Boral Limited
ABN 13 008 421 761
Level 39, AMP Centre
50 Bridge Street, Sydney NSW 2000
GPO Box 910, Sydney NSW 2001
Telephone: +61 2 9220 6300
Internet: www.boral.com.au
Email: info@boral.com.au
Share Registry
c/- Link Market Services
Level 12
680 George St, Sydney NSW 2000
Locked Bag A14
Sydney South NSW 1235
Telephone: +61 1300 730 644
Internet: www.linkmarketservices.com.au
Email: boral@linkmarketservices.com.au
BORAL
ANNUAL
REPORT
2013
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Boral Limited
Annual Report
for the year ended 30 June 2013
Boral Limited
ABN 13 008 421 761
The Annual General Meeting of
Boral Limited will be held at the
City Recital Hall, Angel Place,
Sydney, on Thursday 31 October
2013 at 10.30am.
Financial Calendar
Record date for final dividend
2 September 2013
Final dividend payable
Annual General Meeting
Half year end
27 September 2013
31 October 2013
31 December 2013
Half year results announcement
12 February 2014*
Ex dividend share trading commences
18 February 2014*
Record date for interim dividend
24 February 2014*
Interim dividend payable
Year end
* Timing of events is subject to change.
24 March 2014*
30 June 2014
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 interests
Net profit after tax 1
Significant items – net of tax
Net profit/(loss) attributable
to members of Boral Limited
Total assets
Total liabilities
Net assets
Shareholders' funds
Net debt
Funds employed
Dividends paid or declared
Statistics
2013
$ millions
2012
$ millions
2011
$ millions
2010
$ millions
2009
$ millions
2008
$ millions
2007
$ millions
2006
$ millions
2005
$ millions
2004
$ millions
5,286
5,010
4,711
4,599
4,875
5,199
4,909
4,767
4,305
4,150
519
473
522
505
539
688
762
823
794
794
291
273
245
253
263
240
231
209
191
195
228
(97)
130
(20)
(6)
104
(316)
200
(88)
111
(9)
(1)
101
75
277
(64)
213
(40)
2
175
(8)
252
(97)
155
(22)
(1)
132
(222)
276
(127)
149
(17)
–
131
11
448
(112)
336
(90)
1
247
(4)
531
(111)
420
(122)
–
298
–
614
(98)
516
603
(71)
532
600
(66)
534
(153)
(162)
(163)
–
362
–
(1)
370
–
(1)
370
–
(212)
177
168
(91)
142
243
298
362
370
370
6,316
2,923
3,394
3,394
1,446
4,840
85
6,499
3,096
3,403
3,403
1,518
4,921
82
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
13c
59%
1.7
5,895
2,985
2,910
2,910
1,515
4,425
202
34c
82%
1.2
5,817
2,829
2,987
2,987
1,482
4,470
203
34c
68%
1.5
5,587
2,832
2,755
2,755
1,578
4,333
200
34c
55%
1.8
5,001
2,594
2,407
2,407
1,394
3,800
197
34c
53%
1.9
4,511
2,151
2,360
2,360
938
3,298
175
30c
47%
2.1
Dividend per ordinary share
11.0c
11.0c
14.5c
13.5c
Dividend payout ratio 1
Dividend cover 1
81%
1.2
81%
1.2
60%
1.7
67%
1.5
Earnings per ordinary share 1
13.6c
13.6c
24.4c
22.1c
22.2c
41.4c
50.0c
61.7c
63.4c
63.8c
Return on equity 1
EBIT to sale 1
EBIT to funds employed 1
ROFE 2 (EBIT to average
funds employed 1)
3.2%
4.3%
4.7%
3.0%
4.0%
4.1%
5.6%
5.9%
7.6%
5.0%
5.5%
6.6%
4.8%
5.7%
8.5% 10.0% 13.2% 15.4% 15.7%
8.6% 10.8% 12.9% 14.0% 14.4%
6.5% 10.1% 11.9% 14.2% 15.9% 18.2%
4.7%
4.7%
7.4%
6.2%
6.3% 10.1% 12.1% 15.1% 17.0% 19.3%
Net interest cover (times) 1
Gearing (net debt to equity)
2.3
43%
2.3
45%
4.4
16%
2.6
45%
2.2
55%
4.0
52%
4.8
50%
6.3
57%
8.5
58%
9.1
40%
Gearing (net debt to net debt
plus equity)
Net tangible asset backing
per share
30%
31%
14%
31%
35%
34%
33%
36%
37%
28%
$3.17
$3.31
$3.91
$3.92
$4.12
$4.41
$4.41
$4.07
$3.57
$3.65
1
Excludes the impact of significant items in 2013, 2012, 2011, 2010, 2009 and 2008.
2 Refer to the 2013 Remuneration Report on page 41 for a discussion of how ROFE will be used as an additional performance hurdle under the Company's long term incentive plan from FY2014.
Results for the years ended 2005 to 2013 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.
Boral Limited Annual Report 2013 129
Boral Limited
Annual Report
For the year ended 30 June 2013
Chairman’s Review
Chief Executive’s Review
Financial Review
Divisional Performance
Sustainability Overview
Executive Committee
Board of Directors
Corporate Governance Statement
Directors’ Report
Remuneration Report
Financial Statements
Income Statement
Statement of Comprehensive Income
Balance Sheet
Statement of Changes in Equity
Statement of Cash Flows
Notes to the Financial Statements
1 Significant accounting policies
2 Segments
3 Profit for the period
4 Significant items
5 Discontinued operations, assets held for sale
2
4
6
10
18
22
23
24
32
39
56
56
57
58
59
60
61
61
67
69
71
and business disposals
Income tax expense / (benefit)
73
75
6
76
7 Dividends
8 Earnings per share
77
9 Cash and cash equivalents and cash on deposit 78
78
10 Receivables
11
79
12
Inventories
Investments accounted for using the
equity method
Intangible assets
13 Other financial assets
14 Property, plant and equipment
15
16 Other assets
17 Payables
18 Loans and borrowings
19 Other financial liabilities
20 Current tax liabilities
21 Deferred tax assets and lilabilities
22 Provisions
80
81
82
84
85
86
86
86
87
87
89
Issued capital
23
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 statement of cash flows
36 Parent entity disclosures
37 Deed of cross guarantee
Statutory Statements
Shareholder Information
Financial History
Company Information
91
92
93
94
95
100
101
109
114
114
116
119
120
121
122
124
126
129
130
Non-IFRS Information
EBIT before significant items and net profit after tax before significant
items are Non-IFRS measures used to provide a greater understanding
of the underlying performance of the Group. This information has been
extracted or derived from the financial statements. Significant items are
detailed in Note 4 to the financial statements and relate to income and
expenses that are associated with significant business restructuring,
impairment or individual transactions.
The sections of our Annual Report titled Chairman’s Review, Chief
Executive’s Review, Financial Review and Divisional Performance
comprise our operating and financial review (OFR) and form part of
the Directors’ Report.
Boral Limited Annual Report 2013 1
CHAIRMAN’S
REVIEW
From the
Chairman
The past 12 months has been a
period of further change at Boral.
In response to competitive
pressures, changes in markets
and longer-term opportunities,
the Company’s portfolio has
been realigned, its organisational
structure has been streamlined, the
workforce has reduced and Boral’s
strategic priorities have been
strengthened.
An important leadership change was completed in October
2012, with the appointment of Mike Kane as Boral’s new CEO
& Managing Director. Mike brings 40 years of valuable industry
experience to the role including the experience he gained while
steering Boral’s US business from the trough of the Global
Financial Crisis.
Performance and strategic priorities
With a renewed senior executive team and a rationalised divisional
structure, a detailed review of Boral staffing levels resulted in a
reduction of more than 800 positions from the organisation. This is
expected to deliver $90 million of annualised savings. Importantly,
Boral continues to employ more than 12,600 people across our
global divisions, including around 7,860 employees in Australia.
In addition to overhead cost savings, it has been important for the
Group to focus on reducing capital expenditure and generating
cash to reduce debt levels at this low point in the cycle. The
results to date are commendable and in line with the undertakings
Mike Kane made in late 2012. Good progress has been made in
delivering significant cost reductions, reducing stay-in-business
and growth capital expenditure to below $300 million, and
generating $173 million of cash from divestments and the sale of
surplus land.
External conditions have had a significant impact on the business.
Cyclical low levels of activity, unfavourable shifts in demand,
increased competition, the high Australian dollar and unrecovered
costs associated with the carbon tax have meant Boral’s financial
performance remains disappointing.
An underlying profit after tax1 of $104 million was 3% above the
prior year result of $101 million. Earnings before interest and tax
(EBIT)1 of $228 million was 14% ahead of the prior year. This
return on Boral’s invested capital remains less than satisfactory
and will continue to be an area of focus in the year ahead.
After recognising $316 million of net significant items, the Group
reported a net loss after tax of $212 million.
With both the Board and management of the view that the
performance of the business needs significant improvement, we
are confident in the future prospects of the Company. Boral’s
Construction Materials & Cement division is set to continue to
perform well, Boral’s US business is very well-positioned to return
to profitability towards the end of FY2014 as the market recovery
continues, the Gypsum division remains a very attractive growth
platform, and steps are underway to return Building Products in
Australia to profitability.
Shareholder returns and alignment
The Board has resolved to pay a final dividend of 6.0 cents per
share, bringing the full year dividend to 11.0 cents (fully franked),
which is in line with last year. The final dividend will be paid on
27 September 2013.
During the year, the Board undertook a review of Boral’s executive
remuneration structure to align incentives more closely with key
business objectives and shareholder returns.
2 Boral Limited Annual Report 2013
1 Excluding significant items.
New executive staff appointments were also made during the
year, namely: Robert Gates (Chief Administrative Officer), Damien
Sullivan (Group General Counsel) and Dominic Millgate (Company
Secretary). Matt Coren (Group Strategy and M&A Director) and
Kylie FitzGerald (Group Communications & Investor Relations
Director) are also existing members of the leadership team. Post
year end Andrew Poulter left Boral for personal reasons and was
replaced as Chief Financial Officer by Rosaline Ng, who has spent
the past four years as Boral USA’s Chief Financial Officer.
The Board recognises the many decades of combined
contribution from the senior executives who left Boral during
the year, including Murray Read, Bryan Tisher, Mike Beardsell,
Margaret Taylor and Robin Town.
Boral’s renewed executive team has significant global industry
experience and is leading a cultural change program across the
Group, with a focus on improving returns and delivering better
safety outcomes.
Beyond the new executive team, the Board has confidence
in the depth of management talent across the business. The
considerable strength of our regional management teams and their
local market knowledge complements the global experience and
strategic focus of Boral’s senior executives.
On behalf of the Board, I congratulate Mike and his team on
the progress made in FY2013 and thank all employees for their
contribution during a year of significant change and challenging
market conditions.
Dr Bob Every AO
Chairman
A key objective for Mike and his executive team is to significantly
improve Boral’s return on funds employed (ROFE) in the medium
term, and then targeting a longer-term ROFE of around 15%.
To enhance focus on improving returns, the Board has introduced
a second measure to the long-term incentive (LTI) program.
Changes will see long-term incentives potentially realised by
around 130 of Boral’s most senior executives if ROFE hurdles and
TSR hurdles are met following a three year performance period.
The Remuneration Report on page 39 provides more details on
the LTI structure and other changes introduced from FY2014.
Impairments and significant items
Significant items totalling a $316 million after tax loss were
reported for the year.
These significant items largely related to asset impairments as a
result of capacity rationalisation and permanent structural industry
changes in Australia, as well as organisational restructuring and
redundancy costs. The Board believes the asset impairments were
an appropriate response to global and domestic industry changes,
positioning the Company well for the long term and setting a more
realistic platform for the future.
The Board
With the exception of Mike Kane’s appointment as CEO &
Managing Director, the composition of the Board remained
unchanged in FY2013. At the 2012 Annual General Meeting, John
Marlay and Catherine Brenner were re-elected to the Board. Eileen
Doyle, Richard Longes and I will stand for re-election at this year’s
Annual General Meeting.
In May 2013, the Board visited the USA, spending a week with
Boral’s US management team, employees and customers. We
were all impressed by Boral’s reorganised and efficient production
footprint, our extensive distribution network, Boral’s relationships
with customers – from the largest production builders through to
niche builders – and our strengthening track record of bringing
new products to market in the USA. The Board has great
confidence in the US management team and Boral’s ability to truly
leverage the upside of the housing recovery in that country.
The Board has site visits planned in Australia and Asia this
financial year.
Boral’s people
Several senior level changes took place during the year under
Mike Kane’s leadership.
Joe Goss was appointed Divisional Managing Director of the
newly combined Boral Construction Materials & Cement division,
Al Borm became President of Boral USA, and Darren Schulz was
appointed Executive General Manager of Boral Building Products.
Frederic de Rougemont continued in his role of Divisional
Managing Director, but his portfolio increased as the Australian
and Asian plasterboard businesses were combined under a single
division – Boral Gypsum.
Boral Limited Annual Report 2013 3
CHIEF EXECUTIVE’S
REVIEW
From the
CEO
When I became CEO & Managing
Director in October 2012, it was
obvious that difficult market
and economic conditions were
presenting significant challenges
for Boral. My job is to ensure that
the business is in the best shape
possible at every point in the cycle.
I am focused on the things that we
can control.
4 Boral Limited Annual Report 2013
After nearly 40 years in the building and construction industry,
I have seen my fair share of cyclical downturns, and my experience
tells me that the upturns will come. But when the markets recover,
we need to deliver exceptional performance to more than offset the
poor performance at the low point in the cycle.
A strategy to Fix, Execute and Transform
In late 2012, I set a series of simple and clear mandates for myself
and the organisation:
• deliver world-class safety performance;
•
•
clean up Boral’s portfolio and simplify our structures;
significantly reduce overhead costs that have built up
over time; and
• maximise cash generation and conserve capital to
reduce debt.
I set these priorities as part of a drive to “fix” Boral. I believe that
it will take about two years to get the Company into good shape
so that we can then focus our efforts on “transforming” Boral
into a global building and construction materials company that is
known for its world leading safety performance, innovative product
platform and superior returns on shareholders’ funds.
We are fixing Boral through safety interventions, portfolio reshaping
and restructuring, and vigilantly managing costs, cash and capital
through the downturn.
I recognise that we need to ensure that our people are
well-equipped to “execute” our plans and initiatives efficiently and
consistently. We are driving consistency and discipline across the
areas of safety, employee engagement, and the Boral Production
System, which is underpinned by a comprehensive set of LEAN
and Sales & Marketing Excellence tools. These activities are
driving improvement outcomes across the business and helping
us to streamline processes and reduce costs.
Deliver world-class safety performance
While Boral’s lost time injury frequency rate (LTIFR) of 1.8 for
FY2013 was in line with the prior year, this is short of our target
to deliver an LTIFR for employees and contractors which is
considered global best practice. Despite good results in some
businesses, there has been no real overall improvement in Boral’s
safety performance in five years.
To engage employees and reinvigorate efforts to improve safety
performance, we launched a series of senior management safety
interventions across all our divisions, beginning two years ago in
the USA and culminating over the next two years throughout Asia
and Australia.
In December 2012, I undertook the first safety intervention in
our Australian business. I spent three nights with an asphalt
team in Queensland, speaking to every Boral employee involved
in the operation to understand their issues and ideas in regard
to working safely. We have taken that feedback to implement
improvements and have rolled out a behaviour-based pilot
program in that part of the business to improve safety outcomes.
Discussions like these are occurring throughout Asia and Australia
as senior executives deliver the all-important message that safety
comes first – before production.
Boral’s portfolio and simplified structures
Significant progress was made during the year to further reshape
Boral’s portfolio and realign the organisation.
Boral’s portfolio has been simplified and improved following the
divestments of construction materials in Asia, masonry on the
East Coast of Australia and construction material operations in
Oklahoma. The exiting of clinker manufacturing at Waurn Ponds
in Victoria, engineered flooring production in New South Wales,
exporting of woodchip from New South Wales and softwood
distribution in Queensland, have also strengthened Boral’s portfolio.
While divestments and closures have been necessary to deliver
a more profitable portfolio over time, we have allocated growth
capital expenditure to those businesses that have the potential to
deliver strong earnings growth, particularly construction materials
in Australia, gypsum in Asia and cladding in the USA.
With the reshaping of Boral’s portfolio, the organisational structure
has been streamlined from six to four operating divisions. This has
reduced costs and duplication, strengthened collaboration, and
improved the line of sight through the business.
Boral’s new Executive Committee
Boral’s new 11-person Executive Committee includes eight
members who have joined us in the past year. Most of these
new appointments have been internal appointments, which is an
indication of the depth of talent in the business.
In addition to the internal Boral experience that the team has, the
global experience of the team has been significantly strengthened.
All but three members of the team have worked across at least
two continents, with some having worked across three or four.
Collectively, the team brings experience from the world’s largest
building and construction materials players including Lafarge,
Holcim, CRH, Hanson/Heidelberg and US Gypsum.
Costs, cash and capital
In January 2013, I announced that our headcount would be
reduced by 700 administration and managerial positions,
supporting a more efficient, streamlined overhead structure. We
have exceeded this estimate, with a reduction of more than 800
positions. This has resulted in the expected delivery of $90 million
of annualised cost savings, with $37 million delivered in FY2013.
The two year FY2013–2014 target of delivering between
$200 million and $300 million of cash proceeds from land sales
and divestments remains on track, with $173 million of cash
proceeds delivered in FY2013.
In FY2013, capital expenditure was also highly prioritised and
kept below $300 million. A total of $111 million was spent on
stay-in-business (SIB) capital compared with $192 million in the
prior year, representing 38% of depreciation. Growth capital
totalled $183 million. In FY2014, it is expected that SIB capital
will increase, but the total level of capital expenditure will remain
around $300 million, with growth capital constrained.
Significant items and impairments
As a result of the significant portfolio reshaping and restructuring
undertaken, we incurred $60 million of restructuring costs and
$399 million of asset impairments and write-downs due to
divestments, closures and the permanent structural changes that
have occurred in some of our industries. On a post-tax basis,
significant items totalled a $316 million loss, which included a gain
from the disposal of Asian construction materials together with
insurance settlements.
Divisional performance and outlook
In FY2013, Boral’s largest division – Construction Materials &
Cement – delivered a strong 16% EBIT improvement on the
back of major project activity, prior year acquisitions and property
sales. The division’s performance is expected to remain strong in
the year ahead despite substantially lower property sales and a
slowdown in major project work.
Results from Building Products in Australia were disappointing in
FY2013, with a reported $40 million EBIT loss. Weak demand,
increased competition, significant pricing pressure in key markets
and the cost of production capacity reconfiguration impacted
the result. Further improvement initiatives are underway to
substantially reduce losses in the year ahead.
With an EBIT of $83 million, Boral Gypsum delivered softer
underlying earnings in FY2013 due mainly to cyclical challenges
in some Asian markets and the cost impacts of investment
ramp-ups of three additional board lines that will increase net
capacity by 16%. The business remains extremely well positioned
for future earnings growth in Asia and Australia.
In Boral’s US business, we have continued to reduce losses,
despite a slower than expected rate of recovery due to an adverse
mix shift in the type of housing construction and geographic
sales mix. The business reported an EBIT loss of A$64 million in
FY2013 and is expected to start to turn a profit in the second half
of FY2014.
External pressures are expected to continue in FY2014, including
a similar net cost impact of $15 million from the Australian carbon
tax. Nevertheless, incremental benefits are anticipated from
ongoing improvement, production leverage and cost reduction
initiatives. We are continuing to “right-size” the business and
explore value enhancing opportunities across the portfolio.
I acknowledge that Boral’s EBIT return on funds employed
(ROFE) for FY2013 of 4.7% is unacceptably low. I look forward to
delivering the business objective of returning ROFE to above 15%
in the long term.
Mike Kane
CEO & Managing Director
Boral Limited Annual Report 2013 5
FINANCIAL
REVIEW
Financial
review
Boral’s divisional results were
mixed, with Construction Materials
& Cement performing well, the US
division well positioned to return
to profitability as markets recover,
the Gypsum division experiencing
some short-term challenges
but remaining a strong growth
platform, and Building Products in
Australia delivering a disappointing
result in FY2013.
Revenue
Revenue from continuing operations increased by 10% to $5.2b
as resource sector growth in Australia together with the continued
recovery in the US residential construction markets was supported
by the first full year revenues from the FY2012 acquisitions of
the remaining 50% of Boral Gypsum in Asia and the South East
Queensland quarry and concrete businesses. These increases were
partially offset by further weakening of demand in the Australian
residential markets, which primarily impacted the Building Products
division, which has the greatest exposure to this sector.
The discontinued operations comprise the Thailand Construction
Materials and the Australian East Coast Masonry businesses,
which were sold in December 2012 and March 2013 respectively.
The former Construction Materials and Cement divisions were
merged in the second half year and are now reported as a single
division. These operations were a key driver of the Group’s
revenue growth, the division reporting an 8% increase on FY2012
to $3.1b. There were several factors influencing this result,
including the first time full year consolidation of the Queensland
quarry and concrete acquisitions, the significant concrete demand
from the three Curtis Island LNG projects, the increase in asphalt
demand arising from Queensland infrastructure repairs following
6 Boral Limited Annual Report 2013
the major flooding in 2011 and 2012 and the participation in key
major projects in Victoria and New South Wales.
These positive drivers were partially offset by a mixed outcome in
the residential sector, which historically has comprised circa 35%
of divisional demand. Demand in New South Wales was positive
due to increased activity in Sydney and its metropolitan areas.
The division was successful in gaining the core concrete supply
to the Barangaroo development, which commenced in the final
quarter. Demand in Western Australia also increased, and there
are clear signs of a recovery in the residential sector, although
Boral has less exposure to this market.
Housing activity in our second and third largest markets,
Queensland and Victoria, continued to weaken throughout the
year and had a significant impact on both concrete sales and the
important pull-through of cement and aggregates from Boral’s
vertically integrated positions in these states.
Building Products revenues are predominantly driven by Australian
detached housing construction and were significantly impacted
by low activity levels and further declines in Queensland and
Victoria during the year. Brick and roofing revenues declined by
7% over the prior year. This reduction, together with the significant
overcapacity in the Australian brick industry, has caused continued
downward pricing pressures, particularly in Western Australia,
which has seen margins decline to unsustainably low levels.
The Timber operations were similarly impacted, although
this weakness was further compounded by increased import
competition due to the strength of the Australian dollar and
weak overseas markets together with a significant reduction in
“high end” alterations and additions demand. As a result, Timber
revenues declined by 19% compared to FY2012.
In the USA, the division’s core brick, roof tile and stone demand
is also exposed to the US residential markets. The residential
market recovery is now well underway, with FY2013 housing starts
increasing by 28% on FY2012, the second consecutive year of
growth following a 20% increase in the prior year. At 870,000
housing starts in the 2013 financial year, demand is still 42%
below its long-term average of 1.5m housing starts.
Despite this growth in housing starts, FY2013 revenues increased
by only 10%, to US$569m, year-on-year, reflecting a slower rate
of increase in single family home construction, the key underlying
driver of Boral’s product demand, and the adverse shift in product
intensity. This latter factor, which is seen as a temporary shift in the
early stages of the recovery in the housing markets, has occurred
due to the dominance of the national production home builders,
who are currently targeting lower cost starter homes which use less
brick, stone and roof tiles. This adverse mix is expected to change
as the regional custom home builders return to the market which
will also drive an increase in single family housing construction.
The continued growth in residential demand is a key factor in the
return to profitability for the USA. While management is confident
of a sustained recovery in the US market, any macro-economic
events which significantly impact this recovery may have a material
impact on Group earnings.
Finally, we turn to the Gypsum division, which was formed
in October 2012 following the combination of the Asian
and Australian plasterboard operations. Prior year revenue
comparatives are understated due to the acquisition of the
remaining 50% of Boral Gypsum in Asia in December 2011.
Underlying like-for-like sales revenues for the Gypsum division
increased by 1% over the prior year as a 5% decline in Australia,
due primarily to a reduction in residential construction, was offset
by 4% growth in Asia. The rate of increase in Asia slowed during
the year due to several factors, primarily related to the four key
markets, Korea, China, Thailand and Indonesia, which comprise
over 80% of Boral’s revenues from Asia.
Growth in Thailand and Indonesia continued, driven by strong
economic activity and increased plasterboard use. In China,
growth was sustained through higher demand in the eastern
Shanghai markets and through market share growth in Shandong
following the commissioning of the recently acquired plant in
Shandong in early 2012. Demand declined in the central west
markets of Chongqing and Chengdu due to government lending
constraints imposed to curb housing price inflation.
In Korea, demand also declined, resulting in a 5% volume
reduction due to weaker market conditions and a market share
loss in the first half year, which has since recovered.
The continued emergence of markets in Asia, together with
the realisation of increased plasterboard utilisation, is the key
factor for Boral’s future growth in the region. Asia has in the past
experienced regional market demand cycles, and such future
cycles may present some risk to short-term demand projections.
Boral, however, remains confident in the long-term, strategic
growth potential for plasterboard in Asia.
Earnings
Net profit after tax before significant items for continuing
operations was $114.7m, a 9% increase on the prior year. This
improvement was primarily due to an 18% increase in earnings
before interest and tax (EBIT)1 offset by an $11.1m increase in
interest and $9.9m increase in tax expense.
Interest expense increased due to the full year cost of funding
Boral Gypsum in Asia and South East Queensland quarry and
concrete businesses acquired in December 2011 quarter. The
effective tax rate rose from 8% in FY2012 to 15%, largely due
to the reduction in the proportion of US tax losses which are tax
effected at a higher rate. The tax rate has also continued to benefit
from property sales, which were capital in nature and have been
covered by brought forward capital losses.
Due to the continued US recovery, the further reduction in US tax
losses and lower Property earnings, the future effective tax rate will
progress towards a more normal 23% – 28% range.
The primary drivers for the improvement in Group EBIT were
increased revenues in Construction Materials & Cement and the
USA and the $37m benefit from the overhead cost reductions.
Pricing outcomes were weaker than projected, with concrete
and quarry products varying widely by region and broadly only
recovering the key cost increases from energy, raw materials and
inflation. Cement margins were placed under further pressure by
the continued constraints of import parity costs which suppressed
price rises, preventing the business from recovering costs from
rising energy and fuel cost inflation.
Following the carbon tax introduction from 1 July 2012, it is
estimated that the net cost to the Group was $15m, with little
pass through achieved from additional pricing outcomes. While the
Group reduced its carbon footprint following the decision to cease
the high cost manufacture of cement clinker at Waurn Ponds in
April this year, it is estimated that FY2014 costs will be similar to
those of FY2013. This is due to an increase in the carbon price of
$1.15/tonne together with a reduction in the amount of assistance
to be received under the Jobs and Competitiveness Program.
The Construction Materials & Cement division reported a $38m
or 16% increase in EBIT underpinned by the growth in LNG and
infrastructure revenues and a $16m increase in earnings from the
Property group. The latter’s $28m EBIT now brings to a conclusion
the consistent earnings stream from discontinued and non-core
Income Statement
Year ended 30 June
$millions
Sales Revenue
EBIT/(Loss)1
Interest
Income Tax Expense1
Non Controlling Interests
Underlying Profit/(Loss) after tax1
Net Significant Items
Net Profit/(Loss) after tax
2013
2012
Group
Discontinued
Operations
Continuing
Operations
Group
Discontinued
Operations
Continuing
Operations
5,286.5
77.1
5,209.4
5,010.3
294.1
4,716.2
227.8
(97.4)
(19.6)
(6.4)
104.4
(316.5)
(212.1)
(8.8)
(1.4)
(0.1)
–
(10.3)
11.6
1.3
236.6
(96.0)
(19.5)
(6.4)
114.7
(328.1)
(213.4)
199.6
(88.4)
(8.9)
(1.1)
101.2
75.4
176.6
(1.3)
(3.5)
0.7
(0.3)
(4.4)
(28.7)
(33.1)
200.9
(84.9)
(9.6)
(0.8)
105.6
104.1
209.7
1 Before significant items. EBIT before significant items is a Non-IFRS measure used to provide a greater understanding of the underlying business performance of the Group. The disclosures are
extracted or derived from the audited financial statements.
Boral Limited Annual Report 2013 7
FINANCIAL
REVIEW
land divestment realised over the past seven years. While the
Group still retains a substantial land bank of property assets,
revenues and earnings will be significantly lower in the near term
as resale opportunities are assessed and planning and timing
outcomes optimised in line with future demand.
Underlying divisional earnings at $253m were 10% above FY2012
and benefited from major project revenues which offset the
weakness in residential demand. The importance of the sustained
infrastructure demand was seen in asphalt, where revenues grew
by 5% to $825m, providing a valuable pull through of aggregates.
Cement revenues declined by 7% due to reduced demand in
Victoria and lower wholesale industry sales, though earnings were
sustained through improved plant efficiency and the avoidance of
major repairs at Waurn Ponds prior to its kiln closure in April 2013.
The transition to imported clinker has been successful, with the
supply chain from Asia established and clinker handling equipment
successfully commissioned at the Port of Geelong.
The Building Products division was impacted by the low levels
of Australian residential construction and reported a $40m EBIT
loss, which was $35m lower than the prior year. The division partly
mitigated its losses by the reduction in overhead costs, which will
also benefit FY2014. In addition, the division bore an $8m one-off
cost from the consolidation of its brick operations in Queensland
(Darra 3), New South Wales (Badgerys Creek) and Western
Australia (Midland kilns 7 and 8). These and future capacity
consolidation actions will be necessary to align brick capacity
more closely to projected demand in order to provide the basis for
a recovery in margins to more sustainable levels.
The decline in Building Products earnings triggered a review of
the carrying value of Brick and Timber assets and resulted in a
significant impairment.
The Gypsum operations reported a $17m increase in EBIT due
to the part year consolidation of the results of the Asia operations
in 2012. Australian earnings were level as the weaker market
demand was offset by improved efficiencies and lower costs
following the successful commissioning of the Port Melbourne
plant upgrade. Despite a modest increase in revenues in Asia,
underlying earnings declined by 10%. This resulted from weaker
demand and rising cost pressures in Korea and Vietnam and the
progressive market entry from the Shandong plant in China.
The pursuit of the strategy to increase both the size and the share
of the higher margin technical board sectors and to increase plant
utilisation are the key opportunities and risks to the projections for
Boral’s operations in Asia.
The USA reported a further $20m (23%) reduction in EBIT losses
during the year through the continued recovery in its core brick,
stone and tile markets, but fell short of expectations due to the
unanticipated reduction in product intensity in this, the second
year of the US housing market recovery. The return to a normal
housing mix will be a key factor in achieving the transition to
profitability in the second half of the 2014 financial year.
The division continues to invest in its innovative composite trim
products and whilst the operation continues to make steady
progress, it will continue in a loss-making position until scale
manufacturing and optimum market price positioning is achieved.
Significant items
The Group reported a net loss after tax of $212.1m due to
$316.5m of net significant items recognised during the year.
These charges relate primarily to the fundamental restructuring
and cost reduction actions taken during the year together with the
impairments taken in the Australian Building Products operations.
The $60m of organisational and restructuring costs relate
to redundancy costs during the year, together with costs of
outsourcing Boral’s Australian IT infrastructure and data centres.
Reconciliation of Underlying Results to Reported Results
$millions
EBIT
Interest
expense
Income tax
Non-controlling
interests
Profit
after tax
Underlying results
227.8
(97.4)
(19.6)
(6.4)
104.4
Significant items
Organisational restructure
Capacity rationalisation and impairments
Australian Building Products
Construction Materials & Cement
USA
Insurance settlements
Gain on disposal of Asian Construction Materials
Income tax benefit
Total significant items
Reported results
8 Boral Limited Annual Report 2013
(59.8)
(208.7)
(160.5)
(29.7)
13.1
12.0
(433.6)
(205.8)
(59.8)
(208.7)
(160.5)
(29.7)
13.1
12.0
117.1
(316.5)
(212.1)
117.1
117.1
97.5
(97.4)
(6.4)
As evident from the segmental earnings, a material structural
decline in the Australian Building Products businesses has
occurred during FY2013. The overcapacity in the Australian brick
industry has lead to an unsustainable decline in product margins.
A reassessment of future demand, margins and capacity has
resulted in a material impairment of both the west coast brick and
masonry and the east coast brick operations.
A review has also been made of the Timber and Windows
operations. In Timber this resulted in the exit of the engineered
flooring and the Queensland distribution and export woodchip
operations and the closure of the Batemans Bay timber mill. In
Windows, further NSW capacity has been closed at Newcastle
and Nowra.
These actions together have resulted in a $209m restructuring and
impairment charge in Building Products.
The $160m impairment in Construction Materials & Cement relates
to the suspension of clinker manufacturing at Waurn Ponds,
Victoria, which was recognised in the first half of FY2013, together
with the impairment of the carrying value of the Berrima Colliery.
The latter has arisen due to current planning uncertainties around
the continued operation of the colliery and its supply of coal to the
Berrima cement plant.
An impairment has also been recognised with regard to Boral’s
NSW land development costs. This has resulted from a change
in strategy to seek an earlier opportunity for the sale of the west
Sydney land development as opposed to retaining the land and
awaiting a future market recovery.
Finally in the USA, a $30m charge has been taken, primarily in
regard to the exit of the tile businesses in Mexico, the impairment
of idle Trinidad assets and the sale of the Oklahoma concrete and
sand operations, the latter of which was completed in the final
quarter of the year.
Cash flow and borrowings
Operating cash flow increased by $161m to $294m through
improved earnings and continued focus on working capital
management. Particular attention has been placed on brick
inventories, which were reduced by 10% in the USA and 20% in
Australia following the capacity constraints imposed in 2012.
Working capital, however, increased by $43m, though at a lesser
rate than in the prior year, due to increases in accounts receivable
arising from higher sales and also from late payments by several
large Australian accounts across the financial year end.
Interest and tax payments declined primarily due to the $57m tax
refund received in the second half year. This refund related to the
tax instalments made during the 2012 financial year which were
levied upon the higher prior year earnings.
Capital expenditure at $294m was tightly managed and held
below FY2012. Stay-in-business expenditure was constrained
to $111m, just 38% of depreciation, in favour of the growth
investment. The key growth projects underway are the new
Peppertree Quarry in New South Wales, the completion of
additional plasterboard capacity in China, Indonesia and Vietnam
and revenue growth projects such as Wheatstone LNG in Western
Australia and Barangaroo in Sydney.
The $173m proceeds from the sale of assets realised during the
year is on track to deliver the $200m – $300m target by the end of
the 2014 financial year.
Net debt reduced by $72m to $1.45b, with the benefits from the
$175m positive net cash flow partly offset by the weakening of
the Australian dollar versus the US dollar in the final quarter of the
year. This resulted in a 9% devaluation over the prior year, causing
a $103m, non-cash increase from the conversion of our closing
US dollar denominated debt at 30 June 2013.
Gearing, net debt to net debt plus equity, reduced to 30%.
The Group has continued to sustain the weighted average debt
maturity in line with Board requirements of over 3.5 years. The
$500m Australian dollar syndicated bank debt facility has been
extended by one year to November 2016, and in January this year
the Group raised A$153m under its European Medium Term Note
program through the issue of a seven year Swiss Bond.
The Company has little exposure to refinancing risk due to the
improved spread of its debt maturities, the realised benefits
from its focus upon tight capital expenditure management, its
asset divestment process and tight working capital management.
In addition, the Company continues to sustain its $0.5b of
unused bank debt facilities as a hedge against unforseen
macro-economic risk.
Foreign currency risk
The recent decline in the Australian dollar versus the US dollar
will be positive for Boral as the US business returns to profitability
towards the end of FY2014. The US losses over the past four
years have benefited from the conversion into Australian dollars,
the higher rate providing lesser dilution to the Group earnings.
Conversely, as the USA returns to profitability, the weaker
Australian dollar will provide an earnings benefit on conversion
to the Group results.
With regard to the balance sheet and specifically the US dollar
debt, the US net assets are closely matched with the US dollar
debt. As the US dollar fluctuates, so do both the US net assets
and the debt, creating a natural hedge.
The other material currency risk is the impact of the increase in
Group debt due to a weakening Australian dollar resulting from the
conversion of the US dollar denominated debt and the potential
impact upon banking covenants. As at 30 June 2013, when the
Australian dollar was US$0.92, the Group's principal bank gearing
measure, gross debt to gross debt plus equity less intangibles,
was at 40%, remaining comfortably within our banking covenant
ratio requirement of 60%.
Boral Limited Annual Report 2013 9
DIVISIONAL
PERFORMANCE
Boral
Construction
Materials
& Cement
Construction Materials
& Cement is Boral’s largest and
most profitable division and
will continue to underpin future
earnings for Boral.
At a glance
Revenue
EBITDA1
EBIT1
Employees
Capital expenditure
Revenue by business
$3,142m
$451m
$281m
5,139
$206m
8%
14%
16%
7%
15%
Property, landfill and transport 6%
Concrete placing 4%
Cement 9%
Concrete 39%
Asphalt 26%
Our business
Boral’s Construction Materials & Cement division is an integrated
business supplying cement, concrete, quarry materials, asphalt,
and concrete placing services to the Australian building and
construction industry. The division also manages a property
operation, a landfill business and an integrated transport business.
Competition and markets
Boral generally competes against two or three large competitors
and a number of smaller, independent players in its construction
materials markets. Boral’s large competitors have global
leadership positions, which help to drive efficiency and best
practice in Australia.
In FY2013, a high cost environment was intensified by the
introduction of the carbon tax and a continued high Australian
dollar, which constrained cement pricing. Cement is the only
business that competes with imports, and in April 2013 Boral
closed its clinker manufacturing operations in Victoria and is now
importing around 30% of its cement needs, which is in line with
the Australian industry.
With barriers to entry lower in concrete and asphalt, a recent
market entrant in asphalt in Queensland has intensified
competition in that region.
Revenues from Construction Materials & Cement are driven by
Australian residential and non-residential construction activity, as
well as construction of roads, highways, subdivisions and bridges
and major project work. In FY2013, detached housing starts were
estimated to have increased by 3%, with total housing starts up
8% to 157,2002, driven by a 16% increase in multi-residential
construction. Non-residential activity is estimated to have declined
4%3 year-on-year, with Queensland and Western Australia
particularly weak. Infrastructure work for roads, highways,
subdivisions and bridges was estimated to be down 3% year-on-
year, with Queensland down 24% and Victoria 14% lower3.
Performance
Construction Materials & Cement revenues of $3.14b increased
$240m (8%) on FY2012, benefiting from increased resources and
major project activity, a full year contribution from the South East
Queensland acquisitions and higher property sales. Increased
construction activity in New South Wales metro, Queensland and
Western Australia country markets offset a marked decline in
demand in Victoria and South East Queensland.
Quarries 16%
EBIT before property sales of $253m was up $22m or 10%, driven
by revenue growth and overhead cost reductions.
Revenues in the second half of FY2013 were however relatively flat
on the prior corresponding period, with improved Concrete and
Quarries revenues offset by lower revenues in Asphalt, Cement
and Concrete Placing.
10 Boral Limited Annual Report 2013
1 Excludes significant items.
2 ABS original data; Jun-13 quarter based on HIA estimate.
3 ABS value of work done rebased to 2010/11 constant prices; BIS forecast used for
Jun-13 quarter.
The following steps were taken to strengthen the business
during FY2013:
ü
restructuring and combining Cement and Australian
Construction Materials into a single division;
ü divestment of Thailand Construction Materials;
ü ceasing clinker manufacturing at Waurn Ponds and
strengthening Boral’s clinker import capabilities;
ü closure of Emu Plains Transport depot and closures or exits
from 19 small and redundant concrete batching plants and
quarry sites;
ü $85m invested as part of the $200m Peppertree Project for a
new, efficient quarry and manufactured sand operation which
will deliver around 100 years of hard rock and sand into the
Sydney market through an integrated rail network. The quarry
is expected to be in full scale operation in early FY2015.
Construction Materials & Cement is expected to deliver a sustained
strong performance in FY2014, but revenues and earnings are
not expected to exceed FY2013 due to an anticipated substantial
decline in Property earnings. The benefit of announced price
increases in Cement (effective October 2013) and in Concrete and
Quarries (effective April 2013), together with overhead reductions
and rationalisation benefits at Waurn Ponds, are expected to be
offset by reduced LNG project activity in the second half of FY2014,
continued weakness in activity in South East Queensland, Victoria
and South Australia and low Property earnings.
Concrete and Quarries revenues in FY2013 were up 13%
and 7% respectively on the prior year. Excluding acquisitions,
concrete volumes were up 2% and quarry volumes were down
6%. Concrete and quarry delivered prices were up 14% and 6%
respectively, reflecting a continued shift to higher priced project
and country markets and strong pricing disciplines. Concrete and
Quarries earnings continued to benefit from supply to the three
Curtis Island LNG projects at Gladstone, which will carry on until
the end of CY2013.
Asphalt revenues increased by 5% year-on-year, benefiting from
flood recovery work and major infrastructure projects including
Jondaryan-Warrego Highway and Port Connect in Queensland,
and Melbourne Peninsula Link in Victoria. Revenue and earnings
in the second half of FY2013 were impacted by: a sharp decline in
road and highways work, particularly in Queensland and Victoria;
increased competitive pressures including a new market entrant
in Queensland; and wet weather in Queensland and New South
Wales which impacted operating efficiency and project timing.
While cement sales volumes increased by 4% and prices were
steady, Cement revenues of $291m were down 7% on the prior
year due to lower wholesale clinker volumes and the loss of lime
and limestone to Bluescope Steel (following the closure of the
Port Kembla furnace in the second half of CY2011). Cement
EBIT of $73m improved by 7%, underpinned by stable operating
performance and overhead cost reductions.
Revenues from the Concrete Placing business, De Martin &
Gasparini, were 6% above FY2012 due to a favourable mix shift,
underpinned by higher volumes of “supply and place” sales, and
an increase in market share.
Property contributed earnings of $28m in FY2013, which is
a $16m increase on the prior year. Significant transactions
contributing to this result included the sale of surplus land at Darra
and Lawnton in Queensland, and Red Hill in Western Australia.
While the lost time injury frequency rate (LTIFR) in the Cement
business was 0.5, which is in line with global best practice, overall,
the division has more work to do to improve its LTIFR of 2.0 for
employees and contractors. Safety interventions are continuing,
and new behaviour-based safety programs have been piloted in
the Queensland Asphalt business and in the De Martin & Gasparini
Concrete Placing business.
Strategic priorities and outlook
As Boral’s largest and most profitable division, Construction
Materials & Cement delivered a return on funds employed of
12.5% in FY2013. This division will continue to underpin future
earnings for Boral, with the business to benefit over time as
the New South Wales Peppertree Quarry investment comes to
market, the returns on the Queensland acquisitions made in 2011
continue to grow, and continuous improvement programs deliver
further benefits.
Boral Limited Annual Report 2013 11
DIVISIONAL
PERFORMANCE
Boral
Building
Products
Boral Building Products is
continuing to take steps to help
return the business to profitability.
At a glance
Revenue
EBITDA1
EBIT1
Employees
Capital expenditure
Revenue by business
$592m
$(3)m
$(40)m
1,816
$22m
10%
109%
671%
10%
30%
Windows 21%
Bricks
and Roofing 53%
Timber 26%
12 Boral Limited Annual Report 2013
Our business
Boral’s Building Products division in Australia manufactures and
supplies bricks, roof tiles, timber and windows to the residential
and non-residential construction sectors. In Western Australia and
South Australia, Boral also continues to manufacture concrete
masonry products which are integrated with the local Bricks and
Roofing operations.
Competition and markets
The smaller Building Products division is suffering from industry
overcapacity and significant competitive pressures in all of its
markets. Despite a 42% reduction in Boral’s brick capacity in
recent years, further restructuring in Bricks is required to address
poor profitability and industry overcapacity in New South Wales
and Victoria (due to higher density and lower brick-intensity
housing), and in Western Australia (where increased competition
has seen a major structural change in the industry and capacity).
With political and economic uncertainty in Australia, a low interest
rate environment is having little effect on stimulating a housing
recovery. High manufacturing costs were made worse by the
introduction of the carbon tax, and a strong Australian dollar
supported a high level of import competition in Timber in FY2013,
constrained pricing and resulted in Boral exiting the export
woodchip business in June 2013.
Around 68% of Building Products’ revenue was derived from new
dwelling construction, with the majority of this from detached
housing starts; a further 20% of revenues came from the alterations
and additions market. In FY2013, housing starts were up 8% to
157,2002, but detached housing starts were estimated to have
only increased by 3%, with multi-family construction, which is
less product intensive, up by 16%. The shift to urban multi-family
dwellings in Australia is continuing and is not transitionary, which is
having an adverse impact on building products demand. Alterations
and additions activity was down 11% on the prior year, which
significantly impacted Boral’s Timber business.
Performance
Building Products revenues of $592m declined 10% on the prior
year, reflecting lower volumes and mixed pricing outcomes. These
lower volumes were underpinned by a temporary loss in east coast
brick market share following product availability constraints and a
loss in timber market share due to increased import competition.
Building Products reported volume declines of 4% in Bricks3,
8% in Roofing3 and 9% across Hardwood and Softwood. Prices
were marginally higher in Bricks and Hardwood, broadly flat in
Roofing, and lower in Softwood. The division also saw a reduction
in woodchip sales due to the loss of its major overseas customer,
which resulted in Boral’s exit from the woodchip export business in
June 2013.
An EBIT loss of $40m in FY2013 was $35m lower than in the prior
year, primarily driven by lower volumes in Bricks and Timber as
well as lower margins.
1 Excludes significant items.
2 ABS original housing starts; Jun-13 quarter based on HIA estimate.
3 Not including Masonry volumes.
Combined revenues from the Bricks and Roofing business
declined by 7% over the prior year, with earnings falling by
$21m due to lower sales volumes, competitive price pressures
in Western Australia and $8m in one-off impacts from Bricks
capacity optimisation projects. Three Bricks capacity optimisation
projects were undertaken in FY2013, all of which were essentially
completed in the second half of the year – the upgrade of Darra
line 1 in Queensland (increasing plant output by 10% following
the closure of Darra line 3 in 2012); the consolidation of Badgerys
Creek production into Bringelly in New South Wales; and the
transfer of products from mothballed kilns 7 and 8 to kiln 11 in
Western Australia.
The Timber business reported a 19% revenue decline and an
$11m reduction in earnings on the prior year, as a result of a
number of factors, including:
•
•
•
significantly lower demand for decorative hardwood products
at the premium end of the new housing and alterations and
additions markets;
increased import and domestic competition in softwood and
hardwood; and
a substantial decline in revenue from the woodchip export
business as the high Australian dollar reduced price
competitiveness.
Windows revenues were down 6%, reflecting weak residential
activity in Victoria and the impacts of the closure of the Newcastle
and Nowra window fabrication sites in New South Wales.
Improvement initiatives have since been implemented which
should benefit FY2014 earnings.
The Building Products division played a key role in realising
overhead cost savings, delivering a $12m reduction in
administration costs during the year. Substantial restructuring and
streamlining of the business took place during the year, including in
Timber, where Boral has eliminated peripheral activities, having now
exited from the woodchip export business, softwood distribution in
Queensland and engineered flooring production at Murwillumbah.
In an effort to return Building Products to profitability, it is critical that
margins are recovered to achieve a sustainable business base. Boral
is continuing to review value creating opportunities for its Australian
Bricks business, further reduce costs and increase prices.
Safety performance in Building Products in FY2013 was
disappointing, with a LTIFR of 4.8. Safety interventions have
commenced, and the Boral Production System (LEAN)
improvement tools are being integrated into safety management
systems.
Strategic priorities and outlook
The smaller Building Products division is suffering from industry
overcapacity and significant competitive pressures. Further
restructuring in Bricks is required to address poor profitability
and overcapacity in New South Wales and Victoria (due to
higher density and lower brick-intensity housing), and in Western
Australia (where increased competition has seen a major structural
change in the industry and capacity). In Timber, Boral has been
working cooperatively with the Forestry Corporation of NSW to
better align short-term log supply with lower demand. Negotiations
are continuing to find a sustainable solution that better aligns
cyclical demand with available log supply through the term of
Boral’s Wood Supply Agreements.
While further work is progressing, the following steps were
taken in FY2013 to streamline the business and help return it to
profitability:
ü divestment of East Coast Masonry;
ü closure or exit of:
– Batemans Bay timber mill;
– woodchip export business;
– softwood distribution in Queensland;
– engineered flooring manufacturing at Murwillumbah;
– Nowra and Newcastle window fabrication operations.
While conditions will remain challenging in FY2014 for Building
Products, the business will benefit from restructuring, price
increases, the non-recurrence of one-off costs, and some
improvement in dwelling activity levels in New South Wales and
Western Australia. Performance will improve significantly, but the
business is expected to remain loss making in FY2014.
Boral Limited Annual Report 2013 13
DIVISIONAL
PERFORMANCE
Boral
Gypsum
Boral Gypsum is a strategically
important division for Boral, with
the leading position in the highest
growth gypsum market in the world.
At a glance1
Revenue
EBITDA2
EBIT2
Employees
Capital expenditure
Revenue by country
$919m
$125m
$83m
3,104
$46m
2%
Other 11%
Indonesia 7%
Australia 36%
China 13%
Thailand 14%
Korea 19%
14 Boral Limited Annual Report 2013
Our business
Boral Gypsum is the leading supplier of plasterboard and interior
lining products across Asia, where it has manufacturing positions in
eight countries. Boral also has a leadership position in Australia, with
manufacturing operations in Queensland, New South Wales and
Victoria and a 50% interest in both a gypsum mining operation in
South Australia and a metal wall and ceiling framing business, Rondo.
Competition and markets
With the leading position in the highest growth gypsum market in
the world, Boral Gypsum is a strategically important division for
Boral. We have more than 40% market share across countries
where the combined population is 570m and where 470m m2 of
plasterboard is currently consumed.
Revenue from Boral Gypsum’s operations in Australia accounted
for 6% of Boral’s revenues in FY2013 and Asia accounted for
11%, with revenues from Korea, Thailand, China and Indonesia
accounting for 82% of this total.
In Thailand, Indonesia and Malaysia, strong economic conditions
continued to increase underlying demand, while Korea and
Vietnam experienced softer market conditions. In China, central
government measures to reduce house price inflation continue to
dampen housing construction demand, particularly at the premium
end of the market, although Boral’s operations continue to grow
share in the north east following entry into the Shandong market
in early 2012. Volume growth is expected across Asia, which will
support a return to pricing stability in the Gypsum business and
will deliver cost benefits as a result of a greater absorption of
capacity increases in China, Indonesia and Vietnam.
In Australia, Boral supplies plasterboard into the residential and
non-residential housing sectors. FY2013 housing starts were up
8% to 157,2003, driven mostly by multi-dwellings as opposed
to detached dwelling construction, and non-residential activity is
estimated to have declined 4%4 year-on-year.
Performance
Boral Gypsum revenues of $919m and EBIT of $83m include a
full year consolidated contribution from Boral Gypsum’s Asian
operations; Boral acquired the remaining 50% interest in Boral
Gypsum Asia on 9 December 2011.
In Australia revenue of $335m was down 5% and EBIT of $25m
was flat year-on-year. Revenues were adversely impacted by lower
market demand resulting in a 2% decline in board volumes, flat
board prices and lower resale product and contracting revenues.
Plasterboard Australia earnings, however, benefited from lower
operational and distribution costs from the upgraded Port
Melbourne plant, reduced overheads and a higher contribution
from the Rondo joint venture.
1 Prior year revenue and earnings are not comparable as prior to December 2011, Boral’s
share of Lafarge Boral Gypsum Asia’s post-tax earnings was equity accounted.
2 Excludes significant items.
3 ABS original housing starts; Jun-13 quarter based on HIA estimate.
4 ABS value of work done rebased to 2010/11 constant prices; BIS forecast used for
Jun-13 quarter.
EBIT from Asia of $57m in FY2013 compares to a contribution
of $41m in the prior year, $10.1m of which was equity income
recognised prior to acquisition of the remaining 50% interest in
Boral Gypsum Asia.
On a like-for-like basis, theoretical consolidation for the prior
comparative period would have resulted in Asia revenue of $559m
and EBIT of $63m in FY2012. On this basis, revenues from Asia
increased 4% while EBIT declined 10%. The benefit of revenue
growth on Asia earnings, most notably in Thailand, China and
Indonesia, was offset by lower volumes and margins in Korea and
Vietnam, as well as the cost of market entry into north eastern
China through the Shandong plant.
Accounting for a combined one third of Asian revenues, Thailand
and Indonesia reported strong revenue growth underpinned by
favourable economic conditions. Margins in Indonesia, however,
were impacted by the ramp-up of the new board line at Cilegon
and higher energy costs. In Korea, which accounts for another
30% of Asian revenues, strong pricing competition in a weak
housing market coupled with higher input costs adversely
impacted margins. Revenues in China benefited from a full year
contribution of the Shandong plant, which was commissioned
in early 2012; year-on-year volume growth continued to be
dampened by weaker construction activity, particularly at the
premium end of the market.
The remaining country markets in Asia account for around 16% of
Asian revenues on a combined basis including Vietnam, Malaysia
and India. Malaysia reported solid revenue growth while Vietnam
experienced a slowing economy and plant performance issues,
which have since been resolved, resulting in lower sales volume
and margins. Sales volumes in India were negatively impacted by
anti-dumping restrictions on sales of imported products.
In line with expectations, the plant expansion of 30m m2 at Cilegon
(Indonesia) was completed in the first quarter of CY2013 and will
be a critical investment in meeting the rapid growth in the Jakarta
market in FY2014. The ramp-up of the Shandong plant has
delivered the expected cost improvements although sales have
been below expectations due to weaker market conditions.
The capacity expansions of 15m m2 at Chongqing (China) and
30m m2 at Ho Chi Minh City (Vietnam) are progressing well,
although the timing of both these projects has been marginally
delayed with expected completion at Chongqing in the second
half of CY2013 and Ho Chi Minh City in early CY2014. In total,
capacity increases of 16% (75m m2) with attendant ramp up costs
have and will detract from earnings performance until capacity
utilisation moves from a current level of 69% to greater than 80%.
Boral Gypsum delivered a good safety outcome in FY2013,
with a LTIFR of 0.9 in line with the targeted LTIFR of less than
1.0. A program of safety interventions is scheduled to continue
over the next two years, and the roll-out of the Boral Production
System underpinned by LEAN tools will be integrated into safety
management systems.
1 Based on total plant capacity at year end.
Strategic priorities and outlook
Boral Gypsum delivered a return on funds employed of 5.3% in
FY2013. FY2013 was a relatively slow growth year with only 4.0%
volume growth in Asia, reflecting a pause in construction markets
in Korea, China and Vietnam. Despite some low growth years,
including during the global financial crisis, sales growth in the
Asian business has averaged 7% per annum since FY2007. The
projected growth trajectory for this business remains strong and
particularly so in Thailand, Indonesia and Vietnam, where forecast
economic growth is high and plasterboard penetration is low.
Compared to Gypsum Asia’s historic capacity utilisation of 78%1 in
FY2007, capacity utilisation in Asia was down to 69%1 in FY2013
following significant capacity investment in the last few years
including 30m m2 of new capacity that came online in Indonesia in
FY2013. Boral is confident of continued growth in the region and
with around 195m m2 of available capacity once 45m m2 capacity
expansions are completed in Vietnam and China in FY2014,
the business is well positioned without the need for significant
investment in capacity in the short- to medium-term. Margins and
profitability will improve as capacity utilisation lifts towards 80%
once new capacity expansions are fully leveraged.
Key steps taken in FY2013 to strengthen the Gypsum business were:
ü combining of Plasterboard Australia and Boral Gypsum Asia
into a single Boral Gypsum division;
ü US$25m spent of approved investments of US$47m to
complete new plasterboard plants in Ho Chi Minh City
(Vietnam), Cilegon (Indonesia) and Chongqing (China).
Access to future technology innovation for the Gypsum business
remains a priority, and all options are being explored.
In FY2014 Boral Gypsum is expected to deliver improved returns
with better volume and pricing outcomes in Australia, Korea and
Vietnam. To the extent that volume improvements can lift capacity
utilisation in Asia, we can expect to deliver improved returns.
Boral Limited Annual Report 2013 15
DIVISIONAL
PERFORMANCE
Our business
Boral has the number one position in clay bricks and
manufactured stone veneer (Cladding) and in clay and concrete
roof tiles (Roofing) in the USA. Boral also operates a national fly
ash business and has construction materials interests in Colorado
and Oklahoma.
Competition and markets
In the USA, while housing starts for FY2013 remained 42% below
the 50-year annual average of 1.5m starts, demand continued its
upward momentum, with total housing starts of 877,000, up 28%
compared to FY2012.
In Boral’s US Brick States2, single family housing starts increased by
22% year-on-year, and in Boral’s US Tile States3, by 43% compared
to the prior year. The higher proportion of starter homes has
adversely impacted brick, stone and tile intensity and sales volume
with subsequent impacts on pricing leverage. A return to a more
typical mix of single- and multi-family housing starts will support
Boral’s volume growth in US markets and price appreciation.
Boral typically competes with two or three major competitors in
the markets in which it operates. Boral’s Cladding and Roofing
products tend to be used by higher end construction and typically
do not compete with lower priced alternative cladding products
such as asphalt shingles and vinyl siding.
Performance
Boral USA revenues of A$555m were up 11% on the prior year,
reflecting the benefit of a 22% increase in single family US housing
starts in Boral’s US Brick States2 and 43% in Boral’s US Tile States3.
The reported EBIT loss of A$64m was a 23% improvement on the
prior year loss of A$84m. US dollar losses of US$66m decreased
by US$21m from FY2012.
The improved result was driven by higher Cladding and Roofing
volumes, better production leverage, operational cost containment
projects and overhead cost reductions which more than offset
cost inflation and lower prices in Cladding and Roofing.
Cladding and Roofing volume gains, however, continued to be
below expectations as growth in new housing construction was
biased towards low cost national production home builders which
typically have a lower intensity of Boral products relative to regional
custom home builders. The adverse mix shift towards production
builders coupled with a geographic mix shift towards lower priced
markets, and a soft re-roof market resulted in average selling
prices declining in Cladding and Roofing.
Revenue from Cladding (Bricks, Cultured Stone and Trim) was
up 16% to US$276m, reflecting a 14% volume increase in both
Bricks and Cultured Stone and a strong uplift in resale product
revenues which partly offset lower prices. Sales of the innovative
composite trim products, which were introduced into the market
less than two years ago, increased significantly, albeit from a low
1 Excludes significant items.
2 McGraw Hill/Dodge data. Boral’s US Brick States include: Alabama, Arkansas, Georgia, Kentucky,
Louisiana, Mississippi, North Carolina, Oklahoma, South Carolina, Tennessee and Texas.
3 McGraw Hill/Dodge data. Boral’s US Tile States include: Arizona, California, Florida and Nevada.
Boral USA
Boral USA, currently the smallest
division by revenue terms, is
expected to grow the fastest as
the residential market continues
to recover.
$555m
$(23)m
$(64)m
2,233
$18m
11%
45%
23%
4%
41%
At a glance
Revenue
EBITDA1
EBIT1
Employees
Capital expenditure
Revenue by business
Construction Materials
and Fly Ash 30%
Roofing 21%
Cladding 49%
16 Boral Limited Annual Report 2013
base; the business will continue to be loss making until scale
manufacturing and optimum market positioning are achieved.
Bricks and Cultured Stone plant utilisation remains low at 41%
and 27% respectively in FY2013, with Bricks benefiting from earlier
capacity reductions following the closure of 45% of Boral’s brick
plants. Commissioning of the Bessemer commercial brick plant
which was completed in the last quarter of FY2013 is expected to
deliver earnings benefits from the second half of FY2014.
Roofing revenues of US$122m increased by 20%, with volumes
improving by 24% and pricing down on last year. Earnings
increased over the prior period due to operational cost reductions
as well as improved volumes.
Combined Construction Materials and Fly Ash revenues of
US$171m were 3% lower on FY2012, with margins slightly down
as FY2012 earnings benefited by $5m from the termination and
settlement of an onerous fly ash contract. Strong volume gains
in the Colorado construction business driven by higher market
demand offset lower Fly Ash revenues which were impacted
by some site closures; volumes in the Oklahoma construction
materials business were broadly flat on last year. The Oklahoma
concrete and sand operations were sold in June 2013.
With a LTIFR of 0.7, Boral USA’s safety performance is benefiting
from the Safety Intervention program which started in this division
two years ago.
Strategic priorities and outlook
Boral USA is currently the smallest division in revenue terms but
is expected to grow the fastest as the residential market recovers
from the worst downturn since the Great Depression. Ongoing
improvements and cost reductions have been implemented, with
the focus being to grow the Cladding and Roofing businesses over
time leveraging the current asset base. In FY2013 the following
steps were taken to improve the US portfolio:
ü commissioning of a new $14m commercial brick line at the
Bessemer brick plant in the USA;
ü closure of the Mexico roof tile plant;
ü divestments of Oklahoma Concrete and Sand operations;
ü outsourcing of brick transport operations.
In FY2014, the continuing US housing recovery should see Boral
USA better positioned to break through to profitability in the
second half, significantly reducing reported losses in FY2014.
Boral Limited Annual Report 2013 17
SUSTAINABILITY
OVERVIEW
Sustainability
overview
Our people
At a glance
FTE employees
JV employees
FTE contractors
Average length of service
Australia
USA
Asia
Women in Boral
Women in management
Women on the Board
FY2013
12,610
574
~6,600
9.1 years
7.7 years
7.5 years
15%
11%
25%
FY2012
14,740
586
~6,300
8.1 years
7.5 years
6.4 years
14%
9%
25%
While a significant change program is taking place within the
organisation, Boral’s long-standing corporate values of Excellence,
Integrity, Collaboration and Endurance are unchanged. Managers
and employees are expected and empowered to take actions
and work together in a way that supports the delivery of Boral’s
immediate priorities and longer-term objectives.
Across its global operations, Boral employed 12,610 full-time
equivalent (FTE) employees and approximately 6,600 contractors
as at 30 June 2013. As a result of major organisational changes,
including closures, divestments, restructuring and an overhead
cost reduction program, there was a 14% decrease in FTE
employees compared to the prior year.
Boral’s more streamlined organisational structure has reduced
bureaucracy and is supporting more efficient decision-making and
accountability.
The average length of service of a Boral employee in Australia is
approximately 9.1 years, an increase on the prior year. In the USA,
the average length of service remains relatively constant at 7.7 years
with Asia’s average length of service moving upwards to 7.5 years.
Employee turnover increased in FY2013 to 25% in Australia and
26% in the USA. The increase in employee turnover reflects the
18 Boral Limited Annual Report 2013
impact of restructuring and divestments in both regions. Employee
turnover for the Asian Gypsum business was 15% for the financial
year, which is in line with recent years.
Diversity
Diversity remains a key area of focus for Boral, specifically gender
diversity and Indigenous relations.
The Company set a diversity objective for the year to improve
the representation of women in key roles, with a specific focus
on recruitment, leadership development, diversity reporting and
pay equity. Women now represent 11% of people working in
management roles in Boral, an increase on the previous year.
Boral continues to actively support and promote its Indigenous
relations strategy and program with a revised Indigenous
Employment Plan to be implemented in FY2014. The Group
is proud of its high level of retention of Indigenous employees,
retaining 97% of the 42 employed in the Australian operations
under the FY2011 strategy.
Training and development
It is an important part of Boral’s people strategy to have engaged
employees with the right skills and capabilities to develop their
careers and perform their roles effectively. A range of methods to
train and develop our people is provided, from on-the-job training
through to leadership development programs.
More recently we have focused on building capability in the
divisions in the areas of safety, people engagement, the Boral
Production System (BPS), sales and innovation. Several regional
initiatives are underway to build the skill sets necessary to deliver
on the promise of these change management tools.
The annual Personal Development Process and mid-year
employee review are important for managing and tracking
employee development. The process is used to identify and
communicate performance expectations and map out plans to
help employees achieve their potential for their benefit and the
benefit of Boral. This process is evolving so that employees are
increasingly expected and supported to take responsibility for their
own career trajectory and to essentially acquire the information
and feedback necessary to put them in a position to excel and
achieve their aspirations.
Workplace health
and safety
Our goal is zero harm. To get there, Boral needs the engagement
of the entire workforce.
In FY2013, Boral’s employee and contractor lost time injury
frequency rate (LTIFR)1 of 1.8 was in line with the prior year.
Despite very good safety outcomes in some businesses, there has
been no real overall improvement in Boral’s safety performance for
the past five years. We expect this to change, and quickly.
Creating a world-class safety culture
Based on the five stages of creating a world-class safety culture2,
Boral has been moving from “realisation” that we need to improve
safety performance, through a stage of using “traditional” policies,
procedures, rules and regulations, to a stage of “observation”
using behaviour-based management and compliance to improve
performance. Our standardised safety management system,
known as 1Boral SMS, is being rolled out across the Australian
1 Per million hours worked.
2 WILSON, L, and HIGBEE, Gary A, “Inside Out”, Electrolab Limited, 2012, p.253.
businesses and is reinforcing these earlier stages of development.
In the USA and in Asia, similar behaviour-based systems are in
place or being rolled out.
In the USA, Boral’s employees reported over 17,000 near misses
in FY2013, reflecting a heightened awareness and focus on
managing risks.
We are now progressing Boral’s cultural change process through
“empowerment” and heading to an “employee-driven, self-
sustaining” safety management culture, which will deliver
real change.
To support this change program, management and employees are
expected to address safety first in all internal communications, and
there is a cultural change taking place whereby the management
of day-to-day safety is being turned over to Boral’s front line
teams. All employees are being empowered to put safety first
and act accordingly. More importantly, we are insisting that the
organisational leadership “walk this talk”.
To further empower employees, senior level “safety interventions”
have been introduced, and new behaviour-based safety systems
are being piloted and integrated with the Boral Production
System to support more effective problem solving, monitoring
and reporting. Training programs regarding the awareness of risk
are also being used to change the way employees identify and
respond to health and safety risks in the workplace. The latest
thinking on the “reticular activating system”, which is a function of
the brain that learns to ignore repetitive stimuli including risks, is
being incorporated into this training.
Senior management safety interventions commenced in Boral’s
US business two years ago and are culminating over the next
two years throughout Asia and Australia. Safety interventions
involve a senior executive spending several days in an operation
meeting one-on-one with every employee to understand their
issues and suggestions in relation to improving health and safety
outcomes. During these discussions, the critically important
message that safety must be given priority over production at all
times is reinforced and discussed. Subject matter experts in the
areas of health and safety and the Boral Production System work
with site managers to coach them in using appropriate tools and
implementing improvement actions.
Performance
Boral deeply regrets that a contractor was fatally injured in a work
related vehicle accident in country New South Wales in June
2013. The driver, who was employed by a contractor to Boral’s
Construction Materials & Cement division, was tragically killed
when the truck left the road after striking another truck travelling
in the opposite direction. While the accident remains under
investigation, the circumstances surrounding this accident have
been communicated throughout Boral to reinforce the potential risks
many of our employees and contractors face in their daily activities.
During FY2013, 81 lost time injuries were sustained in Boral
businesses, resulting in a combined LTIFR for employees and
contractors of 1.8, representing an 11% improvement over the
average of the prior three years. Percentage hours lost across the
businesses was 0.06 in FY2013, which was a slight deterioration
on the average of the prior three years.
Three of Boral’s businesses delivered a LTIFR in line with global
best practice in FY2013 – Boral Cement reported a LTIFR of 0.5,
Boral USA 0.7 and Boral Gypsum’s LTIFR was 0.9.
Boral uses both lag and lead indicators to understand health
and safety performance. We are attempting to rely less on lagging
indicators (eg accidents) and activities (eg managing injuries)
and more on leading indicators such as near miss reporting.
Employee and contractor LTIFR1
3.2
2.0
2.2
2.0
1.8
1.8
FY08
FY09
FY10
FY11
FY12
FY13
Injury type
Injury analysis assists in the development of corrective action
plans, training and process redesign. Four types of incidents
made up around 80% of injuries in Boral’s Australian workplaces in
FY2013: muscular stress (36%), hit by moving object (21%), falls
from same level (15%) and hitting objects with part of the body
(8%). Of the incidents that occurred during the year, the five areas
most affected were the back/neck (21%), shoulder (19%), knee/
leg (18%) and head/face/eyes (15%).
Efforts continue to focus on the root causes of these incidents,
and this has led to a significant decrease in the number of hand
and finger injuries reported during the year, and an increased focus
on ergonomics and the causes of muscular stress.
Muscular stress 36%
Mechanism of injury
Other 20%
Hitting objects with
part of body 8%
Falls from same
level 15%
Hit by moving object 21%
Employee health and wellbeing
Every employee is required to be fit for work and have the required
level of health and fitness to work safely. Pre-employment medical
examinations are required for all roles within Boral, and regular
employment medical examinations are carried out for high risk
roles. Throughout the organisation, work groups and teams can
be seen using pre-shift stretching exercises designed for the
stresses and work practices encountered in their daily work. The
equivalent to a “stretch work-out” before exercising is increasingly
becoming a shift start-up requirement at Boral.
1 Per million hours worked.
Boral Limited Annual Report 2013 19
SUSTAINABILITY
OVERVIEW
Boral continues to be committed to supporting the health and
wellbeing of its employees through its BWell and Employee
Assistance programs, including health assessments, educational
information and counselling services for employees and their families.
Environment
At a glance
FY2013
FY2012
FY20111
GHG emissions (million T CO2e)
Australia
USA
Asia
Total
2.7
0.2
0.5
3.4
2.9
0.2
0.4
3.5
3.0
0.2
0.41
3.6
Mains water (million litres)
3,916
3,500
2,130
PINs
Number
Fines
8
7
5
$31,960 $10,750 $12,473
Boral’s Australian GHG emissions
Other 3%
Diesel and liquid fuels 10%
Natural gas 13%
Calcination 39%
Coal 17%
Electricity 18%
Following our program of restructuring and right-sizing, we are now
optimising integration of environment with health and safety as well
as other relevant functions, and the use of Boral Production System
tools in achieving a sustainable zero harm culture.
While Boral’s operations currently consume a significant amount
of energy and some businesses are particularly emissions
intensive, Boral is transforming itself. We are aiming to have a high
performance, participative culture using the Boral Production System
to eliminate waste, and to integrate research and development
globally into process, product and platform technologies to migrate
away from energy intensive, natural materials.
Greenhouse gas emissions and energy use
In FY2013, greenhouse gas (GHG) emissions from Boral’s fully
owned businesses in Australia, the USA and Asia totalled 3.4
million tonnes of CO2e, which was 3% lower than the prior year.
Australian operations were down 5%, the US operations up 2%,
and the Asian operations up 11% on the prior year.
Boral’s overall energy use in FY2013 was 21.4 petajoules from
fully owned businesses, down 8% on the prior year. Australian
operations were down 10%, the US operations up 6%, and the
Asian operations up 13% on the prior year.
The changes in Boral’s GHG emissions and energy consumption
generally reflect the significantly lower production of building
products and clinker in Australia due to lower demand and a
decision to suspend clinker manufacturing in Victoria and replace
these volumes with imported clinker. This change came into
effect in April 2013. These reductions were only partially offset
by increased construction materials production in Australia and
increased production in Asia.
Boral’s Energy Efficiency Program, which is underpinned by Boral
Production System techniques, has been coupled with a kiln energy
efficiency program to form the basis of our statutory obligations
under the federal Energy Efficiency Opportunities program.
Implications of carbon pricing schemes
Boral submitted its “Interim Emissions Number” report for its
Australian operations in May 2013 and subsequently surrendered
1.4 million carbon credit units in the Australian scheme. These
units had been issued to Boral as Jobs and Competitiveness
Program assistance in late 2012, as Boral is an emissions
intensive trade exposed clinker and lime manufacturer.
Boral’s Western Landfill (Victoria) operation generated its first
tranche of 135,000 carbon credit units, for combusting landfill
gas, under the federal Carbon Farming Initiative, which were then
sold for $3m. Boral received a $3.2m grant towards the upgrade
of our Darra brick kiln in Queensland under the Clean Technology
Investment Program which is funded from carbon pricing revenue.
In China, at least two of Boral’s plasterboard operations are
subject to pilot regional carbon emissions trading schemes
and mandated government energy efficiency schemes. The
requirements and likely cost impacts of these schemes are yet
to be confirmed.
Infringements
During FY2013 Boral incurred eight Penalty Infringement Notices
(PINs), with seven related to environmental contraventions in
Australia and one in Thailand, resulting in $31,960 in fines.
One fine in Western Australia was for $15,000, for unauthorised
vegetation clearing (sometime in 2008, but only discovered
mid-2012) within a quarry production area, while another for
$9,400 was in Shongkla, Thailand for exceedence of trade (water)
waste discharge criteria in October 2012. The other penalties
were low level, for minor air emissions or water discharge
contraventions. There were no infringements in the USA.
20 Boral Limited Annual Report 2013
1
FY2011 GHG emissions data include 100% of BGA, Wagners and Sunshine Coast Quarries.
FY2011 water data exclude 50% of BGA previously owned by Lafarge, Wagners and Sunshine
Coast Quarries.
HomeAid
Boral continued its partnership, initially established in 2006, with
HomeAid in the USA with contributions of cash and product to
provide shelter for the homeless. Through this program Boral works
with customers, showcases our products and engages employees.
Glenn & Ken Moss Post Graduate Scholarships in
Engineering Research
Boral has contributed to the Glenn & Ken Moss Post Graduate
Scholarships in Engineering Research at the University of
Newcastle in memory of Dr Ken Moss AM, Boral’s past Chairman.
At the time of his death in October 2012, Dr Moss was Chancellor
of the University and had himself established the scholarship
program. It reflects his strong ties to the region and the field of
engineering and it is a fitting tribute for Boral to assist an additional
PhD student at the University for the next two years.
Outward Bound
This is the second year that Boral has made a financial
contribution to the Australian Outward Bound Development
Fund to assist youth in need. This year’s program was held in
May 2013 in south east New South Wales and involved 41 high
school students from Bega and the surrounding districts who
could not otherwise have taken part in such a program.
Redkite
Boral is a Supporting Partner of Redkite’s Financial Assistance
Program which enables the charity to assist families dealing with
cancer to meet day-to-day needs such as buying groceries,
paying utility bills and putting petrol in the car to get a child to
treatment. Boral’s support has assisted more than 110 families
across Australia this year.
Taronga Conservation Society
This very successful partnership has been in place since 2003,
and Boral has recently renewed its sponsorship until October
2015. Boral has been involved in many aspects of Taronga
Zoo’s operations, including the supply of product and technical
advice, and is currently the naming rights sponsor of the Youth
at the Zoo (YATZ) program. Employees can access Zoo passes
to visit Taronga and Western Plains Zoos, attend Boral’s Family
Day event and participate in the annual Boral YATZ Eco Fair. The
Zoo’s Twilight at Taronga Concert program also provides Boral’s
sales and marketing team with a unique customer hospitality
opportunity.
Touched by Olivia Foundation
Boral donated concrete to its second all-abilities playground
through its national partnership with the Touched by Olivia
Foundation. Alice’s Place is located in St Albans in Victoria, and
was officially opened in July 2013.
These playgrounds cater for children of varying abilities and ages to
play side-by-side on the same equipment, ensuring the integration
of children with special needs and their families in the community.
Water management
Boral’s operations consume water for manufacturing and
maintenance processes. Mains and town water are Boral’s most
significant water source, with a total of 3.9 gigalitres of mains
water used in Boral’s wholly owned and controlled businesses in
Australia, the USA and Asia in FY2013. Mains water use increased
by 0.4 gigalitres on the prior year largely due to the increased
manufacturing of plasterboard in Asia. The significant increase
in mains water use on FY2011 levels reflects Boral's 100%
ownership of the gypsum business in Asia since December 2011.
Boral Timber and biodiversity
Boral’s Environmental Policy includes a commitment to protect
biodiversity. The majority of timber for Boral’s timber business is
supplied by the Forestry Corporation of NSW, which is certified
to meet the Australian Forestry Standard (AFS), an independently
audited forest management standard. All products made by Boral
Timber are also certified to the AFS Australian Chain of Custody
standard, which traces Boral’s production back to its source of
supply. This provides Boral’s customers with certainty that its
products come from legal and sustainable sources.
Community
partnerships
Boral undertakes a thorough selection process to identify the
most appropriate and meaningful community partnerships. The
organisations chosen must be well run and reputable, and share
similar values to Boral.
In FY2013, Boral contributed a total of $439,855 to its corporate
community partnerships. In addition, Boral employees throughout
Australia conducted further fundraising activities for Redkite and for
the Juvenile Diabetes Research Foundation (JDRF). Over $72,000
was raised by 22 Boral employees who participated in the JDRF
Ride To Cure Diabetes held in South Australia in January 2013.
In addition to the Group’s corporate partnerships, Boral’s
businesses support 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.
Bangarra Dance Theatre
Boral has partnered for over a decade with Bangarra, Australia’s
leading Indigenous contemporary dance company and is proud to
be the Sydney season sponsor. Boral employees, customers and
suppliers attended performances in regional centres and capital
cities throughout Australia during FY2013. For the second year
running, Boral has contributed towards the salary of a new trainee
dancer for Bangarra as part of its sponsorship funding.
Conservation Volunteers Australia (CVA)
This is Boral’s longest-standing community partnership, and the
current three year term is focused on developing biodiversity
classrooms in schools across Australia. Each year up to 45 practical
conservation projects are conducted on or near the school grounds
of selected schools. This year, projects were concentrated in New
South Wales, South Australia and Queensland, including creating
vegetable or bush food gardens, maintaining rainforest habitat and
creating frog-friendly environments.
Boral Limited Annual Report 2013 21
Executive Committee
Mike Kane
Chief Executive Officer &
Managing Director
Joe Goss
Divisional Managing
Director, Boral
Construction Materials
& Cement
Joined in 2013 from Lafarge
North America and was
previously with Schlumberger
NV. Joe has experience in
roles across Europe, the USA
and Australasia and holds a
PhD and a Masters of Science
in Materials Science
& Engineering.
Rosaline Ng1
Chief Financial Officer
Robert Gates
Chief Administrative
Officer
Matt Coren
Group Strategy and M&A
Director
Darren Schulz
Executive General
Manager, Boral Building
Products
Joined in 2002 and held
strategy and executive
roles in Bricks, Distribution
and Roofing in the USA,
Trinidad and Mexico.
Previously he was at
PricewaterhouseCoopers,
Optus Communications
Limited and Minter Ellison,
Lawyers. Darren has a
Bachelor of Business
(Accounting) and an MBA.
Joined in 1995 and held senior
finance roles in Boral’s Building
Products division. Ros left in
2001 to work at Phoneware/
Sirius Telecommunications
before returning to Boral
in 2002. Most recently she
has overseen the finance
function in the USA. Ros has
a Bachelor of Commerce and
is a member of the Institute of
Chartered Accountants.
Joined in 2010 and has
previously held the roles of
Chief Information Officer
and Vice President Lean
Manufacturing in the USA.
Prior to Boral Robert was in
operations with McKinsey
& Company. He has a
Masters of Science (Business
Administration) and a Bachelor
of Science (Civil Engineering).
Joined in 2010 following a
career in global investment
banking. Matt focused on
strategy in industrial sectors
and M&A and capital markets
transactions. He has degrees
in commerce and law.
Al Borm
President & CEO,
Boral USA
Frederic de Rougemont
Divisional Managing
Director, Boral Gypsum
Joined in 2010 and was
previously President, Boral
Roofing USA. Al has held
roles with USG Pioneer,
Hanson Building Products and
Oldcastle APG and worked
across North America, Europe
and Asia. He has a Bachelor
of Science in Management
and an MBA.
Joined in 2011 and was
previously CEO of LBGA and
prior to that held senior roles
with Lafarge in South Africa
and South Korea as well as
research roles in France and
the USA. Frederic has a PhD
in Physical Sciences.
Joined Boral in 2009 and was
previously General Counsel,
Australia. Damien has worked
as a lawyer in private practice
and in-house legal roles in
Sydney, New York and Los
Angeles. He has Law and
Applied Science degrees.
Joined in 2010 and was
previously Boral’s Assistant
Company Secretary. Prior to
Boral he held legal counsel
and company secretary roles
in Australia and Singapore
and legal roles in London and
Sydney. Dominic has finance
and law degrees.
With Boral from 1995 to
2010 then re-joined in 2012.
Kylie has a background in
production management and
corporate affairs and investor
relations. She has a Ceramic
Engineering degree and
an MBA.
Damien Sullivan
Group General Counsel
Dominic Millgate
Company Secretary
Kylie FitzGerald
Group Communications
& Investor Relations
Director
1
Appointed Chief Financial Officer effective 15 September 2013 replacing Andrew Poulter who
was Boral's Chief Financial Officer throughout FY2013.
22 Boral Limited Annual Report 2013
Board of Directors
holding the position of Managing
Director, Investment Banking of ABN
AMRO Australia. She 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 and of the Remuneration &
Nomination Committee.
Brian Clark
Non-executive Director
Age 64
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.
Bob Every AO
Non-executive Chairman
Age 68
Dr Bob Every AO 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, Western Australian
Institute for Medical Research (WAIMR)
and UNSW Foundation Limited, and a
Patron 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 Engineering. He has
a science degree (honours) and a
doctorate of philosophy (metallurgy)
from the University of New South
Wales. In 2012, he was appointed an
Officer of the Order of Australia for
his distinguished service to business,
particularly through leadership roles
in the Australian steel industry, as
an advocate for corporate social
responsibility, and to the community as
a contributor to educational, charitable
and cultural organisations.
Dr Every is a member of the
Remuneration & Nomination
Committee and of the Health,
Safety & Environment Committee.
Catherine Brenner
Non-executive Director
Age 42
Catherine Brenner was appointed to
the Boral Board on 15 September
2010. Ms Brenner is a Director of AMP
Limited and Coca-Cola Amatil Limited.
Previously held directorships include
Centennial Coal Company Limited and
the Australian Brandenburg Orchestra.
Ms Brenner is a Trustee of the Sydney
Opera House Trust and was previously
a member of the Takeovers Panel. She
has extensive experience in corporate
finance and capital markets, previously
Eileen Doyle
Non-executive Director
Age 58
Dr Eileen Doyle joined the Boral Board
in March 2010. She is a Director of
GPT Group Limited and Bradken
Limited. She is also a Director of a
number of private companies and
Government boards including being
Deputy Chairman of CSIRO. Dr Doyle
was previously a Director of OneSteel
Limited and Ross Human Directions
Limited and Chairman of Port Waratah
Coal Services Limited. Her executive
career was in the materials and water
industries in Australia, with CSR
Limited, BHP Limited and Hunter
Water Corporation. 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.
Mike Kane
CEO & Managing Director
Age 62
Mike Kane joined the Boral Board in
October 2012 when he was appointed
CEO & Managing Director, after being
President of Boral USA since February
2010. He has extensive experience
in the building and construction
industry including 24 years in senior
executive roles with US Gypsum,
Pioneer/Hanson Building Materials,
Johns-Manville Corp and Holcim.
Mr Kane’s experience spans a broad
range of geographies across America,
Europe and the Asia Pacific, and
his portfolio of responsibilities has
included cement, aggregate, concrete,
plasterboard, bricks and roof tile
businesses. Prior to joining Boral,
he was CEO and Board Member
of Calstar Products Inc, a Silicon
Valley Clean Technology start-up
reinventing exterior building materials
for sustainable construction. Mr Kane
has a Bachelor of Arts in Sociology
from Southern Illinois University, a Juris
Doctorate from DePaul University’s
School of Law in Illinois, and a Masters
in Science from Creighton University,
School of Law in Nebraska.
Richard Longes
Non-executive Director
Age 68
Richard Longes joined the Boral
Board in 2004. He is the Chairman of
Austbrokers Holdings Limited and a
Director of Investec Bank (Australia)
Limited and Voyages Indigenous
Tourism Australia Pty Ltd. He was
previously a Director of Metcash
Limited, a founding 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.
John Marlay
Non-executive Director
Age 64
John Marlay joined the Boral Board
in December 2009. He is a Director
of Incitec Pivot Limited, Chairman
of Cardno Limited, a Director of
the Climate Change Authority (a
Government Statutory Authority) and
Independent Chairman of Flinders
Ports Holdings Pty Limited. He
was previously a Director of Alesco
Corporation Limited. Mr Marlay
was the Chief Executive Officer
and Managing Director of Alumina
Limited from December 2002 until
his retirement from that position
in 2008. He has also 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.
Paul Rayner
Non-executive Director
Age 59
Paul Rayner joined the Boral Board
in 2008. He is a Director of Qantas
Airways Limited, Chairman of Treasury
Wine Estates Limited and a Director
of 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 Executive Director-Finance
and Administration of Rothmans
Holdings Limited and 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.
Boral Limited Annual Report 2013 23
Corporate Governance Statement
Introduction
This section of the Annual Report outlines Boral’s governance
framework.
Boral is committed to ensuring that its policies and practices
reflect a high standard of corporate governance. The Directors
consider that Boral’s governance framework and adherence
to that framework are fundamental in demonstrating that the
Directors are accountable to shareholders and are appropriately
overseeing the management of risk and the future direction of the
Group to enhance shareholder value.
Throughout FY2013, Boral’s governance arrangements were
consistent with the Corporate Governance Principles and
Recommendations published 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/article/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.
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 CEO 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 that appropriate resources are
available;
•
approving the Company’s financial statements and annual
budget, and monitoring financial performance against the
approved budget;
24 Boral Limited Annual Report 2013
•
•
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);
considering and making decisions about key management
recommendations (such as major capital expenditure,
acquisitions, divestments, restructuring and funding);
• determining dividend policy and the amount, nature and
timing of dividends to be paid;
• monitoring Board composition, processes and performance;
and
• monitoring the effectiveness of systems in place for keeping
the market informed, including shareholder and community
relations.
Non-executive Directors spend approximately 35 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 the Peppertree Quarry in the Southern Highlands of NSW
and the Health, Safety & Environment Committee members visited
Boral’s plasterboard operations at Camellia in Western Sydney.
The Directors also undertook a tour of certain of the Group’s
roofing, flooring and stucco operations in the USA.
Delegation to management
The Board has delegated to the CEO & Managing Director and,
through the CEO & Managing Director, 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 CEO & Managing Director 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 CEO & Managing Director 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 CEO & Managing Director. The criteria assessed are both
qualitative and quantitative and include profit performance, other
financial measures, safety performance and strategic actions.
The CEO & Managing Director annually reviews the performance
of each of Boral’s senior executives, being members of the
Executive Committee, using criteria consistent with those used
for reviewing the CEO & Managing Director. The CEO & Managing
Director reports to the Board through the Remuneration &
Nomination Committee on the outcome of those reviews.
An evaluation of the performance of the CEO & Managing
Director and senior executives of Boral took place in FY2013 in
accordance with the process described above.
Further details on the assessment criteria for CEO & Managing
Director and senior executive remuneration (including equity-based
plans) are set out in the Remuneration Report which forms part of
the Annual Report.
PRINCIPLE 2: STRUCTURE THE BOARD TO ADD VALUE
Structure of the Board
Together, the Board members have a broad range of financial
and other skills, extensive experience and knowledge necessary
to oversee Boral’s business. The Board of Directors comprises
seven non-executive Directors (including the Chairman) and, from
1 October 2012, also includes one executive Director, being the
CEO & Managing Director. The roles of Chairman and CEO &
Managing Director are not exercised by the same individual. The
skills, experience and expertise of each Director are set out on
page 23 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 FY2013, Mike Kane joined the Board (in October 2012).
The period of office held by each current Director is:
Richard Longes
Bob Every
Eileen Doyle
Brian Clark
Paul Rayner
John Marlay
Catherine Brenner
Mike Kane
Appointed
Last Elected at an
Annual General Meeting
2004
2007
2010
2007
2008
2009
2010
2012
4 November 2010
4 November 2010
4 November 2010
3 November 2011
3 November 2011
1 November 2012
1 November 2012
Not applicable
Details of the number of meetings attended by each Director are
set out on page 35 in the Directors’ Report.
Chairman’s appointment and responsibilities
The Board selects the Chairman from the non-executive
independent Directors. The Chairman leads the Board and
is responsible for the efficient organisation and conduct of
the Board’s functioning. He ensures that Directors have the
opportunity to contribute to Board deliberations. The Chairman
regularly communicates with the CEO & Managing Director 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 a Health, Safety & Environment Committee. The
qualifications of each Committee member are set out on page 23 of
the Annual Report, and the number of meetings they attended during
the reporting period is set out on page 35 in the Directors’ Report.
These Committees review matters on behalf of the Board and, as
determined by the relevant Charter:
•
refer matters to the Board for decision, with a
recommendation from the Committees; or
• determine matters (where the Committee acts with delegated
authority), which the Committees then report to the Board.
Board Committees are discussed further below under Principle
4 (Audit Committee), Principle 7 (Health, Safety & Environment
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; and
the Director has no material contractual relationship with a
Boral company other than as a Director.
It is considered that none of the interests of Directors with other
firms or companies having a business relationship with Boral
could materially interfere with the ability of those Directors to
act in Boral’s best interests. Material in the context of Director
independence is, generally speaking, regarded as being 5% of the
revenue of the supplier, customer or other entity being attributable
to the association with a Boral company or companies.
Accordingly, all of the non-executive Directors (including the
Chairman) are considered independent.
Boral Limited Annual Report 2013 25
CORPORATE
GOVERNANCE
Nomination and appointment of Directors
Board succession planning, and the progressive and orderly
renewal of Board membership, are an important part of the
governance process.
The Board’s policy for the selection, appointment and
reappointment 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.
The Board is also looking to maintain gender diversity in its
membership. Currently two of the seven non-executive Directors
on the Boral Board are women.
As part of the appointment process, Directors consider Board
renewal and succession plans and whether the Board is of a
size and composition that is conducive to making appropriate
decisions.
The appointment of Directors follows a process during which the
full Board assesses the necessary and desirable competencies
of potential candidates and considers 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.
26 Boral Limited Annual Report 2013
The Board does not regard nominations for re-election as being
automatic but rather as 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 performance of Directors standing for
re-election in the absence of those Directors. Each Director’s
suitability for re-election is considered on a case-by-case basis,
having regard to individual performance. Tenure is just one of the
many factors that the Board takes into account when assessing
the independence and ongoing contribution of a Director.
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 FY2013 in accordance with the process
described above.
Conflicts of interest
In accordance with Boral’s Constitution and the Corporations Act
2001 (Cth) (Corporations Act), Directors are required to declare
the nature of any interest they have in business to be dealt with by
the Board. Except as permitted by the Corporations Act, Directors
with a material personal interest in a matter being considered
by the Board may not be present when the matter is being
considered and may not vote on the matter.
Access to information, independent advice and
indemnification
After consultation with the Chairman, Directors may seek
independent professional advice, in furtherance of their duties, at
the Company’s expense. Directors also have access to members
of senior management at any time to request relevant information.
The Company Secretary provides advice and support to the Board
and is responsible for Boral’s day-to-day governance framework.
Under the Company’s Constitution and agreements with Directors
and to the extent permitted by law, the Company indemnifies
Directors and executive officers against liabilities to third parties
incurred in their capacity as officers of the Company and against
certain legal costs incurred in defending an action for such a
liability.
Diversity at Boral
Boral is committed to fostering an inclusive workplace which
embraces diversity and recognises that a diverse workplace can:
• produce better business outcomes by leveraging the unique
experiences of people with diverse backgrounds; and
•
improve employee engagement and retention by fostering a
culture that promotes personal achievement and is based on
fair and equitable treatment of all employees, irrespective of
their individual backgrounds.
The Board, in conjunction with management, is responsible for
establishing policy and objectives aimed at improving diversity
within Boral’s workforce (in particular, gender diversity).
Boral’s Diversity Policy is available on Boral’s website.
Diversity at Boral is underpinned by the following principles:
•
•
•
•
recruiting and promoting on merit;
remunerating on a non-discriminatory basis;
ensuring that development activities are available to all on a
non-discriminatory basis; and
striving to increase the proportion of women in the organisation,
particularly in executive and senior management roles.
As part of Boral’s commitment to gender diversity, the Board has
set the following measurable objectives:
• Establish monitoring and reporting mechanisms to track, by
gender, pay levels, selection, retention and promotion trends
across the business.
• Review the means by which Boral recruits graduates, and set
appropriate targets for female graduate intake for each of the
next five years, with progress to be reviewed and tracked on
an annual basis and the necessary actions to achieve those
targets to be identified and implemented.
• Achieve increased female participation in the Boral Leadership
Development Program and the Boral Emerging Leaders Program.
•
Incorporate diversity related KPIs as part of each senior
manager’s Personal Development Process, and track
progress against those objectives as part of their annual
performance appraisal.
• Establish partnership/sponsorship/membership with an external
body promoting a women’s leadership initiative or female
participation in the construction and building materials sector.
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 the 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.
The Code and related guidelines and policies guide the Directors,
the CEO & Managing Director, 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.
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.
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.
Boral Limited Annual Report 2013 27
CORPORATE
GOVERNANCE
Progress toward achieving these objectives is summarised in the following table:
Measurable objective
Progress
Reporting mechanisms
Graduate recruitment
Leadership programs
Diversity related KPIs
A six monthly reporting process has been developed and is in place to monitor, track and
report on key diversity measures. Reports are prepared for each division and used by
divisional management as input for the Group’s performance management process.
The graduate program has undergone revision, and a two year structured program
is under development for the FY2014 intake, which will set intake targets for female
graduates by discipline and otherwise focus on attracting female graduates.
Female participation in leadership programs is increasing in the three key leadership
programs. Female participation in FY2013 was as follows:
• Frontline Leadership Development Program – 31%;
• Emerging Leaders Program – 19%;
• Leadership Development Program – 22%.
Diversity was included in the curriculum of all leadership programs.
One of the key attributes of the Group’s performance management process relates
to leadership in the area of the promotion of gender diversity. Personal objectives for
managers in relation to gender diversity have been developed as part of the FY2014
performance management process.
Partnership with external body
Boral is a member of the Diversity Council and will be taking a more active role in utilising
the Council’s resources and expertise.
Management is responsible for implementing initiatives throughout
the businesses to achieve the Group’s diversity objectives, and
more generally to reinforce Boral’s commitment to fostering
an inclusive and supportive workplace in accordance with the
principles outlined in the Diversity Policy.
In terms of the Group’s profile, currently two of the seven non-
executive Directors on the Boral Board are women. Approximately
11% of employees in senior management positions are women,
including the Group Communications & Investor Relations Director,
the Group Finance Manager, the Group HR Manager, the Group
Remuneration and Benefits Manager and the CFO of Boral’s
US operations who has been recently appointed CFO of Boral
Limited, effective 15 September 2013. Overall 15% of the Boral
workforce are women.
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
The Committee met four times during FY2013.
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:
28 Boral Limited Annual Report 2013
•
•
•
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 that 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 for year end financial reports,
the CEO & Managing Director 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.
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 CEO & Managing Director 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 Audit Committee monitors procedures to ensure the rotation
of external audit engagement partners every five years as required
by the Corporations Act.
the Continuous Disclosure Policy adopted by the Board. These
mechanisms also ensure accountability at a senior executive level
for that compliance.
The CEO & Managing Director, the Chief Financial Officer,
the Group General Counsel and the Company Secretary are
responsible for determining whether or not information is required
to be disclosed to the ASX.
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
activities.
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
Boral Review.
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.
All formal reporting and Company announcements made to
the ASX are published on Boral’s website after 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.
The Independence Declaration by the external auditor is set out on
page 38.
Internal audit
During FY2013, the internal audit function at Boral has consisted
of a dedicated in-house team with individuals based in Australia,
Asia and the USA. The internal audit program is approved by
the Audit Committee before the start of each year and the
effectiveness of the function is kept under review.
PRINCIPLE 5: MAKE TIMELY AND BALANCED DISCLOSURE
The Company appreciates the importance of timely and adequate
disclosure to the market, and is committed to making timely
and balanced disclosure of all material matters and to effective
communication with its shareholders and investors so as to give
them ready access to balanced and understandable information.
The Company complies with all relevant disclosure laws and
ASX Listing Rule requirements and has in place mechanisms
designed to ensure compliance with those requirements, including
Boral encourages shareholders to attend and participate in all
general meetings including annual general meetings. Shareholders
are entitled to ask questions about the management of the
Company and of the auditor as to its conduct of the audit and
preparation of its reports.
Notices of Meeting are accompanied by explanatory notes to
provide shareholders with information to enable them to decide
whether to attend and how to vote upon the business of the
meeting. Full copies of Notices of Meeting and explanatory notes
are posted on Boral’s website. If shareholders are unable to attend
general meetings, they may vote by appointing a proxy using the
form attached to the Notice of Meeting or an online facility.
Shareholders are invited, at the time of receiving the Notice of
Meeting, to put forward questions that they would like addressed
at the Annual General Meeting.
Boral’s policy on Communications with Shareholders is available
on Boral’s website.
Boral Limited Annual Report 2013 29
CORPORATE
GOVERNANCE
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 (through the
Audit Committee) on the effectiveness of the management of the
material business risks faced by Boral during FY2013.
Risk management matters are analysed and discussed by the
Board at least twice yearly 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 management
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 at every Board meeting and
certified by Treasury management and the Audit Committee
twice yearly;
• material 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 Boral’s business.
The internal audit function is involved in risk assessment and
management and the measurement of effectiveness. The internal and
external audit functions are separate and independent of each other.
30 Boral Limited Annual Report 2013
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 Boral’s
material business risks.
Boral’s Risk Management Policy is available on Boral’s website.
Health, Safety & Environment Committee
The Board has a Health, Safety & Environment Committee which
comprises three independent non-executive Directors.
The members of the Committee are:
Eileen Doyle (Chairman)
Bob Every
John Marlay
The Committee met on four occasions during FY2013.
The Committee’s responsibilities include the review and
monitoring of:
•
•
•
•
•
•
the effectiveness of the Group’s policies, systems and
governance structure for identifying and managing health,
safety and environment risks which are material to the Group;
the policies and systems within the Group for ensuring
compliance with applicable legal and regulatory requirements
associated with health, safety and environment matters;
the performance of the Group, assessed by reference to
agreed targets and measures, in relation to health, safety and
environment matters, including the impact on employees,
third parties and the reputation of the Group;
the output of the Group’s audit performance in relation to
health, safety and environment matters;
the adequacy of the Group’s systems for reporting actual or
potential accidents, breaches and significant incidents, and
review of investigations and remedial actions in respect of any
significant incident; and
the Group’s reports which are prepared and lodged in
compliance with its statutory obligations concerning the
environment.
The Health, Safety & Environment Committee Charter is available
on Boral’s website.
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 Officer and Chief Financial Officer
declaration
The Chief Executive Officer and the Chief Financial Officer have
provided the Directors with a declaration in accordance with
section 295A of the Corporations Act for FY2013. The Board
confirms that it has received assurance from the Chief Executive
Officer 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.
•
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.
Remuneration of non-executive Directors
The remuneration of the non-executive Directors is fixed. The
non-executive Directors 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 55.
PRINCIPLE 8: REMUNERATE FAIRLY AND RESPONSIBLY
Remuneration & Nomination Committee
The Board has a Remuneration & Nomination Committee which
comprises four independent non-executive Directors.
The members of the Committee are:
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.
Brian Clark (Chairman)
Bob Every
John Marlay
Catherine Brenner
The Committee met on eight occasions during FY2013.
The Remuneration & Nomination Committee has a formal Charter
which sets out its role and responsibilities, composition, structure
and membership requirements.
The Remuneration & Nomination Committee Charter is available
on Boral’s website.
The Committee makes recommendations to the full Board on
remuneration arrangements for the CEO & Managing Director 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;
Boral Limited Annual Report 2013 31
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 2013:
(1) Review and results of operations
Information on the operations and financial position of Boral is set
out in our operating and financial review (‘OFR’), which comprises
the Chairman’s Review, Chief Executive’s Review, Financial Review
and Divisional Performance on pages 2 to 17 of the Annual Report
accompanying the Directors’ Report.
Risks
The achievement of Boral’s future prospects may be adversely
impacted by several risks, some of which are beyond our control.
An overview of the material business risks facing the Group and
our approach to managing those risks is set out below.
Additional information regarding Boral’s material business risks
is included in the OFR. The Group’s broader risk identification
and management framework is also set out in the Corporate
Governance Statement on pages 24 to 31 of the Annual Report.
(2) State of affairs
The following significant changes in Boral’s state of affairs
occurred during the year:
• Mike Kane was appointed CEO & Managing Director on
1 October 2012.
•
The Group reported a net loss after tax of $212.1m after
recognising a net significant loss of $316.5m as detailed in
Note 4 to the financial statements.
(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.
(5) Likely developments, business strategies, prospects
and risks
Likely developments, business strategies and prospects
The OFR refers to likely developments in Boral’s operations in
future financial years and the expected results of those operations.
Other than the information set out in the OFR, information
regarding other likely future developments in Boral’s operations
and the expected results of those operations has not been
included in the Directors’ Report.
The OFR sets out information on Boral’s business strategies and
prospects for future financial years. This information has been
provided to enable shareholders to make an informed assessment
of our business strategies and future prospects.
While the Company continues to meet its obligations in respect of
continuous disclosure, we have not included information where it
would be likely to result in unreasonable prejudice to Boral. This
includes information that is commercially sensitive, is confidential
or could give a third party a commercial advantage (for example,
details of our internal budgets and forecasts).
32 Boral Limited Annual Report 2013
Industry and market risks
As Boral operates mainly in residential, non-residential and
infrastructure construction markets, its financial performance is
closely tied to the performance of those markets. The housing,
industrial, commercial and infrastructure construction markets
are cyclical and affected by various factors beyond the Group’s
control, including:
•
the performance of national economies in the countries in
which Boral operates;
• monetary policies in the countries in which Boral operates
(such as a change in interest rates);
•
•
•
the allocation of government funding for public infrastructure
and other building programs;
the level of demand for construction materials and services
generally; and
the availability of labour, raw materials and transport services
as well as the price and availability of fuel and energy.
To manage the above risks, we have implemented key initiatives
to reduce costs, improve operating efficiencies and encourage
sustainable performance within the Group. These initiatives include
the implementation of organisational restructuring and the allocation
of capital expenditure to those businesses with the potential
to deliver strong earnings growth. Boral also actively manages
short-term fluctuations in fuel and energy costs through the use of
hedging instruments and electricity demand management.
Competition risks
Boral operates in competitive markets, against domestic suppliers
and in some cases imported product suppliers. The competitive
environment can be significantly affected by local market forces,
such as new market entrants, production capacity utilisation,
economic conditions and product demand. Such competition
may lead to product price volatility risk. Boral has in place various
strategies to manage these risks, including seeking to sustain and
improve margins by reducing costs, optimising capacity in line
with projected demand, and increasing the size and share of our
higher margin businesses. We are also exploring options for future
technology innovation in order to diversify our product range and
develop new products in our core markets.
Health, safety and environment risks
Boral is subject to a broad range of health, safety and
environmental laws, regulations and standards in the jurisdictions
in which it operates, which could give rise to losses and liabilities.
Due to the nature of the operating scale of the construction and
building materials industry, there is a risk of incidents occurring
that may cause injury to Boral’s staff or contractors, or damage to
the environment. Any such events may result in additional costs
and fines, and may adversely affect Boral’s reputation.
To manage these risks, Boral applies strict operating standards,
policies, procedures and training to ensure compliance with all
applicable health, safety and environmental laws. We are focused
on achieving better safety outcomes across the Group as part of
our broader strategy to deliver world-class safety performance.
The Group also has established reserves for known environmental
liabilities, including quarry remediation, that are probable and
reasonably capable of estimation. Further details regarding our
approach to managing health, safety and environment risks are
contained in the OFR and Sustainability Overview on pages 2 to
21 of the Annual Report.
Business interruption risks
Due to the high fixed-cost nature of the construction and building
materials industry, interruptions in production capabilities and
lower capacity utilisation at key manufacturing and processing
facilities may have a material adverse effect on the productivity
and results of the Group’s operations. The Group’s manufacturing
processes and related services are dependent upon critical
plant, which may occasionally be out of service or damaged
as a result of unanticipated failures, incidents or force majeure
events. Furthermore, from time to time, there may be raw material
shortages which are critical to Boral’s ability to manufacture certain
products and to meet market demand, as a result of force majeure
type events.
To mitigate against potential losses from such risks, Boral has
instigated a comprehensive risk management program which
actively manages and mitigates risks from a Group through to local
site operating level through both management intervention and
business continuity planning. Boral also covers certain major risk
exposures through its comprehensive Group insurance program,
which provides cover for damage to facilities and associated
business interruption as well as product performance.
Foreign exchange risks
Boral has significant operations in Australia, the USA and Asia
and is also dependent on imported products and supply of plant
and equipment. The Group is therefore exposed to the macro-
economic conditions in those regions and to movements in various
foreign currencies (in particular, to movements in the Australian and
US dollar exchange rates). As part of its approach to managing
these risks, Boral’s US net assets are closely matched with its US
dollar debt in order to hedge against fluctuations in the US dollar.
The Group also utilises forward exchange contracts for material
product and equipment supply in order to manage against short- to
medium-term currency fluctuations.
(6) Environmental performance
Details of Boral’s performance in relation to environmental
regulation are set out under “Environment” on pages 20 to 21 of
the Annual 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 3.5 cents per ordinary share
(fully franked at the 30% corporate tax rate) for
the year ended 30 June 2012 was paid on 28
September 2012
the interim dividend of 5.0 cents per ordinary share
(fully franked at the 30% corporate tax rate) for
FY2013 was paid on 25 March 2013
Total
Dividend
$m
26.6
38.3
The Directors have resolved to pay a final dividend of 6.0 cents
per ordinary share (fully franked at the 30% corporate tax rate) for
FY2013. The dividend will be paid on 27 September 2013.
(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
Mike Kane
Catherine Brenner
Brian Clark
Eileen Doyle
Richard Longes
John Marlay
Paul Rayner
Dr Every, Ms Brenner, Dr Clark, Dr Doyle, Mr Longes, Mr Marlay
and Mr Rayner have been Directors at all times during and since
the end of the year. Mr Kane was CEO & Managing Director from
1 October 2012.
Boral Limited Annual Report 2013 33
DIRECTORS’
REPORT
(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
31/10/2005
31/10/2012
06/11/2006
06/11/2013
06/11/2007
06/11/2014
Exercise
price
Balance at
beginning
of year
Number
$7.65
$7.27
$6.78
2,479,300
3,720,400
4,816,200
11,015,900
Options
issued
during
the year
Number
Options
lapsed
during
the year
Number
–
–
–
–
2,479,300
136,100
193,100
2,808,500
Shares
issued during
the year as
a result of
exercise
of options
Options at
end of year
Options
exerciseable
Number
Number
Number
–
–
–
–
–
–
3,584,300
1,792,150
4,623,100
3,975,866
8,207,400
5,768,016
The options referred to above were held by 95 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 or
interests of the Company or any controlled entity are under option
other than as set out in this clause.
(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 (Cth) (‘Corporations Act’).
During the year, Boral paid premiums in respect of Directors’ and
Officers’ Liability and Legal Expenses insurance contracts for the
year ended 30 June 2013 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 2014. 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 its
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 page 23 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
Wesfarmers Limited from February 2006 (current)
Mike Kane
No other directorships to be disclosed
Catherine Brenner
Coca-Cola Amatil Limited from April 2008 (current)
AMP Limited from June 2010 (current)
Centennial Coal Company Limited from October 2005
to September 2010
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 to August 2012
John Marlay
Incitec Pivot Limited from December 2006 (current)
Cardno Limited from November 2011 (current)
Alesco Corporation Limited from November 2011 to
December 2012
Paul Rayner
Centrica plc from September 2004 (current)
Qantas Airways Limited from July 2008 (current)
Treasury Wine Estates Limited from May 2011 (current)
34 Boral Limited Annual Report 2013
(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
Meetings
attended
Audit
Committee
Meetings
attended
Meetings
held while
a member
Meetings
held while
a Director
Remuneration
& Nomination
Committee
Health,
Safety &
Environment
Committee
Meetings
held while
a member
Meetings
attended
Meetings
held while
a member
Meetings
attended
Catherine Brenner
Brian Clark
Eileen Doyle
Bob Every
Mike Kane
Richard Longes
John Marlay
Paul Rayner
17
17
17
17
14
17
17
17
17
16*
17
17
14
17
17
17
4
–
4
–
–
4
–
4
4
–
4
–
–
4
–
4
* The Board Meeting that Dr Clark was unable to attend was an unscheduled meeting.
8
8
–
8
–
–
8
–
8
8
–
8
–
–
8
–
–
–
4
4
–
–
4
–
–
–
4
4
–
–
4
–
Bob Every is not a member of the Audit Committee but attended two of the meetings held by that Committee from 1 July 2012
to 30 June 2013. Mike Kane attended all Committee meetings held during the period he was a Director, from 1 October 2012 to
30 June 2013.
(14) Company Secretary
Margaret Taylor was appointed General Counsel and Company Secretary of the Company in November 2008 and remained in this role
until her resignation from the Company with effect from 1 July 2013. 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, and is a Fellow of the Institute of Chartered Secretaries.
Dominic Millgate was appointed Company Secretary of the Company with effect from 1 July 2013, after previously holding the position
of Assistant Company Secretary since 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.
Boral Limited Annual Report 2013 35
DIRECTORS’
REPORT
(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 the date of this Report:
Catherine Brenner
Brian Clark
Eileen Doyle
Bob Every
Mike Kane
Richard Longes
John Marlay
Paul Rayner
Non-
executive
Directors’
Share Plan a
Share
Acquisition
Rights
(SARs) b
Options
–
5,329
–
4,616
–
10,144
–
1,790
–
–
–
–
–
–
–
–
–
–
–
–
847,668c
–
–
–
Shares
15,301
70,628
15,058
65,605
10,100
28,530
25,048
47,957
The shares are held in the name of the Director except in the case of:
• Catherine Brenner, 10,000 shares are held by Brenner Super Pty Ltd for and on behalf of the Brenner Super Fund;
• Brian Clark, 46,585 shares are held by MCG Wealth Management Australia Nominees Pty Limited – and
22,272 shares are held by MCG Wealth Management Australia Nominees Pty Limited – JBC Investment Holdings Pty Ltd ;
• Eileen Doyle, 13,750 shares are held by Mr SE Doyle and Dr EJ Doyle for the S&E Doyle Super Fund A/C;
• Bob Every, 30,000 shares are held by RBC Dexia Investor Service Australia Nominees Pty Ltd ;
• Richard Longes, 22,000 shares are held by Gemnet Pty Limited for Richard Longes Superannuation Fund;
•
John Marlay, 21,069 shares are held by Bond Street Custodians Limited on behalf of The Marlay Superannuation Fund; and
• Paul Rayner, 26,630 shares are held by Yarradale Investments Pty Limited and 20,000 shares are held by Invia Custodian Pty
Limited for and on behalf of Bigpar Pty Ltd (the trustee of the PaulJul Super Fund).
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.
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 FY2013.
b The SARs are rights to acquire shares in the Company under the Boral Long Term Incentive 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 S&P/ASX 100 Index during the vesting period, is satisfied.
c The SARs held by Mike Kane are as follows:
Number of SARs
Expiry Date
78,717
102,285
666,666
12 November 2017
1 September 2018
1 September 2019
(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.
36 Boral Limited Annual Report 2013
(17) Non-Audit Services
Amounts paid or payable to Boral’s auditor, KPMG, for non-audit
services provided during the year by KPMG totalled $487,000.
These services consisted of:
Signed in accordance with a resolution of the Directors.
Taxation compliance in Australia
Taxation compliance/due diligence related
services in jurisdictions other than in Australia
$160,000
$58,000
Australian due diligence and other services
$269,000
Dr Bob Every AO
Director
Mike Kane
Director
Sydney, 10 September 2013
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.
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 because:
• Directors are not aware of any reason to question the
auditor’s independence declaration under section 307C
of the Corporations Act;
•
the nature of the non-audit services provided is not
inconsistent with the requirements of the Corporations Act;
and
• provision of the non-audit services is consistent with the
processes in place for the Audit Committee to monitor the
independence of the auditor.
(18) Auditor’s Independence Declaration
The auditor’s independence declaration made under section 307C
of the Corporations Act is set out on page 38 of the Annual Report
and forms part of this Report.
(19) Remuneration Report
The Remuneration Report is set out on pages 39 to 55 of the
Annual Report and forms part of this Report.
(20) Proceedings on behalf of the Company
No application under section 237 of the Corporations Act
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.
(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 the Directors’ Report have been rounded off to the
nearest one hundred thousand dollars unless otherwise indicated.
Boral Limited Annual Report 2013 37
DIRECTORS’
REPORT
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 2013 there have been:
(i) no contraventions of the auditor independence requirements as set out in the Corporations Act 2001 in relation to the audit; and
(ii) no contraventions of any applicable code of professional conduct in relation to the audit.
KPMG
Greg Boydell
Partner
Sydney, 10 September 2013
38 Boral Limited Annual Report 2013
2013 Remuneration Report
Introduction from the Chairman of the Remuneration & Nomination Committee
Dear Shareholders
I am pleased to present our Remuneration Report for 2013, which is designed to provide a clear and transparent summary of the
remuneration arrangements and outcomes for your Directors and members of the senior executive team.
The 2013 financial year has been another challenging one in terms of the market conditions facing the Company, and the focus
has been to continue to transform the Group’s operating structure so that the organisation is more market responsive and performs
more consistently through the business cycle. As part of this transformation, there has been a significant reduction in headcount,
including a consolidation of senior executive roles and changes in the composition of the senior executive team. Consistent with
the steady financial performance for the 2013 financial year, remuneration outcomes for members of the senior executive team
were modest.
Looking ahead, a number of changes have been made to the remuneration arrangements for senior executives to better align
executive remuneration structures with the Company’s strategy and the new operating structure. Design changes have been
made to the short-term incentive (STI) and long-term incentive (LTI) plans with effect from 1 July 2013, including the deferral of
part of any STI award into equity, the removal of retesting under the LTI plan, and the introduction of a return on funds employed
measure as a second, additional LTI performance hurdle. The Board has also adopted a minimum shareholding requirement for
senior executives. Your Directors are confident that these changes will enhance the alignment between shareholder and executive
interests, and will motivate the behaviours necessary to deliver Boral’s strategy.
On behalf of the Board and the Remuneration & Nomination Committee, I invite you to read the 2013 Remuneration Report and
welcome your feedback on the Company’s approach to, and disclosure of, its remuneration arrangements.
Brian Clark
Chairman of the Remuneration & Nomination Committee
Contents
Introduction: Key changes FY2014
Section 1:
Senior Executive remuneration outcomes
Section 2:
Senior Executive remuneration governance and framework
Section 3:
Senior Executive remuneration elements
Section 4:
Linking remuneration to performance
Section 5:
Senior Executive contracts and transitions
Section 6:
Senior Executive remuneration tables
Section 7:
Non-executive Directors’ remuneration
41
43
44
45
47
50
51
55
Boral Limited Annual Report 2013 39
2013 REMUNERATION
REPORT
The Directors of Boral Limited present the Remuneration Report
(the Report) for the Company and its controlled entities for the
year ended 30 June 2013 (FY2013). This Report forms part of
the Directors’ Report and has been audited in accordance with
the Corporations Act 2001. The Report sets out remuneration
information for the Company’s:
•
non-executive Directors; and
• CEO & Managing Director and other current and former
members of the senior executive team (Senior Executives).
These people are accountable for planning, directing and controlling
the affairs of the Company and its controlled entities. Collectively,
they are the Key Management Personnel (KMP) of the Company.
The broader management group (who also participate in the
various reward programs) are referred to as executives.
Senior Executives
The Company underwent an organisational restructure to
strengthen Boral’s competitiveness, which resulted in a
significantly streamlined, more market responsive organisation with
a lower and more sustainable fixed cost base. Accordingly, there
were a number of changes at the Senior Executive level during
FY2013. The table below shows how the Senior Executive team
changed during the year.
Senior Executives as at 30 June 2013
Role
Dates
Current Senior Executives
Mike
Kane
CEO & Managing
Director
Al Borma
President, Boral
Industries USA
Joseph Gossb Divisional Managing
Director, Boral
Construction Materials
& Cement
3 months as President,
Boral Industries USA
(until 30 September
2012)
9 months as CEO &
Managing Director
(from 1 October 2012)
9 months (from
1 October 2012)
3 months (from
1 April 2013)
Andrew Poulter Chief Financial Officer
12 months
Frederic de
Rougemont
Divisional Managing
Director, Boral Gypsum
12 months
Darren Schulzc Executive General
Manager, Boral
Building Products
5 months (from
1 February 2013)
Former Senior Executives
Ross Batstoned CEO
Mike Beardselle Divisional Managing
Murray Readf
Bryan Tisherg
Director, Boral Cement
Divisional Managing
Director, Boral
Construction Materials
Divisional Managing
Director, Boral Building
Products
3 months (until 30
September 2012)
7 months (until 31
January 2013)
9 months (until 31
March 2013)
7 months (until 6
February 2013)
a Al Borm was President, Boral Roofing USA until he took up his Senior Executive role
on 1 October 2012. His remuneration relating to the period prior to his appointment
as President, Boral Industries USA has not been included in this Report.
b As a result of the organisational restructure, the positions of Divisional Managing
Director, Boral Cement and Divisional Managing Director, Boral Construction
Materials were moved into the new Senior Executive position of Divisional Managing
Director, Boral Construction Materials & Cement.
c Darren Schulz was employed by Boral Industries USA prior to moving into his role as
Executive General Manager, Boral Building Products. His remuneration relating to the
period when he was not a Senior Executive has not been included in this Report.
d From 1 October 2012, Ross Batstone took on a non-KMP role as Chairman, Boral
Gypsum Asia. Ross Batstone retired from Boral on 1 July 2013, and has been
engaged as a consultant for a further period (see pages 50 to 51 below for further
details).
e Mike Beardsell departed the Group on 31 January 2013 when his role was
made redundant.
f Murray Read ceased to be a Senior Executive from 1 April 2013 when he moved
into a temporary transitional role, reporting to the Divisional Managing Director, Boral
Construction Materials & Cement. Murray Read departed the Group on 1 July 2013.
g Bryan Tisher departed the Group on 6 February 2013. As a result of the
organisational restructure, the position of Divisional Managing Director,
Boral Building Products no longer exists.
For those Senior Executives named above who served in a KMP
role for only part of FY2013, this Report only sets out the amounts
they received as remuneration in their capacity as a KMP (unless
otherwise indicated).
Non-executive Directors
The following table sets out the non-executive Directors for FY2013.
Non-executive Directors
Bob Every
Catherine Brenner
Brian Clark
Eileen Doyle
Richard Longes
John Marlay
Paul Rayner
Chairman
Director
Director
Director
Director
Director
Director
40 Boral Limited Annual Report 2013
INTRODUCTION: KEY CHANGES FY2014
A summary of the key changes to remuneration-related matters
approved during the 2013 financial year is set out below. The
changes are effective 1 July 2013 and will apply for the 2014
financial year onwards.
A. Senior Executive remuneration strategy
The cyclical nature of Boral’s business requires a remuneration
strategy that promotes sustained effort and motivates
performance throughout the duration of the business cycle, while
maintaining alignment between the interests of the executives and
Boral’s shareholders.
In order to align more closely Boral’s remuneration strategy with
its business demands, the Board has approved a number of
significant changes to remuneration arrangements for current
Senior Executives. The changes made resulted from a review
conducted by the Remuneration & Nomination Committee, which
was supported by EY, the independent adviser to the Board.
• STI deferral: 20% of STI awards for eligible executives will
be delivered in performance rights, and will be subject to
a two year deferral period. The Company believes that this
additional exposure to the share price for executives will drive
behaviours aimed at increasing shareholder value.
Executives will forfeit the deferred portion of their STI if they
resign or are dismissed from the Company before the end of
the deferral period.
Executives are not entitled to dividends on performance rights
during the deferral period.
The deferral into equity enhances alignment between
executive and shareholder interests and allows the Board to
reduce or cancel the deferred component of the STI under the
new clawback provisions (described below).
• Additional performance hurdle for the LTI plan: in
addition to the existing relative Total Shareholder Return (TSR)
performance hurdle, Return on Funds Employed (ROFE)
will be introduced as a second LTI performance measure.
Two-thirds of the LTI grant will be subject to the existing TSR
hurdle and one-third will be subject to the new ROFE hurdle
(ROFE Component).
ROFE tests the efficiency and profitability of the Company’s
capital investments. ROFE will be determined by the
Board based on earnings before interest and tax (EBIT) as
a percentage of average Funds Employed (where Funds
Employed is the sum of net assets and net debt).
The ROFE performance hurdle and relevant targets as
determined by the Board are intended to reward achievement
linked to improving the Company’s ROFE performance
through the cycle. Our longer term goal is to exceed the cost
of capital, which equates to a ROFE of 15%.
In determining the Company’s ROFE performance, the Board
may make adjustments where it considers it necessary or
appropriate in order to accurately reflect the ROFE outcomes
in a manner that rewards performance that is consistent with
shareholder expectations and the intent and purpose of the
relevant ROFE target.
In regard to the LTI grant expected to be made in September
2013, the percentage of the ROFE Component which
may vest will be determined by the Board based on ROFE
performance for the financial year ending 30 June 2016 in
accordance with the following vesting schedule:
If the Company’s ROFE
performance for FY2016 is:
The percentage of the ROFE
Component which will vest is:
Less than 7.6%
7.6%
0%
50%
Greater than 7.6% and less
than 8.0%
Progressive pro rata vesting
from 50% to 100% (i.e. on a
straight line basis)
8.0% or above
100%
The percentage of the ROFE Component that does not vest
in accordance with this schedule will lapse (i.e. there will be
no further testing). For each subsequent year’s LTI grant new
ROFE targets will be set.
The Company’s ROFE performance will be reported annually
in the Company’s Remuneration Report. Refer to the table
at the start of Section 4 (page 47) for the Company's ROFE
performance (EBIT to average funds employed) from 2009
to 2013. For FY2013, the Company's ROFE performance
was 4.7%.
• No retesting for new LTI awards: testing of performance
under the LTI plan will occur after three years (i.e. at the end of
the performance period) and there will be no retesting.
• Clawback: a broader clawback has been introduced for
future LTI awards, which will also apply to all new deferred
STI awards. In addition to applying clawback where an
employee has acted fraudulently or dishonestly or breached
their obligations to the Group, the Board will have a further
discretion in the event there is a material misstatement or
omission in Boral's financial statements or if the Company is
required or entitled to reclaim any overpaid bonus or other
amount from an employee.
• Minimum shareholding requirement: a new minimum
shareholding requirement has been introduced for the CEO &
Managing Director and all other current Senior Executives.
Boral Limited Annual Report 2013 41
2013 REMUNERATION
REPORT
Timeline for delivery of rewards
The following table illustrates the key points of difference in the remuneration framework for the 2013 and 2014 financial years.
Reward element
FY2013 framework
FY2014 framework
Rationale
Fixed pay
• CEO & Managing Director –
benchmarked to median of
Australian listed companies in the
industrials and materials sector
• Other Senior Executives – salary
survey data sourced from Hay
• Unchanged
• Aligned with market practice and
appropriate for Boral’s business
STI
• 100% of STI award delivered in cash
• 80% of STI award delivered in cash
• Subject to business unit and Boral
• 20% of STI award delivered in
Group EBIT performance
performance rights and subject to a
two year deferral period
• STI awards subject to business unit
and Boral Group EBIT performance
LTI
• Performance rights
• Performance rights
• Number of rights determined by fair
• Number of rights determined by fair
market value
market value
• Tested against TSRs of comparator
group of companies in S&P/ASX
100 Index on grant date
• Two-thirds tested against TSRs of
comparator group of companies in
S&P/ASX 100 Index on grant date
• Performance initially tested after
• One-third tested against ROFE
three years
target set by Board
• Performance retested after five and
• Performance tested after three
seven years
years
• No retesting
• Deferral encourages sustained
performance throughout the
building cycle, supports retention,
and promotes an ownership
mindset amongst executives
• EBIT remains the most appropriate
measure of performance over the
short term
• Use of ROFE (in addition to TSR)
provides a balanced assessment
of performance and focuses
executive effort on areas of strategic
importance
• Removal of performance retesting
supports accountability over
sustainable business performance
Minimum
shareholding
requirement
• None
• A minimum number of Boral shares
• Promotes an ownership mindset
amongst current Senior Executives
• Encourages focus on share prices
throughout the building cycle
must be maintained by current
Senior Executives
• Minimum number of shares must
equal 100% of fixed remuneration
for the CEO & Managing Director
and 50% of fixed remuneration for
other current Senior Executives
• Minimum shareholding to be built
within five years
B. Non-executive Director remuneration
A comprehensive review of the level of fees paid to Boral’s non-executive Directors was undertaken during the year. This analysis
considered the elements of size and complexity of the business, time commitments, and fees paid for non-executive Directors of
companies of a comparable size.
As an outcome of this assessment, non-executive Director fees will be increased effective 1 July 2013 to ensure that non-executive
Directors’ remuneration remains market appropriate. Non-executive Director fees were last increased on 1 November 2011.
While these increases are not required to be disclosed in this Report for FY2013, the Board remains committed to transparency in
remuneration. Main Board fees will increase by $5,000 per annum to $135,000 per annum, and the Chairman’s fee will increase by
$15,600 per annum to $405,600 per annum. Committee fees and the aggregate fee pool will remain unchanged.
42 Boral Limited Annual Report 2013
SECTION 1: SENIOR EXECUTIVE REMUNERATION OUTCOMES
The table below sets out the cash and other benefits received by the current Senior Executives who were KMP in FY2013. This
non-statutory remuneration outcomes table has been prepared to provide shareholders with a view of the remuneration framework and
how remuneration was actually paid to current Senior Executives for FY2013. The Board believes that presenting information in this way
provides shareholders with increased clarity and transparency.
Remuneration details prepared in accordance with statutory obligations and accounting standards are contained on page 52 of
the Report. Cash and other benefits received by the current Senior Executives in FY2013 are lower than the amounts shown in the
remuneration table on page 52 of the Report. This is because the full remuneration table includes amounts in respect of options and
rights which are amortised over a five year period and may not have delivered value to executives in FY2013. For example, it includes
accounting values for current and prior years’ LTI grants which have not been and may never be realised as they are dependent on the
market-based performance hurdles being met in future years. The table below includes the value of any LTI grants which actually vested
to executives in FY2013.
Remuneration outcomes table
A$’000s
Mike Kane
Al Borm
Joseph Goss
Andrew Poulter
Frederic de Rougemont
Darren Schulz
Cash salary
1,404.6
363.9
187.5
810.5
521.0
187.5
2013
2013
2013
2013
2013
2013
STI
0.0
0.0
14.1
0.0
0.0
0.0
LTI
0.0
0.0
0.0
0.0
0.0
0.0
Other
280.5
30.4
60.0
10.5
243.2
52.3
Total
1,685.1
394.3
261.6
821.0
764.2
239.8
In reconciling the above table dealing with actual remuneration outcomes and the statutory remuneration table, the summary below may
be helpful in understanding the variances in disclosed remuneration.
Executives
Cash salary
STI
LTI/share-based
payments
Other
Non-monetary
benefits
Superannuation
Termination
benefits
Other long term
Remuneration outcomes table (non-statutory) (above)
Total of fixed
pay and
superannuation
contributions
STI awarded in
September 2013
expressed as a
cash value
CEO & Managing
Director
All other current
Senior Executives
(for period of year
as KMP only)
Value of rights
that vested
during FY2013
calculated using
the market price
of Boral shares on
the vesting date
All other benefits
(non-monetary
and cash),
including
parking, fringe
benefits tax,
leave allowances
and expatriate
allowances/
benefits (including
relocation
allowance,
medical
insurance, home
leave and taxation
advice)
Included
in “Other”
Included in
“Cash salary”
Not applicable
as none paid
during the year
for current
Senior Executives
Long service
leave included in
“Other”
Senior Executive remuneration table (statutory) (page 52)
As above
Total of fixed pay,
any relocation
allowances and
the accrued value
of annual leave
CEO & Managing
Director
All other current
and former Senior
Executives (for
period of year as
KMP only)
Amortised LTI
values related to
all LTI awards
Not applicable
All non-monetary
benefits, including
parking, fringe
benefits tax and
some expatriate
non-cash benefits
(including medical
insurance, home
leave and taxation
advice)
Employer
superannuation
contributions
Any eligible
termination
payments
Long service
leave accrual
Boral Limited Annual Report 2013 43
2013 REMUNERATION
REPORT
SECTION 2: SENIOR EXECUTIVE REMUNERATION
SECTION 2: SENIOR EXECUTIVE REMUNERATION
GOVERNANCE AND FRAMEWORK
GOVERNANCE AND FRAMEWORK
Remuneration governance
Remuneration & Nomination Committee
The Remuneration & Nomination Committee of the Board (the
Committee) makes recommendations for approval by the full
Board on remuneration arrangements for the non-executive
Directors, the CEO & Managing Director, other Senior Executives
and other executives. This includes recommendations relating to
Directors’ fees, annual executive remuneration reviews, and STI
and LTI structure, grants, measures and targets. The Committee
also advises the Board on remuneration policies and practices for
Boral generally.
The Committee comprises four independent non-executive
Directors: Brian Clark (Committee Chairman), Catherine Brenner,
Bob Every and John Marlay. The responsibilities of the Committee
are outlined in its Charter, which is reviewed annually by the Board.
The Charter is available on Boral’s website at
www.boral.com.au/ci_home.asp.
Independent remuneration consultants
The Committee seeks information and advice regarding
remuneration directly from its external remuneration consultants
PwC and EY, who are independent of the Company’s management.
PwC provided advice to the Committee until the end of November
2012. EY provided advice from November 2012 and has been
appointed by the Committee as its ongoing independent consultant.
Throughout 2013, the main information received from the
Committee’s remuneration consultants related to:
• Senior Executive remuneration review;
• benchmarking of CEO & Managing Director and non-executive
Director reward;
must report directly to the Committee or the non-executive
Directors. If a consultant makes a recommendation concerning the
remuneration of a Senior Executive, the recommendation must be
provided directly to the Committee or the non-executive Directors.
Total fees paid for the advice provided by EY which included
remuneration recommendations were $123,245. Other services
provided by EY related to the provision of human resources advice
(including remuneration-related advice) and the fees for all other
services were $126,129 for FY2013.
Fees paid to PwC totalled $48,450 and related to services for CEO
& Managing Director and non-executive Director benchmarking
and the valuation of performance rights.
For each of the remuneration recommendations referred to above,
the Board is satisfied that the recommendations were made free
from any undue influence. In addition to the internal protocol
referred to above that has been adhered to, in each case, EY
provided a formal declaration confirming that the recommendation
was made free from undue influence by the members of the KMP
to whom the recommendation related.
Remuneration philosophy
Boral’s remuneration philosophy is the foundation of our
remuneration framework, policies and processes. The key
elements of this philosophy are:
Principle
Description
Align executive reward with
Boral’s performance
•
•
•
cost modelling and sensitivity analysis of Committee proposals;
calculation of the fair market valuation for the grant of rights
made in September 2012 under the Company’s LTI plan; and
Provide flexibility to meet
challenging business
conditions
input into the Company’s review of the Senior Executive
reward strategy.
Attract and retain high calibre
executives
Remuneration policies reward
executives for the creation
of short-term and long-term
shareholder value
Variable reward is “elastic”
and moves up and down to
reflect company and individual
performance
Remuneration is competitive to
attract, motivate and retain the
highest quality individuals in order
to deliver Boral’s business and
growth strategy
During the year EY provided advice which included “remuneration
recommendations” (that is, recommendations relating to the
remuneration of KMP). The remuneration recommendations
were provided to Boral as an input into decision making. The
Committee considered the recommendations, along with other
factors, in making its remuneration decisions.
The Board has adopted a protocol governing the engagement
of remuneration consultants and the provision of remuneration
recommendations. The purpose of this protocol is to ensure
that recommendations provided by consultants are made free
from undue influence by the Senior Executives to whom the
recommendations relate.
The protocol provides that before Boral enters into a contract to
engage a consultant to provide remuneration recommendations,
the proposed consultant must be approved by the Committee
or the non-executive Directors. The remuneration consultant
44 Boral Limited Annual Report 2013
Remuneration framework
The remuneration arrangements of the Senior Executives
are made up of both fixed and “at risk” remuneration. This is
composed of the following elements:
•
fixed annual remuneration (FAR) which provides a predictable
“base” level of reward;
• STI which is “at risk”; and
•
LTI which is “at risk”.
The “at risk” elements are based on performance against key
financial measures. More detail on each of these elements and their
link to performance is included in Sections 3 to 4 of this Report.
Total target remuneration
Boral’s mix of fixed and “at risk” components for each of the current Senior Executives disclosed in the Report, as a percentage of total
target annual remuneration for FY2013, is as follows:
CEO & Managing Director
Other current Senior Executivesa
a Other current Senior Executive percentages vary between individuals.
Fixed
FAR
34%
At risk
STI
33%
LTI
33%
50 – 65%
16 – 25%
19 – 25%
SECTION 3: SENIOR EXECUTIVE REMUNERATION ELEMENTS
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.
Total remuneration levels are reviewed annually by the Committee and the Board through a process that ensures an executive’s fixed
remuneration remains competitive with the market and reflects their skills, experience, accountability and general performance.
In undertaking the review, the Committee benchmarks the remuneration of the current Senior Executives against a group of companies
which it considers reflects the size and complexity of Boral and its competition for key executive talent. In determining each current
Senior Executive’s remuneration, the Committee considers the median remuneration within the Group and then positions current
remuneration. Use of a range around the median provides flexibility to recognise capability, contribution, value to the organisation and
performance of individuals, while maintaining remuneration at levels that are not more generous than necessary to retain and motivate.
STI plan
A summary of the STI plan in effect during FY2013 is provided below:
Feature
Objective
Participation
STI value
Description
• To support Boral’s strategic objectives by providing rewards that are based on achievement against
performance targets.
• Executives who have significant influence on the annual financial outcomes of Boral and its business units.
• The CEO & Managing Director has a target STI equal to 100% of FAR. Other Senior Executives have
a target STI of between 30% and 50% of FAR.
• The CEO & Managing Director has a maximum STI potential of 140% of FAR, while other Senior
Executives have a maximum STI potential of 60% to 100% of FAR.
• No STI awards will be made if the relevant performance targets are not met.
Assessment of performance
• The Remuneration & Nomination Committee and the Board assess the financial performance of the
Group and divisions and approve the actual STI rewards to be paid to the CEO & Managing Director,
his direct reports and other executives.
Funding guideline
• The Board has agreed that expenditure on STI awards should not exceed a range of 4% to 6% of annual
EBIT. The Board retains discretion to adjust the remuneration outcomes up or down to ensure consistency
with the Company’s remuneration philosophy and to prevent any inappropriate reward outcomes.
Refer to Section 4 for more detail on STI performance conditions, outcomes and alignment with Company performance.
Boral Limited Annual Report 2013 45
2013 REMUNERATION
REPORT
LTI plan
A summary of the LTI plan in effect during FY2013 is provided below:
Feature
Objective
Description
• To link long-term executive rewards with the sustained creation of shareholder value through the
allocation of equity awards that are subject to the satisfaction of long-term performance conditions.
• In addition, the LTI structure aims to attract and retain high quality executives and to reward
executives for the achievement of performance conditions which underpin sustainable long-term
performance.
Participation
Equity type
• The CEO & Managing Director, other Senior Executives and other executives.
• Awards are delivered in the form of performance rights. Upon vesting, each performance right
entitles the executive to one ordinary share.
LTI value
• The CEO & Managing Director has a target LTI equal to 100% of FAR. Other Senior Executives have
a target LTI equal to 25% to 50% of FAR.
• The number of performance rights allocated depends on each executive’s target LTI. The number
is calculated using a fair market value methodology and takes into account the number of shares
expected to vest at the end of the performance period (using a Monte Carlo simulation analysis in
accordance with accounting standards).
Performance period
• Awards are subject to a three year forward looking performance period. For the LTI grants made in
FY2013, the performance period is 1 September 2012 to 1 September 2015.
Performance hurdle
• The LTI award granted in FY2013 is measured against relative 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 over the same period of a comparator group (as outlined below).
TSR comparator group
• Companies comprising the S&P/ASX 100 Index as at the grant date.
• The Board has the 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.
Vesting schedule
Boral’s TSR rank in S&P/ASX 100 Index
% of 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%
Retesting
• Rights that do not vest based on performance over the initial three year measurement period will
Total shares issued
be available for vesting based on performance over five year and seven year measurement periods.
Rights that have not vested following the seven year measurement period automatically lapse. For
grants made after FY2013, there will be no retesting.
• The number of shares 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.
Cessation of employment
• For “good leavers” (including cessation of employment due to death, permanent disablement, bona
fide retirement, redundancy, sale of subsidiary or business assets):
– rights will remain on foot beyond termination (with a pro rata scale back for rights granted within
three years prior to the cessation date); and
– rights will be tested on the next test date and will lapse if they do not meet the performance hurdle.
• For other leavers, rights will lapse upon cessation of employment unless the Board determines
otherwise.
46 Boral Limited Annual Report 2013
Forfeiture
• The Board has the discretion to partially reduce or forfeit an LTI award where an employee has their
employment terminated for cause, acts fraudulently or dishonestly, or breaches their obligations to
the Group.
Change of control
• The Board may exercise its discretion to allow all or some unvested rights to vest if a change of
control event occurs (e.g. a takeover bid, a scheme of arrangement or other corporate action).
• The Board would have regard to the performance of the Company during the vesting period up to
the date of a change of control event.
Dealing restrictions
• Boral’s Share Trading Policy prohibits executives from entering into hedge and other derivative
transactions in relation to rights granted under the LTI plan.
• Shares allocated to participants upon vesting of their LTIs may only be dealt with in accordance with
the Share Trading Policy.
• Any contravention of the Policy would result in disciplinary action.
Dividends
• No dividends are paid on unvested LTI awards.
Refer to Section 4 for more detail on LTI performance conditions, outcomes and alignment with Company performance.
SECTION 4: LINKING REMUNERATION TO PERFORMANCE
Overview of 2013 financial performance
The aim of the recent organisational restructure is to transform Boral into an organisation that is more responsive to the realities of a
cyclical marketplace and which can remain competitive not just during the cycle highs, but also when conditions are challenging, as they
have been for the past few years.
The effect of the business cycle on Boral’s performance is demonstrated in the table below.
Earnings per sharea (¢)
Dividends per share (¢)
Closing share price ($ as at 30 June)
Return on equitya (%)
EBIT to average funds employed (ROFE)a (%)
a Excludes financial impact of significant items.
2013
13.6
11.0
4.21
3.2
4.7
2012
13.6
11.0
2.95
3.0
4.7
2011
24.4
14.5
4.40
5.6
7.4
2010
22.1
13.5
4.82
5.0
6.2
2009
22.2
13.0
4.07
4.8
6.3
Short-term performance – FY2013
Boral continued to use a single financial hurdle for STI awards in respect of FY2013 to create a clear line of sight for executives and
transparency for shareholders around how STI awards are determined. Performance at the completion of the financial year is measured
against pre-determined EBIT targets that were established as part of the Group's annual budget process.
EBIT was chosen as the financial target because the Board believes that it effectively aligns rewards for executives with the Company’s
strategic focus on delivering strong earnings throughout the business cycle. The focus on EBIT is considered appropriate in light of the
difficult market conditions that Boral has faced over the past few years, and continues to face, particularly in the USA and Australia.
The table below provides an overview of the STI performance targets for FY2013 for current Senior Executives.
Position
CEO & Managing Director and Chief Financial Officer
Other current Senior Executives
Weighting and target
• 100% Group EBIT
• 50% Group EBIT
• 50% relevant divisional EBIT
Boral Limited Annual Report 2013 47
2013 REMUNERATION
REPORT
The STI performance objectives are communicated to Senior Executives at the beginning of the performance year and annual
performance evaluations are conducted following the end of the financial year. For FY2013, the evaluations were conducted in July and
August 2013.
For FY2013, the Group did not achieve the minimum level of EBIT performance required and no STI payments were awarded to Senior
Executives for this component (i.e. Group EBIT). However, despite challenging market conditions, the Construction Materials & Cement
division achieved its divisional EBIT budget (being the minimum threshold of performance required for an STI payout in FY2013) and
payments were made to the current and former Divisional Managing Directors, Joseph Goss and Murray Read, respectively.
Ross Batstone was also provided with an STI award of $750,000. This payment represented 50% of his total STI opportunity and
reflects his performance against defined business improvement activities. The remaining 50% was based on the achievement of a Group
EBIT target, which was not met.
The table on page 53 provides details of the STI awards made for performance during FY2013.
Long-term performance – FY2013
Relative TSR is the sole performance condition for the LTI award made in FY2013, as well as for the LTI awards made in previous years
that were tested in FY2013. The Board believes that a relative TSR hurdle ensures alignment between comparative shareholder return
and reward for the executive. It also provides a relative, external market performance measure having regard to Boral’s comparative
companies.
Economic conditions mostly relating to the housing and construction cycle in recent years have resulted in the Company’s TSR
underperforming the comparator group. 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 2013, Boral has achieved an annual TSR of 2.4%, which is lower than that of the companies in the ASX 100
over the same period (as represented by the ASX 100 Accumulation Index).
BLD TSR vs ASX 100 Accumulation Index
10 years to 30 June 2013
TSR (%)
250
200
150
100
50
0
-50
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
1
1
c
e
D
2
1
n
u
J
2
1
c
e
D
3
1
n
u
J
BLD
ASX 100 Accumulation Index
The LTI grants that were available for vesting in FY2013 were the grants with respect to FY2005, FY2006, FY2007, FY2008 and FY2009.
The relative TSR performance and the vesting level for each LTI grant since October 2005 are set out in the table below. The LTI grants
from November 2006 are within the seven year life and the performance hurdle may still be reached before they lapse.
48 Boral Limited Annual Report 2013
The table below demonstrates the level of performance achieved for each LTI grant up to 30 June 2013.
Grant date
Expiry date
Option
exercise price
Mix of options/rights
Relative TSR
performance
Vesting level
Oct 05
Nov 06
Nov 07
Nov 08
Oct 12
Nov 13
Nov 14
Nov 15
Nov 09
Nov 16
Nov 10
Sep 11a
Sep 12
Nov 17
Sep 18
Sep 19
$7.65
$7.27
$6.78
N/A
N/A
N/A
N/A
N/A
50% options 50% rights
50% options 50% rights
50% options 50% rights
38%
50%
68%
100% rights
100% rights
100% rights
100% rights
100% rights
28% as at 1st test date
(Nov 2011)
26% as at 1st test date
(Nov 2012)
1st test date Nov 2013
1st test date Sep 2014
1st test date Sep 2015
0%
50%
86%
0%
0%
N/A
N/A
N/A
a The Company granted Mr Batstone 135,135 share acquisition rights on 1 September 2011 as a retention incentive, in recognition of his additional responsibilities as
Divisional Managing Director of Boral Building Products in establishing a new Asian Plasterboard Division. The grant was made on terms and conditions determined by the
Board and linked to service hurdles to be tested on 31 December 2012 (and not subject to a relative TSR performance hurdle). Those rights vested, and 135,135 fully paid
ordinary shares were issued to Mr Batstone on 14 February 2013.
Boral Limited Annual Report 2013 49
2013 REMUNERATION
REPORT
SECTION 5: SENIOR EXECUTIVE CONTRACTS AND TRANSITIONS
Remuneration structure and contract terms for Mike Kane
Mike Kane was appointed CEO & Managing Director on 1 October 2012. An overview of the terms of his employment is provided below:
Feature
Description
Total reward determination
• Benchmarked to a comparator group which is closely aligned to Boral’s current market position and
selected from similar companies within a range of Boral’s market capitalisation.
• The group includes companies from the Industrials and Materials sectors of the S&P/ASX 200 Index with
a 12 month moving average market capitalisation and revenue of between 33% and 300% of Boral’s.
Total reward summary
• FAR of $1.6 million as at 1 October 2012.
• STI entitlement is 100% of FAR for “target” performance with a maximum of 140% of FAR for
“stretch” performance.
• LTI grant under the terms of the LTI plan (described at pages 41 and 46 to 47 of this Report).
• At the 2012 Annual General Meeting shareholders approved a grant of 554,655 performance
rights to Mr Kane as disclosed in the remuneration table on page 53. This is a nine month pro rata
entitlement for FY2013, which takes account of a grant of 112,011 performance rights granted to
Mr Kane in September 2012 for the first three months of FY2013 while he was in the role of
President, Boral Industries USA.
Contract duration
• Ongoing contract, which can be terminated at any time by the Company upon giving 12 months’
notice (or three months in the case of illness) or by Mr Kane upon giving six months’ notice.
Termination of employment
(without cause)
• If employment is terminated without cause, by reason of illness or death or as a result of a
fundamental change, Mr Kane will receive a separation payment equal to 12 months’ FAR.
• In such circumstances, Mr Kane will forfeit his entitlement to any STI in respect of the year of
termination (i.e. the STI is not pro-rated), unless the Board determines otherwise.
• In relation to the FY2013 LTI award, any performance rights that are unvested will remain on foot and
vest on the next test date if the performance hurdles are satisfied. If vesting does not occur at that
time, the rights will lapse. For future LTI grants which remain unvested at the date of termination, the
incentives will remain on foot in accordance with the terms of the individual grant, unless the Board
determines otherwise.
• Where Mr Kane resigns, or his employment is terminated for cause, Mr Kane will not receive a
separation payment. In these circumstances, Mr Kane will not be entitled to any STI in respect of
the year of termination, and any unvested LTI entitlements will lapse unless the Board determines
otherwise.
• Boral agreed to pay for the cost of relocating Mr Kane and his family from his base in the USA to
Sydney as a result of his appointment as CEO & Managing Director, as well as reasonable rental
costs for up to five years.
Termination of employment
(with cause) or resignation
Relocation expenses
Mr Batstone’s transition and consultancy contract
Ross Batstone held the position of CEO from 22 May 2012 until 30 September 2012, while a global search was conducted for a new
CEO. The key terms of his contract and remuneration structure as a CEO were set out in last year’s Remuneration Report. As at 30
September 2012, Mr Batstone ceased to be a KMP when he assumed the position of Chairman, Boral Gypsum Asia on a full-time basis.
He retired as an employee of the Company on 1 July 2013.
Mr Batstone was eligible to participate in the STI plan for FY2013. The Board agreed that he met the target level of performance and
that he would be entitled to receive an STI payment of $750,000.
Mr Batstone’s interim CEO contract did not include an entitlement to a FY2013 grant under the Company’s LTI plan; however,
Mr Batstone received grants under the LTI plan in the form of options and performance rights in prior years in respect of other senior
roles he held in the Company. Details of these prior grants are set out on page 54 of the Report. The Board determined that no portion
of the rights granted to Mr Batstone in 2010 or 2011 under the LTI plan would lapse on his retirement, but rather are to remain on foot
for their full term. These rights will vest in due course only if the applicable performance hurdles are met on the relevant test dates.
50 Boral Limited Annual Report 2013
The Company granted Mr Batstone 135,135 share acquisition rights on 1 September 2011 as a retention incentive, in recognition of his
additional responsibilities as Divisional Managing Director of Boral Building Products in establishing a new Asian Plasterboard Division.
The grant was made on terms and conditions determined by the Board and linked to service hurdles to be tested on 31 December
2012. Those rights vested, and 135,135 fully paid ordinary shares were issued to Mr Batstone on 14 February 2013.
To ensure Boral does not lose the benefit of Mr Batstone’s experience and deep business knowledge of Boral's gypsum operations
in Australia and Asia, upon his retirement from the Company, Mr Batstone has been engaged under a consultancy arrangement for a
further period of up to two years.
CFO transition
On 20 August 2013, the Company announced the appointment of Ms Rosaline Ng as Chief Financial Officer of Boral Limited, effective
15 September 2013. Ms Ng replaces Mr Andrew Poulter who leaves Boral for personal reasons and ceases to be classified as one
of Boral's key management personnel on 15 September 2013. Mr Poulter will remain in employment and available to assist Boral
through a transition period until 28 February 2014, at which time he will be entitled to receive payment of approximately one year's fixed
remuneration under the terms of his contract.
Impact of other executive transitions
Mike Beardsell, Bryan Tisher and Murray Read all departed the Group in FY2013. The tables on pages 52 to 54 provide further details
regarding these KMP departures.
Mr Beardsell, Mr Tisher and Mr Read each received a separation payment equivalent to 12 months’ FAR.
In addition, as each departing Senior Executive is a “good leaver”, their unvested LTIs will remain on foot (subject to the usual pro rata
scale back arrangements under the relevant LTI plan rules) and will be tested in due course. This is not a “termination benefit” for the
purposes of the statutory cap on termination benefits, as no value has crystallised in connection with termination and the former Senior
Executives will only derive value from the awards to the extent the performance conditions are satisfied. However, in accordance with the
treatment required under the accounting standards when a Senior Executive is terminated and their outstanding awards remain on foot,
the table on page 52 shows the accelerated costs associated with their unvested performance rights and/or options.
Contract terms for other current Senior Executives
Key features of the employment arrangements for the current Senior Executives (other than the CEO & Managing Director) include:
•
•
•
employment continues until terminated by either the Senior 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 12 months’
fixed remuneration.
The entitlement of Senior Executives to unvested LTI awards is dealt with under the LTI plan rules and the specific terms of grant.
SECTION 6: SENIOR EXECUTIVE REMUNERATION TABLES
The following Senior Executive remuneration table has been prepared in accordance with the accounting standards and has been
audited. The values in the table below align with the amounts expensed in Boral’s financial statements.
These amounts differ from the actual remuneration outcomes table on page 43 in that LTI payments in the earlier table reflect the
value of rights that actually vested during the year while the “share-based payments” below reflect the fair market value of LTI grants
made calculated in accordance with the accounting standards. This includes an accelerated LTI expense for those Senior Executives
who ceased employment in FY2013 but were allowed to retain their unvested LTI awards on the same terms (including performance
conditions) as if they had remained employed.
Boral Limited Annual Report 2013 51
2013 REMUNERATION
REPORT
Senior Executive remuneration table
Short term
Post
employment
Termination
benefit
Share-based paymentsa
Other
long termb
Total
Cash salaryc
Short-term
incentive
Non-
monetary
benefitsd
Super-
annuation
Options
Rights
A$’000s
Current Senior Executives
Mike Kanee
Al Bormf
Joseph Gossg
Andrew Poulter
Frederic de Rougemonth
Darren Schulz
Sub-total
2013
2012
2013
2013
2013
2012
2013
2013
2013
1,494.1
0.0
140.9
462.1
326.5
241.9
791.0
765.4
429.1
224.4
196.4
0.0
14.1
0.0
0.0
0.0
0.0
30.3
30.3
2.4
0.0
0.0
240.0
5.3
29.7
66.6
37.5
0.0
16.5
15.8
95.1
7.0
3,507.0
14.1
418.9
185.8
Former Senior Executives
Ross Batstonei
Mike Beardsell
Murray Read
Bryan Tisher
Sub-total
Total
Total
2013
2012
2013
2012
2013
2012
2013
2013
2013
2012
335.6
818.9
377.3
658.1
548.1
642.5
414.6
1,675.6
5,182.6
3,347.0
750.0
0.0
0.0
0.0
52.3
0.0
0.0
802.3
816.4
196.4
3.5
19.4
9.0
19.1
0.0
0.2
5.9
18.4
437.3
69.0
39.4
127.1
9.6
15.8
31.3
100.0
9.6
685.2
89.9
2,144.1
275.7
2,144.1
325.3
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
688.6
0.0
770.3
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
1.9
28.9
3.4
13.1
3.4
12.6
5.6
14.3
14.3
54.6
359.3
20.4
2,044.4
85.5
30.7
0.0
158.8
77.8
41.6
2.6
0.0
0.0
3.2
13.5
12.7
0.0
3.1
840.9
425.0
261.6
979.8
871.7
805.8
242.4
593.0
40.2
4,759.0
188.9
953.5j
243.8
173.9
273.4
192.3
300.0
1,006.1
1,599.1
1,483.0
5.7
1,325.0
13.7
1,961.5
6.7
1,338.4
11.0
891.0
9.3
1,688.1
10.7
958.3
7.1
1,428.0
28.8
5,779.5
69.0 10,538.5
48.1
5,523.4
a The fair market 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 market value of the options and rights allocated to the FY2013
reporting period.
b Other long term includes long service leave accruals.
c Cash salary includes all fixed salary, relocation allowances and accrued annual leave.
d Includes all non-monetary benefits, such as parking, medical insurance, home leave, housing allowances, vehicle costs, and any applicable fringe benefits tax payable by the
Company upon providing these benefits.
e Mike Kane’s remuneration for his period as President, Boral Industries USA during FY2013 has been converted at the foreign exchange rate of AUD1=USD1.0238 being the
average conversion for the FY2013 period.
f Al Borm’s remuneration for FY2013 has been converted at the foreign exchange rate of AUD1=USD1.0238 being the average conversion for the FY2013 period.
g Under the terms of his expatriate agreement, superannuation contributions have not been made for Joseph Goss.
h Frederic de Rougemont’s remuneration for FY2013 has been converted at the foreign exchange rate of AUD1=EUR0.7903 being the average conversion for the FY2013 period.
i Remuneration for Ross Batstone for FY2013 is for his period as CEO only, when he was a KMP.
j Includes an expense in FY2012 for Ross Batstone for rights of $332,384 that would normally have been amortised over future years.
52 Boral Limited Annual Report 2013
STI payments
The table below details the STI payments awarded for FY2013. These are typically paid in September of each year.
2013
%
vested
of target STI
Cash bonus
A$’000s
2012a
%
forfeited
of target STI
Cash bonus
A$’000s
%
vested
of target STI
%
forfeited
of target STI
Current Senior Executives
Mike Kane
Al Borm
Joseph Goss
Andrew Poulter
Frederic de Rougemont
Darren Schulz
Former Senior Executives
Ross Batstone
Mike Beardsell
Murray Read
Bryan Tisher
Total
0.0
0.0
14.1
0.0
0.0
0.0
750.0
0.0
52.3
0.0
816.4
0
0
15
0
0
0
50
0
15
0
–
100
100
85
100
100
100
50
100
85
100
–
196.4
N/A
N/A
0.0
N/A
N/A
0.0
0.0
0.0
N/A
196.4
42
N/A
N/A
0
N/A
N/A
0
0
0
N/A
–
58
N/A
N/A
100
N/A
N/A
100
100
100
N/A
–
a Al Borm, Joseph Goss, Frederic de Rougemont, Darren Schulz and Bryan Tisher were not Senior Executives for the FY2012 performance period.
LTI grants and movement during the year
The following tables provide details of rights granted during the year under the LTI plan, as well as the movement during the year in
options and rights granted under the LTI plan in previous financial years.
Granted
during the
year as
remuneration a
Balance at
1 July 2012
Value of
grantb
Exercised/
vested during
the year
Number
Number
$
Number
Value of
options
and rights
exercised/
vestedc
Lapsed/
cancelled
during the
year
Value of
options and
rights lapsed/
cancelledd
Current Senior Executivese
Mike Kane
Al Borm
Joseph Goss
Andrew Poulter
Rights
181,002
666,666 1,599,998
Rights
Rights
48,900
34,640
83,136
–
–
–
Rights
188,205
169,875
407,700
Frederic de Rougemont
Darren Schulz
Rights
Rights
–
–
104,442
250,661
13,333
31,999
Former Senior Executives
Ross Batstone
Options
240,700
Rights
659,142
Mike Beardsell
Options
102,000
–
–
–
–
–
–
Rights
309,050
131,888
316,531
Murray Read
Options
99,000
–
–
Rights
354,703
161,458
387,499
Bryan Tisher
Options
170,500
–
–
Rights
340,718
135,000
324,000
Number
–
–
–
–
–
–
$
–
–
–
–
–
–
Balance at
30 June 2013
Number
847,668
83,540
–
358,080
104,442
13,333
$
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(71,700)
548,505
169,000
(135,135)
669,351
(18,849)
95,376
505,158
–
–
–
–
–
–
–
–
–
–
–
–
(25,500)
195,075
76,500
(325,972)
915,665
114,966
(27,300)
208,845
71,700
(7,175)
36,306
508,986
(49,400)
377,910
121,100
(288,314)
735,649
187,404
Boral Limited Annual Report 2013 53
2013 REMUNERATION
REPORT
a Rights were granted to Senior Executives on 1 September 2012, with the earliest vesting date on 1 September 2015 and the last vesting date (expiry date) of 1 September 2019.
b The fair market value of rights granted on 1 September 2012, calculated using a Monte Carlo simulation analysis, is $2.40 per right.
c Calculated per right as the market price of Boral shares on the date of vesting. No exercise price is payable in respect of rights that vest. While there were exercisable options
during the year, no options were exercised by Senior Executives because the exercise price exceeded the market price for Boral shares.
d Value is calculated at fair market value of option or right on date of grant.
e No options were granted to any Senior Executives during the FY2013 period.
The number of options and rights included in the balance at 30 June 2013 for the Senior Executives is set out below:
Year of grant
2006
2007
2008
2009
2010
2011
2012
Balance
at 30 June
2013
Current Senior Executives
Mike Kane
Al Borm
Joseph Gossa
Andrew Poulter
Frederic de Rougemont
Darren Schulz
Former Senior Executives
Ross Batstone
Mike Beardsell
Rights
Rights
Rights
Rights
Rights
Rights
–
–
–
–
–
–
Options
Rights
Options
Rights
74,900
10,232
34,100
4,655
–
–
–
–
–
–
94,100
–
–
–
–
–
–
–
–
–
–
–
–
–
–
78,717
102,285
666,666
847,668
14,582
34,318
34,640
83,540
–
–
–
–
21,701
166,504
169,875
358,080
–
–
–
–
–
–
104,442
104,442
13,333
13,333
–
–
–
–
–
169,000
505,158
76,500
114,966
71,700
3,427
74,624
82,463
147,569
186,843
42,400
1,545
–
–
–
–
–
–
–
–
65,716
43,050
–
–
Murray Readb
Options
29,300
42,400
Rights
4,008
1,544
29,538
29,175
125,000
158,263
161,458
508,986
Bryan Tisher
Options
51,800
69,300
–
–
–
Rights
7,083
2,522
60,576
60,430
56,793
–
–
–
–
121,100
187,404
a Joseph Goss became a Senior Executive from 1 April 2013 and did not receive any rights following his appointment during FY2013.
b The balance of options and rights for Murray Read are as at 30 June 2013. Murray Read departed the Group on 1 July 2013, on which date his LTI awards became subject to a
pro rata lapsing in accordance with the relevant LTI plan rules.
The unvested options and 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 the date of vesting while the maximum value of unvested options is
the sale price of Boral shares at the date of exercise less the applicable exercise price.
54 Boral Limited Annual Report 2013
SECTION 7: NON-EXECUTIVE DIRECTORS’ REMUNERATION
The non-executive Directors receive fixed remuneration only, which includes base remuneration (Board fees) and Board 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 $1,550,000 per annum was approved at the Company’s Annual General Meeting in November 2011.
Non-executive Director fee levels for the 2013 financial year were as follows:
Position
Chairman
Committee Chairman
Director
Base remuneration
Committee fees
Total remuneration
$390,000
$130,000
$130,000
$0
$28,540
$14,270
$390,000
$158,540
$144,270
The total annual non-executive Director remuneration for the current Board of seven non-executive Directors for FY2013 was
$1,339,891 including superannuation.
Non-executive Directors’ remuneration is reviewed annually by the full Board. This review takes account of the recommendations of
the Remuneration & Nomination Committee and external benchmarking of comparable companies. During the year, the Board took
independent advice from EY regarding non-executive Directors’ remuneration.
Non-executive Directors’ total remuneration
The remuneration of the non-executive Directors is set out in the following table.
A$’000s
Directors
Catherine Brenner
Brian Clark
Eileen Doyle
Bob Every, Chairman
Richard Longes
John Marlaya
Paul Rayner
Total
2013
2012
Short-term
Board and
Committee fees
Post-
employment
superannuation
Total
remuneration
Short-term
Board and
Committee fees
Post-
employment
superannuation
Total
remuneration
145.4
145.4
158.5
373.5
132.4
145.4
145.4
1,246.0
13.1
13.1
14.3
16.5
11.9
11.8
13.1
93.8
158.5
158.5
172.8
390.0
144.3
157.2
158.5
134.3
140.8
153.6
366.0
130.0
142.8
140.8
1,339.8
1,208.3
12.1
12.7
13.8
15.8
11.7
12.9
12.6
91.6
146.4
153.5
167.4
381.8
141.7
155.7
153.4
1,299.9
a John Marlay’s superannuation was reduced by $1,349 in FY2013 to reflect an overpayment in the FY2012 year.
Boral Limited Annual Report 2013 55
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 of associates
Profit/(loss) 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 interests
Net profit/(loss)
Basic earnings per share
Diluted earnings per share
Continuing operations
Basic earnings per share
Diluted earnings per share
CONSOLIDATED
Note
2013
$ millions
2012
$ millions
3
3
3
3,12
3
3
6
5
8
8
8
8
5,209.4
(3,806.4)
(871.9)
(352.9)
4,716.2
(3,425.4)
(812.6)
(331.0)
(5,031.2)
(4,569.0)
50.8
(455.6)
17.6
(209.0)
7.6
(103.6)
(96.0)
(305.0)
98.0
(207.0)
1.3
(205.7)
(212.1)
6.4
(205.7)
(27.7c)
(27.7c)
(27.8c)
(27.8c)
207.5
(119.3)
30.8
266.2
14.6
(99.5)
(84.9)
181.3
29.2
210.5
(32.8)
177.7
176.6
1.1
177.7
23.8c
23.6c
28.2c
28.0c
The income statement should be read in conjunction with the accompanying notes which form an integral part of the
financial statements.
56 Boral Limited Annual Report 2013
FINANCIAL STATEMENTS Statement of Comprehensive Income
Boral Limited and Controlled Entities
For the year ended 30 June
Net profit/(loss)
Other comprehensive income
Items that will not be reclassified to Income Statement:
Actuarial gain/(loss) on defined benefit plans
Income tax on items that will not be reclassifed to Income Statement
Items that may be reclassified subsequently to Income Statement:
Net exchange differences from translation of foreign operations taken
to equity
Foreign currency translation reserve transferred to net profit on recognition
of LBGA as a subsidiary
Foreign currency translation reserve transferred to net profit on disposal
of controlled entities
Fair value adjustment on cash flow hedges
Income tax on items that may be reclassified subsequently to
Income Statement
Total comprehensive income/(loss)
Total comprehensive income is attributable to:
Members of the parent entity
Non-controlling interests
Total comprehensive income/(loss)
CONSOLIDATED
Note
2013
$ millions
2012
$ millions
(205.7)
177.7
27
24
24
24
4.5
(1.4)
116.3
–
3.1
8.3
56.0
(9.8)
3.0
(4.4)
30.5
18.6
(4.2)
2.5
(18.9)
213.9
(33.6)
14.7
(18.9)
210.7
3.2
213.9
The statement of comprehensive income should be read in conjunction with the accompanying notes which form an integral part of the
financial statements.
Boral Limited Annual Report 2013 57
Balance Sheet
Boral Limited and Controlled Entities
As at 30 June
CURRENT ASSETS
Cash and cash equivalents
Cash on deposit
Receivables
Inventories
Other financial assets
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 assets
Other
TOTAL NON-CURRENT ASSETS
TOTAL ASSETS
CURRENT LIABILITIES
Payables
Loans and borrowings
Other financial liabilities
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 interests
TOTAL EQUITY
CONSOLIDATED
Note
2013
$ millions
2012
$ millions
9
9
10
11
13
16
5
10
11
12
13
14
15
21
16
17
18
19
20
22
5
17
18
19
21
22
23
24
149.9
70.6
887.8
680.0
11.6
42.8
–
1,842.7
16.8
19.6
34.6
23.5
3,347.1
849.9
133.7
48.5
4,473.7
6,316.4
760.1
126.9
56.1
19.1
212.1
–
1,174.3
9.4
1,539.6
25.5
57.6
116.5
1,748.6
2,922.9
3,393.5
2,433.8
74.4
796.0
3,304.2
89.3
3,393.5
205.7
–
809.6
656.1
0.2
69.0
62.9
1,803.5
17.8
104.9
36.6
–
3,566.7
820.1
101.2
48.3
4,695.6
6,499.1
732.2
148.3
7.1
22.8
187.8
44.6
1,142.8
10.9
1,575.1
72.4
182.5
112.0
1,952.9
3,095.7
3,403.4
2,368.4
(109.2)
1,069.9
3,329.1
74.3
3,403.4
The balance sheet should be read in conjunction with the accompanying notes which form an integral part of the financial statements.
58 Boral Limited Annual Report 2013
FINANCIAL STATEMENTS Statement of Changes in Equity
Boral Limited and Controlled Entities
For the year ended 30 June 2013
Balance at 1 July 2012
Net profit/(loss)
Other comprehensive income
Translation of net assets of overseas controlled entities
Translation of long-term borrowings and foreign
currency forward contracts
Foreign currency translation reserve transferred to
net profit on disposal of controlled entities
Fair value adjustment on cash flow hedges
Actuarial gain/(loss) on defined benefit plans
Income tax relating to 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
Share-based payments
Contributions by non-controlling interests
Total transactions with owners in their capacity
as owners
Balance at 30 June 2013
For the year ended 30 June 2012
Balance at 1 July 2011
Net profit
Other comprehensive income
Issued
capital
$ millions
2,368.4
–
–
–
–
–
–
–
–
64.9
0.5
–
–
–
CONSOLIDATED
Reserves
$ millions
Retained
earnings
$ millions
Total parent
entity interest
$ millions
Non-controlling
interests
$ millions
Total equity
$ millions
(109.2)
–
1,069.9
(212.1)
3,329.1
(212.1)
74.3
6.4
3,403.4
(205.7)
187.7
(79.7)
3.1
8.3
–
56.0
175.4
–
(0.5)
–
8.7
–
–
–
–
–
4.5
(1.4)
(209.0)
–
–
(64.9)
–
–
187.7
8.3
196.0
(79.7)
3.1
8.3
4.5
54.6
(33.6)
64.9
–
(64.9)
8.7
–
–
(79.7)
–
–
–
–
14.7
–
–
(6.0)
–
6.3
3.1
8.3
4.5
54.6
(18.9)
64.9
–
(70.9)
8.7
6.3
65.4
2,433.8
8.2
74.4
(64.9)
796.0
8.7
3,304.2
0.3
89.3
9.0
3,393.5
Issued
capital
$ millions
2,261.3
–
CONSOLIDATED
Reserves
$ millions
Retained
earnings
$ millions
Total parent
entity interest
$ millions
Non-controlling
interests
$ millions
Total equity
$ millions
(159.5)
–
1,007.0
176.6
3,108.8
176.6
47.6
1.1
3,156.4
177.7
Translation of net assets of overseas controlled entities
Translation of long-term borrowings and foreign
currency forward contracts
Foreign currency translation reserve transferred to
net profit on recognition of LBGA as a subsidiary
Foreign currency translation reserve transferred to
net profit on disposal of controlled entities
Fair value adjustment on cash flow hedges
Actuarial gain/(loss) on defined benefit plans
Income tax relating to 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
Purchase of employee compensation shares
Share-based payments
Non-controlling interest acquired
Purchase of non-controlling interest
Non-controlling interest disposed
Contributions by non-controlling interests
Total transactions with owners in their capacity as owners
Balance at 30 June 2012
–
–
–
–
–
–
–
–
106.9
0.2
–
–
–
–
–
–
–
107.1
2,368.4
(1.5)
(5.0)
30.5
18.6
(4.2)
–
2.5
40.9
–
(0.2)
–
(1.0)
10.6
–
–
–
–
9.4
(109.2)
–
–
–
–
–
(9.8)
3.0
169.8
–
–
(106.9)
–
–
–
–
–
–
(106.9)
1,069.9
(1.5)
(5.0)
30.5
18.6
(4.2)
(9.8)
5.5
210.7
106.9
–
(106.9)
(1.0)
10.6
–
–
–
–
9.6
3,329.1
2.1
–
–
–
–
–
–
3.2
–
–
(1.0)
–
–
22.8
(0.8)
(2.9)
5.4
23.5
74.3
0.6
(5.0)
30.5
18.6
(4.2)
(9.8)
5.5
213.9
106.9
–
(107.9)
(1.0)
10.6
22.8
(0.8)
(2.9)
5.4
33.1
3,403.4
The statement of changes in equity should be read in conjunction with the accompanying notes which form an integral part of the
financial statements.
Boral Limited Annual Report 2013 59
Statement of Cash Flows
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)/received
Acquisition costs, restructure costs and legal settlements paid
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)
Purchase of non-controlling interest
Loans to associates
Increase in cash on deposit
Proceeds on disposal of non-current assets
Proceeds on disposal of controlled entities and businesses
(net of cash disposed and transaction costs)
NET CASH USED IN INVESTING ACTIVITIES
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issue of shares
Purchase of employee compensation shares
Dividends paid (net of dividends reinvested under the Dividend Reinvestment
Plan of $29.4 million (2012: $54.8 million))
Dividends paid to non-controlling interests
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
CONSOLIDATED
Note
2013
$ millions
2012
$ millions
35
35
32
5
5,643.9
(5,203.3)
440.6
18.6
7.6
(101.8)
2.2
(73.2)
294.0
(293.4)
(0.4)
–
–
1.8
(63.9)
84.9
87.8
(183.2)
35.5
–
(35.5)
(6.0)
6.3
186.5
(352.8)
(166.0)
(55.2)
181.5
9.4
135.7
5,426.0
(5,069.4)
356.6
22.1
15.1
(99.7)
(69.7)
(91.1)
133.3
(408.8)
(5.6)
(700.5)
(0.8)
0.4
–
64.3
65.3
(985.7)
52.1
(1.0)
(52.1)
(1.0)
5.4
630.9
(162.2)
472.1
(380.3)
561.2
0.6
181.5
Cash and cash equivalents at the end of the year
35
The statement of cash flows should be read in conjunction with the accompanying notes which form an integral part of the
financial statements.
60 Boral Limited Annual Report 2013
FINANCIAL STATEMENTS Notes to the Financial Statements
Boral Limited and Controlled Entities
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 2013 comprise Boral Limited and its controlled entities
(the “Group”).
The financial statements were authorised for issue by the Directors
on 10 September 2013.
The Group is a for-profit entity and is primarily involved in the
manufacturing and supply of building and construction materials in
Australia, Asia and the United States of America.
•
A. Basis of preparation
The financial statements are a general purpose financial statement
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, which
is the Company's functional currency. 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.
In determining the amount of current and deferred tax, the
Group takes into account the impact of uncertain tax positions
and whether additional taxes and interest may be due. This
assessment relies on estimates and assumptions and may
involve a series of judgements about future events. 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.
•
•
•
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.
New accounting standards: Several new accounting standards
have been published that are not mandatory for this reporting
period and have not yet been adopted by the Group:
AASB 9 Financial Instruments (2010)
AASB 10 Consolidated Financial Statements
AASB 11 Joint Arrangements
AASB 12 Disclosure of Interests in Other Entities
AASB 13 Fair Value Measurement
AASB 119 Employee Benefits (revised)
AASB 128 Investments in Associates and Joint Ventures
AASB Interpretation 20 Stripping Costs
Boral Limited Annual Report 2013 61
Notes to the Financial Statements
Boral Limited and Controlled Entities
1. Significant accounting policies (continued)
The impact of these changes is still being fully assessed; however,
initial assessments indicate that there will be no significant impact
on the Group’s financial statements.
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 operations and assets: The interests of the
Group in unincorporated joint ventures and jointly controlled assets
are brought to account by recognising in its financial statements
the assets it controls and the liabilities that it incurs, and the
expenses it incurs and its share of income that it earns from the
sale of goods or services by the joint venture.
Transactions eliminated on consolidation: Intragroup
balances and transactions, and any unrealised gains and losses
arising from intragroup transactions, are eliminated in preparing
the consolidated financial statements. Unrealised gains arising
from transactions with associates and jointly controlled entities
are eliminated to the extent of the Group’s interest in the entity.
Unrealised losses arising from transactions with associates are
eliminated in the same way as unrealised gains, but only to the
extent that there is no evidence of impairment.
Business combinations: The acquisition method of accounting
is used to account for all business combinations.
The consideration transferred for the acquisition of a subsidiary
or business 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.
62 Boral Limited Annual Report 2013
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, which is the date goods are delivered to the customer.
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.
Income tax
E.
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.
FINANCIAL STATEMENTS 1. Significant accounting policies (continued)
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. As a consequence, all members of the tax
consolidated group are taxed as a single entity. The head entity
is Boral Limited.
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 statement of cash flows on a gross
basis. The GST components of cash flows arising from investing
and financing activities which are recoverable from, or payable to,
the ATO are classified as operating cash flows.
G. Net financing costs
Financing costs include interest payable on borrowings calculated
using the effective interest rate method, finance charges in respect
of finance leases, exchange differences arising from foreign currency
borrowings to the extent that they are regarded as an adjustment
to interest costs and differences relating to the unwinding of the
discount of assets and liabilities measured at amortised cost.
Financing costs are recognised as an expense in the period in
which they are incurred, unless they relate to a qualifying asset.
Financing costs incurred for the construction of any qualifying
asset are capitalised during the period of time that is required to
complete and prepare the asset for its intended use or sale.
Financial income is recognised as it accrues, taking into account
the effective yield on the financial asset.
H. Foreign currencies
Transactions: Transactions in foreign currencies are translated
at the foreign exchange rate ruling at the date of the transaction.
Monetary assets and liabilities denominated in foreign currencies
at the balance sheet date are translated to Australian dollars at
the foreign exchange rate ruling at that date. Foreign exchange
differences arising on translation are recognised in the Income
Statement. Non-monetary assets and liabilities that are measured
in terms of historical cost in a foreign currency are translated using
the exchange rate at the date of the transaction.
Translation: The financial statements of foreign operations are
translated to Australian dollars as follows:
•
•
•
assets (including goodwill) and liabilities for each balance
sheet are translated at the closing rate at the date of that
balance sheet;
all resulting exchange differences are recognised as a separate
component of equity (foreign currency translation reserve); and
income and expenses for each Income Statement are
translated at average exchange rates approximating the rates
prevailing on the transaction dates.
On consolidation, exchange differences arising from the translation
of any net investment in foreign entities, and of borrowings
and other currency instruments designated as hedges of such
investments, are taken to 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.
Inventories
J.
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.
Boral Limited Annual Report 2013 63
Notes to the Financial Statements
Boral Limited and Controlled Entities
1. Significant accounting policies (continued)
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.
K.
Non-current assets held for sale and discontinued
operations
Non-current assets are classified as held for sale and stated at
the lower of their carrying amount and fair value less costs to sell
if their carrying amount will be recovered principally through a sale
transaction rather than through continuing use. An impairment
loss is recognised for any initial or subsequent write-down of the
asset to fair value less costs to sell. A gain is recognised for any
subsequent increase in fair value less costs to sell of an asset, but
not in excess of any cumulative impairment loss.
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.
Impairment
L.
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. Discount
rates of 12.8% (2012: 12.8%) for the Australian businesses and
13.9% (2012: 13.9%) for the US businesses were applied for
impairments recognised for the year ended 30 June 2013.
64 Boral Limited Annual Report 2013
In respect of assets valued at fair value less costs to sell, the
assets are valued based on indicative offers.
Reversals of impairment: An impairment loss in respect of
goodwill is not reversed. In respect of other assets, an impairment
loss is reversed if there is an indication that the impairment loss
may no longer exist and there has been a change in the estimates
used to determine the recoverable amount.
An impairment loss is reversed only to the extent of the asset’s
carrying amount net of depreciation or amortisation, as if no
impairment loss has been recognised.
M. Intangible assets
Goodwill: 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 including mine stripping costs, development
of quarry infrastructure and deferred maintenance 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.
FINANCIAL STATEMENTS 1. Significant accounting policies (continued)
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
Timber licences and mineral
reserves
2013
2012
1 – 10%
1 – 10%
1 – 5%
1 – 5%
Plant and equipment
5 – 33.3%
5 – 33.3%
Q. Payables
Trade payables and other accounts payable are recognised when
the Group becomes obliged to make future payments resulting
from the purchase of goods and services. Payables are stated at
their amortised cost.
R. Borrowings
Borrowings are initially recognised at fair value, net of transaction
costs incurred. Subsequent to initial recognition, borrowings are
stated at amortised cost, with any difference between cost and
redemption value being recognised in the Income Statement over
the period of the borrowings on an effective interest basis.
S. Employee benefits
Wages and salaries: The provision for employee entitlement to
wages and salaries represents the amount which the Group has
a present obligation to pay resulting from employees’ services
provided up to the balance date.
Annual leave, long service leave and retirement benefits:
The provision for employee entitlements 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.
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.
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.
Boral Limited Annual Report 2013 65
Notes to the Financial Statements
Boral Limited and Controlled Entities
1. Significant accounting policies (continued)
T. Provisions
A provision is recognised in the balance sheet when the Group has a
present legal or constructive obligation as a result of a past event, and
it is probable that an outflow of economic benefits will be required to
settle the obligation. If the effect is material, provisions are determined
by discounting the expected future cash flows at a pre-tax rate that
reflects current market assessments of the time value of money and,
where appropriate, the risks specific to the liability. Where discounting
is applied, increases in the balance of provisions attributable to the
passage of time are recognised as an interest expense.
Restoration and environmental rehabilitation: Provision is
made to recognise the fair value of the liability for restoration
and environmental rehabilitation of areas from which natural
resources are extracted. The associated asset retirement costs are
capitalised as part of the carrying amount of the related long-lived
asset and amortised over the life of the related asset. At the end
of each year, the liability is increased to reflect the passage of time
and adjusted to reflect changes in the estimated future cash flows
underlying the initial fair value measurement. Provisions are also
made for the expected cost of environmental rehabilitation of sites
identified as being contaminated as a result of prior activities at the
time when the exposure is identified and estimated clean-up costs
can be reliably assessed.
Onerous contracts: An onerous contract is considered to exist
where the Group has a contract under which the unavoidable
costs of meeting the obligations under the contract exceed the
economic benefits expected to be received under it. Present
obligations arising under onerous contracts are recognised and
measured as a provision.
U. Derivative financial instruments
The Group is exposed to changes in interest rates, foreign
exchange rates and commodity prices from its activities. The
Group uses the following derivative financial instruments to hedge
these risks: interest rate swaps, forward rate agreements, interest
rate options, forward foreign exchange contracts and futures
commodity fixed price swap contracts.
The Group does not enter into derivative financial instrument
transactions for trading purposes. However, financial instruments
entered into to hedge an underlying exposure which does not qualify
for hedge accounting are accounted for as trading instruments.
Derivatives are initially recognised at fair value on the date a
derivative contract is entered into and are subsequently remeasured
to their fair value. The method of recognising the resulting gain or
loss depends on whether the derivative is designated as a hedging
instrument, and if so, the nature of the item being hedged. The
Group designates certain derivatives as either; hedges of the fair
value of recognised assets or liabilities or a firm commitment (fair
value hedge), hedges of highly probable forecast transactions (cash
flow hedge), and hedges of net investment in foreign operations.
The Group documents at the inception of the transaction the
relationship between hedging instruments and hedged items, as
well as its risk management objective and strategy for undertaking
various hedge transactions. The Group also documents its
assessment, both at hedge inception and on an ongoing basis, of
whether the derivatives that are used in hedging transactions have
been and will continue to be highly effective in offsetting changes
in fair values of cash flows or hedged items.
Fair value hedge: Changes in the fair value of derivatives that are
designated and qualify as fair value hedges are recorded in the
66 Boral Limited Annual Report 2013
Income Statement, together with any changes in the fair value of the
hedged asset or liability that are attributable to the hedged risk.
Cash flow hedge: The effective portion of changes in the fair
value of derivatives that are designated and qualify as cash flow
hedges is recognised in equity in the hedging reserve. The gain or
loss relating to the ineffective portion is recognised immediately in
the Income Statement.
Amounts accumulated in equity are recycled in the Income
Statement in the periods when the hedged item will affect profit
or loss. However, when the forecast transaction that is hedged
results in the recognition of a non-financial asset or a non-financial
liability, the gains and losses previously deferred in equity are
transferred from equity and included in the measurement of the
initial cost and carrying amount of the asset or liability.
When a hedging instrument expires or is sold or terminated, or
when a hedge no longer meets the criteria for hedge accounting,
any cumulative gain or loss existing in equity at that time remains
in equity and is recognised when the forecast transaction is
ultimately recognised in the Income Statement. When a forecast
transaction is no longer expected to occur, the cumulative gain or
loss that was reported in equity is immediately transferred to the
Income Statement.
Hedge of net investment in 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.
FINANCIAL STATEMENTS 2. Segments
Operating segments are based on internal reporting to the Chief Executive Officer in assessing performance and determining the
allocation of resources. During the year, a number of restructuring activities were undertaken to simplify the Group and focus on core
activities. This resulted in changes to the Group's management reporting structure, and therefore the reportable segments have been
amended to comply with requirements of the relevant accounting standard. As a result, two new segments have been created:
Construction Materials & Cement – which consolidates the activities of the former Construction Materials and Cement operations
into a single division.
Boral Gypsum – which consists of the Group's Australian and Asian plasterboard operations. The remaining Australian Building
Product businesses have been aggregated into the redefined Building Products segment.
Comparative segment information has been restated to align with the current structure.
The following summary describes the operations of the Group's reportable segments:
Construction Materials & Cement
Building Products
Boral Gypsum*
Boral USA
Discontinued Operations
Unallocated
– Quarries, concrete, asphalt, transport, landfill, property, cement and concrete placing.
– Australian bricks, roof tiles, masonry, timber products and windows.
– Australian and Asian plasterboard.
– Bricks, cultured stone, roof tiles, fly ash, concrete and quarries.
– Asian Construction Materials, East Coast masonry and Queensland roofing.
– Non-trading operations and unallocated corporate costs.
*
Results from Boral Gypsum Asia (BGA) were equity accounted until 9 December 2011 when the Group acquired the remaining 50% interest from Lafarge.
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 include items directly attributable to a segment as well as those that can be allocated on a
reasonable basis.
In presenting information on a geographical basis, segment revenues are based on the geographical location of customers, while
segment assets are based on the geographical location of assets.
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
Loss from discontinued operations
Significant items applicable to discontinued operations
Profit/(loss) before net financing costs and income tax expense from continuing operations
Net financing costs from continuing operations
Profit/(loss) before tax from continuing operations
CONSOLIDATED
2013
$ millions
2012
$ millions
5,286.5
(77.1)
5,209.4
5,010.3
(294.1)
4,716.2
(205.8)
8.8
(12.0)
(209.0)
(96.0)
(305.0)
223.2
1.3
41.7
266.2
(84.9)
181.3
Boral Limited Annual Report 2013 67
Notes to the Financial Statements
Boral Limited and Controlled Entities
2. Segments (continued)
TOTAL REVENUE
INTERNAL REVENUE
EXTERNAL REVENUE
2013
$ millions
2012
$ millions
2013
$ millions
2012
$ millions
2013
$ millions
2012
$ millions
Construction Materials & Cement
3,176.0
2,956.0
Building Products
Boral Gypsum
Boral USA
Discontinued Operations
593.3
919.3
555.4
77.1
659.9
655.9
499.4
295.7
33.7
0.9
–
–
–
5,321.1
5,066.9
34.6
54.3
3,142.3
2,901.7
–
–
0.7
1.6
56.6
592.4
919.3
555.4
77.1
659.9
655.9
498.7
294.1
5,286.5
5,010.3
PROFIT BEFORE NET
FINANCING COSTS AND
INCOME TAX EXPENSE
OPERATING PROFIT
(EXCLUDING ASSOCIATES)
EQUITY ACCOUNTED
RESULTS OF ASSOCIATES
2013
$ millions
2012
$ millions
2013
$ millions
2012
$ millions
2013
$ millions
2012
$ millions
Construction Materials & Cement
269.0
230.1
Building Products
Boral Gypsum
Boral USA
Discontinued Operations
Unallocated
Significant items (refer to note 4)
(40.1)
72.6
(63.6)
(8.8)
(22.4)
206.7
(430.1)
(223.4)
(5.2)
47.0
(83.0)
(1.3)
(18.8)
168.8
23.6
192.4
11.7
–
10.0
(0.6)
–
–
21.1
(3.5)
17.6
12.7
–
18.8
(0.7)
–
–
30.8
–
30.8
280.7
242.8
(40.1)
82.6
(64.2)
(8.8)
(22.4)
227.8
(433.6)
(205.8)
(5.2)
65.8
(83.7)
(1.3)
(18.8)
199.6
23.6
223.2
SEGMENT ASSETS
(EXCLUDING INVESTMENTS
IN ASSOCIATES)
EQUITY ACCOUNTED
INVESTMENTS IN ASSOCIATES
TOTAL ASSETS
2013
$ millions
2012
$ millions
2013
$ millions
2012
$ millions
2013
$ millions
2012
$ millions
Construction Materials & Cement
2,752.2
2,813.3
570.5
827.1
1,707.7
1,585.1
842.5
–
54.7
829.1
62.9
38.1
20.7
–
13.9
–
–
–
20.2
–
12.7
3.7
–
–
2,772.9
2,833.5
570.5
827.1
1,721.6
1,597.8
842.5
–
54.7
832.8
62.9
38.1
5,927.6
6,155.6
34.6
36.6
5,962.2
6,192.2
220.5
133.7
205.7
101.2
–
–
–
–
220.5
133.7
205.7
101.2
6,281.8
6,462.5
34.6
36.6
6,316.4
6,499.1
Building Products
Boral Gypsum
Boral USA
Discontinued Operations
Unallocated
Cash and cash equivalents and
cash on deposit
Tax assets
68 Boral Limited Annual Report 2013
FINANCIAL STATEMENTS 2. Segments (continued)
Construction Materials and Cement
Building Products
Boral Gypsum
Boral USA
Discontinued Operations
Unallocated
Loans and borrowings
Tax liabilities
LIABILITIES
ACQUISITION OF
SEGMENT ASSETS*
DEPRECIATION
AND AMORTISATION
2013
$ millions
2012
$ millions
2013
$ millions
2012
$ millions
2013
$ millions
2012
$ millions
533.5
130.2
174.6
134.9
–
206.5
1,179.7
1,666.5
76.7
506.8
152.3
159.5
117.4
44.6
186.4
1,167.0
1,723.4
205.3
205.9
241.5
169.9
154.0
21.6
46.0
18.1
2.1
0.1
30.8
94.4
30.8
11.0
5.9
37.2
41.9
41.3
–
0.8
38.5
24.5
42.4
13.3
0.7
293.8
414.4
291.1
273.4
–
–
–
–
–
–
–
–
2,922.9
3,095.7
293.8
414.4
291.1
273.4
*
Excludes amounts attributable to the acquisition of controlled entities and businesses as detailed in note 32.
Geographical information
For the year ended 30 June 2013, the Group's trading revenue from external customers in Australia amounted to $4,070.0
million (2012: $3,913.9 million), with $584.0 million (2012: $303.6 million) from the Plasterboard Asia operations, $555.4 million
(2012: $498.7 million) relating to operations in the USA and $77.1 million (2012: $294.1 million) relating to discontinued operations.
The Group's non-current assets (excluding deferred tax assets and other financial assets) in Australia amounted to $2,566.2 million
(2012: $2,942.3 million), with $1,134.1 million (2012: $1,024.3 million) in Asia and $616.2 million (2012: $627.8 million) in the USA.
3. Profit for the period
For the year ended 30 June
REVENUE FROM CONTINUING OPERATIONS
Sale of goods
Rendering of services
Revenue from continuing operations
OTHER INCOME FROM CONTINUING OPERATIONS
Significant items
Net profit on sale of assets
Other income
Other income from continuing operations
OTHER EXPENSES FROM CONTINUING OPERATIONS
Significant items
Net foreign exchange loss
Other expenses from continuing operations
SHARE OF NET PROFIT OF ASSOCIATES
Share of associates' net profit
Impairment disclosed as significant item
CONSOLIDATED
Note
2013
$ millions
2012
$ millions
5,112.3
97.1
5,209.4
4,627.6
88.6
4,716.2
4
4
12
4
13.1
31.6
6.1
50.8
455.2
0.4
455.6
21.1
(3.5)
17.6
184.5
15.0
8.0
207.5
119.2
0.1
119.3
30.8
–
30.8
Boral Limited Annual Report 2013 69
Notes to the Financial Statements
Boral Limited and Controlled Entities
3. Profit for the period (continued)
For the year ended 30 June
DEPRECIATION AND AMORTISATION EXPENSES
Land and buildings
Plant and equipment
Mineral reserves and licences
Leased assets capitalised
Other intangibles
Less depreciation and amortisation expenses from discontinued operations
NET FINANCING COSTS FROM CONTINUING OPERATIONS
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 from continuing operations
CONSOLIDATED
2013
$ millions
2012
$ millions
20.2
263.5
3.2
0.1
4.1
291.1
–
291.1
0.5
7.1
7.6
101.1
2.5
103.6
(96.0)
18.2
250.2
1.6
–
3.4
273.4
(13.3)
260.1
0.6
14.0
14.6
95.9
3.6
99.5
(84.9)
*
In addition, interest of $3.6 million (2012: $4.1 million) was paid to other parties and capitalised in respect of qualifying assets. The capitalisation rate used was 6.0% (2012: 6.0%).
OTHER CHARGES
Employee benefits expense*
Operating lease rental charges
Bad and doubtful debts expense
1,137.6
1,110.1
110.3
8.8
119.6
4.7
*
Employee benefits expense includes salaries and wages, defined benefit and defined contribution expenses together with share-based payments and other entitlements including
termination payments.
70 Boral Limited Annual Report 2013
FINANCIAL STATEMENTS 4. Significant items
For the year ended 30 June
Net profit/(loss) includes the following items whose disclosure is relevant in
explaining the financial performance of the Group:
Continuing operations
Gain on fair value remeasurement of initial LBGA shareholding
Gain on fair value of purchase price commitment for Cultured Stone
Acquisition and integration costs
Gain on settlement of insurance claims
Curtailment of clinker operations at Waurn Ponds and reassessment
of coal supply arrangements
Organisational restructure costs
Impairment of assets, businesses and restructuring costs
Goodwill
Property, plant and equipment
Investments accounted for using the equity method
Inventory
Restructure and closure costs
Loss on sale of Oklahoma assets – USA
Loss on sale of Best Block business – USA
Resolution of onerous fly ash contract – USA
Summary of significant items from continuing operations
Profit/(loss) before tax
Income tax benefit
Net significant items from continuing operations
Discontinued operations
Gain on disposal of Asian Construction Materials businesses
Gain on sale of East Coast Masonry businesses
Impairment of assets, businesses and restructuring costs
Property, plant and equipment
Inventory
Restructure and closure costs
Summary of significant items from discontinued operations
Profit/(loss) before tax
Income tax benefit/(expense)
Net significant items from discontinued operations
Summary of significant items
Profit/(loss) before tax
Income tax benefit
Net significant items
CONSOLIDATED
Note
2013
$ millions
2012
$ millions
(i)
(ii)
(iii)
–
–
–
13.1
(130.3)
(59.8)
(32.4)
(165.9)
(3.5)
(47.6)
(13.9)
(263.3)
(5.3)
–
–
(445.6)
117.5
(328.1)
12.0
–
–
–
–
–
12.0
(0.4)
11.6
(433.6)
117.1
(316.5)
158.1
26.4
(28.8)
–
–
–
(20.0)
(38.7)
–
(11.6)
(23.8)
(94.1)
–
(2.3)
6.0
65.3
38.8
104.1
34.2
3.4
(37.2)
(15.0)
(27.1)
(79.3)
(41.7)
13.0
(28.7)
23.6
51.8
75.4
Boral Limited Annual Report 2013 71
Notes to the Financial Statements
Boral Limited and Controlled Entities
4. Significant items (continued)
2013 Significant items
(i) Curtailment of clinker operations at Waurn Ponds and reassessment of Berrima coal supply arrangements
Impairment and exit costs associated with the cessation of clinker manufacture at the Victorian Waurn Ponds operations together with
impairments and costs associated with reassessment of coal supply arrangements in Cement NSW resulted in asset write-downs of
$96.9 million and other charges and costs of $33.4 million.
(ii) Organisational restructure costs
During the year, the Group incurred costs and redundancies associated with a coordinated Group-wide organisation restructure program
to simplify business structures and improve operational efficiency together with implementation costs of outsourcing the Group's
Australian IT operations. This resulted in costs of $58.7 million and asset write-downs of $1.1 million.
(iii) Impairment of assets, businesses and restructuring costs
A structural decline in the Australian Bricks, Timber and Windows markets together with increased competition in Western Australia
resulted in impairments of Building Products' assets (including $32.4 million of goodwill). The Bricks' businesses were impaired by
$132.5 million, Timber impaired by $36.3 million and Windows by $6.3 million. Exit from the Engineered Flooring, Woodchips and
Queensland distribution businesses resulted in a further $33.6 million of restructuring costs and inventory write-downs.
In Construction Materials & Cement, land development costs of $30.2 million associated with land development in NSW were written off.
In the USA, the recovery has progressed slower than expected, resulting in the impairments of $24.4 million in respect of excess tile
production capacity in Mexico, Trinidad and Ione, California.
With the exception of the Windows business, which has been assessed on a fair value less costs to sell basis, the impairments have
been based on value in use calculations.
2012 Significant items
Gain on fair value remeasurement of initial LBGA shareholding
On 9 December 2011, the Group acquired the remaining 50% shareholding in Lafarge Boral Gypsum in Asia Sdn Bhd (LBGA).
On acquisition of the remaining 50% interest in LBGA, this initial investment was remeasured to fair value in accordance with Australian
Accounting Standard AASB 3 Business Combinations, which resulted in a gain to the Group. The gain is net of the derecognition of the
foreign currency reserve of $30.5 million associated with this initial investment.
Gain on fair value of purchase price commitment for Cultured Stone
The present value of the future purchase price commitment in respect of the remaining 50% interest in the USA Cultured Stone
business has been remeasured to fair value as at 30 June 2012, based on current and expected operating results, resulting in a gain
of $26.4 million.
Acquisition and integration costs
In 2012, the Group incurred costs (including stamp duty), associated with the acquisition and integration of the Asian Plasterboard
operations, Wagners' Construction Material concrete and quarry assets, and Sunshine Coast Quarries' concrete assets and quarries.
The acquisition costs are included in other expenses in the Income Statement for the prior period.
Impairment of assets, businesses and restructuring costs – continuing operations
Deterioration in returns from a number of businesses resulted in a reassessment of long-term manufacturing capacity requirements in
both Australia and the USA.
In the USA, this resulted in a charge of $15.9 million in respect of two USA brick plants and in light of ongoing depressed trading
conditions in the USA construction materials markets in Oklahoma and Denver, the goodwill associated with the USA construction
materials businesses was reassessed resulting in a $20.0 million impairment charge reflecting lower margins and increased competition.
In Australia, this resulted in a charge of $37.0 million in respect of the Galong lime plant that was closed and subsequently sold during
the year and $21.2 million of restructure costs, predominantly redundancies associated with closing manufacturing capacity in the
Australian Building Products businesses of $13.8 million, together with Corporate restructure costs of $7.4 million.
Impairment of assets, businesses and restructuring costs – discontinued operations
On 28 February 2012, the Group announced the closure of its Roofing manufacturing and distribution operations in Queensland
following a review of the long-term financial performance and low industry capacity utilisation. In addition, the Group announced that it
proposed to divest of its East Coast Masonry business and focus the Australian Building Products division on those areas with market
leadership positions in high growth markets. This resulted in impairment of assets of $52.2 million together with closure and restructure
costs of $27.1 million.
72 Boral Limited Annual Report 2013
FINANCIAL STATEMENTS 4. Significant items (continued)
Summary of significant items before interest and tax by segment
Construction Materials & Cement
Building Products
Boral Gypsum
Boral USA
Discontinued Operations
Unallocated
CONSOLIDATED
2013
$ millions
2012
$ millions
(157.0)
(199.1)
–
(29.7)
12.0
(59.8)
(433.6)
(37.0)
(13.8)
158.1
(5.8)
(41.7)
(36.2)
23.6
5. Discontinued operations, assets held for sale and business disposals
During the year, the Group divested its remaining Asian Construction Materials operations in Thailand, finalised the sale of the Indonesian
operations, and divested its East Coast Masonry business.
CONSOLIDATED
Note
2013
$ millions
2012
$ millions
Results of discontinued operations
Revenue
Expenses
Impairment of assets, businesses and restructuring costs
Gain on sale of discontinued operations
Profit/(loss) before net financing costs and income tax expense
Net financing costs
Profit/(loss) before income tax expense
Income tax (expense)/benefit
Net profit/(loss)
4
4
6
Attributable to:
Members of the parent entity
Non-controlling interest
Net profit/(loss)
Basic and diluted earnings/(loss) per share
Cash flows from discontinued operations
Net cash from operating activities
Net cash from investing activities
Net cash from 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
Provisions
Liabilities classified as held for sale
Net assets
77.1
(85.9)
(8.8)
–
12.0
3.2
(1.4)
1.8
(0.5)
1.3
1.3
–
1.3
0.1c
3.4
70.1
73.5
–
–
–
–
–
–
–
–
–
–
294.1
(295.4)
(1.3)
(79.3)
37.6
(43.0)
(3.5)
(46.5)
13.7
(32.8)
(33.1)
0.3
(32.8)
(4.4c)
12.5
54.1
66.6
15.1
0.9
11.2
32.3
3.4
62.9
18.8
25.8
44.6
18.3
Boral Limited Annual Report 2013 73
Notes to the Financial Statements
Boral Limited and Controlled Entities
5. Discontinued operations, assets held for sale and business disposals (continued)
Disposal of discontinued businesses
During the year, the Group divested its remaining Asian Construction Materials operations in Thailand, finalised the sale of the Indonesian
operations, and divested its East Coast Masonry business.
Consideration
Cash
Trade and other receivables
Inventories
Property, plant and equipment
Intangible assets
Other assets
Payables
Deferred taxes
Provisions
Net assets disposed
Foreign currency translation reserve transferred to net profit on disposal of controlled entities
Non-controlling interest
Gain on disposal of discontinued operations before income tax expense
Consideration
Cash and cash equivalents disposed
Less: Deferred consideration to be received
Consideration (net of transaction costs)
CONSOLIDATED
2013
millions
2012
$ millions
76.5
(4.3)
(50.1)
(13.1)
(4.0)
(0.9)
(3.0)
13.8
–
0.2
(61.4)
(3.1)
–
12.0
76.5
(4.3)
–
72.2
97.2
–
(20.2)
(7.6)
(35.3)
–
(10.8)
17.5
(0.9)
13.4
(43.9)
(18.6)
2.9
37.6
97.2
–
(31.9)
65.3
Disposal of Oklahoma Concrete
In June 2013, the Group sold its Oklahoma Concrete business for net cash proceeds of $15.6 million and generated a loss before tax
of $5.3 million.
The disposal of the Oklahoma Concrete business has not been recorded as a discontinued operation as it is not considered as a
material business of the Group.
Summary of consideration (after transaction costs)
Discontinued businesses
Controlled businesses
Total
72.2
15.6
87.8
65.3
–
65.3
74 Boral Limited Annual Report 2013
FINANCIAL STATEMENTS 6. Income tax expense/(benefit)
For the year ended 30 June
(i)
Income tax expense/(benefit)
Current income tax expense/(benefit)
Deferred income tax expense/(benefit)
Under/(over) provision for tax in previous years
Income tax expense/(benefit) attributable to profit/(loss)
(ii) Reconciliation of income tax expense/(benefit) to prima facie tax
Income tax expense/(benefit) on profit/(loss):
–
–
at Australian tax rate 30% (2012: 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/(recovered)
Non-deductible depreciation and amortisation
Capital gains/(losses) brought to account
Non-deductible asset impairments and write-downs
Non-assessable fair value gains
Share of associates' net profit and franked dividends (excluding significant items)
Other items
Income tax expense/(benefit) on profit
Under/(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
CONSOLIDATED
Note
2013
$ millions
2012
$ millions
(8.8)
(91.0)
2.3
(97.5)
(91.0)
(12.6)
(103.6)
0.5
0.2
(8.7)
15.5
–
(6.2)
2.5
(99.8)
2.3
(97.5)
19.5
(117.5)
(98.0)
0.1
0.4
0.5
(97.5)
1.4
(58.3)
2.3
(54.6)
(31.7)
(3.8)
(7.4)
(42.9)
40.4
(9.3)
31.1
2.7
1.5
(5.8)
–
(56.6)
(9.2)
0.8
(35.5)
(7.4)
(42.9)
9.6
(38.8)
(29.2)
(0.7)
(13.0)
(13.7)
(42.9)
(3.0)
(1.5)
(1.0)
(5.5)
Boral Limited Annual Report 2013 75
4
4
5
Notes to the Financial Statements
Boral Limited and Controlled Entities
7. Dividends
Dividends recognised by the Group are:
2013
2012 final – ordinary
2013 interim – ordinary
Total
2012
2011 final – ordinary
2012 interim – ordinary
Total
Amount per share
Total amount
$ millions
Franked amount
per share
Date of payment
3.5 cents
5.0 cents
7.0 cents
7.5 cents
26.6
38.3
64.9
51.1
55.8
106.9
3.5 cents
5.0 cents
28 September 2012
25 March 2013
7.0 cents
7.5 cents
27 September 2011
5 April 2012
Subsequent event
Since the end of the financial year, the Directors declared the following dividend:
2013 final – ordinary
6.0 cents
46.4
6.0 cents
27 September 2013
The financial effect of the final dividend for the year ended 30 June 2013 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 2013 is $44.9 million (2012: $70.8 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 $19.9 million (2012: $11.4 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 2 September 2013.
76 Boral Limited Annual Report 2013
FINANCIAL STATEMENTS 8. Earnings per share
Classification of securities as ordinary shares
Only ordinary shares have been included in basic earnings per share (EPS).
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
Profit attributable to non-controlling interests
Net profit excluding significant items
Net significant items
Net profit/(loss) attributable to members of the parent entity
Earnings reconciliation – continuing operations
Net profit before significant items and non-controlling interests
Profit attributable to non-controlling interests
Net profit excluding significant items
Net significant items
Net profit/(loss) attributable to members of the parent entity – continuing operations
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
2013
$ millions
2012
$ millions
110.8
(6.4)
104.4
(316.5)
(212.1)
121.1
(6.4)
114.7
(328.1)
(213.4)
102.3
(1.1)
101.2
75.4
176.6
106.4
(0.8)
105.6
104.1
209.7
CONSOLIDATED
2013
2012
766,598,996
743,487,487
6,437,744
6,101,791
773,036,740
749,589,278
(27.7c)
(27.7c)
13.6c
13.5c
(27.8c)
(27.8c)
23.8c
23.6c
13.6c
13.5c
28.2c
28.0c
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.
Boral Limited Annual Report 2013 77
Notes to the Financial Statements
Boral Limited and Controlled Entities
9. Cash and cash equivalents and cash on deposit
Cash at bank and on hand
Bank short-term deposits
Cash and cash equivalents
Cash on deposit
CONSOLIDATED
2013
$ millions
2012
$ millions
95.5
54.4
149.9
70.6
220.5
106.9
98.8
205.7
–
205.7
The bank short-term deposits mature within 90 days and pay interest at a weighted average interest rate of 2.37% (2012: 3.47%).
The cash on deposit with banks mature within 180 days and pay interest at a weighted average interest rate of 2.69% (2012: Nil).
10. Receivables
Current
Trade receivables
Associated entities
Less: Allowance for impairment
Other receivables
Less: Allowance for impairment
CONSOLIDATED
2013
$ millions
2012
$ millions
807.1
20.6
827.7
(15.6)
812.1
78.8
(3.1)
75.7
887.8
706.1
19.5
725.6
(12.8)
712.8
100.2
(3.4)
96.8
809.6
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 $117.1 million (2012: $78.3 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:
CONSOLIDATED
2013
$ millions
104.3
12.8
2012
$ millions
73.3
5.0
Trade receivables – past due 0 – 60 days
Trade receivables – past due > 60 days
78 Boral Limited Annual Report 2013
FINANCIAL STATEMENTS 10. Receivables (continued)
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
Acquisitions of entities or operations
Disposals of entities or operations
Transferred to assets held for sale
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 2013.
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
CONSOLIDATED
2013
$ millions
2012
$ millions
(12.8)
6.6
(8.8)
–
–
–
(0.6)
(15.6)
7.8
9.0
16.8
(18.9)
7.9
(4.7)
(3.5)
2.7
4.0
(0.3)
(12.8)
8.3
9.5
17.8
CONSOLIDATED
2013
$ millions
2012
$ millions
196.0
47.8
377.3
58.9
680.0
186.5
62.3
390.3
17.0
656.1
19.6
104.9
15.5
63.0
78.5
21.6
100.3
121.9
Boral Limited Annual Report 2013 79
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
2013
%
2012
%
2013
$ millions
2012
$ millions
CONSOLIDATED
OWNERSHIP
INTEREST
INVESTMENT
CARRYING AMOUNT
Details of investments in associates
Bitumen Importers Australia Pty Ltd
Bitumen importer Australia
30-Jun
Caribbean Roof Tile Company Limited Roof tiles
Trinidad
31-Dec
Flyash Australia Pty Ltd
Fly ash collection Australia
31-Dec
Gypsum Resources Australia Pty Ltd Gypsum mining
Australia
Highland Pine Products Pty Ltd
Timber
Australia
Penrith Lakes Development
Corporation Ltd
Quarrying
Australia
Rondo Building Services Pty Ltd
Rollform systems Australia
South East Asphalt Pty Ltd
Asphalt
Australia
30-Jun
30-Jun
30-Jun
30-Jun
30-Jun
Sunstate Cement Ltd
US Tile LLC
TOTAL
Cement
manufacturer
Australia
30-Jun
Roof tiles
USA
31-Dec
Movements in carrying value of associates
Balance at the beginning of the year
Associates becoming controlled entities during the year
Share of associates' net profit
Impairment disclosed as significant item
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
40
50
50
50
50
50
50
50
50
50
40
50
50
50
50
0.4
–
2.9
–
–
–
13.9
0.8
–
3.7
2.9
–
–
–
12.7
0.8
16.6
16.5
–
–
34.6
36.6
CONSOLIDATED
Note
2013
$ millions
2012
$ millions
4
36.6
–
21.1
(3.5)
(18.6)
(1.6)
0.3
0.3
34.6
240.2
(209.9)
30.8
–
(22.1)
(0.6)
(13.4)
11.6
36.6
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.
80 Boral Limited Annual Report 2013
FINANCIAL STATEMENTS 12. Investments accounted for using the equity method (continued)
Summary of performance and financial position of associates*
The Group's share of aggregate revenue, profits, assets and liabilities of associates is as follows:
CONSOLIDATED
Note
2013
$ millions
2012
$ millions
167.1
301.2
29.7
(8.6)
–
21.1
(3.5)
17.6
44.1
(12.4)
(0.9)
30.8
–
30.8
Share of associates' revenue
Share of associates' profit before income tax expense
Share of associates' income tax expense
Share of associates' non-controlling interest
Impairment disclosed as significant item
Share of associates' net profit – equity accounted
4
*
Results from Lafarge Boral Gypsum in Asia Sdn Bhd were equity accounted until 9 December 2011 when the Group acquired the remaining 50% interest from Lafarge and the entity
became a controlled entity.
Share of associates' net assets
Current assets
Non-current assets
Total assets
Current liabilities
Non-current liabilities
Total liabilities
Net assets
Share of associates' commitments
Share of associates' capital expenditure commitments contracted but not provided for:
Not later than one year
Share of associates' operating lease commitments payable:
Not later than one year
Later than one year but not later than five years
Later than five years
13. Other financial assets
Current
Derivative financial assets
Non-current
Derivative financial assets
57.7
81.8
139.5
42.4
62.5
104.9
34.6
0.8
4.1
12.1
3.7
19.9
55.3
89.1
144.4
47.2
60.6
107.8
36.6
0.1
3.7
9.4
4.5
17.6
CONSOLIDATED
2013
$ millions
2012
$ millions
11.6
0.2
23.5
–
Boral Limited Annual Report 2013 81
Notes to the Financial Statements
Boral Limited and Controlled Entities
14. Property, plant and equipment
Land and buildings
At cost
Less: Accumulated depreciation, amortisation and impairment
Mineral reserves and licences
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
Reconciliations
Land and buildings
CONSOLIDATED
2013
$ millions
2012
$ millions
1,434.1
(189.8)
1,244.3
148.1
(17.2)
130.9
4,594.7
(2,627.6)
1,967.1
5.1
(0.3)
4.8
1,377.5
(146.3)
1,231.2
150.3
(14.6)
135.7
4,607.9
(2,408.2)
2,199.7
0.5
(0.4)
0.1
1,971.9
3,347.1
2,199.8
3,566.7
Balance at the beginning of the year
1,231.2
1,035.9
Additions
Disposals
Acquisitions of entities or operations
Disposals of entities or operations
Transferred from other property, plant and equipment
Impairment disclosed as significant items
Transferred to assets held for sale
Depreciation expense
Net foreign currency exchange differences
Balance at the end of the year
82 Boral Limited Annual Report 2013
24.7
(29.0)
–
–
25.1
(32.1)
–
(20.2)
44.6
4.3
(11.1)
202.8
(0.3)
43.6
(27.3)
(9.9)
(18.2)
11.4
1,244.3
1,231.2
FINANCIAL STATEMENTS 14. Property, plant and equipment (continued)
Mineral reserves and licences
Balance at the beginning of the year
Disposals
Acquisitions of entities or operations
Transferred from other property, plant and equipment
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
Disposals of entities or operations
Transferred to other property, plant and equipment
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
CONSOLIDATED
2013
$ millions
2012
$ millions
135.7
–
–
1.4
(5.6)
(3.2)
2.6
74.4
(6.2)
67.6
0.4
–
(1.6)
1.1
130.9
135.7
2,199.8
1,784.6
268.7
(18.0)
–
–
(26.5)
(226.2)
–
(4.3)
(5.0)
(263.6)
47.0
404.5
(31.7)
410.1
(35.0)
(44.0)
(48.6)
(5.2)
0.8
–
(250.2)
14.5
1,971.9
2,199.8
Boral Limited Annual Report 2013 83
Notes to the Financial Statements
Boral Limited and Controlled Entities
15. Intangible assets
Goodwill
Other intangible assets
Less: Accumulated amortisation
Total
Reconciliation of movements in goodwill
Balance at the beginning of the year
Acquisitions of entities or operations
Impairment disclosed as significant items
Goodwill disposed
Net foreign currency exchange differences
Balance at the end of the year
CONSOLIDATED
2013
$ millions
2012
$ millions
825.8
59.8
(35.7)
24.1
849.9
797.3
–
(32.4)
(6.1)
67.0
797.3
54.6
(31.8)
22.8
820.1
243.7
572.3
(20.0)
(4.1)
5.4
825.8
797.3
Impairment testing for cash generating units containing goodwill
For the purposes of the impairment testing, goodwill is allocated to the Group's operating divisions according to business types and
geographical span of operations. The aggregate carrying amounts of goodwill allocated to each Cash Generating Unit (CGU) are
as follows:
Boral Gypsum Asia
US Bricks
Other*
628.0
87.5
110.3
825.8
571.4
79.6
146.3
797.3
*
Relates to multiple business units, none of which are considered individually significant.
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. Cash flows for the Asian
plasterboard business are projected over five years. Whilst recognising the cyclical nature of the USA building industry, cash flow
projections for the US Bricks business cover a period of seven years, reflecting a full business cycle. Cash flows beyond the projection
period are extrapolated using growth rates of between 2.5% and 4.0% for Asian plasterboard, and 0.8% for US Bricks. These growth
rates 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 13.9% for US Bricks to 15% for Asian plasterboard.
The key assumptions relate to:
•
•
housing starts and market share for the bricks business in the USA; and
plasterboard demand, plasterboard intensity and economic activity in the Asian plasterboard business.
These assumptions have been determined with reference to current performance and taking into account external forecasts. Housing starts
and plasterboard demand forecasts utilised in the cash flow projections are based on historical experiences in the relevant geographies.
The recoverable amount of the CGUs based on value in use exceeds their carrying values as at 30 June 2013. Due to the recent
acquisition, the value in use calculation for the Asian plasterboard business shows minimal headroom and therefore any reasonable
adverse change in the key assumptions would reduce the recoverable amount below carrying value. Management believes no
reasonable changes in the key assumptions on which the estimates for the US Bricks business are based would cause the carrying
amount to exceed the recoverable amount.
84 Boral Limited Annual Report 2013
FINANCIAL STATEMENTS 15. Intangible assets (continued)
Segment summary of goodwill
Construction Materials & Cement
Building Products
Boral Gypsum
Boral USA
Reconciliation of movements in other intangible assets
Balance at the beginning of the year
Additions
Australian carbon credit units
Acquisitions of entities or operations
Amortisation expense
Transferred to assets held for sale
Transfer from other assets
Net foreign currency exchange differences
Balance at the end of the year
CONSOLIDATED
2013
$ millions
2012
$ millions
70.2
–
640.6
115.0
825.8
70.2
32.4
584.0
110.7
797.3
22.8
12.2
0.4
2.9
–
(4.1)
–
(0.2)
2.3
5.6
–
6.6
(3.4)
(0.9)
1.0
1.7
24.1
22.8
Other intangible assets
Other intangible assets relate predominantly to brand names, technology, software development and government grant of carbon
credits. Where appropriate, other intangible assets 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
Deposits and prepayments
Non-current
Deferred expenses
CONSOLIDATED
2013
$ millions
2012
$ millions
17.7
25.1
42.8
32.0
37.0
69.0
48.5
48.3
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%.
Boral Limited Annual Report 2013 85
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 overdrafts – unsecured
Bank loans – unsecured
Other loans – unsecured
Finance lease liabilities
Non-current
Bank loans – unsecured
Other loans – unsecured
Finance lease liabilities
For more information about the Group's financing arrangements, refer to note 28.
19. Other financial liabilities
Current
Derivative financial liabilities
Future purchase liability – Cultured Stone
Non-current
Derivative financial liabilities
Future purchase liability – Cultured Stone
86 Boral Limited Annual Report 2013
CONSOLIDATED
2013
$ millions
2012
$ millions
757.6
2.5
760.1
9.4
9.4
726.6
5.6
732.2
10.9
10.9
CONSOLIDATED
2013
$ millions
2012
$ millions
14.2
54.4
56.9
1.4
126.9
432.2
1,101.0
6.4
24.2
120.6
3.2
0.3
148.3
668.5
906.0
0.6
1,539.6
1,575.1
CONSOLIDATED
2013
$ millions
2012
$ millions
8.0
48.1
56.1
25.5
–
25.5
7.1
–
7.1
29.6
42.8
72.4
FINANCIAL STATEMENTS 20. Current tax liabilities
Current
Current tax liability
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:
CONSOLIDATED
2013
$ millions
2012
$ millions
19.1
22.8
CONSOLIDATED
2013
$ millions
2012
$ millions
133.7
(57.6)
76.1
101.2
(182.5)
(81.3)
The potential deferred tax asset has not been taken into account in respect
of tax losses where recovery is not probable*
143.5
93.0
*
The potential benefit of the deferred tax asset will only be obtained if:
(i)
(ii)
(iii)
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;
the relevant Group entities continue to comply with the conditions for deductibility imposed by the law;
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*
China
Germany
India
Thailand
United Kingdom*
United States of America*
United States of America
Vietnam
*
Unbooked capital losses.
Expiry date
No restriction
31 Dec 2013 – 31 Dec 2017
No restriction
31 Mar 2013 – 31 Mar 2020
30 Jun 2013 – 30 Jun 2017
No restriction
30 Jun 2016
30 Jun 2029 – 30 June 2033
31 Dec 2013 – 31 Dec 2014
CONSOLIDATED
2013
$ millions
2012
$ millions
99.7
33.6
50.9
2.9
–
38.3
6.9
203.7
1.7
32.5
11.1
44.8
11.5
4.3
35.8
6.3
133.4
2.1
Boral Limited Annual Report 2013 87
Notes to the Financial Statements
Boral Limited and Controlled Entities
21. Deferred tax assets and liabilities (continued)
MOVEMENT IN TEMPORARY DIFFERENCES DURING THE YEAR
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
5.4
(28.0)
(157.4)
(14.3)
3.9
0.2
95.0
(24.1)
(111.2)
149.2
(81.3)
(1.7)
13.2
56.2
(9.2)
(0.6)
0.9
(2.2)
2.4
(0.2)
32.2
91.0
–
–
–
–
–
(2.3)
–
(1.4)
58.3
–
54.6
–
–
(8.0)
(2.3)
–
–
1.6
–
–
20.5
11.8
3.7
(14.8)
(109.2)
(25.8)
3.3
(1.2)
94.4
(23.1)
(53.1)
201.9
76.1
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
5.8
(32.6)
(144.9)
(21.8)
5.4
0.2
108.1
(22.3)
(107.1)
136.3
(72.9)
(0.5)
4.6
11.7
8.6
(1.5)
(0.5)
(13.4)
(4.6)
(5.2)
4.6
3.8
–
–
–
–
–
1.0
–
3.0
1.5
–
5.5
0.1
–
(24.2)
(1.1)
–
(0.5)
0.3
(0.2)
(0.4)
8.3
(17.7)
5.4
(28.0)
(157.4)
(14.3)
3.9
0.2
95.0
(24.1)
(111.2)
149.2
(81.3)
As at 30 June 2013
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 2012
Receivables
Inventories
Property, plant and equipment
Intangible assets
Payables
Loans and borrowings
Provisions
Other
Unrealised foreign exchange
Tax losses carried forward
88 Boral Limited Annual Report 2013
FINANCIAL STATEMENTS 22. Provisions
Current
Employee benefits
Rationalisation and restructuring
Claims
Restoration and environmental rehabilitation
Other
Non-current
Employee benefits
Claims
Restoration and environmental rehabilitation
Other
CONSOLIDATED
2013
$ millions
2012
$ millions
132.2
137.7
13.8
10.3
39.8
16.0
7.7
9.4
23.3
9.7
212.1
187.8
25.3
1.5
48.2
41.5
38.5
3.7
44.3
25.5
116.5
112.0
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.
Boral Limited Annual Report 2013 89
Notes to the Financial Statements
Boral Limited and Controlled Entities
22. Provisions (continued)
Reconciliations
Rationalisation and restructuring
Balance at the beginning of the year
Provisions made during the year
Transfer to liabilities held for sale
Payments made during the year
Balance at the end of the year
Claims
Balance at the beginning of the year
Provisions made during the year
Remeasurement of provision
Payments made during the year
Net foreign currency exchange differences
Balance at the end of the year
Restoration and environmental rehabilitation
Balance at the beginning of the year
Provisions made during the year
Unwind of discount
Transfer to liabilities held for sale
Payments made during the year
Balance at the end of the year
Other
Balance at the beginning of the year
Provisions made during the year
Transfer from/(to) liabilities held for sale
Payments made during the year
Transferred from investments accounted for using the equity method
Net foreign currency exchange differences
Balance at the end of the year
90 Boral Limited Annual Report 2013
CONSOLIDATED
2013
$ millions
2012
$ millions
7.7
9.3
–
(3.2)
13.8
13.1
4.3
(1.8)
(4.1)
0.3
11.8
67.6
24.8
1.5
–
(5.9)
88.0
35.2
12.3
12.6
(3.0)
0.4
–
57.5
9.0
9.2
(4.2)
(6.3)
7.7
11.6
2.3
–
(0.9)
0.1
13.1
74.0
6.1
1.4
(3.3)
(10.6)
67.6
56.7
13.4
(13.7)
(22.7)
0.4
1.1
35.2
FINANCIAL STATEMENTS 23. Issued capital
Issued and paid up capital
CONSOLIDATED
2013
$ millions
2012
$ millions
774,000,641 (2012: 758,572,140) ordinary shares, fully paid
2,433.8
2,368.4
Movements in ordinary issued capital
Balance at the beginning of the year
6,973,870 (2012: 14,626,401) shares issued under the Dividend Reinvestment Plan
8,319,496 (2012: 13,971,102) shares issued under the Dividend Reinvestment Plan
underwriting agreement
135,135 (2012: 48,647) shares issued on vesting of rights
Balance at the end of the year
2,368.4
2,261.3
29.4
35.5
0.5
54.8
52.1
0.2
2,433.8
2,368.4
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
135,135 (2012: 228,625) share acquisition rights vested
135,135 (2012: Nil) shares issued on vesting of rights
Nil (2012: 228,625) shares purchased on-market
Balance at the end of the year
–
0.5
(0.5)
–
–
–
1.0
–
(1.0)
–
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.
Boral Limited Annual Report 2013 91
Notes to the Financial Statements
Boral Limited and Controlled Entities
24. Reserves
Foreign currency translation reserve
Hedging reserve – cash flow hedges
Other reserve
Share-based payments reserve
Reconciliations
Foreign currency translation reserve
Balance at the beginning of the year
Net loss on translation of assets and liabilities of overseas entities
Foreign currency translation reserve transferred to net profit on recognition of LBGA as a subsidiary
Foreign currency translation reserve transferred to net profit on disposal of controlled entities
Net gain on translation of long-term borrowings and foreign currency forward contracts net of tax
benefit $58.3 million (2012: $1.5 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
Losses taken directly to equity
Tax benefit/(expense)
Balance at the end of the year
Other reserve
Balance at the beginning of the year
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
2013
$ millions
2012
$ millions
81.9
2.4
(66.3)
56.4
74.4
(87.5)
187.7
–
3.1
(21.4)
81.9
(3.6)
1.3
7.3
(0.3)
(2.3)
2.4
(66.3)
(66.3)
48.2
8.7
–
(0.5)
56.4
(87.5)
(3.6)
(66.3)
48.2
(109.2)
(131.6)
(1.5)
30.5
18.6
(3.5)
(87.5)
(0.4)
1.2
0.1
(5.5)
1.0
(3.6)
(66.3)
(66.3)
38.8
10.6
(1.0)
(0.2)
48.2
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 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.
92 Boral Limited Annual Report 2013
FINANCIAL STATEMENTS 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
CONSOLIDATED
2013
$ millions
2012
$ millions
6.1
1.3
7.4
5.6
1.6
7.2
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 2013 are
set out in note 37.
Boral Limited Annual Report 2013 93
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
Later than one year but not later than five years
Less: Future finance charges and executory costs
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
2013
$ millions
2012
$ millions
40.8
0.1
40.9
129.1
26.7
155.8
1.8
7.1
8.9
(1.1)
7.8
84.6
156.2
44.3
285.1
0.3
0.7
1.0
(0.1)
0.9
91.9
187.8
55.4
335.1
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.
94 Boral Limited Annual Report 2013
FINANCIAL STATEMENTS 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
Exercise price
Balance at
beginning of
the year
Issued during
the year
Lapsed
during the
year
Exercised
during the
year
Balance at
end of the
year
Vested and
exercisable
Number
Number
Number
Number
Number
Number
Consolidated – 2013
(xv)
(xvi)
(xvii)
31/10/2005 31/10/2012
$7.65
2,479,300
6/11/2006
6/11/2013
$7.27
3,720,400
6/11/2007
6/11/2014
$6.78
4,816,200
11,015,900
Consolidated – 2012
(xiv)
(xv)
(xvi)
(xvii)
29/10/2004 29/10/2011
$6.55
1,536,700
31/10/2005 31/10/2012
$7.65
2,552,700
6/11/2006
6/11/2013
$7.27
3,823,900
6/11/2007
6/11/2014
$6.78
4,989,800
12,903,100
–
–
–
–
–
–
–
–
–
(2,479,300)
(136,100)
(193,100)
(2,808,500)
(1,536,700)
(73,400)
(103,500)
(173,600)
–
–
–
–
–
–
–
–
–
–
3,584,300
1,792,150
4,623,100
3,975,866
8,207,400
5,768,016
–
2,479,300
–
–
3,720,400
1,902,700
4,816,200
4,239,552
(1,887,200)
– 11,015,900
6,142,252
There were no options exercised or shares issued to employees on the exercise of options during the financial year or in the preceding
financial year.
Boral Limited Annual Report 2013 95
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 $2.40 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
2013
$3.50
2012
$3.70
2.58 – 2.72%
4.01 – 4.28%
3.18%
35%
4.39%
30%
Set out below are summaries of share acquisition rights granted under the plans.
Tranche
Grant date
Expiry date Exercise price
Balance at
beginning of
the year
Issued during
the year
Cancelled
during the
year
Exercised
during the
year
Balance at
end of the
year
Vested and
exercisable
Number
Number
Number
Number
Number
Number
Consolidated – 2013
(ii)
(iii)
(iv)
(v)
(vi)
(vii)
(viii)
(ix)
(x)
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
12/11/2010 12/11/2017
1/9/2011
1/9/2018
1/9/2011
31/12/2012*
1/9/2012
1/9/2019
Consolidated – 2012
(i)
(ii)
(iii)
(iv)
(v)
(vi)
(vii)
(viii)
(ix)
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
12/11/2010 12/11/2017
1/9/2011
1/9/2018
1/9/2011
31/12/2012*
$0.00
$0.00
$0.00
651,744
223,625
77,277
$0.00
1,474,011
$0.00
2,074,034
$0.00
2,841,776
$0.00
4,522,150
135,135
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
438,121
671,039
237,776
83,594
$0.00
1,586,280
$0.00
2,176,056
$0.00
2,994,226
–
–
–
–
–
–
–
–
(651,744)
(18,576)
(7,027)
(236,374)
(285,245)
(401,429)
(947,642)
–
–
–
–
–
–
–
–
205,049
70,250
1,237,637
1,788,789
2,440,347
3,574,508
–
(135,135)
–
–
4,432,920
(874,013)
–
3,558,907
11,999,752
4,432,920
(3,422,050)
(135,135) 12,875,487
(160,849)
(277,272)
–
–
–
–
–
–
–
–
(19,295)
(14,151)
(6,317)
(112,269)
(102,022)
(152,450)
–
–
–
–
–
–
–
–
651,744
223,625
77,277
1,474,011
2,074,034
2,841,776
4,522,150
135,135
$0.00
$0.00
–
–
4,680,635
(158,485)
135,135
–
8,187,092
4,815,770
(725,838)
(277,272) 11,999,752
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
*
The Company granted Ross Batstone 135,135 SARs on 1 September 2011 as a retention incentive, in recognition of his additional responsibilities as Divisional Managing Director
of Boral Building Products in establishing a new Asian Plasterboard Division. The grant was made on terms and conditions determined by the Board and linked to service hurdles
to be tested on 31 December 2012. During 2013, the SARs vested and 135,135 fully paid shares were issued on 14 February 2013 at a weighted average price of $4.9532 per share.
During the year ended 30 June 2013, the consolidated entity recognised an expense of $8.7 million (2012: $10.6 million) in relation to
share-based payments.
96 Boral Limited Annual Report 2013
FINANCIAL STATEMENTS 27. Employee benefits (continued)
Superannuation
At 30 June 2013, 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. During the year, approval was gained to terminate the plan. Employees
who elected a lump sum distribution were paid out and Boral purchased annuities for the remaining participants and the plan has now
been terminated.
Boral Super is a sub-plan of the Plum Superannuation Fund; it has a defined benefit plan and an accumulation plan. In April 2013, Boral
Limited formally advised the Trustee of the Boral Super sub-plan of the Plum Superannuation Fund that under Rule 4.5(d)(1) it intended
to terminate contributions in respect of defined benefit members and under Rule 4.2(c) to reclassify these defined benefit members as
accumulation members with effect as at 30 June 2013.
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 were 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 2013
was $50.1 million (2012: $47.9 million).
The following sets out details in respect of the defined benefit plans 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
2013
$ millions
2012
$ millions
(17.2)
(3.1)
4.5
15.6
0.2
–
(7.3)
(4.7)
(9.8)
4.7
(0.1)
(17.2)
The accrued benefits, fund assets and vested benefits were determined based on amounts calculated by the actuary projected forward
to 30 June 2013.
Contributions to the Boral Super sub-plan and the Boral Industries Inc. plan were based on actuarial advice. On closure of the plans,
any shortfall in the defined benefit obligation was paid by the Group.
Boral Limited Annual Report 2013 97
Notes to the Financial Statements
Boral Limited and Controlled Entities
27. Employee benefits (continued)
Superannuation (continued)
Reconciliation of the net liability 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
Settlements
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
Settlements
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)
Settlements
Net foreign currency exchange differences
Cumulative actuarial losses
Actual return on plan assets
98 Boral Limited Annual Report 2013
CONSOLIDATED
2013
$ millions
2012
$ millions
–
–
–
76.6
4.1
0.2
0.2
(4.5)
(15.4)
(61.0)
(0.2)
–
59.4
1.2
–
15.6
0.2
(15.4)
(61.0)
–
–
4.1
0.2
(1.2)
3.1
(32.2)
4.5
28.4
(0.7)
–
1.3
(76.6)
59.4
(17.2)
73.0
5.0
2.6
0.2
8.8
(13.6)
–
0.6
76.6
65.7
2.9
(1.0)
4.7
0.2
(13.6)
–
0.5
59.4
5.0
2.6
(2.9)
4.7
(22.1)
(9.8)
–
(0.3)
(32.2)
1.9
FINANCIAL STATEMENTS 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
2013
–
–
–
–
2012
–
100.0%
–
–
2013
2012
–
–
–
–
10.9%
89.1%
–
–
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.
BORAL SUPER
SUB-PLAN
BORAL INDUSTRIES
INC. PLAN
2013
2012
2013
2012
Principal actuarial assumptions at the balance sheet date
Discount rate
Expected rate of return on plan assets
Expected salary increase rate
–
–
–
2.7%
2.7%
4.0%
–
–
–
5.3%
6.0%
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
CONSOLIDATED
2013
$ millions
2012
$ millions
2011
$ millions
2010
$ millions
2009
$ millions
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)
4.5
(76.6)
59.4
(17.2)
(1.0)
(8.8)
(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)
Boral Limited Annual Report 2013 99
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
Effective
interest rate
2013
Calendar year
of maturity
Currency
30 June 2013
Carrying
amount
$ millions
30 June 2012
Carrying
amount
$ millions
Fair value
$ millions
Fair value
$ millions
Current
Bank overdrafts – unsecured
Bank loans – unsecured
Bank loans – unsecured
Bank loans – unsecured
US senior notes – unsecured
Other loans – unsecured
Finance lease liabilities
Non-current
Syndicated term credit facility –
unsecured
Syndicated loan facility – unsecured
Bank loans – unsecured
US senior notes – unsecured
CHF notes – unsecured
Other loans – unsecured
Finance lease liabilities
Total
US SENIOR NOTES – UNSECURED
Multi
USD
THB
Multi
USD
Multi
Multi
USD
AUD
Multi
USD
CHF
AUD
Multi
4.58% 2013 – 2014
14.2
14.2
–
–
–
–
5.29% 2013 – 2014
7.01%
2014
5.05% 2013 – 2014
6.53% 2013 – 2014
–
–
54.4
56.2
0.7
1.4
–
–
54.4
59.1
0.7
1.4
24.2
9.8
50.1
60.7
2.8
0.4
0.3
24.2
9.8
50.1
60.7
2.8
0.4
0.3
126.9
129.8
148.3
148.3
2.34%
4.85%
2015
2016
6.21% 2014 – 2017
6.31% 2014 – 2020
2.25%
2020
9.03% 2014 – 2022
6.23% 2014 – 2018
75.6
300.0
56.6
930.4
166.8
3.8
6.4
75.6
300.0
56.9
1,004.1
172.4
3.8
6.4
150.0
461.3
57.2
905.7
–
0.3
0.6
150.0
461.3
57.4
1,003.5
–
0.3
0.6
1,539.6
1,666.5
1,619.2
1,749.0
1,575.1
1,723.4
1,673.1
1,821.4
Borrower
Boral USA
Boral USA
Boral USA
Boral USA
Boral USA
Boral Limited
Boral Limited
Total
CHF NOTES – UNSECURED
Borrower
Boral Limited
100 Boral Limited Annual Report 2013
Notional amount
US$ millions
Issue date
Interest rate
Maturity date
AUD equivalent
$ millions
52.0
200.0
53.5
30.0
76.2
200.0
276.0
887.7
05/2002
05/2005
05/2002
04/2008
04/2008
05/2005
04/2008
7.01%
5.42%
7.11%
7.12%
7.22%
5.52%
7.12%
05/2014
05/2015
05/2017
04/2018
04/2020
05/2017
04/2018
56.2
216.0
57.8
32.4
82.3
244.3
297.6
986.6
Notional amount
CHF millions
Issue date
Interest rate
Maturity date
AUD equivalent
$ millions
150.0
02/2013
2.25%
02/2020
166.8
FINANCIAL STATEMENTS 28. Loans and borrowings (continued)
BANK FACILITIES
Syndicated term credit facility
A committed A$500 million, subsequently reduced to A$350 million and US$195 million (aggregate equivalent A$561 million) syndicated term
credit facility was established on 14 February 2011 for general corporate purposes. The maturity date of the facility is 13 February 2015.
Syndicated loan facility
A committed A$500 million multi-currency syndicated loan facility was established on 24 November 2011 to provide liquidity for
general corporate purposes. The original maturity date of the facility was 23 November 2015 and has since been extended to
23 November 2016.
Bi-lateral loan facilities
Approximately US$159.8 million (equivalent A$172.6 million) of committed and uncommitted facilities from a number of banks in various
currencies have been provided to Boral Gypsum Asia (BGA) and its subsidiaries for general corporate purposes.
Bank overdraft, lease liabilities and other
The Group operates unsecured bank overdraft facility arrangements in Australia and Asia that have combined limits of A$99.6 million.
The facilities within Australia are conducted on a set-off basis. All facilities are subject to annual review where repayment can occur
on demand by the lending bank. Finance leases within Australia and Asia 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 2013.
29. Financial instruments
FINANCIAL RISK MANAGEMENT
Boral's Treasury operates as a service centre providing funding, risk management and specialist Treasury advice to the Group with the
objective of ensuring Boral's strategic and operational objectives are met. The Group's business activities are exposed to a variety of
financial risks, including credit, liquidity, foreign currency, interest rate and commodity price risks. Derivative instruments are used to
manage these financial risks. The Group does not use derivative or financial instruments for trading or speculative purposes.
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.
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 counterparty credit risk policy in place and the exposure to credit risk is monitored on an ongoing basis.
Credit risk relating to cash at bank and derivative contracts is minimised by using financial counterparties that have a long-term credit
rating greater than A-/A3 although allowance is given for up to 10% of total cash or A$20 million (whichever is lower) to be deposited
with financial counterparties with a rating below A-/A3. Additionally, no more than 40% of Boral's total credit exposure is to be with
any individual eligible counterparty.
Boral Limited Annual Report 2013 101
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
Cash on deposit
CONSOLIDATED
Carrying amount
2013
$ millions
Fair value
2013
$ millions
Carrying amount
2012
$ millions
Fair value
2012
$ millions
28.4
876.2
149.9
70.6
28.4
876.2
149.9
70.6
27.8
799.6
205.7
–
27.8
799.6
205.7
–
1,125.1
1,125.1
1,033.1
1,033.1
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 2013
Derivative financial assets
Foreign exchange contracts
designated as cash flow hedges
Commodity swaps designated
as cash flow hedges
Cross currency swaps
designated as fair value hedges
30 June 2012
Derivative financial assets
Foreign exchange contracts
designated as cash flow hedges
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
5.0
5.0
5.1
3.3
1.8
–
3.6
3.6
3.6
1.5
1.2
0.9
26.5
35.1
26.5
35.1
59.2
67.9
1.5
6.3
2.5
5.5
0.2
1.1
–
–
–
–
–
–
55.0
55.0
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
0.2
0.2
0.2
0.2
0.2
0.2
0.2
0.2
–
–
–
–
–
–
–
–
102 Boral Limited Annual Report 2013
FINANCIAL STATEMENTS 29. Financial instruments (continued)
LIQUIDITY RISK
Liquidity risk is the risk that the Company has insufficient funds to meet its financial obligations when they fall due. It is also associated with
planning for unforeseen events or business disruptions that may cause pressure on liquidity. The Group manages this risk by ensuring that:
(i) Boral has a well spread debt maturity profile with a target of > 3.5 years; (ii) Short-term debt (< 1 year) is not to exceed 20% of the sum of
Total Debt plus Committed Undrawn Facilities > 1 year; (iii) Committed Undrawn Facilities plus cash is > A$500 million. The following are the
contractual maturities of financial liabilities, including estimated interest payments but excluding the impact of netting agreements:
30 June 2013
Non-derivative financial liabilities
Bank overdrafts – unsecured
Bank loans – unsecured
US senior notes – unsecured
CHF notes – 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 designated as cash flow hedges
30 June 2012
Non-derivative financial liabilities
Bank overdrafts – unsecured
Bank loans – unsecured
US senior notes – unsecured
Other loans – unsecured
Finance lease liabilities
Future purchase liability – Cultured Stone
CONSOLIDATED
Carrying
amount
$ millions
Contractual
cash flows
$ millions
6 months
or less
$ millions
6-12
months
$ millions
1-2 years
$ millions
2-5 years
$ millions
More than
5 years
$ millions
14.2
486.6
986.6
166.8
4.5
7.8
48.1
760.1
(14.4)
(545.9)
(1,199.0)
(197.0)
(6.3)
(8.4)
(48.1)
(760.1)
0.5
0.5
10.9
19.5
2.1
2,508.2
(0.5)
(0.5)
(12.1)
(43.8)
(2.1)
(2,838.2)
(4.4)
(45.9)
(20.0)
–
(0.9)
(0.9)
–
(760.1)
(0.4)
(0.2)
(3.0)
(2.1)
(0.7)
(838.6)
(10.0)
(37.0)
(86.8)
(2.5)
(0.1)
(0.9)
(48.1)
–
–
(127.5)
(273.2)
(3.9)
(0.6)
(1.8)
–
–
–
(335.5)
(724.8)
(11.6)
(1.9)
(4.8)
–
–
(0.1)
(0.3)
0.2
(0.8)
(0.8)
(187.2)
–
–
(2.4)
(3.1)
(0.6)
(413.1)
–
–
(5.7)
(37.8)
–
(1,122.1)
–
–
(94.2)
(179.0)
(2.8)
–
–
–
–
–
(1.2)
–
–
(277.2)
CONSOLIDATED
Carrying
amount
$ millions
Contractual
cash flows
$ millions
6 months
or less
$ millions
6-12
months
$ millions
1-2 years
$ millions
2-5 years
$ millions
More than
5 years
$ millions
24.2
(25.0)
789.1
(889.7)
908.5
(1,156.3)
0.7
0.9
(0.7)
(1.0)
42.8
(44.2)
(5.0)
(89.0)
(27.9)
(0.2)
(0.2)
–
(20.0)
(65.9)
(27.9)
(0.2)
(0.1)
–
–
–
(48.3)
(106.7)
(0.3)
(0.2)
(44.2)
–
–
(686.5)
(580.5)
–
–
(413.3)
–
(0.5)
–
–
–
–
–
–
Trade and other payables
732.2
(732.2)
(732.2)
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 designated as cash flow hedges
1.3
7.2
3.2
23.3
1.7
2,535.1
(1.3)
(7.4)
(3.6)
(36.0)
(1.7)
(2,899.1)
(1.1)
(4.1)
(0.3)
0.5
(0.2)
(859.7)
(0.2)
(2.2)
(0.4)
1.3
(0.4)
(116.0)
–
(1.1)
(0.8)
2.7
(0.7)
(199.6)
–
–
(2.1)
(40.5)
(0.4)
(1,310.5)
–
–
–
–
–
(413.3)
Boral Limited Annual Report 2013 103
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 optimised.
MARKET RISK
Currency risk
The Group is exposed to foreign currency risk. This occurs as a result of purchase of raw materials, interest expense related to non
AUD borrowings, imported plant and equipment, some export related receivables and the translation of its investment in overseas assets.
The Group manages this risk by adopting the following policies:
(a)
All global operational FX exposures are regarded as being within discretionary parameters. If hedging is elected then maximum
hedging levels of 75% for Year 1 (months 1 to 12) and 50% for Year 2 (months 13 to 24) apply. The maximum hedging term
permitted is two years.
(b) Capital expenditure related foreign currency exposures > A$0.5 million must be 100% hedged at the time of Capex approval. The
maximum permitted term for a hedge transaction is two years.
(c) Net investments, including net intercompany loans, in overseas domiciled investments are hedged, regulatory conditions and
available hedge instruments permitting.
The Group uses forward exchange contracts to hedge foreign exchange risk. Most of the forward exchange contracts have maturities of
less than one year. Where necessary and in accordance with policy compliance, forward exchange contracts can be rolled over at maturity.
The Group primarily uses external foreign currency denominated borrowings, cross currency swaps and forward exchange contracts to
hedge the Group's net investment in overseas domiciled assets. The related exchange gains/losses on foreign currency movements are
taken primarily to the Foreign Currency Translation Reserve.
The Group's foreign currency exposure for overseas assets at balance date was as follows, based on notional amounts:
Currency
30 June 2013
Balance sheet
Net investment in overseas
domiciled Boral subsidiaries
Foreign currency borrowings
Cross currency swaps
USD
Euro
GBP
NZD
Multi*
CONSOLIDATED
Equivalent to A$ millions
344.5
(618.0)
271.3
(2.2)
1.7
–
–
1.7
(1.7)
–
–
(1.7)
(0.2)
1,110.3
–
–
–
–
(0.2)
1,110.3
*
Exposure relates to net assets of Boral Gypsum Asia, which are denominated in multiple Asian currencies.
Currency
30 June 2012
Balance sheet
Net investment in overseas
domiciled Boral subsidiaries
Forward exchange contracts
Foreign currency borrowings
Cross currency swaps
104 Boral Limited Annual Report 2013
USD
Euro
GBP
NZD
THB
Multi*
CONSOLIDATED
Equivalent to A$ millions
391.1
9.8
(650.3)
253.8
4.4
1.6
–
–
–
1.6
(1.7)
1.6
(17.3)
940.0
–
–
–
–
–
–
–
–
–
–
–
–
(1.7)
1.6
(17.3)
940.0
FINANCIAL STATEMENTS
29. Financial instruments (continued)
MARKET RISK (continued)
Based on notional amounts, the forward exchange contracts taken out to hedge foreign exchange risk at balance date were as follows:
Notional amounts AUD
Average exchange rate
2013
$ millions
2012
$ millions
2013
2012
US dollars
Buy US dollars/sell Australian dollars
One year or less
Sell US dollars/buy Australian dollars
One year or less
Buy US dollars/sell MYR
One year or less
Euros
Buy Euros/sell Australian dollars
One year or less
JPY
Buy JPY/sell Australian dollars
One year or less
THB
Sell US dollars/buy THB
One year or less
Sell SGD/buy THB
One year or less
KRW
Buy US dollars/sell KRW
One year or less
Sell US dollars/buy KRW
One year or less
41.0
72.9
14.6
1.0184
0.9968
21.2
0.9263
1.0348
–
5.9
–
–
5.8
6.4
0.7765
0.7434
–
1.1
8.9
1.2
7.4
1.2
8.5
6.7
11.2
10.0
–
–
–
–
–
81.9100
–
–
–
–
The forward exchange contracts are considered to be highly effective hedges as they are matched against underlying foreign currency cash
flows such as future 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 or 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 US senior notes interest payables were hedged using forward exchange contracts. Other foreign
currency cash, payables and receivables were A$25.2 million at 30 June 2013 (2012: A$13.3 million). The related exchange gains/losses
on foreign currency movements are taken primarily to the Income Statement.
Sensitivity
At 30 June 2013, 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$2.1 million (2012: equivalent A$1.2 million) and equity would have increased/decreased respectively by around equivalent
A$114.6 million (2012: equivalent A$97.6 million).
The following significant exchange rates applied during the year:
USD
Euro
GBP
NZD
THB
Average rate
Reporting date spot rate
2013
2012
2013
2012
1.0238
0.7903
0.6531
1.2456
31.1687
1.0347
0.7742
0.6529
1.2752
31.9775
0.9257
0.7094
0.6069
1.1857
28.7150
1.0175
0.8075
0.6496
1.2739
32.3460
Boral Limited Annual Report 2013 105
Notes to the Financial Statements
Boral Limited and Controlled Entities
29. Financial instruments (continued)
INTEREST RATE RISK
The Group adopts a policy that ensures a minimum of 35% and a maximum of 75% of its borrowings are hedged with fixed interest
rates at all times. 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 35% and 75% of borrowings.
Interest rate swaps denominated in AUD and USD and cross currency swaps denominated in USD/AUD and CHF/AUD have been
transacted to assist with achieving an appropriate mix of fixed and floating interest rate borrowings. The interest rate derivative
instruments mature progressively over the next seven years. The duration applicable to the interest rate and cross currency swaps
is consistent with maturities applicable to the underlying borrowings.
At the reporting date, the interest rate profile of the Group's interest bearing financial instruments was:
Fixed rate instruments
Bank loans – unsecured
US senior notes – unsecured 1
CHF notes – unsecured 2
Other loans – unsecured
Finance lease liabilities
Variable rate instruments
Bank overdrafts – unsecured
Bank loans – unsecured 3, 4
CONSOLIDATED
2013
Carrying amount
$ millions
2012
Carrying amount
$ millions
9.6
986.6
166.8
4.5
7.8
–
908.5
–
0.7
0.9
1,175.3
910.1
14.2
477.0
491.2
24.2
789.1
813.3
1,666.5
1,723.4
1
2
3
4
US$225 million (equivalent A$271.3 million) fixed rate senior notes due May 2015 and May 2017 have been swapped to AUD floating rates via cross currency swaps.
CHF150 million (equivalent A$166.8 million) fixed rate notes due February 2020 have been swapped to AUD floating rate via cross currency swaps.
A$300 million of floating rate debt drawn under the A$500 million syndicated term credit facility has been swapped to fixed rates via interest rate swaps.
US$20 million (equivalent A$21.6 million) floating rate bank loan has been swapped to fixed rate via an interest rate swap.
Interest rate derivatives
Pay fixed interest rate derivatives
Pay fixed against A$ BBSY
Pay fixed against US$ LIBOR
Pay variable interest rate derivatives
Cross currency swap pay floating A$ BBSW
1.6
0.5
2.1
3.9
3.9
0.7
1.0
1.7
26.5
26.5
Sensitivity
At 30 June 2013, 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$0.5 million higher/lower (2012: A$0.3 million) and the change in equity would have been
A$7.4 million (2012: A$2.7 million) mainly as a result of a higher interest cost applying to interest rate derivatives.
106 Boral Limited Annual Report 2013
FINANCIAL STATEMENTS
29. Financial instruments (continued)
INTEREST RATE RISK (continued)
INTEREST RATES USED FOR DETERMINING FAIR VALUE
Where appropriate, the Group uses BBSW, LIBOR and Treasury Bond yield curves as of 30 June 2013 plus an adequate credit spread
to discount financial instruments. The interest rates used are as follows:
Derivatives
Interest bearing loans and borrowings
Finance leases
2013
% pa
2012
% pa
0.27 – 5.8
0.47 – 5.22
0.00 – 11.00
0.00 – 12.70
3.14 – 14.68
3.14 – 14.78
COMMODITY PRICE RISK
The Group is exposed to commodity price risk that is associated with the purchase of petroleum, natural gas, electricity and aluminium
purchases under variable price contract arrangements. The Group adopts a policy where the only commodity exposure where
compulsory hedging applies is diesel for the Australia Business and this hedging is to be in AUD. All other global commodity exposures
fall within discretionary hedging parameters. If hedging is elected then a minimum of 50% of the Australian Diesel exposure is to be
hedged for a period of not less than six months with maximum hedging levels of 75% for Year 1 (months 1 to 12) and 50% for Year 2
(months 13 to 24). The maximum permitted term for a hedge transaction is two years.
The Group uses commodity swaps to hedge commodity price risk. All of the commodity swaps have maturities of less than two years.
Commodities hedging activities
Notional value of commodity derivative instruments at year end is as follows:
Singapore gasoil 0.5%
Natural gas (NYMEX)
Electricity
Details of balance sheet carrying value/fair value of instruments hedging commodities price risk:
Assets
Commodity swaps designated as cash flow hedges
Liabilities
Commodity swaps designated as cash flow hedges
CONSOLIDATED
2013
$ millions
2012
$ millions
48.1
5.4
3.1
3.6
(0.5)
3.1
68.7
–
–
–
(7.2)
(7.2)
The commodity swaps 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 Nil in 2013 (2012: A$0.1 million).
Sensitivity
At 30 June 2013, 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 (2012: unchanged) and the change in equity would have been
A$5.9 million (2012: A$6.1 million).
Boral Limited Annual Report 2013 107
Notes to the Financial Statements
Boral Limited and Controlled Entities
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 (forward exchange contracts, commodity swaps, cross currency swaps);
financial liabilities, including derivatives used for hedging (forward exchange contracts, commodity swaps, interest rate swaps,
cross currency swaps).
The following table presents the Group's financial assets and liabilities that are measured at fair value:
Level 1
Level 2
Level 3
Total
$ millions
$ millions
$ millions
$ millions
–
–
–
–
35.1
35.1
33.5
33.5
–
–
–
–
35.1
35.1
33.5
33.5
Level 1
Level 2
Level 3
Total
$ millions
$ millions
$ millions
$ millions
–
–
–
–
–
0.2
0.2
–
36.7
36.7
–
–
–
–
–
0.2
0.2
–
36.7
36.7
30 June 2013
Assets
Derivatives used for hedging
Total assets
Liabilities
Derivatives used for hedging
Total liabilities
30 June 2012
Assets
Derivatives used for hedging
Total assets
Liabilities
Derivatives at fair value through profit or loss
Derivatives used for hedging
Total liabilities
108 Boral Limited Annual Report 2013
FINANCIAL STATEMENTS 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
Bob Every AO
Mike Kane*
Catherine Brenner
Brian Clark
Eileen Doyle
Richard Longes
John Marlay
Paul Rayner
Chairman and Non-executive Director
CEO and Managing Director (appointed 1 October 2012)
Non-executive Director
Non-executive Director
Non-executive Director
Non-executive Director
Non-executive Director
Non-executive Director
*
Mr Mike Kane held the position of President and CEO Boral USA until 1 October 2012, on which date he was appointed as CEO and Managing Director.
EXECUTIVES
Current Executives
Al Borm
Joseph Goss
Darren Schulz
Frederic de Rougemont
President and CEO Boral USA (appointed 1 October 2012)
Divisional Managing Director – Boral Construction Materials & Cement (appointed 1 April 2013)
Executive General Manager – Boral Building Products (appointed 1 February 2013)
CEO Boral Gypsum Asia until 1 October 2012, on which date he was appointed as Divisional
Managing Director – Boral Gypsum
Andrew Poulter
Chief Financial Officer
Former Executives
Mr Ross Batstone held the position of Chief Executive from 22 May to 30 September 2012. From 1 October 2012, he took on the role
of Chairman, Boral Gypsum Asia until his retirement effective 1 July 2013.
Mr Mike Beardsell held the position of Divisional Managing Director – Boral Cement until 31 January 2013, when he departed the Group
after his role was made redundant.
Mr Murray Read held the position of Divisional Managing Director – Boral Construction Materials until 31 March 2013, on which date
he moved into a temporary transitional role before departing the Group on 1 July 2013 after his role was made redundant.
Mr Bryan Tisher held the position of Divisional Managing Director – Boral Building Products until 6 February 2013, when he departed
the Group after his role was made redundant.
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
Termination benefits
Share-based payments
Long-term employee benefits
June 2012 comparatives include key management personnel for that year.
CONSOLIDATED
2013
$'000
7,682.3
369.5
2,144.1
1,613.4
69.0
2012
$'000
6,693.1
432.7
1,888.3
5,079.1
79.1
11,878.3
14,172.3
Boral Limited Annual Report 2013 109
Notes to the Financial Statements
Boral Limited and Controlled Entities
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 the
end of the year
Number
Number
Number
Number
Number
Number
Current Director
Mike Kane
Current Executives
Al Borm
Joseph Goss
Darren Schulz
2013
2012
2013
2013
2013
Frederic de Rougemont 2013
Andrew Poulter
Former Executives
Ross Batstone a
Mike Beardsell a
Murray Read a
Bryan Tisher a
2013
2012
2013
2012
2013
2012
2013
2012
2013
–
–
–
–
–
–
–
–
240,700
297,500
102,000
113,100
99,000
123,200
170,500
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
240,700
(56,800)
240,700
(25,500)
76,500
(11,100)
102,000
(27,300)
(24,200)
71,700
99,000
(49,400)
121,100
118,376
118,376
53,514
53,514
51,114
51,114
85,498
a
Option holding at the date of ceasing to be an executive included in key management personnel.
110 Boral Limited Annual Report 2013
FINANCIAL STATEMENTS 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 (SARs) 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 the
end of the year
Number
Number
Number
Number
Number
Number
181,002
78,717
666,666
102,285
48,900 a
34,640 a
–
–
–
188,205
21,701
659,142
352,382
309,050
182,746
354,703
202,935
340,718
–
13,333 a
104,442
169,875
166,504
–
321,978
131,888
129,280
161,458
158,263
135,000
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
847,668
181,002
83,540
–
13,333
104,442
358,080
188,205
–
659,142
(8,218)
(7,000)
659,142
–
(325,972)
114,966
(1,607)
–
(3,507)
(1,369)
(7,175)
(2,988)
309,050
508,986
354,703
–
(288,314)
187,404
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Current Director
Mike Kane
Current Executives
Al Borm
Joseph Goss
Darren Schulz
2013
2012
2013
2013
2013
Frederic de Rougemont 2013
Andrew Poulter
Former Executives
Ross Batstone b
Mike Beardsell b
Murray Read b
Bryan Tisher b
2013
2012
2013
2012
2013
2012
2013
2012
2013
a
b
Initial rights holding at the date of commencing as an executive included in key management personnel.
Final shareholding at the date of ceasing to be an executive included in key management personnel. Mr Ross Batstone ceased to be an executive included in key management
personnel from 1 October 2012. After this time, Mr Batstone received 135,135 shares upon the vesting of 135,135 SARs.
Boral Limited Annual Report 2013 111
Notes to the Financial Statements
Boral Limited and Controlled Entities
30. Key management personnel disclosures (continued)
EQUITY INSTRUMENTS (continued)
(iv) Shareholdings
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:
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
2013
2012
2013
2012
2013
2012
2013
2012
2013
2012
2013
2012
2013
2012
2013
2012
70,221
70,221
–
–
5,195
5,000
74,546
71,937
1,282
1,234
28,341
27,725
4,969
4,781
29,189
28,156
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
10,100
–
10,106
195
1,411
2,609
13,776
48
10,333
616
20,079
188
20,558
1,033
70,221
70,221
10,100
–
15,301
5,195
75,957
74,546
15,058
1,282
38,674
28,341
25,048
4,969
49,747
29,189
Current Directors
Bob Every AO
Mike Kane
Catherine Brenner
Brian Clark
Eileen Doyle
Richard Longes
John Marlay
Paul Rayner
a
Directors will only be entitled to a transfer of the shares in accordance with the terms and conditions of the plan.
112 Boral Limited Annual Report 2013
FINANCIAL STATEMENTS 30. Key management personnel disclosures (continued)
EQUITY INSTRUMENTS (continued)
(iv) Shareholdings (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
–
–
–
–
10,186
10,000
713,895
705,677
88,573
86,966
214,796
231,289
126
–
–
–
–
–
–
–
8,218
–
1,607
–
3,507
–
–
–
–
–
–
–
–
–
207
186
10,393
10,186
–
–
–
–
–
(20,000)
–
713,895
713,895
88,573
88,573
214,796
214,796
126
2013
2013
2013
2013
2013
2012
2013
2012
2013
2012
2013
2012
2013
Current Executives
Al Borm
Joseph Goss
Darren Schulz
Frederic de Rougemont
Andrew Poulter
Former Executives
Ross Batstone a
Mike Beardsell b
Murray Read b
Bryan Tisher b
a
Final shareholding at the date of ceasing to be an executive included in key management personnel. Mr Ross Batstone ceased to be an executive included in key management
personnel from 1 October 2012. After this time, Mr Batstone received 135,135 shares upon the vesting of 135,135 SARs, giving him a balance of 849,030 shares at the end of
financial year 2013.
b
Final shareholding at the date of ceasing to be an executive included in key management personnel.
Boral Limited Annual Report 2013 113
Notes to the Financial Statements
Boral Limited and Controlled Entities
31. Auditors’ remuneration
Audit services:
KPMG Australia – audit and review of financial reports
KPMG overseas firms – audit and review of financial reports
KPMG Australia – other assurance services
KPMG overseas firms – other assurance services
Other auditors – audit and review of financial reports
Other services:
KPMG Australia – taxation services
KPMG Australia – due diligence
KPMG Australia – advisory
KPMG Australia – other
KPMG overseas firms – due diligence
KPMG overseas firms – taxation services
32. Acquisition/disposal of controlled entities
The following controlled entities were acquired or disposed of during the financial year ended 30 June 2013:
Entities acquired:
There were no acquisitions during the year ended 30 June 2013.
Entities disposed:
PT Pion Quarry Nusantara
Thailand Construction Materials
Boral Concrete & Quarry Limited
Ratchiburi Enterprise Company Ltd
Entities deregistered:
Boral Timber Inc.
Boral Investments Ltd
LBGA Trading (Singapore) Pte Ltd
MLOP Pty Ltd (in liquidation)
Boral Johns Perry Ltd (in liquidation)
Dowell Australia Ltd (in liquidation)
Name changes during the financial period:
Boral Material Technologies Inc.
to
Boral Material Technologies LLC
114 Boral Limited Annual Report 2013
CONSOLIDATED
2013
$'000
2012
$'000
1,355
910
108
3
–
1,431
539
103
–
649
2,376
2,722
160
217
36
16
–
58
487
2,863
86
513
35
11
130
162
937
3,659
Date of disposal
Aug 2012
Dec 2012
Date of loss of control
Jun 2013
Jun 2013
Jun 2013
Aug 2012
Aug 2012
Aug 2012
FINANCIAL STATEMENTS
2012
$ millions
531.4
166.2
83.0
(62.8)
(17.3)
700.5
Date of disposal
Mar 2012
Jun 2012
Date of loss of control
Aug 2011
Nov 2011
Apr 2012
Apr 2012
Jun 2012
Jun 2012
Jun 2012
Jun 2012
Jun 2012
32. Acquisition/disposal of controlled entities (continued)
The following controlled entities were acquired or disposed of during the financial year ended 30 June 2012:
Entities acquired:
Lafarge Boral Gypsum in Asia Sdn Bhd
Wagners – concrete and quarry
Sunshine Coast quarries
Less: Net cash acquired
Less: Cash paid – deposit in prior year
Total purchase consideration
Entities disposed:
Indonesian Construction Materials
Pt Jaya Readymix
PT Boral Pipe and Precast Indonesia
PT Boral Indonesia
Boral Best Block LLC
Entities deregistered:
Boral Building Services Pte Ltd
Boral Asia Pacific Pte Ltd
United States Tile Co.
Boral Tile LLC
Boral Benefits Management Inc.
Boral Bricks of Texas LP
Boral Bricks Holdings Inc.
Boral Material Technologies of Texas LP
BMT Holdings Inc.
Name changes during the financial period:
MonierLifetile LLC
MonierLifetile S.R.L. de C.V.
Boral Quarry Products (Thailand) Ltd
Lafarge Boral Gypsum in Asia Sdn Bhd
Lafarge Gypsum in Asia Limited
Lafarge Gypsum (Shanghai) Co Ltd
Lafarge Gypsum (Chengdu) Co Ltd
Lafarge Boral Gypsum India Private Ltd
Lafarge Boral Gypsum Vietnam Co Ltd
Lafarge Prestia Co Ltd
Lafarge Plasterboard System Co Ltd
Lafarge Gypsum Korea Co Ltd
West Gypsum (Chongqing) Co Ltd
Lafarge Plasterboard System (Shanghai) Co Ltd
Lafarge Gypsum (Shandong) Co Ltd
merged into
merged into
merged into
merged into
Boral Bricks Holdings Inc.
Boral Bricks Inc.
BMT Holdings Inc.
Boral Material Technologies Inc.
to
to
to
to
to
to
to
to
to
to
to
to
to
to
to
Boral Roofing LLC
Boral Roofing de Mexico S. de R.L. de C.V.
Boral Concrete & Quarry Limited
Boral Gypsum Asia Sdn Bhd
BGA Holdings Limited
Boral Plasterboard (Shanghai) Co Ltd
Boral Gypsum (Chengdu) Co Ltd
Boral Gypsum India Private Ltd
Boral Gypsum Vietnam Co Ltd
Boral Prestia Co Ltd
Boral Plasterboard System Co Ltd
Boral Gypsum Korea Co Ltd
Boral Gypsum (Chongqing) Co Ltd
Boral Gypsum (Shanghai) Co Ltd
Boral Gypsum (Shandong) Co Ltd
Lafarge Boral Management Services Shanghai Ltd to
Boral Management Services (Shanghai) Co Ltd
Boral Limited Annual Report 2013 115
Notes to the Financial Statements
Boral Limited and Controlled Entities
33. Controlled entities
The financial statements of the following entities have been consolidated to determine the results of the consolidated entity.
Beneficial ownership by
Country of
incorporation
Consolidated entity
2013
%
Consolidated entity
2012
%
Boral Limited
Boral Cement Limited > *
Barnu Pty Ltd *
Boral Building Materials Pty Ltd > *
Boral International Pty Ltd > *
PT Pion Quarry Nusantara ****
MJI (Thailand) Ltd
Boral Concrete (Thailand) Ltd
Boral Concrete & Quarry Limited ****
Ratchiburi Enterprise Company Ltd ****
Boral USA <
Boral International Holdings Inc.
Boral Construction Materials LLC
Ready Mixed Concrete Company
Sprat-Platte Ranch Co. LLLP
Australia
Australia
Australia
Australia
Australia
Indonesia
Thailand
Thailand
Thailand
Thailand
USA
USA
USA
USA
USA
USA
USA
USA
USA
USA
Boral Finance Inc.
USA
Boral Timber Inc. ***
USA
Boral Lifetile Inc.
USA
Boral Concrete Tile Inc.
USA
Boral Roofing LLC
USA
Boral Roofing de Mexico S. de 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
Morton Lakes LLC
Aggregate Investments LLC
BCM Oklahoma LLC
McCanne Ditch and Reservoir Company
Boral Industries Inc.
Boral Bricks Inc.
Dennis Brick Distributors
Boral Composites Inc.
Boral Material Technologies LLC
Boral Stone LLC
Boral Stone Products LLC
Boral IP Holdings LLC **
Boral (UK) Ltd
Boral Investments Ltd ***
Boral Investments BV
Boral Industrie GmbH
Boral Klinker GmbH
Boral Mecklenburger Ziegel GmbH
Boral Industries Ltd
Boral Building Products (NZ) Ltd
116 Boral Limited Annual Report 2013
USA
USA
USA
USA
USA
USA
USA
USA
UK
Jersey
Netherlands
Germany
Germany
Germany
NZ
NZ
100
100
100
100
–
100
100
–
–
100
100
100
100
100
100
100
100
100
100
100
–
100
100
100
100
100
100
100
50
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
50
100
100
100
50
–
100
100
100
100
100
100
100
100
FINANCIAL STATEMENTS
33. Controlled entities (continued)
Beneficial ownership by
Country of
incorporation
Consolidated entity
2013
%
Consolidated entity
2012
%
Boral Gypsum Asia Sdn Bhd
Boral Management Services Shanghai Co Ltd
Boral Building Materials (Malaysia) Sdn Bhd
Boral Plasterboard (Malaysia) Sdn Bhd
Boral Plasterboard (Marketing) Sdn Bhd
Siam Gypsum Industry Co Ltd
Siam Gypsum Industry (Saraburi) Co Ltd
Siam Gypsum Industry (Songkla) Co Ltd
Siam Gypsum Industry Development Co Ltd
Gypsum Business Limited
Boonyavajara Mining Co Ltd
Boral Prestia Co Ltd
Boral Middle East FZE
Boral Middle East (Dubai) LLC
PT Petrojaya Boral Plasterboard
BGA Holdings Limited
Malaysia
China
Malaysia
Malaysia
Malaysia
Thailand
Thailand
Thailand
Thailand
Thailand
Thailand
Thailand
UAE
UAE
Indonesia
Labuan
China Plasterboard Corporation
British Virgin Islands
Boral Plasterboard (Shanghai) Co Ltd
Boral Gypsum (Chongqing) Co Ltd
Boral Gypsum (Chengdu) Co Ltd
Boral Gypsum (Shanghai) Co Ltd
Boral Gypsum India Private Ltd
Boral Gypsum (Shandong) Co Ltd
LBGA Trading (Singapore) Pte Ltd ***
Boral Gypsum Korea Co Ltd
South Korean Plasterboard Corporation
Boral Plasterboard System Co Ltd
Siamsum Corporation
Boral Gypsum Vietnam Co Ltd
Boral Plasterboard Philippines Inc
Boral Australian Gypsum Ltd > *
Waratah Gypsum Pty Ltd (in liquidation)
Boral Plaster Fixing Pty Ltd *
Lympike Pty Ltd *
China
China
China
China
India
China
Singapore
South Korea
Labuan
South Korea
Labuan
Vietnam
Philippines
Australia
Australia
Australia
Australia
100
100
100
100
100
71
71
71
71
100
100
100
100
49
100
100
100
100
100
100
100
100
71
71
71
71
100
100
100
100
49
100
100
100
96.8
96.8
100
100
100
100
100
–
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
60
100
100
100
100
100
100
100
100
100
100
Boral Limited Annual Report 2013 117
Notes to the Financial Statements
Boral Limited and Controlled Entities
33. Controlled entities (continued)
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 > *
Q-Crete Premix 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 > *
Boral Resources (SA) Ltd > *
Bitumax Pty Ltd > *
Road Surfaces Group Pty Ltd > *
Alsafe Premix Concrete Pty Ltd > *
Boral Transport Ltd > *
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 Holdings Ltd > *
Boral Bricks Pty Ltd > *
Boral Masonry Ltd > *
118 Boral Limited Annual Report 2013
Beneficial ownership by
Country of
incorporation
Consolidated entity
2013
%
Consolidated entity
2012
%
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
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
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
FINANCIAL STATEMENTS
33. Controlled entities (continued)
Beneficial ownership by
Country of
incorporation
Consolidated entity
2013
%
Consolidated entity
2012
%
Boral Hollostone Masonry (South Aust) Pty Ltd > *
Boral Montoro Pty Ltd > *
Boral Window 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 > *
Boral IP Holdings (Australia) Pty Ltd **
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
–
>
*
**
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).
Incorporated during the year.
***
Deregistered during the year.
****
Disposed of during the year.
<
A Delaware general partnership.
All the shares held by Boral Limited in controlled entities are ordinary shares.
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:
•
•
•
•
•
the 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.
Boral Limited Annual Report 2013 119
Notes to the Financial Statements
Boral Limited and Controlled Entities
35. Notes to statement of cash flows
(i) Reconciliation of cash and cash equivalents:
Cash includes cash on hand, at bank and short-term deposits, net of outstanding
bank overdrafts. Cash as at the end of the year as shown in the statement of cash
flows is reconciled to the related items in the balance sheet as follows:
Cash and cash equivalents
Bank overdrafts
CONSOLIDATED
Note
2013
$ millions
2012
$ millions
9
18
149.9
(14.2)
135.7
205.7
(24.2)
181.5
The Group also holds $70.6 million (2012: Nil) of bank deposits maturing in less than 180 days.
(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
Fair value adjustment
Impairment of assets, businesses and demolition costs
Share-based payment expense
Fixed asset impairment
Non-cash equity income
(205.7)
177.7
291.1
2.5
(38.2)
–
386.3
8.7
5.0
(2.5)
273.4
3.6
(50.3)
(184.5)
196.2
10.6
–
(8.7)
Net cash provided by operating activities before change in assets and liabilities
447.2
418.0
Changes in assets and liabilities net of effects from acquisitions/disposals
– Receivables
– Inventories
– Payables
– Provisions
– Current and deferred taxes
– Other
Net cash provided by operating activities
(70.4)
10.2
(1.7)
(26.6)
(95.3)
30.6
294.0
16.9
(56.1)
(35.6)
(82.3)
(112.6)
(15.0)
133.3
(iii)
The following non-cash financing and investing activities have not been included
in the statement of cash flows:
Dividends reinvested under the Dividend Reinvestment Plan
29.4
54.8
(iv) Acquisition costs, restructure costs and legal settlements paid
During the year, the Group incurred costs associated with:
Acquisition and integration costs
Restructure and business closure costs
Legal settlements and associated costs
(v) Details of credit standby arrangements and loan facilities are included in note 28.
120 Boral Limited Annual Report 2013
–
(73.2)
–
(73.2)
(35.3)
(36.9)
(18.9)
(91.1)
FINANCIAL STATEMENTS
36. Parent entity disclosures
For the year ended 30 June
RESULT OF THE PARENT ENTITY
Profit after tax
Other comprehensive income after tax
Total comprehensive income/(loss) 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
BORAL LIMITED
2013
$ millions
2012
$ millions
46.3
(1.8)
44.5
6,503.6
440.1
6,943.7
2,447.9
1,155.5
3,603.4
1.1
(1.2)
(0.1)
7,124.3
505.4
7,629.7
3,073.1
1,269.5
4,342.6
3,340.3
3,287.1
2,433.8
2,368.4
54.5
852.0
51.0
867.7
3,340.3
3,287.1
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
6.1
5.2
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 2013 (2012: Nil).
Boral Limited Annual Report 2013 121
Notes to the Financial Statements
Boral Limited and Controlled Entities
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
Loss before income tax expense
Income tax (expense)/benefit
Loss from continuing operations
Discontinued operations
Loss from discontinued operations (net of income tax)
Net loss
Other comprehensive income
Items that will not be reclassified to Income Statement:
Actuarial gain/(loss) on defined benefit plans
Income tax on items that will not be reclassified to Income Statement
Items that may be reclassified subsequently to Income Statement:
Exchange differences from translation of foreign operations taken to equity
Fair value adjustment on cash flow hedges
Income tax on items that may be reclassified subsequently to Income Statement
CONSOLIDATED
2013
$ millions
2012
$ millions
4,069.8
3,907.0
(383.2)
194.6
(188.6)
(10.8)
(199.4)
4.1
(1.2)
1.3
7.7
(2.5)
(368.2)
(37.4)
(405.6)
(60.0)
(465.6)
(6.6)
2.1
29.1
(3.3)
0.9
Total comprehensive income/(loss)
(190.0)
(443.4)
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
122 Boral Limited Annual Report 2013
(190.0)
–
(190.0)
(443.4)
–
(443.4)
1,062.9
1,639.9
(199.4)
(64.9)
2.9
801.5
(465.6)
(106.9)
(4.5)
1,062.9
FINANCIAL STATEMENTS
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
2013
$ millions
2012
$ millions
15.4
725.0
411.6
36.6
–
50.1
661.2
483.7
60.2
32.8
1,188.6
1,288.0
8.2
94.0
34.6
2,410.5
2,366.5
87.1
47.1
8.7
104.9
42.7
2,755.8
2,625.4
118.4
45.4
5,048.0
5,701.3
6,236.6
6,989.3
1,052.5
1,483.9
1.7
2.0
197.3
–
0.4
57.0
176.4
29.6
1,253.5
1,747.3
34.7
1,538.3
54.6
103.4
46.3
1,520.1
160.6
81.1
1,731.0
1,808.1
2,984.5
3,555.4
3,252.1
3,433.9
2,433.8
2,368.4
16.8
801.5
3,252.1
2.6
1,062.9
3,433.9
Boral Limited Annual Report 2013 123
FINANCIAL
STATEMENTS
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 56 to 123 and the Remuneration Report in the Directors'
Report, set out on pages 39 to 55, 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 2013 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.
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.
The Directors have been given the declarations required by section 295A of the Corporations Act 2001 from the chief executive
officer and chief financial officer for the financial year ended 30 June 2013.
The Directors draw attention to note 1 to the consolidated financial statements, which includes a statement of compliance with
International Financial Reporting Standards.
2.
3.
4.
Signed in accordance with a resolution of the Directors:
Dr Bob Every AO
Director
Mike Kane
Director
Sydney, 10 September 2013
124 Boral Limited Annual Report 2013
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 2013, and consolidated income statement and 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 37 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 2013 and of its performance for the year ended
on that date; and
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.
(ii)
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 2013.
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 2013 complies, with Section 300A of the
Corporations Act 2001.
KPMG
Greg Boydell
Partner
Sydney, 10 September 2013
Boral Limited Annual Report 2013 125
FINANCIAL
STATEMENTS
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 Australia
Telephone 1300 730 644
International +61 1300 730 644
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 FY2013 of 6.0 cents per share will be paid
by Boral on 27 September 2013. 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.
Dividend payments
As foreshadowed in Boral’s 2011 Annual Report, Boral
implemented direct credit as the preferred method for the payment
of cash dividends, effective from the interim dividend paid on
5 April 2012.
126 Boral Limited Annual Report 2013
For those shareholders with a registered address in Australia
or New Zealand, dividend payments will only be made by direct
credit to your nominated bank account (rather than by cheque
posted to your registered address). To provide or update your
bank account details, please contact the share registry or visit
its website at www.linkmarketservices.com.au
For those shareholders without a registered address in Australia
or New Zealand, if you wish your dividends to be paid directly to
a bank, building society or credit union account in Australia or
New Zealand, please contact the share registry or visit its 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.
Shareholders are also 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 (NSW).
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
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
Share trading and price
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 Boral 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.
•
October/November – the Annual General Meeting.
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
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 1300 730 644.
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 22 August 2013
Substantial shareholders
Ellerston Capital Limited, by a notice of initial substantial holder
dated 24 June 2013, advised that it and its associates were
entitled to 42,953,576 ordinary shares.
Franklin Resources Inc., by a notice of initial substantial holder
dated 16 May 2013, advised that it and its associates were
entitled to 38,993,689 ordinary shares.
Commonwealth Bank of Australia, by a notice of change
of interests of substantial holder dated 28 February 2013,
advised that it and its associates were entitled to 72,671,322
ordinary shares.
The Capital Group Companies Inc., by a notice of initial substantial
holder dated 18 December 2012, advised that it and its associates
were entitled to 40,943,587 ordinary shares.
Prudential plc, by a notice of change of interests of substantial
holder dated 19 October 2011, advised that it and its associates
were entitled to 44,427,035 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.
Boral Limited Annual Report 2013 127
Shareholder Information
Boral Limited and Controlled Entities
Distribution schedule of shareholders as at 22 August 2013
Size of shareholding
(a)
in the categories –
1 to 1,000
1,001 to 5,000
5,001 to 10,000
10,001 to 100,000
100,001 and over
(b) holding less than a marketable parcel (118 shares)
Number of shareholders
% of ordinary shares
25,406
26,819
4,819
2,882
119
60,045
1,507
1.65
7.97
4.42
7.71
78.25
100.00
0.01
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 22 August 2013
1
2
3
4
5
6
7
8
9
J P Morgan Nominees Australia Limited
HSBC Custody Nominees (Australia) Limited
National Nominees Limited
Citicorp Nominees Pty Limited
BNP Paribas Nominees Pty Limited
RBC Dexia Investor Services Australia Nominees Pty Limited
AMP Life Limited
UBS Wealth Management Australia Nominees Pty Ltd
Australian Foundation Investment Company Limited
10 The Senior Master of the Supreme Court (Common Fund No 3 A/C)
11 Argo Investments Limited
12 Invia Custodian Pty Limited
13 QIC Limited
14 Equitas Nominees Pty Limited (PB-600744 A/C)
15 Gwynvill Investments Pty Ltd
16 Bond Street Custodians Limited
17 Milton Corporation Limited
18 Djerriwarrh Investments Limited
19 Konann Pty Ltd (Peter White Family No 2 A/C)
20 Share Direct Nominees Pty Ltd (10026 A/C)
Ordinary shares
% of ordinary shares
145,168,789
130,624,810
125,011,728
94,328,665
32,655,477
24,994,803
4,741,844
4,320,706
4,008,492
3,545,765
3,035,213
2,995,069
2,580,525
2,450,738
2,037,750
1,754,778
1,627,463
1,152,519
1,027,198
981,185
18.76
16.88
16.15
12.19
4.22
3.23
0.61
0.56
0.52
0.46
0.39
0.39
0.33
0.32
0.26
0.23
0.21
0.15
0.13
0.13
128 Boral Limited Annual Report 2013
Designed and produced by Businesswriters & Design
FINANCIAL STATEMENTS
Boral Limited
ABN 13 008 421 761
The Annual General Meeting of
Boral Limited will be held at the
City Recital Hall, Angel Place,
Sydney, on Thursday 31 October
2013 at 10.30am.
Financial Calendar
Record date for final dividend
2 September 2013
Final dividend payable
Annual General Meeting
Half year end
27 September 2013
31 October 2013
31 December 2013
Half year results announcement
12 February 2014*
Ex dividend share trading commences
18 February 2014*
Record date for interim dividend
24 February 2014*
Interim dividend payable
Year end
* Timing of events is subject to change.
24 March 2014*
30 June 2014
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 interests
Net profit after tax 1
Significant items – net of tax
Net profit/(loss) attributable
to members of Boral Limited
Total assets
Total liabilities
Net assets
Shareholders' funds
Net debt
Funds employed
Dividends paid or declared
Statistics
2013
$ millions
2012
$ millions
2011
$ millions
2010
$ millions
2009
$ millions
2008
$ millions
2007
$ millions
2006
$ millions
2005
$ millions
2004
$ millions
5,286
5,010
4,711
4,599
4,875
5,199
4,909
4,767
4,305
4,150
519
473
522
505
539
688
762
823
794
794
291
273
245
253
263
240
231
209
191
195
228
(97)
130
(20)
(6)
104
(316)
200
(88)
111
(9)
(1)
101
75
277
(64)
213
(40)
2
175
(8)
252
(97)
155
(22)
(1)
132
(222)
276
(127)
149
(17)
–
131
11
448
(112)
336
(90)
1
247
(4)
531
(111)
420
(122)
–
298
–
614
(98)
516
603
(71)
532
600
(66)
534
(153)
(162)
(163)
–
362
–
(1)
370
–
(1)
370
–
(212)
177
168
(91)
142
243
298
362
370
370
6,316
2,923
3,394
3,394
1,446
4,840
85
6,499
3,096
3,403
3,403
1,518
4,921
82
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
13c
59%
1.7
5,895
2,985
2,910
2,910
1,515
4,425
202
34c
82%
1.2
5,817
2,829
2,987
2,987
1,482
4,470
203
34c
68%
1.5
5,587
2,832
2,755
2,755
1,578
4,333
200
34c
55%
1.8
5,001
2,594
2,407
2,407
1,394
3,800
197
34c
53%
1.9
4,511
2,151
2,360
2,360
938
3,298
175
30c
47%
2.1
Dividend per ordinary share
11.0c
11.0c
14.5c
13.5c
Dividend payout ratio 1
Dividend cover 1
81%
1.2
81%
1.2
60%
1.7
67%
1.5
Earnings per ordinary share 1
13.6c
13.6c
24.4c
22.1c
22.2c
41.4c
50.0c
61.7c
63.4c
63.8c
Return on equity 1
EBIT to sale 1
EBIT to funds employed 1
ROFE 2 (EBIT to average
funds employed 1)
3.2%
4.3%
4.7%
3.0%
4.0%
4.1%
5.6%
5.9%
7.6%
5.0%
5.5%
6.6%
4.8%
5.7%
8.5% 10.0% 13.2% 15.4% 15.7%
8.6% 10.8% 12.9% 14.0% 14.4%
6.5% 10.1% 11.9% 14.2% 15.9% 18.2%
4.7%
4.7%
7.4%
6.2%
6.3% 10.1% 12.1% 15.1% 17.0% 19.3%
Net interest cover (times) 1
Gearing (net debt to equity)
2.3
43%
2.3
45%
4.4
16%
2.6
45%
2.2
55%
4.0
52%
4.8
50%
6.3
57%
8.5
58%
9.1
40%
Gearing (net debt to net debt
plus equity)
Net tangible asset backing
per share
30%
31%
14%
31%
35%
34%
33%
36%
37%
28%
$3.17
$3.31
$3.91
$3.92
$4.12
$4.41
$4.41
$4.07
$3.57
$3.65
1
Excludes the impact of significant items in 2013, 2012, 2011, 2010, 2009 and 2008.
2 Refer to the 2013 Remuneration Report on page 41 for a discussion of how ROFE will be used as an additional performance hurdle under the Company's long term incentive plan from FY2014.
Results for the years ended 2005 to 2013 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.
Boral Limited Annual Report 2013 129
Boral Limited
ABN 13 008 421 761
Level 39, AMP Centre
50 Bridge Street, Sydney NSW 2000
GPO Box 910, Sydney NSW 2001
Telephone: +61 2 9220 6300
Internet: www.boral.com.au
Email: info@boral.com.au
Share Registry
c/- Link Market Services
Level 12
680 George St, Sydney NSW 2000
Locked Bag A14
Sydney South NSW 1235
Telephone: +61 1300 730 644
Internet: www.linkmarketservices.com.au
Email: boral@linkmarketservices.com.au
BORAL
ANNUAL
REPORT
2013
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Boral Limited
Annual Report
for the year ended 30 June 2013
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