIBOR.
Bi-lateral loan facilities
Committed THB1,600 million (equivalent A$49.2 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.
109
28. Loans and borrowings (continued)
Bank overdraft, lease liabilities and other
The Group operates unsecured bank overdraft facility arrangements in Australia and Asia that have combined limits of A$23.9 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 2011.
29. 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 relating 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 rate,
commodity price, credit and liquidity risk.
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.
Forward exchange contracts and 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.
110
Boral Limited Annual Report 2011
NOTES TO THE FINANCIAL STATEMENTS
Boral Limited and Controlled Entities
29. 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
2011
$ millions
28.2
766.2
561.2
Fair value
2011
$ millions
28.2
766.2
561.2
1,355.6
1,355.6
Carrying
amount
2010
$ millions
86.8
716.1
157.0
959.9
Fair value
2010
$ millions
86.8
716.1
157.0
959.9
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 2011
Derivative financial assets
Commodity swaps/options
designated as cash flow hedges
Interest rate swaps designated
as fair value hedges
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
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
3.2
4.3
7.5
3.2
4.3
7.5
3.2
4.5
7.7
2.4
2.1
4.5
0.8
2.4
3.2
CONSOLIDATED
–
–
–
–
–
–
–
–
–
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
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
111
29. 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 2011) 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 2011
Non-derivative financial liabilities
US senior notes – unsecured
Bank loans – unsecured
Other loans – unsecured
Finance lease liabilities
Future purchase liability –
Cultured Stone
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
Cross currency swaps designated
as fair value hedges
Interest rate swaps not designated
as hedges for accounting purposes
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
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
More than
5 years
$ millions
(667.4)
–
–
–
–
–
–
–
More than
5 years
$ millions
(888.4)
–
–
–
–
999.7
65.6
1.1
0.2
63.9
702.8
3.6
0.1
3.9
(1,301.3)
(67.6)
(1.1)
(0.2)
(31.3)
(10.7)
(0.2)
(0.1)
(69.5)
(702.8)
–
(702.8)
(3.6)
(0.1)
(4.4)
(3.0)
(0.2)
(0.3)
(1.3)
48.0
(64.8)
(376.4)
–
(0.3)
–
(69.5)
–
–
–
(173.5)
(8.2)
(0.2)
(0.1)
–
–
(0.5)
–
(0.4)
(1.5)
(52.7)
(48.7)
(0.4)
–
–
–
(0.1)
0.1
(0.8)
(3.0)
(2.2)
(0.7)
(18.1)
(40.9)
0.2
1,889.1
(0.2)
(2,215.6)
(0.2)
(750.1)
–
(184.4)
–
(105.6)
–
(466.5)
–
(709.0)
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
1,271.2
66.9
1.4
0.1
640.9
(1,714.6)
(70.8)
(1.5)
(0.1)
(640.9)
0.6
2.9
2.7
(0.6)
(3.0)
(3.3)
(39.4)
(1.1)
(0.6)
(0.1)
(640.9)
(0.6)
(1.8)
(0.2)
(39.4)
(9.5)
(0.6)
–
–
–
(1.2)
(0.3)
(257.3)
(2.1)
(0.3)
–
–
(490.1)
(58.1)
–
–
–
–
–
–
–
–
–
(0.6)
(1.5)
(0.7)
1.8
1,988.5
(1.8)
(2,436.6)
(0.9)
(685.6)
(0.5)
(51.5)
(0.4)
(260.7)
–
(549.7)
–
(889.1)
112
Boral Limited Annual Report 2011
NOTES TO THE FINANCIAL STATEMENTS
Boral Limited and Controlled Entities
29. Financial instruments (continued)
LIQUIDITY RISK (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 returns to shareholders by the adoption of an appropriate capital structure.
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 assets; 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$0.5 million
are 100% hedged; and
(c)
net investments, including net intercompany loans, in overseas domiciled investments are hedged, regulatory conditions and
available hedge instruments permitting.
The Group uses forward foreign exchange and currency option contracts to hedge foreign exchange risk. Most of the forward exchange
and option contracts have maturities of less than one year. Where necessary and in accordance with policy compliance, forward
exchange contracts can be rolled over at maturity.
Foreign currency exposure
The Group primarily uses external foreign currency denominated borrowings, cross currency swaps and forward exchange contracts to
hedge the Group’s net investment in overseas domiciled assets. The related exchange gains/losses on foreign currency movements are
taken primarily to the Foreign Currency Translation Reserve.
The Group’s foreign currency exposure for overseas assets at balance date was as follows, based on notional amounts:
Currency
30 June 2011
Balance sheet
Net investment in overseas domiciled
Boral subsidiaries
Forward exchange contracts
Foreign currency borrowings
Cross currency swaps
CONSOLIDATED
USD
Euro
GBP
NZD
THB
IDR
Equivalent to A$ millions
162.4
76.4
(466.1)
232.1
4.8
2.1
–
–
–
2.1
(1.6)
2.8
(23.3)
58.1
–
–
–
–
–
–
–
–
–
–
–
–
(1.6)
2.8
(23.3)
58.1
113
29. Financial instruments (continued)
MARKET RISK (continued)
Currency
30 June 2010
Balance sheet
Net investment in overseas domiciled Boral
subsidiaries
Forward exchange contracts
Foreign currency borrowings
Cross currency swaps
CONSOLIDATED
USD
Euro
GBP
NZD
THB
IDR
Equivalent to A$ millions
127.0
171.4
(596.2)
302.1
4.3
2.4
–
–
–
2.4
(1.8)
3.7
(25.4)
59.8
–
–
–
–
–
–
–
–
–
–
–
–
(1.8)
3.7
(25.4)
59.8
The forward exchange contracts taken out to hedge foreign exchange risk of foreign currency dominated interest payments, purchase
and sales contracts at balance date were as follows, based on notional amounts:
US dollars
Buy US dollars/sell Australian dollars
One year or less
One year to two years
Sell US dollars/buy Australian dollars
One year or less
Euros
Buy Euros/sell Australian dollars
One year or less
Buy Euros/sell US dollars
One year or less
Notional amounts AUD
Average exchange rate
2011
2010
2011
2010
$ millions
$ millions
56.5
1.5
–
7.2
0.9
34.3
0.5
0.8
1.0003
0.9469
0.8638
0.8340
–
0.7914
3.5
0.6802
0.5680
–
–
–
The forward exchange contracts are considered to be highly effective hedges as they are matched against underlying interest
payments, purchases and sales. Any gains or losses on the forward contracts attributed to the hedged risk are taken directly to equity.
When goods and services are delivered, the amount recognised in equity is adjusted to the interest expense, inventory, plant and
equipment accounts. There was no significant cash flow hedge ineffectiveness in the current or prior year.
As at balance date, the Group’s foreign currency interest payables were hedged using forward exchange contracts. Other foreign
currency payables and receivables were immaterial.
The Group’s foreign currency cash and deposits were A$13.4 million at 30 June 2011 (2010: A$0.7 million). The related exchange
gains/losses on foreign currency movements are taken primarily to the income statement.
114
Boral Limited Annual Report 2011
NOTES TO THE FINANCIAL STATEMENTS
Boral Limited and Controlled Entities
29. Financial instruments (continued)
MARKET RISK (continued)
Sensitivity
At 30 June 2011, 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$1.1 million (2010: equivalent A$0.4 million) and equity would have increased/decreased respectively by around equivalent
A$11.4 million (2010: equivalent A$29.2 million).
The following significant exchange rates applied during the year:
USD
Euro
GBP
NZD
THB
IDR
Average rate
Reporting date spot rate
2011
2010
2011
2010
1.0002
0.7272
0.6276
1.3064
0.8822
0.6362
0.5567
1.2483
1.0728
0.7404
0.6667
1.2953
0.8535
0.6981
0.5670
1.2295
30.3567
29.0267
32.9900
27.6400
8,776
8,260
9,219
7,733
INTEREST RATE RISK
The Group adopts a policy that ensures between 30% and 70% of its borrowings are subject to interest rates based on fixed rates
greater than 12 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 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 six years where the duration applicable to the interest rate and cross currency swaps is
consistent with maturities applicable to the underlying borrowings.
29. Financial instruments (continued)
INTEREST RATE RISK (continued)
At the reporting date, the interest rate profile of the Group’s interest bearing financial instruments was:
Fixed rate instruments
US Senior notes – unsecured 1
Other loans – unsecured
Finance lease liabilities
Variable rate instruments
Bank loans – unsecured
1 US$100 million (equivalent A$97.5 million) fixed rate senior notes have been swapped to floating rate via an interest rate swap, and
US$225 million (equivalent A$232.1 million) fixed rate senior notes have been swapped to floating rate via a cross currency swap.
Interest rate derivatives
Pay fixed interest rate derivatives
Pay fixed against US$ LIBOR
Pay variable interest rate derivatives
Pay floating against US$ LIBOR
Cross currency swap pay floating US$ LIBOR
115
CONSOLIDATED
2011
Carrying
amount
2010
Carrying
amount
$ millions
$ millions
999.7
1,271.2
1.1
0.2
1.4
0.1
1,001.0
1,272.7
65.6
66.9
1,066.6
1,339.6
0.2
1.8
(4.3)
51.9
47.6
(10.6)
(12.5)
(23.1)
Sensitivity
At 30 June 2011, if interest rates had changed by +/- 1% pa from the year end rates with all other variables held constant, the Group’s
pre-tax profit for the year would have been A$0.4 million higher/lower (2010: A$0.7 million) and the change in equity would have been
A$0.1 million (2010: A$0.8 million) mainly as a result of a higher interest cost applying to interest rate derivatives.
INTEREST RATES USED FOR DETERMINING FAIR VALUE
Where appropriate, the Group uses BBSW, LIBOR and Treasury Bond yield curves as of 30 June 2011 plus an adequate credit spread
to discount financial instruments. The interest rates used are as follows:
Derivatives
Interest bearing loans and borrowings
Finance leases
2011
% pa
2010
% pa
0.25–5.69
0.54–5.50
0.00–7.22
0.00–7.22
9.31
6.00
116
Boral Limited Annual Report 2011
NOTES TO THE FINANCIAL STATEMENTS
Boral Limited and Controlled Entities
29. Financial instruments (continued)
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/fair value of instruments hedging commodities price risk:
Assets
Commodity swaps/options designated as cash flow hedges
Liabilities
Commodity swaps designated as cash flow hedges
CONSOLIDATED
2011
$ millions
2010
$ millions
33.6
0.9
2.8
3.2
(0.1)
3.1
35.6
5.6
4.6
–
(2.9)
(2.9)
The commodity swaps/options are considered to be highly effective hedges as they are matched against forward commodity
purchases. The ineffective portion of the hedges transferred to the income statement was A$0.1 million in 2011 (2010: Nil).
Sensitivity
At 30 June 2011, if the 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 (2010: unchanged) and the change in equity would have been A$3.9 million
(2010: A$4.2 million).
117
29. Financial instruments (continued)
THE FAIR VALUE HIERARCHY
The table below analyses financial instruments carried at fair value, by valuation method. The different levels have been defined
as follows:
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 (commodity swaps, commodity options, interest rate swaps);
– financial liabilities at fair value through profit or loss (interest rate swaps not designated as hedges for accounting purposes);
– 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 2011
Assets
Derivatives used for hedging
Total assets
Liabilities
Derivatives at fair value through profit or loss
Derivatives used for hedging
Total liabilities
30 June 2010
Assets
Derivatives used for hedging
Total assets
Liabilities
Derivatives at fair value through profit or loss
Derivatives used for hedging
Total liabilities
Level 1
Level 2
Level 3
Total
$ millions
$ millions
$ millions
$ millions
–
–
–
–
–
7.5
7.5
0.2
55.6
55.8
–
–
–
–
–
7.5
7.5
0.2
55.6
55.8
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
118
Boral Limited Annual Report 2011
NOTES TO THE FINANCIAL STATEMENTS
Boral Limited and Controlled Entities
30. 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
Catherine Brenner Non-Executive Director (appointed 15 September 2010)
Brian Clark
Non-Executive Director
Eileen Doyle
Non-Executive Director
Robert Every
Chairman and Non-Executive Director
Richard Longes
Non-Executive Director
John Marlay
Non-Executive Director
Paul Rayner
Non-Executive Director
Mark Selway
Chief Executive
Former Director
Dr Roland Williams held the position of Non-Executive Director until 4 November 2010 on which date he retired from the Board.
EXECUTIVES
Current Executives
Ross Batstone
Divisional Managing Director – Boral Building Products
Michael Beardsell
Divisional Managing Director – Boral Cement
Michael Kane
President and CEO Boral USA
Andrew Poulter
Chief Financial Officer
Murray Read
Divisional Managing Director – Boral Construction Materials
KEY MANAGEMENT PERSONNEL COMPENSATION
The key management personnel compensation included in “employee benefits expense” in note 3 is as follows:
Short-term employee benefits
Post-employment benefits
Share-based payments
Long-term employee benefits
June 2010 comparatives include key management personnel for that year.
CONSOLIDATED
2011
$’000
2010
$’000
6,883.6
11,105.7
420.9
1,034.2
75.4
2,789.3
3,456.4
90.2
8,414.1
17,441.6
119
30. 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 the
beginning of
the year
Granted during
the year as
remuneration
Exercised
during the year
Lapsed/
cancelled
during the year
Balance at the
end of the year
Vested and
exercisable at
end of the year
Number
Number
Number
Number
Number
Number
Current Director
Mark Selway
Current Executives
Ross Batstone
Michael Beardsell
Michael Kane
Andrew Poulter
Murray Read a
2011
2010
2011
2010
2011
2010
2011
2010
2011
2010
2011
–
–
351,470
351,470
131,500
131,500
–
–
–
–
146,400
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(53,970)
–
(18,400)
–
–
–
–
–
297,500
351,470
113,100
131,500
118,376
–
53,514
592
–
–
–
–
–
–
–
–
(23,200)
123,200
51,114
a Initial shareholding at the date of commencing as an executive included in key management personnel.
120
Boral Limited Annual Report 2011
NOTES TO THE FINANCIAL STATEMENTS
Boral Limited and Controlled Entities
30. Key management personnel disclosures (continued)
EQUITY INSTRUMENTS (continued)
(ii) Option holdings (continued)
Shares provided on exercise of options
During the financial year, there were no shares issued on the exercise of options granted as compensation.
(iii) Share Acquisition Rights
The number of Share Acquisition Rights (SAR) 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 the
beginning of
the year
Rights granted
during the year
Exercised
during the year
Lapsed/
cancelled
during the year
Balance at the
end of the year
Vested and
exercisable at
end of the year
Number
Number
Number
Number
Number
Number
Current Director
Mark Selway
Current Executives
Ross Batstone
Michael Beardsell
Michael Kane
Andrew Poulter
Murray Read a
2011
2010
2011
2010
2011
2010
2011
2010
2011
2010
2011
431,034
–
303,819
431,034
–
–
236,100
153,637
98,218
59,688
–
–
–
–
147,569
(31,287)
82,463
98,672
38,530
78,717
–
21,701
–
–
(14,144)
–
–
–
–
–
91,430
125,000
(13,495)
–
–
–
–
–
–
–
–
–
–
–
734,853
431,034
352,382
236,100
182,746
98,218
78,717
–
21,701
–
202,935
–
–
–
–
–
–
–
–
–
–
–
a Initial holding at the date of commencing as an executive included in key management personnel.
121
30. 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
Catherine Brenner b
Brian Clark
Eileen Doyle
Robert Every
Richard Longes
John Marlay
Paul Rayner
Mark Selway
Former Director
Roland Williams c
Balance at the
beginning of
the year
Received
during the year
on the exercise
of options/
SARs
Allocation in
Non-Executive
Directors’
Share Plan a
Other changes
during the year
Balance at the
end of the year
Number
Number
Number
Number
Number
2011
2011
2010
2011
2010
2011
2010
2011
2010
2011
2010
2011
2010
2011
2010
2011
2010
–
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
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
5,000
7,316
707
234
1,000
28,370
25,000
4,990
288
2,781
2,000
17,811
2,675
13,064
8,800
5,641
1,738
5,000
71,937
64,621
1,234
1,000
70,221
41,851
27,725
22,735
4,781
2,000
28,156
10,345
21,864
8,800
82,321
76,680
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 included in key management personnel.
c Shareholding at the date of ceasing to be a Director.
122
Boral Limited Annual Report 2011
NOTES TO THE FINANCIAL STATEMENTS
Boral Limited and Controlled Entities
30. Key management personnel disclosures (continued)
EQUITY INSTRUMENTS (continued)
(iv) Share holdings (continued)
Balance at the
beginning of
the year
Received
during the year
on the exercise
of options/
SARs
Other changes
during the year
Balance at the
end of the year
Number
Number
Number
Number
Current Executives
Ross Batstone
Michael Beardsell
Michael Kane
Andrew Poulter
Murray Read a
2011
2010
2011
2010
2011
2010
2011
2010
2011
561,991
561,991
60,685
60,685
–
–
–
–
31,287
112,399
–
–
14,144
12,137
705,677
561,991
86,966
60,685
–
–
–
–
–
10,000
10,000
–
–
–
–
–
–
–
181,495
13,495
36,299
231,289
a Initial shareholding at the date of commencing as an executive included in key management personnel.
31. Auditors’ remuneration
Audit services:
KPMG Australia – audit and review of financial reports
Overseas KPMG firms – audit and review of financial reports
KPMG Australia – other assurance services
Other services:
KPMG Australia – taxation services
KPMG Australia – due diligence
KPMG Australia – other
Overseas KPMG firms – due diligence
Overseas KPMG firms – taxation services
CONSOLIDATED
2011
$’000
2010
$’000
1,428
445
90
1,963
115
530
8
1,127
95
1,875
3,838
1,395
461
185
2,041
148
515
10
59
161
893
2,934
32. Acquisition/disposal of controlled entities
The following controlled entities were acquired or disposed of during the financial year ended 30 June 2011:
Entities acquired:
MonierLifetile
Owens Corning Masonry Products LLC
Wagners’ Deposit
Miscellaneous acquisitions
Less: Cash acquired
Total purchase consideration
123
CONSOLIDATED
2011
$ millions
2010
$ millions
88.3
44.2
17.3
2.4
(6.2)
146.0
–
–
–
–
–
–
Acquisition-related costs in respect of these acquisitions of $1.9 million are included in other expenses in the income statement for the
current year.
i. MonierLifetile
During July 2010, the Group acquired the remaining 50% interest in MonierLifetile LLC, MonierLifetile S.R.L. de C.V. and Tile Service
Company LLC (“MonierLifetile”).
At 30 June 2010, the Group held an initial 50% interest in MonierLifetile that was recorded as an equity accounted investment. On
acquisition of the remaining 50% of MonierLifetile this initial investment was remeasured to fair value in accordance with Australian
Accounting Standards.
Carrying value of equity accounted investment as at acquisition date
Carrying value of loans to associates as at acquisition date
Fair value of investment as at acquisition date
The acquisition had the following effect on the Group’s assets and liabilities at acquisition date:
Purchase consideration
Cash paid – purchase price
Total purchase consideration
Fair value of net identifiable assets acquired
$ millions
36.2
52.1
88.3
88.3
$ millions
88.3
88.3
88.3
124
Boral Limited Annual Report 2011
NOTES TO THE FINANCIAL STATEMENTS
Boral Limited and Controlled Entities
32. Acquisition/disposal of controlled entities (continued)
i. MonierLifetile (continued)
Assets and liabilities acquired are as follows:
CURRENT ASSETS
Cash and cash equivalents
Receivables
Inventories
Other assets
NON-CURRENT ASSETS
Property, plant and equipment
Investments
Intangible assets
Deferred tax assets
Other
CURRENT LIABILITIES
Payables
Provisions
NON-CURRENT LIABILITIES
Payables
Provisions
Net identifiable assets acquired
Equity accounted investment
Loan to MonierLifetile
Total purchase consideration
Acquiree’s
carrying
amount
$ millions
Fair value
$ millions
4.2
12.8
20.4
0.6
4.2
12.0
20.0
0.6
160.3
162.4
1.9
0.1
–
0.5
(17.0)
(1.9)
(1.4)
(3.6)
1.4
0.1
1.4
0.1
(18.9)
(1.9)
(1.4)
(3.4)
176.9
176.6
(36.2)
(52.1)
88.3
During the period from 1 July 2010 to 30 June 2011, MonierLifetile has contributed revenue of $76.7 million and a loss before interest
and tax of $21.6 million.
125
32. Acquisition/disposal of controlled entities (continued)
ii. Cultured Stone acquisition
At the end of December 2010, the Group acquired a 50% controlling interest in Owens Corning Masonry Products LLC (“Cultured
Stone”), a stone veneer producer in the United States. Under the terms of the agreement, the acquisition of Owens Corning Masonry
Products LLC will occur in two stages:
– an initial acquisition of a 50% controlling interest for US$45 million in December 2010;
– followed by the acquisition of the remaining 50% membership interest for a payment equal to a multiple of 7.0 times 50% of
calendar year 2013 EBITDA, subject to a minimum payment of US$45 million. The present value of the expected payment has been
recognised as a liability.
Cultured Stone is the leading stone veneer producer in the United States, with plants in California and South Carolina. Its key products,
Cultured Stone, ProStone and Versetta Stone, are sold through distributors across the United States and Canada. This acquisition
enables Boral to expand its range of product offerings in the cladding sector. The transaction provides Boral with Board control and
management control of operations.
During the period from acquisition to 30 June 2011, Cultured Stone has contributed revenue of $36.2 million and a loss before interest
and tax of $9.8 million. The Group considers it impractical to determine the consolidated revenue or profit of the Group had this
business acquisition taken place at 1 July 2010 as the entity’s accounting policies and reporting period were not consistent with those
adopted by the Group.
The acquisition had the following effect on the Group’s assets and liabilities at acquisition date:
Purchase consideration
Cash paid – purchase price
Total purchase consideration
Fair value of net identifiable assets acquired
Assets and liabilities acquired are as follows:
CURRENT ASSETS
Cash and cash equivalents
Receivables
Inventories
NON-CURRENT ASSETS
Property, plant and equipment
Intangible assets
CURRENT LIABILITIES
Payables
Provisions
NON-CURRENT LIABILITIES
Provisions
Net identifiable assets acquired
Less: Non-controlling interest
Total purchase consideration
$ millions
44.2
44.2
44.2
Acquiree’s
carrying
amount
$ millions
Fair value
$ millions
2.0
7.1
37.7
53.2
–
(4.2)
–
–
95.8
2.0
6.1
30.0
45.7
11.3
(5.7)
(0.5)
(0.4)
88.5
(44.3)
44.2
The Group elected to recognise the non-controlling interest in Cultured Stone at its proportionate share of the acquired net
identifiable assets.
126
Boral Limited Annual Report 2011
NOTES TO THE FINANCIAL STATEMENTS
Boral Limited and Controlled Entities
32. Acquisition/disposal of controlled entities (continued)
iii. Wagners’ Construction Materials assets
During April 2011, an agreement was reached to acquire certain construction materials assets of the Wagners’ Group for $173 million
subject to the approval of the transaction by the Australian Competition and Consumer Commission. This acquisition will include five
quarries and 19 concrete plants located throughout the Darling Downs, South East Queensland and Townsville regions and fly ash
interests in the Darling Downs. The transaction is expected to be completed in the second half of calendar 2011.
The acquisition had the following effect on the Group’s assets and liabilities as at 30 June 2011.
Purchase consideration
Cash paid – deposit
Entities disposed:
$ millions
17.3
Consideration
received
$ millions
Interest
disposed
%
Date
of disposal
Boral Formwork and Scaffolding Pty Ltd
33.9
100
Sep 2010
Entities deregistered:
Leo N. Dunn & Sons Pty Ltd (in liquidation)
Concrite Holdings Pty Ltd (in liquidation)
Name changes during the financial period:
Blue Circle Southern Cement Ltd
Girotto Precast Pty Ltd
Go Crete Pty Ltd
Midland Brick Company Pty Ltd
Owens Corning Masonry Products LLC
Sawmillers Exports Pty Ltd
Date of loss of control
Feb 2011
Feb 2011
to
to
to
to
to
to
Boral Cement Limited
Boral Precast Holdings Pty Ltd
Boral Construction Related Businesses Pty Ltd
Boral Bricks Western Australia Pty Ltd
Boral Stone Products LLC
Boral Timber Fibre Exports Pty Ltd
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:
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)
Date of loss of control
Mar 2010
Mar 2010
Mar 2010
Mar 2010
Mar 2010
Mar 2010
Mar 2010
Mar 2010
127
33. Controlled entities
The financial statements of the following entities have been consolidated to determine the results of the consolidated entity.
Beneficial ownership by
Boral Limited
Boral Cement Limited > *
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 USA <
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
Morton Lakes LLC
Aggregate Investments LLC
BCM Oklahoma LLC
McCanne Ditch and Reservoir Company
Boral Industries Inc.
Boral Finance Inc.
Boral Timber Inc.
Boral Lifetile Inc.
Boral Concrete Tile Inc.
MonierLifetile LLC ***
Country of
incorporation
Australia
Australia
Australia
Australia
Australia
Indonesia
Indonesia
Indonesia
Indonesia
Thailand
Thailand
Thailand
Thailand
USA
USA
Singapore
Singapore
USA
USA
USA
USA
USA
USA
USA
USA
USA
USA
USA
USA
USA
USA
MonierLifetile S.R.L. de C.V. ***
Mexico
E.U.M. Teja de Concreto Servicio Compania S.R.L. de C.V. *** Mexico
Tile Service Company LLC ***
United States Tile Co.
Boral Tile LLC
Boral Bricks Inc.
Boral Bricks Holdings Inc.
Boral Bricks of Texas LP
Boral Benefits Management Inc.
Dennis Brick Distributors
USA
USA
USA
USA
USA
USA
USA
USA
Consolidated
entity
2011
%
Consolidated
entity
2010
%
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
100
100
100
100
100
100
100
100
89.47
50
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
100
100
100
100
89.47
50
128
Boral Limited Annual Report 2011
NOTES TO THE FINANCIAL STATEMENTS
Boral Limited and Controlled Entities
33. Controlled entities (continued)
Beneficial ownership by
Country of
incorporation
Consolidated
entity
2011
%
Consolidated
entity
2010
%
Boral Composites Inc.
Boral Material Technologies Inc.
BMT Holdings Inc.
Boral Material Technologies of Texas LP
Boral Stone LLC ***
Boral Stone Products LLC ***
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 *
Boral Construction Related Businesses Pty Ltd > *
Boral Resources (Vic) Pty Ltd > *
Bayview Quarries Pty Ltd *
Boral Resources (Qld) Pty Ltd > *
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 *
Boral Precast Holdings 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 > *
USA
USA
USA
USA
USA
USA
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
100
100
100
100
100
50
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
129
33. Controlled entities (continued)
Beneficial ownership by
Country of
incorporation
Consolidated
entity
2011
%
Consolidated
entity
2010
%
Boral Formwork and Scaffolding Pty Ltd ****
Alsafe Premix Concrete Pty Ltd > *
Boral Transport Ltd > *
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 *
Boral Insurance Pty Ltd
Boral Johns Perry 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 Timber Fibre Exports Pty Ltd > *
Boral Shared Business Services Pty Ltd > *
Boral Building Products Ltd > *
Boral Bricks Western Australia Pty Ltd > *
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 to note 36).
Entered into cross guarantee with Boral Limited (refer to note 37).
Deregistered during the year.
Acquired during the year.
Disposed during the year.
A Delaware general partnership.
>
*
**
***
****
<
All the shares held by Boral Limited in controlled entities are ordinary shares.
130
Boral Limited Annual Report 2011
NOTES TO THE FINANCIAL STATEMENTS
Boral Limited and Controlled Entities
34. Related party disclosures
CONTROLLED ENTITIES
Interests held in controlled entities are set out in note 33.
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:
– receipt of dividends from Boral Limited;
– participation in the Boral Long Term Incentive Plan;
– terms and conditions of employment;
– reimbursement of expenses;
– purchases of goods and services.
A number of Directors of the Company hold directorships in other entities. Several of these entities transacted with the Group on terms
and conditions no more favourable than those available on an arm’s length basis.
131
CONSOLIDATED
Note
2011
$ millions
2010
$ millions
9
561.2
561.2
157.0
157.0
165.4
(89.3)
245.0
4.1
(30.0)
73.9
(33.4)
5.8
(14.3)
416.5
(39.9)
(33.5)
58.9
(58.8)
7.5
350.7
252.6
2.9
(16.9)
247.9
–
8.9
48.1
454.2
(27.4)
18.3
33.5
(40.5)
21.0
459.1
35. 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
Discount unwinding
Gain on sale of assets
Impairment of assets, businesses and demolition costs
Net insurance proceeds
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 statement:
Dividends reinvested under the Dividend Reinvestment Plan
53.1
31.9
(iv) Details of credit standby arrangements and loan facilities are included in note 28.
132
Boral Limited Annual Report 2011
NOTES TO THE FINANCIAL STATEMENTS
Boral Limited and Controlled Entities
For the year ended 30 June
36. 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
BORAL LIMITED
2011
$ millions
2010
$ millions
111.8
0.1
111.9
6,858.2
553.5
7,411.7
3,628.5
505.6
4,134.1
69.0
7.4
76.4
6,428.7
568.5
6,997.2
3,565.5
703.6
4,269.1
3,277.6
2,728.1
2,261.3
1,724.0
38.3
978.0
38.1
966.0
3,277.6
2,728.1
3.9
8.4
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.
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 33.
Parent entity capital commitments
The parent entity does not have any capital commitments for acquisition of property, plant and equipment at 30 June 2011 (2010: Nil).
133
37. 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 to note 33), after eliminating all transactions between parties to the Deed.
STATEMENT OF COMPREHENSIVE INCOME
Continuing operations
Revenue
Profit before income tax expense
Income tax expense
Profit from continuing operations
Discontinued operations
Profit/(loss) from discontinued operations (net of income tax)
Net profit
Other comprehensive income
Actuarial gain on defined benefit plans
Exchange differences from translation of foreign operations taken to equity
Fair value adjustment on cash flow hedges
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
Balance at the beginning of the year
Net profit attributable to members of the parent entity
Dividends recognised during the year
Actuarial gains on defined benefit plans, net of tax
Balance at the end of the year
CONSOLIDATED
2011
$ millions
2010
$ millions
4,015.2
3,893.5
518.8
(146.6)
372.2
1.9
374.1
1.8
(31.6)
1.1
(0.9)
344.5
344.5
–
344.5
203.6
(75.4)
128.2
(71.8)
56.4
0.5
11.6
10.7
(3.4)
75.8
75.8
–
75.8
1,365.5
1,383.1
374.1
(101.0)
1.3
56.4
(74.3)
0.3
1,639.9
1,365.5
134
Boral Limited Annual Report 2011
NOTES TO THE FINANCIAL STATEMENTS
Boral Limited and Controlled Entities
37. 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
Loans and borrowings
Current tax liabilities
Provisions
Liabilities classified as held for sale
TOTAL CURRENT LIABILITIES
NON-CURRENT LIABILITIES
Payables
Loans and borrowings
Deferred tax liabilities
Provisions
TOTAL NON-CURRENT LIABILITIES
TOTAL LIABILITIES
NET ASSETS
EQUITY
Issued capital
Reserves
Retained earnings
TOTAL EQUITY
CONSOLIDATED
2011
$ millions
2010
$ millions
497.5
680.3
466.8
77.7
–
114.7
636.5
449.6
55.8
59.5
1,722.3
1,316.1
3.3
93.5
240.2
2,289.0
2,350.3
114.2
46.7
5,137.2
6,859.5
12.9
87.6
258.5
2,294.4
2,309.9
112.6
61.7
5,137.6
6,453.7
1,360.6
1,534.3
147.2
121.5
197.3
–
16.4
101.1
220.0
9.9
1,826.6
1,881.7
68.2
854.0
162.2
81.4
1,165.8
2,992.4
22.1
1,272.1
120.1
73.0
1,487.3
3,369.0
3,867.1
3,084.7
2,261.3
1,724.0
(34.1)
1,639.9
3,867.1
(4.8)
1,365.5
3,084.7
135
38. Subsequent events
(i) Sunshine Coast Quarries acquisition
On 19 July 2011, the Group announced it has reached an agreement to acquire the quarry and concrete assets of Sunshine Coast
Quarries, including a large scale quarry at Moy Pocket, a smaller quarry at Wondai and a concrete plant at Gympie on a cash free, debt
free basis for consideration of $81.5 million.
Completion remains subject to clearance from the Australian Competition and Consumer Commission on terms acceptable to Boral,
and the finalisation of certain procedural issues. The transaction is expected to be completed in the second half of calendar 2011.
(ii) Lafarge Boral Gypsum in Asia Sdn Bhd acquisition
Subsequent to year end, the Group announced that it had reached an agreement with Lafarge to acquire the remaining 50%
shareholding in Lafarge Boral Gypsum in Asia Sdn Bhd (LBGA) for consideration of €429 million (A$598 million) on an enterprise basis,
€380 million (A$530 million) after adjusting for net debt and non-controlling interests. Existing debt facilities will be used to fund the
acquisition. As part of the acquisition, the Group will be required to fair value its existing equity investment in LBGA.
136
Boral Limited Annual Report 2011
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 64 to 135 and the Remuneration Report in the Directors’
Report, set out on pages 48 to 62, 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 2011 and of its performance for the financial year
ended on that date; and
(ii) complying with Australian Accounting Standards 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 33 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 and
chief financial officer for the financial year ended 30 June 2011.
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, 5 September 2011
137
Independent Auditor’s Report to the Members of Boral Limited
Report on the Financial Report
We have audited the accompanying financial report of Boral Limited (“the Company”), which comprises the consolidated balance sheet
as at 30 June 2011, and consolidated income statement, consolidated statement of comprehensive income, consolidated statement
of changes in equity and consolidated statement of cash flows for the year ended on that date, notes 1 to 38 comprising a summary of
significant accounting policies and other explanatory information and the Directors’ Declaration of the Group comprising the Company
and the entities it controlled at the year’s end or from time to time during the financial year.
Directors’ responsibility for the financial report
The Directors of the Company are responsible for the preparation of the financial report that gives a true and fair view in accordance
with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the Directors determine is
necessary to enable the preparation of the financial report that is free from material misstatement whether due to fraud or error. In
note 1, the Directors also state, in accordance with Australian Accounting Standard AASB 101 Presentation of Financial Statements,
that the financial statements of the Group comply 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 of the financial report that gives a true and fair view 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, a true and fair 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)
giving a true and fair view of the Group’s financial position as at 30 June 2011 and of its performance for the year ended on
that date; and
(ii) complying with Australian Accounting Standards 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 2011.
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 2011 complies with section 300A of the
Corporations Act 2001.
KPMG
Sydney, 5 September 2011
Greg Boydell
Partner
138
Boral Limited Annual Report 2011
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
boral@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 2010/11 year of 7.0
cents per share will be paid by Boral on 27
September 2011. 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 (TFN), 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 Chief Commissioner
of State Revenue under the Unclaimed
Money Act 1995.
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.
Boral is planning to introduce direct credit as
the preferred means of paying dividends in the
future, moving away from paying dividends
by cheque for shareholders with registered
addresses in Australia and New Zealand. This
is expected to be effective from the 2012
interim dividend payment (expected to be paid
in March 2012), and further information will be
provided to shareholders in due course.
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
Securityholder 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 Securityholder 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, and 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.
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.
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 Securityholder 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.
139
that it and its associates were entitled to 36,694,141 ordinary shares.
Commonwealth Bank of Australia, by a notice of change of interests of substantial holder dated
15 April 2011, advised that it and its associates were entitled to 52,741,825 ordinary shares.
Ausbil Dexia Limited, by a notice of change of interests of substantial holder dated 9 November
2010, advised that it and its associates were entitled to 44,499,371 ordinary shares.
Distribution schedule of shareholders as at 26 August 2011
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
Number of
shareholders
% of ordinary
shares
37,764
30,523
5,463
3,139
136
77,025
2.35
9.62
5.29
8.86
73.88
100.00
0.05
(b) holding less than a marketable parcel (138 shares)
7,525
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 26 August 2011
1 HSBC Custody Nominees (Australia) Limited
2 National Nominees Limited
3 JP Morgan Nominees Australia Limited
4 Citicorp Nominees Pty Limited
5 Cogent Nominees Pty Limited
6 Warbont Nominees Pty Limited
7 PSS Board
8
RBC Dexia Investor Services Australia
Nominees Pty Limited
9 Queensland Investment Corporation
10 Australian Foundation Investment Company Limited
11 CSFB Fourth Nominees Pty Limited
12 AMP Life Limited
13
The Senior Master of the Supreme Court
(Common Fund No 3 A/C)
14 Argo Investments Limited
15 Equitas Nominees Pty Limited
16
UBS Wealth Management Australia Nominees
Pty Limited
17 Bond Street Custodians Limited
18 Invia Custodian Pty Limited
19 Milton Corporation Limited
20 FETA Nominees Pty Limited
Ordinary shares
135,258,086
124,746,922
99,505,154
60,918,250
19,927,631
15,377,460
10,232,553
9,098,357
7,727,962
4,638,492
4,230,259
3,840,300
3,294,474
3,266,907
2,781,172
1,947,572
1,920,668
1,718,255
1,627,462
1,503,422
% of ordinary
shares
18.53
17.09
13.63
8.35
2.73
2.11
1.40
1.25
1.06
0.64
0.58
0.53
0.45
0.45
0.38
0.27
0.26
0.24
0.22
0.21
Requests for publications and other enquiries
about Boral’s affairs should be addressed to:
Corporate Affairs Manager
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 (ADRs)
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 26 August 2011
Substantial shareholders
UBS AG, by a notice of initial substantial
holder dated 30 August 2011, advised
that it and its associates were entitled
to 40,476,350 ordinary shares (effective
26 August 2011).
National Australia Bank Limited, by a notice
of change of interests of substantial holder
dated 30 August 2011, advised that it and
its associates were entitled to 63,345,673
ordinary shares (effective 25 August 2011).
Franklin Resources Inc., by a notice of
change of interests of substantial holder
dated 15 August 2011, advised that it and
its associates were entitled to 67,022,531
ordinary shares.
Prudential plc, by a notice of change of
interests of substantial holder dated 30 June
2011, advised that it and its associates were
entitled to 50,591,949 ordinary shares.
Schroder Investment Management Australia
Limited, by a notice of initial substantial
holder released 18 April 2011, advised
140
Boral Limited Annual Report 2011
FINANCIAL HISTORY
Boral Limited and Controlled Entities
30 June
Revenue
Earnings before interest, tax, depreciation
and amortisation (EBITDA) 1
Depreciation and amortisation
Earnings before interest and tax 1
Net financing costs 1
Profit before tax 1
Income tax expense 1
Non-controlling interest
Net profit after tax 1
Significant items – net of tax
Net profit attributable to members of
Boral Limited
Total assets
Total liabilities
Net assets
Shareholders’ funds
Net debt
Funds employed
Dividends paid or declared
Statistics
Dividend per ordinary share
Dividend payout ratio 1
Dividend cover 1
2011
$ millions
2010
$ millions
2009
$ millions
2008
$ millions
2007
$ millions
2006
$ millions
2005
$ millions
2004
$ millions
2003
$ millions
2002
$ millions
4,711
4,599
4,875
5,199
4,909
4,767
4,305
4,150
3,831
3,489
522
245
277
(64)
213
(40)
2
175
(8)
505
253
252
(97)
155
(22)
(1)
132
(222)
539
263
276
(127)
149
(17)
–
131
11
688
240
448
(112)
336
(90)
1
247
(4)
762
231
531
(111)
420
(122)
–
298
–
823
209
614
(98)
516
794
191
603
(71)
532
794
195
600
(66)
534
672
194
478
(68)
410
(153)
(162)
(163)
(126)
–
362
–
(1)
(1)
(1)
370
–
370
–
283
–
531
188
343
(63)
280
(87)
–
192
–
168
(91)
142
243
298
362
370
370
283
192
5,668
2,512
3,156
3,156
505
3,662
105
5,209
2,583
2,626
2,626
1,183
3,809
88
5,491
2,738
2,754
2,754
1,514
4,268
77
5,895
2,985
2,910
2,910
1,515
4,425
202
5,817
2,829
2,987
2,987
1,482
4,470
203
5,587
2,832
2,755
2,755
1,578
4,333
200
5,001
2,594
2,407
2,407
1,394
3,800
197
4,511
2,151
2,360
2,360
4,038
1,898
2,140
2,140
3,915
1,966
1,950
1,950
938
764
881
3,298
2,904
2,831
175
133
109
14.5c
13.5c
60% 67%
1.7
1.5
13c
59%
1.7
34c
82%
1.2
34c
68%
1.5
34c
55%
1.8
34c
53%
1.9
30c
47%
2.1
23c
47%
2.1
19c
57%
1.8
Earnings per ordinary share 1
24.4c
22.1c
22.2c
41.4c
50.0c
61.7c
63.4c
63.8c
49.1c
33.7c
Return on equity 1
EBIT to sales 1
EBIT to funds employed 1
Net interest cover (times) 1
Gearing (net debt to equity)
5.6% 5.0% 4.8% 8.5% 10.0% 13.2% 15.4% 15.7% 13.2% 9.9%
5.9% 5.5% 5.7% 8.6% 10.8% 12.9% 14.0% 14.4% 12.5% 9.8%
7.6% 6.6% 6.5% 10.1% 11.9% 14.2% 15.9% 18.2% 16.4% 12.1%
4.4
2.6
16% 45%
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%
Gearing (net debt to net debt plus equity)
14% 31%
Net tangible asset backing per share
$3.91
$3.92
$4.12
$4.41
$4.41
$4.07
$3.57
$3.65
$3.27
$3.02
1. Excludes the impact of significant items in 2011, 2010, 2009 and 2008.
Results for the years ended 2005 to 2011 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.
The Annual General Meeting of Boral Limited will be held at the City Recital Hall, Angel Place,
Sydney on Thursday 3 November 2011 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.
23 August 2011
29 August 2011
27 September 2011
3 November 2011
31 December 2011
8 February 2012*
17 February 2012*
23 February 2012*
23 March 2012*
30 June 2012
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