BORAL
ANNUAL
REPORT
2016
BORAL LIMITED
ANNUAL REPORT
FOR THE YEAR
ENDED 30 JUNE 2016
Boral Limited
ABN 13 008 421 761
The Annual General Meeting
of Boral Limited will be held at
the Civic Pavilion, The Concourse,
Chatswood on Thursday
3 November 2016 at 10.30am.
Financial calendar
Please note dates are subject to review.
Record date for final dividend
31 August 2016
Final dividend payable
Annual General Meeting
Half year end
26 September 2016
3 November 2016
31 December 2016
Half year results announcement
15 February 2017
Ex dividend share trading commences
21 February 2017
Record date for interim dividend
22 February 2017
Interim dividend payable
Year end
10 March 2017
30 June 2017
Boral Limited
Annual Report
For the year ended 30 June 2016
Chairman’s Review
Chief Executive’s Review
Financial Review
Divisional Performance
Sustainability Overview
Executive Committee
Board of Directors
Corporate Governance
Directors’ Report
2016 Remuneration Report
Financial Statements
Statutory Statements
Shareholder Information
Financial History
2
4
6
9
18
28
29
30
44
51
73
132
134
137
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 2.6 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 2016
1
CHAIRMAN’S
REVIEW
From the
Chairman
I was honoured to become Boral’s Chairman in November
last year and, together with Mike Kane, to be leading the
Company in this the 70th year of Boral. I am pleased to
report continued improved results from the Company in
FY2016.
Profit after tax (PAT) (before significant items) of $268 million was
up 8% on last year.
Earnings before interest and tax (EBIT)1 of $398 million was 12%
ahead of the prior year, and Boral’s EBIT return on funds
employed (ROFE)2 improved from 8.2% to 9.0% in FY2016,
despite unfavourable currency movements impacting overseas
asset values.
Boral’s net debt at 30 June 2016 of $893 million was slightly
higher than $817 million a year ago, due to increased capital
expenditure and exchange rate impacts. However, Boral’s
balance sheet is strong, with gearing3 of 20% remaining low.
The Board declared a final dividend of 11.5 cents per share for a
full year fully franked dividend of 22.5 cents per share. This
represents a payout ratio of 62%, which is in line with Boral’s
Dividend Policy of between 50% and 70% of earnings before
significant items, subject to the Company’s financial position.
Boral delivered a solid total shareholder return4 of 11.7% for the
year – ahead of the average 10.0% for ASX100 companies.
1. Before significant items.
2. EBIT (before significant items) return on funds employed at 30 June.
3. Net debt/(net debt + equity).
4. Total shareholder return based on share price appreciation, dividends and franking benefits.
5. Per million hours worked.
2
Boral Limited Annual Report 2016
A strong safety culture
FY2016 also saw continued improvement in Boral’s safety
performance, with a significant 27% reduction in the recordable
injury frequency rate (RIFR) down to 8.85 and a 28% reduction in
the lost time injury frequency rate to 1.35. All divisions performed
well in the area of safety, reflecting the fact that safety is the
number one priority across the Company and that Boral’s
people are committed to a culture of Zero Harm Today.
Strength in Boral’s markets
In FY2016, Australia’s housing market remained very strong –
particularly multi-residential activity. This has helped to smooth
Australia’s transition from the end of the resources boom to
increased investment in major roads and infrastructure work.
As Boral’s multi-year supply of materials to Australia’s large LNG
projects continues to taper off, Boral has been capitalising on
the strength of the housing market and is well-positioned to
supply materials to the growing pipeline of infrastructure work,
which is more pronounced in NSW.
Boral is also well positioned to supply continued growth in US
housing. With US housing activity still well below 50 year
average levels, there is considerable growth through market
recovery expected over the coming years. Our increasing suite
of innovative composite products together with our traditional
product portfolio means that Boral will continue to benefit from
this growth.
In Asia, despite recent slowdowns in Indonesia and Thailand,
USG Boral will benefit from medium- and longer-term market
growth in the region and is continuing to deliver impressive
growth through its superior performing Sheetrock® brand
products and complementary products.
With the Company’s strengthening results and clear strategy to deliver performance excellence and sustainable growth, together with Boral’s well-recognised brand and leading positions, it’s an exciting time for Boral.Dr Brian Clark, Chairman A platform for more sustainable growth
Boral is well-positioned to leverage growth from demand cycles
in all of our three major geographies – Australia, the USA and
Asia. In Australia, however, our ability to grow through cycles is
limited by the scale and scope of the market. This is why we
have identified Asia and North America as our key growth
platforms.
BORAL’S GEOGRAPHIC
DIVERSIFICATION POSITIONS
THE COMPANY WELL TO
LEVERAGE GROWTH
OPPORTUNITIES.
We are investing in innovation for more sustainable growth, and
this is more pronounced in Asia and the USA where greater
market opportunities exist. We continue to invest in Sheetrock®
technologies in USG Boral and in the development of innovative
composite products in the USA.
We are also assessing strategic M&A opportunities where it
makes sense, and it makes most sense in the USA, where there
are more opportunities and where Boral has four decades
of experience.
We continue to maintain a very disciplined approach to
assessing strategic M&A opportunities, and in the event that we
do not find the right opportunities at the right price, capital
management remains an option.
The Board
Boral’s Board benefits from its valuable diversity of experience
across a range of sectors, functions and professions, and also
from its diversity of tenure and gender.
In March 2016, we welcomed Karen Moses as a new non-
executive Director, filling the vacancy left when Dr Bob Every
stepped down from the Board in November 2015. Karen brings
extensive senior executive experience from the energy sector in
Australia and overseas, with responsibilities spanning corporate
strategy, finance, transactions, safety, environment, risk,
compliance and insurance. Karen was a Director of Origin
Energy and is currently a Director of Orica and has been
appointed a Director of Charter Hall. We look forward to Karen’s
continued input on Boral’s Board.
In May 2016, the Board visited USG Boral’s operations in
Vietnam as well as Boral’s operations in Texas in the USA.
The Vietnam business is relatively small but it is an impressive,
thriving operation, with excellent depth and breadth of local
management.
In Texas we spent time with the US management team, and
inspected Boral’s fly ash operations and new Innovation Factory
in San Antonio. The Board has confidence in the US team and
its ability to strengthen Boral’s innovation platform and to shift
the portfolio toward lightweight building products.
Executive Team and Boral’s people
During the year, there were some changes to Boral’s Executive
Committee membership. Matt Coren, who had contributed
significantly to Boral as Group Director of Strategy and M&A
since 2010, left the organisation.
Al Borm, who has been President & CEO of Boral USA since
October 2012, stepped down from the role at the end of June
2016. He continues to be a member of the joint venture Board of
USG Boral and work in an advisory capacity to Boral for a
transition period. David Mariner, who joined Boral in 2010 and
has been running Building Products in Australia since December
2014, became President & CEO of Boral USA from 1 July 2016.
This change provided an opportunity in Australia to bring the
smaller Building Products division together with Construction
Materials & Cement (CM&C), forming a new division, Boral
Australia. Previously responsible for CM&C, Joe Goss became
Divisional Chief Executive of Boral Australia effective 1 July 2016.
With Joe Goss running Boral Australia, David Mariner leading
Boral USA and Frederic de Rougemont the CEO of USG Boral,
all under the leadership of Boral’s highly capable CEO Mike
Kane and expertly supported by experienced functional
executives, the Board is confident that Boral has the right team
in charge. We thank Mike Kane and Boral’s Executive
Committee, and all of Boral’s people, for their considerable
efforts and commitment to delivering Boral’s goals and
strategic priorities.
Dr Brian Clark
Chairman
Boral Limited Annual Report 2016
3
CHIEF EXECUTIVE’S
REVIEW
In conversation
with Mike Kane
QUESTION: Did all Boral divisions perform well in FY2016?
MIKE KANE: Yes, all of Boral’s divisions delivered on their
promises and delivered good outcomes in FY2016.
Boral’s largest division – Construction Materials & Cement
(CM&C) – reported a solid 4% lift in earnings before interest and
tax (EBIT) before property earnings. Including Property, EBIT of
$293 million was $8 million lower than FY2015 because earnings
from Property were not as high as FY2015, as anticipated.
Building Products delivered $33 million of EBIT, which was
$3 million better than last year, due to improved pricing and
operational performance, depreciation savings and a strong result
from the Boral CSR Bricks joint venture.
Our 50%-owned USG Boral gypsum joint venture delivered a
21% increase in post-tax equity income to $59 million and a 27%
lift in underlying EBIT to $179 million.
In the USA, with continuing market recovery, Boral USA
delivered a positive A$44 million (US$32 million) EBIT for the year
compared with A$6 million (US$5 million) in the prior year. After
returning to profitability in FY2015, the growth in earnings is a
highlight for the year.
Q: What’s driving the improvement in performance?
MK: Over the past four years, we have worked hard to get the
cost base right and to effectively manage costs and efficiencies
on an ongoing basis. We are strengthening our ability to recover
cost inflation through price, and we have improved the portfolio
and the way we do things so that our businesses are more
responsive to opportunities and external changes that
drive demand.
In Australia, we are near the end of supplying materials to the
major LNG work in northern Australia (QLD, NT and WA), which
have been significant projects for Boral in recent years. We have
been working hard to secure upcoming project work from the
growing pipeline of major roads and infrastructure. At the same
time, we have been supplying record levels of activity in East
Coast housing while realigning our business in WA as activity in
that state slows.
In the USA, the recovery in the housing market continues, albeit
slower than originally expected. A 9% lift in housing activity in
FY2016 to around 1.15 million starts underpinned solid growth in
Boral’s US earnings. A one-off property sale also assisted
the result.
In USG Boral, the continuing improved performance is coming
from strong volume growth in Australia, cost reduction benefits
and continued penetration of premium Sheetrock® and adjacent
products across Asia, Australia and New Zealand.
Q: Are you pleased with Boral’s health and safety focus and
performance?
MK: We need the whole organisation to embrace the goal of
Zero Harm, and I believe we have that commitment, and the
improved results reflect this.
During the year, we held a two-day safety summit, where Zero
Harm was discussed by 100 Boral leaders. Recognising the
debate about Zero Harm in many industries – whether it’s an
achievable goal or something that can never be achieved, but
you’re always trying to get there – the idea to focus on Zero
Harm for today was suggested. We asked the question, “Can
we get through today without hurting anybody?” And the answer
was, “Yes – we have done it many times”. So that’s our objective,
to get through the work today without injuring anybody. And we’ll
do it again tomorrow. That’s a very achievable goal, and that’s
how Boral is embracing Zero Harm as a safety philosophy.
4
Boral Limited Annual Report 2016
The progress we are making across all divisions to transform Boral for performance excellence and sustainable growth is very encouraging.Mike Kane, CEO & Managing Director I BELIEVE THERE IS A FIRM LINK
BETWEEN STRONG LEADERSHIP,
GOOD SAFETY OUTCOMES AND
FINANCIAL PERFORMANCE. IF YOU
MANAGE SAFETY WELL, YOU
MANAGE YOUR BUSINESS WELL.
WE SEE THAT ACROSS OUR
BUSINESS IN BORAL.
In FY2016, we saw a 28% reduction in Lost Time Injury
Frequency Rate (LTIFR) to 1.3 and a 27% reduction in the
Recordable Injury Frequency Rate (RIFR) to 8.2.
In the broader industries in which we operate in Australia, the
average LTIFR is around 7.2 to 9.31, compared with Boral
Australia’s LTIFR for FY2016 of 1.11. These very strong results
indicate that we are getting it right – across the organisation.
Q: How are you transforming Boral?
MK: In addition to our goal of delivering world class health and
safety outcomes, we are aiming to deliver returns that exceed the
cost of capital through the cycle, and more sustainable growth.
To deliver these goals, our strategy is to:
• Consistently apply best practice for performance excellence
(including operational and commercial excellence).
• Draw on Boral’s strength of geographic diversification,
including leveraging growth platforms in Asia and the USA.
• Build a portfolio of businesses with a balance of traditional
and innovative products and a more flexible cost structure.
This is particularly important in the USA, so that we can
better respond to market cycles and incrementally scale
back in recessionary environments, if required.
•
Invest in innovation and, where it makes sense, grow
through strategically aligned M&A.
Q: What is the outlook for Boral?
MK: Boral is facing growth in key markets and across all
geographies. In Australia, there is a growth trajectory for major
roads and infrastructure. This will keep demand at very strong
levels even if record highs of residential activity come off, as
1. Per million hours worked. Source: Safe Work Australia data 2013-14. Based on Safe Work
Australia’s definition of Lost Time Injury Frequency Rate using injuries that resulted in five or
more days lost time from work. Boral data for Australia only is on the same basis for
comparative purposes for FY2016.
2. Average of analysts’ forecasts (Dodge, Wells Fargo, NAR, NAHB, Fannie Mae, Freddie Mac,
MBA) between June and July 2016.
expected. In Asia, we see product penetration continuing and a
general trend of economic growth. And in the USA, the market
recovery will continue for several years. So the outlook is very
encouraging for Boral.
Looking at the near term, in FY2017 we expect:
Boral Australia will benefit from the strong pipeline in East Coast
residential markets and the uplift in roads and infrastructure
activity, which will benefit more in the second half of FY2017.
CM&C is expected to deliver slightly higher EBIT compared with
FY2016 (including property in both years), and this earnings
growth should more than offset slightly lower earnings from
Building Products due to weaker housing markets in WA and SA.
While property earnings will continue to contribute in FY2017, the
contribution from property is currently expected to be lower than
FY2016.
USG Boral is expected to deliver further improvements
underpinned by strong volumes in Australia and some volume
improvements in Asia together with continued penetration of
Sheetrock® products, cost and price discipline, and joint venture
synergy realisation.
Boral USA should report a further increase in earnings in FY2017
underpinned by continued market growth. At current market
growth trajectories of around 10% per annum, this will see
1.26 million housing starts, broadly in line with external
forecasters2 who on average are projecting approximately
1.3 million housing starts in FY2017.
Mike Kane
CEO & Managing Director
Boral Limited Annual Report 2016
5
FINANCIAL
REVIEW
Report from
the CFO
Income statement
Year ended 30 June
$ millions
Sales revenue
EBIT1
Finance costs1
Tax expense1
Underlying profit after tax1
Net significant items
Net profit after tax
2016
2015
Group
Continuing
operations
Discontinued
operations
4,311.2
4,311.2
397.9
(63.2)
(66.7)
268.0
(12.0)
256.0
397.9
(63.2)
(66.7)
268.0
(16.0)
252.0
–
–
–
–
–
4.0
4.0
Group
4,414.7
356.7
(63.7)
(43.8)
249.2
7.8
257.0
Continuing
operations
Discontinued
operations
4,297.6
345.4
(63.7)
(39.7)
242.0
1.4
243.4
117.1
11.3
-
(4.1)
7.2
6.4
13.6
Financial performance
Revenue
Reported revenue of $4.31b was down 2% on the prior year,
reflecting the impact of a full year of equity accounting the Boral
CSR Bricks joint venture, following its formation on 1 May 2015.
Revenue from continuing operations was broadly steady, with
revenue growth in the USA offsetting a decline in Construction
Materials & Cement.
• Construction Materials & Cement revenue of $2.91b was
down 6%, with declines in Quarries, Concrete and Asphalt
reflecting the fall in major project activity, including LNG
projects in QLD, WA and NT, and the sale of the Landfill
business in FY2015. Excluding these impacts, revenue
remained at similar strong levels, underpinned by strong
East Coast residential construction activity and
pricing gains.
• Building Products revenue of $372.0m was 23% lower than
FY2015, however, revenues increased by 1% after adjusting
for the impact of equity accounting the Boral CSR Bricks JV.
Price gains and a shift towards higher-priced roofing
products offset slower housing activity in WA. Timber
revenues increased due to strong pricing in Hardwood,
partially offset by competition from imported Softwood
products creating price pressure.
• Gypsum underlying revenue of $1.40b was up 10% on the
prior year, driven by growth in premium Sheetrock®
plasterboard sales and adjacent products.
• Boral USA revenue of A$1.03b was up 23% on the prior
year, benefiting from increased US housing construction
activity. Total US housing starts increased by 9% to 1.15
million starts during FY2016.
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.
6
Boral Limited Annual Report 2016
Boral delivered a strong result across all business units, underpinned by strength in residential activity in Australia and the USA, as well as a continued focus on operating cost improvements. Rosaline Ng, Chief Financial Officer Earnings before interest and tax (EBIT)1
Group EBIT before significant items of $397.9m was up 12% on
the prior year, reflecting strong performance from all divisions
driven by operational improvements and cost savings.
• Construction Materials & Cement EBIT of $293.0m was
down 3% due to lower Property earnings of $27.8m in
FY2016 compared to $46.0m in FY2015. Excluding
Property, EBIT of $265.2m was up 4% compared to the
prior year, with higher earnings across all key business units
driven by operational cost improvements and falling fuel and
energy costs. The improved performance was despite
various restructuring costs and $9m in lower earnings from
the divested Landfill business, which more than offset the
$4m in damages received from the CFMEU settlement.
• Building Products EBIT of $32.6m was an 11% improvement
on the prior year. The result was underpinned by energy
cost savings, operational efficiency improvements in
Hardwood and benefits from previous restructuring, which
offset impacts from the declining WA brick market and
ongoing import competition in Softwood.
• Gypsum contributed $59.0m of equity accounted income to
the Group, a 21% increase on prior year. The underlying
performance of the joint venture improved by 27%, reflecting
strong cost management, growth in premium Sheetrock®
sales and adjacent products, improvement initiatives, and
falling energy and fuel prices. Australia, Korea, Thailand and
China all reported earnings growth, while Indonesia was
impacted by a decline in the local market.
• Boral USA EBIT of A$44.2m was a A$38.3m improvement
on the prior year. Margins improved with operational cost
savings and easing of energy costs. The result also included
a one-off benefit of A$10m from the sale of land resumed in
our Denver business.
Finance costs
Net underlying interest expense for FY2016 was $63.2m, in line
with FY2015. Underlying interest cover improved from 5.6 times
last year to 6.3 times in FY2016.
Tax expense1
The average underlying tax rate for the year increased from 15%
in FY2015 to 20% in FY2016. The prior year benefited from the
recovery of capital losses, which was significantly lower in
FY2016. The current year also included a benefit arising from
share acquisition rights that vested in the year. Excluding this,
the effective tax rate for FY2016 was 21%.
Net profit after tax1
Net profit after tax before significant items was $268.0m, an 8%
increase over the prior year. This improvement was due to a 12%
increase in EBIT, partially offset by a $23m increase in tax
expense. Reported profit after tax of $256.0m included a net
expense of $12.0m from significant items and compares to a
profit of $257.0m in the prior year, which included significant
gains of $7.8m.
Significant items
During the year, the Group recorded an after-tax significant loss
of $12.0m in respect of items that were excluded from the
underlying trading result. This primarily relates to the impairment
of the USG Boral earnout receivable, partially offset by the
finalisation of various tax matters and the settlement of a long
standing working capital adjustment from the sale of our
Indonesian Construction Materials business in FY2012.
USG Boral earnout adjustment
As part of the divestment of Boral’s 50% interest in its Gypsum
division, and the formation of the USG Boral Gypsum joint
venture in FY2014, Boral is entitled to receive up to US$75m in
further payments from USG, contingent on the achievement of
various US dollar denominated earnings targets in the joint
venture. The fair value of this earnout was reflected as part of the
proceeds received on completion of the transaction.
While the underlying performance of the business has remained
in line with expectations on a constant currency basis, the
deterioration of the Australian and Asian currencies against the
US dollar has resulted in the recoverability of the US dollar
denominated earnout no longer being probable. An impairment
of A$50.5m was recorded to fully impair the receivable at
30 June 2016.
Finalisation of tax matters
The Group finalised a number of outstanding tax matters during
the year, resulting in an income tax benefit of A$28.9m.
Other
Other relates to additional proceeds attributable to final working
capital adjustments from the sale of the Indonesian Construction
Materials business in FY2012. At the time of the sale, a number
of matters remained outstanding that were subject to finalisation.
These matters were resolved in the period, leading to a
favourable adjustment to the proceeds on sale of A$4.0m.
1. Excluding significant items.
Reconciliation of underlying results to reported results for FY2016
$ millions
Underlying results
Significant items
USG Boral earnout adjustment
Finalisation of tax matters
Other
Total significant items
Reported results
EBIT
Finance costs
Tax
Profit after tax
397.9
(63.2)
(66.7)
268.0
(50.5)
–
4.0
(46.5)
351.4
–
–
–
–
(63.2)
5.6
28.9
–
34.5
(32.2)
(44.9)
28.9
4.0
(12.0)
256.0
Boral Limited Annual Report 2016
7
FINANCIAL
REVIEW
Cash flow
For year ended 30 June, $ millions
EBITDA1
Change in working capital
Share acquisition rights vested
Interest paid
Income taxes paid
Equity earnings less dividends
Profit on sale of assets
Other items
Restructuring costs paid
Operating cash flow
Capital expenditure
Proceeds on disposal of assets
Proceeds on disposal of controlled
entities
Free cash flow
Dividends paid
On-market share buy-back
Other items
Cash flow
2016
645
40
(15)
(61)
(69)
(15)
(27)
15
(35)
478
(324)
56
–
210
(154)
(115)
7
(52)
2015
605
37
–
(63)
(45)
(34)
(41)
4
(44)
418
(250)
45
149
363
(129)
(116)
–
118
Operating cash flow increased by $60m to $478m in FY2016,
reflecting improved earnings and dividends from equity
accounted investments, offset by higher tax payments and the
impact of the vesting of share acquisition rights.
Equity earnings less dividends
The Group recorded an increase in dividends received of $35m
from equity accounted investments, in particular the USG Boral
Gypsum JV and the Boral CSR Bricks JV. This was partially
offset by increased equity accounted earnings in FY2016.
Change in working capital
The Group recorded a net cash inflow in FY2016 of $40m.
The current year performance was driven by further
improvements in debtor management, timing of capital
spending, and a slight reduction in Hardwood inventory levels.
Interest and tax
The Group reported increased tax payments as a result of
capital gains arising from the Landfill sale in FY2015, as well as a
higher instalment rate during FY2016.
Capital expenditure
Capital expenditure at $324m in FY2016 was $74m higher than
in FY2015. Stay-in-business expenditure increased due to plant
upgrades in Deer Park (VIC), Orange Grove (WA) and Holton
Morton (Colorado), new and upgraded concrete plants, a roofing
plant acquisition in Texas, and capital projects to improve
manufacturing costs, particularly in Timber. Growth expenditure
increased from $39m in FY2015 to $43m in FY2016.
1. Excluding significant items.
(Figures may not add due to rounding).
8
Boral Limited Annual Report 2016
Debt and gearing
As at 30 June
Total debt
Total cash and deposits
Net debt
Total shareholders equity
Gearing ratios
Net debt: equity (%)
Net debt: equity plus net debt (%)
Interest cover1 (times)
2016
$ millions
2015
$ millions
1,345
452
893
3,506
25
20
6.3
1,323
506
817
3,524
23
19
5.6
Net debt
Net debt increased by $76m to $893m, primarily due to the
$115m cash outflow related to the share buy-back which
completed on 21 September 2015.
Gearing ratios
Boral’s gearing covenant with its financiers, measured as gross
debt to gross debt plus equity less intangibles, increased slightly
to 30%, remaining comfortably within the 60% threshold.
Gearing as measured by net debt to net debt plus equity is
broadly in line with FY2015 at 20%.
Financial risk management
The Group is exposed to financial risk in its operations as a
result of fluctuations occurring in interest and foreign exchange
rates and certain commodity prices. Boral uses financial
instruments where considered appropriate to manage these
risks. Boral has hedged its foreign exchange exposures arising
from its investment in its US operations; however, earnings from
foreign operations are not hedged.
Capital management
During the year, the Company completed the buy-back of
20,641,950 shares for consideration of $115m at an average
price of $5.59. This is part of the Company’s on-market share
buy-back program which commenced on 18 March 2015 and
completed on 22 September 2015. The total consideration for
shares bought back on market is $231m, at an average price
of $5.91.
In FY2016, an interim dividend of 11.0 cents per share and a final
dividend of 11.5 cents per share were declared. Both were
fully franked.
The Group’s Dividend Reinvestment Plan remains suspended
until further notice.
DIVISIONAL
PERFORMANCE
Boral Construction Materials & Cement
Boral Building Products
(A$)
Revenue
EBITDA1
EBIT1
Net assets
ROFE1
Employees2
EBIT of $293m was $8m lower
than FY2015, with lower
earnings from Property, as
anticipated. Excluding
Property, EBIT was up $10m
primarily due to cost
improvements, pricing gains
and continued strong East
Coast residential construction
activity offsetting lower
construction activity in WA,
and regional QLD and VIC.
Boral Gypsum
Boral’s full year reported result (A$)
Reported EBIT1 or equity income3
Underlying USG Boral result (A$)
Revenue
EBITDA1
EBIT1
Net assets
ROFE1
Employees2
23%
15%
11%
6%
23%
85%
7%
FY2016
$2,907m
$480m
$293m
$2,065m
14.2%
5,012
6%
1%
3%
1%
(A$)
Revenue
EBITDA1
EBIT1
Net assets
ROFE1
Employees2
FY2016
$372m
$42m
$33m
$347m
9.4%
1,073
Revenue
EBIT1
b
1
.
3
$
b
9
.
2
$
m
3
9
2
$
m
1
0
3
$
EBIT of $33m was $3m above
FY2015, reflecting a
continuation of strong East
Coast housing activity, price
gains and depreciation
savings, offsetting the equity
accounting impact for Boral
CSR Bricks and declining
housing activity in WA.
Revenue
EBIT1
m
5
8
4
m $
2
7
3
$
m
3
3
$
m
0
3
$
6
1
Y
F
5
1
Y
F
6
1
Y
F
5
1
Y
F
6
1
Y
F
5
1
Y
F
6
1
Y
F
5
1
Y
F
Boral USA
(A$)
Revenue
EBITDA1
EBIT1
Net assets
ROFE1
Employees2
21%
10%
25%
27%
–
FY2016
$59m
FY2016
$1,397m
$251m
$179m
$1,902m
9.4%
3,453
Boral USA delivered EBIT of
A$44m, which is A$38m
higher than FY2015, reflecting
further recovery in US housing
activity, benefits from
operational cost savings and a
one-off land sale of A$10m.
FY2016
$1,033m
$93m
$44m
$886m
5.0%
2,457
Revenue
EBIT 1
m
1
5
7
$
S
U
m
5
9
6
$
S
U
m
2
3
$
S
U
6
1
Y
F
5
1
Y
F
6
1
Y
F
m
5
$
S
U
5
1
Y
F
Boral’s reported equity accounted income of $59m represents
our 50% share of post-tax earnings from the USG Boral joint
venture for the full year of FY2016, and is a $10m increase on
FY2015. Underlying EBIT of $179m was up $38m on FY2015
due to strong growth in Australia, continued penetration of
premium and adjacent products and cost reduction benefits.
1. Excluding significant items.
2. Includes 50% owned joint venture employees.
3. Post-tax equity income from Boral’s 50% share of the USG Boral joint venture.
Boral Limited Annual Report 2016
9
Divisional results at a glance DIVISIONAL
PERFORMANCE
FY2016 saw record Australian residential activity, further
improvements in US markets, a transition period in Australian
roads and engineering, and slower growth in key Asian markets.
Highlights include:
• Boral is continuing to capitalise on strength in the Australian
residential market, offsetting the transition from resources
and LNG projects to the expected pick-up in major roads
and infrastructure investments from FY2017.
•
Infrastructure pipeline is building, with Boral supplying
NorthConnex from FY2017 and winning a number of other
projects; and a growing pipeline of tendering opportunities.
• Continued recovery of the US housing market with single-
and multi-family house construction improving; Boral is well
positioned to benefit from further growth with an increasing
suite of innovative composite products.
• Strengthened market position in Asia through Sheetrock®
brand products with ongoing penetration opportunities
despite slower construction activity in Indonesia, Thailand
and China.
Boral external revenue1 by market
Other 3%
USA non-dwellings
& engineering 4%
USA dwellings
16%
Asia 9%
Australian RHS&B 25%
Australian non-
dwellings 12%
Australian A&A 10%
Australian multi-dwellings 8%
Australian detached
dwellings 13%
Australia
Boral’s largest exposure is to the roads, highways,
subdivisions & bridges (RHS&B) segment in Australia. In
FY2016, the value of work done (VWD) in RHS&B grew by an
estimated 4%, and a further 26% growth in VWD is expected
in FY20172.
Other engineering activity is continuing to contract in Australia2
with the slowdown of the resources sector and associated
infrastructure.
Housing starts in Australia increased by an estimated 4% in
FY2016 on the prior year, to record high levels of ~226,000
starts3. Detached housing starts were down 3% while
multi-residential starts increased by 11%3. Housing activity on
the East Coast was strong, particularly for multi-residential, while
housing starts in Western Australia and South Australia declined
by an estimated 20% and 3%, respectively3. Market forecasters4
are expecting Australian housing activity to fall by around 17%
on average in FY2017, but still remain at historically high levels of
~188,000 starts. Australian housing approvals in the year to
June 2016 show an overall 1% increase, with NSW and QLD
multi-residential construction remaining at strong levels5.
Detached housing starts as a proportion of total starts in
Australia remain at historically low levels of 50% compared to the
prior 20 year average of 65%3.
Australian alterations & additions (A&A) activity increased by
an estimated 2% in FY2016 compared with the prior year6.
Non-residential activity is estimated to be 5% lower in FY2016
compared with the prior year6.
The accompanying list of current Australian project work, which
includes major RHS&B, as well as larger non-residential and
other engineering work, shows projects awarded to Boral and
the potential pipeline of work being tendered. The major LNG
project Ichthys in NT, commercial high-rise project Barangaroo
in NSW, asphalt project Gateway in WA, and road projects
Cooroy to Curra Section A in QLD and Reid Highway in WA were
completed during the year.
1. Includes Boral’s 50% share of underlying revenue from USG Boral, which does not appear
in Boral’s consolidated accounts.
2. Average of Macromonitor and BIS Shrapnel forecasts for RHS&B. BIS Shrapnel forecast for
Other Engineering.
3. ABS original housing starts; Jun-16 quarter based on average of HIA, BIS Shrapnel and
Macromonitor forecasts.
4. HIA, BIS Shrapnel and Macromonitor.
5. ABS original housing approvals.
6. ABS value of work done 2013/14 constant prices; average of Macromonitor and BIS
Shrapnel forecasts used for Jun-16 quarter.
10
Boral Limited Annual Report 2016
Market conditions and competition Boral’s Australian project pipeline as at August 2016
Perth Stadium, WA
Est. completion Oct-16
Bringelly Road Stage 1, NSW
Est. completion Jun-17
Mitchell Fwy, WA
Est. completion Jun-17
Pacific Hwy Nambucca, NSW
Est. completion Jul-17
Wheatstone, WA
Est. completion Dec-17
Torrens to Torrens, SA
Est. completion Feb-18
Gateway Upgrade North, QLD
Est. completion Mar-18
NorthConnex, NSW
Est. completion Jun-19
Airport Link, WA
Amrun Project, QLD
Commencing Apr-17
Commencing Jul-16
Pacific Hwy W2B, NSW
Currently tendering
Toowoomba Bypass, QLD
Currently tendering
Roe 8, Main Roads, WA
Currently tendering
Northern Connector, SA
Currently tendering
Northlink stages 1, 2 & 3, WA
Currently tendering
Darlington Upgrade, SA
Currently tendering
Kingsford Smith Dr, QLD
Currently tendering
Cooroy to Curra Sect. C, QLD
Currently tendering
Sydney Metro City & SW, NSW
Currently tendering
Northern/Bringelly Rds, NSW
Currently tendering
Brisbane Airport Runway, QLD
Currently tendering
Western Distributor, VIC
Melbourne Metro, VIC
Pre-tendering
Pre-tendering
West. Sydney Stadium, NSW
Pre-tendering
Sunshine Coast Airport, QLD
Pre-tendering
WestConnex Stage 3, NSW
Pre-tendering
Asia
Market demand in Korea remained solid in FY2016,
underpinned by residential construction. In Indonesia and
Thailand, a slowdown in construction activity was seen as GDP
growth rates eased. Activity in the high-end China market
remains subdued. USG Boral’s other construction markets in
Asia, including Vietnam, India, the Philippines, Malaysia and
Singapore, are continuing to grow.
USA
Market conditions continue to strengthen with total US housing
starts increasing 9% to an annualised rate of 1.15 million starts1.
Single-family starts increased by 13% nationally, up 16% in
Boral’s Tile States and up 6% in Boral’s Brick States1. With
multi-family starts up 2% nationally, single-family starts as a
proportion of total starts increased from 64% to 66%, but
remains below the long-term average of 71%1. At just over 3,600
bricks per housing start, brick intensity levels remained relatively
flat on the prior period.
If the market improvement trajectory of the past three years of
around 10% per annum continues in the US, housing starts in
FY2017 will be around 1.26 million. On average, market
forecasters expect total US housing starts to lift to ~1.3 million
starts2 in FY2017.
Competition
Boral generally faces robust competition from a range of large
and small players in most of its building products and
construction materials markets.
In general, Boral’s large competitors in Australia, the USA and
Asia have global leadership positions. Some businesses
experience additional competition as a result of imports,
including Boral’s Timber business in Australia and the USG
Boral joint venture in Asia.
In some cases, such as concrete and asphalt in Australia,
barriers to entry are low and new entrants are attracted to
enter markets when demand is strong. Specific challenges
relating to competition are highlighted on page 17.
1. Seasonally adjusted US Census housing starts for national figures. McGraw Hill/Dodge raw
data — Brick States: Alabama, Arkansas, Georgia, Kentucky, Louisiana, Mississippi, North
Carolina, Oklahoma, South Carolina, Tennessee, Texas. Tile States: Arizona, California,
Florida, Nevada.
2. Average of analysts’ forecasts (Dodge, Wells Fargo, NAR, NAHB, Fannie Mae, Freddie Mac,
MBA) between June and July 2016.
Boral Limited Annual Report 2016 11
DIVISIONAL
PERFORMANCE
Construction Materials & Cement
performance
Revenue
Revenue decreased by 6% to $2.9b, reflecting the decline in
major project activity, including LNG projects in QLD, WA and
NT and the Barangaroo project in NSW, and the sale of the
Landfill business to Transpacific Industries in the prior year.
Excluding these impacts, revenue remained at similar strong
levels to the prior year, with continued strong East Coast
residential construction activity and pricing gains, offset by
lower activity in WA, and other construction activity in regional
QLD and VIC.
EBIT2
EBIT decreased by 3% to $293m, reflecting lower Property
earnings compared to FY2015 as previously flagged. EBIT
excluding Property increased by 4% due to the continued focus on
operational cost improvements. Lower fuel and energy costs,
together with the $4m of damages received from the CFMEU
settlement in the first half, were offset by $9m lower earnings from
the divested Landfill business and various restructuring costs,
including the logistics fleet in WA and VIC, and a voluntary
redundancy program in the Southern Highlands.
Concrete
Concrete delivered improved earnings with strong results in NSW
and South-East Queensland (SEQ), partially offset by reduced
resource-based activity in QLD and WA, falling residential activity
in WA and a slight decline in VIC.
Volumes were 2% weaker, driven by the decline in LNG projects
(Curtis Island and Wheatstone) in FY2016 compared with FY2015.
On a like-for-like basis, concrete prices were up by an average of
2%, with strength in SEQ and metro NSW in particular. However,
average realised prices were only up 1% due to a change in mix.
Quarries
Quarries delivered stronger earnings despite lower volumes, as
activity in NSW, metro VIC and SEQ was offset by weaker
infrastructure and resource-based activity in regional QLD, and
declining construction activity in WA and NT.
On a like-for-like basis, aggregate prices were up by an average
of 1% nationally, while the average selling price across all quarry
materials was down 1% due to a mix shift to lower value
products. External sales in NSW continue to be impacted by an
abundance of excavation materials from tunnel projects in the
market.
1. Effective 1 July 2016, Construction Materials & Cement and Building Products combined to
form a new Boral Australia division.
2. Excluding significant items.
12
Boral Limited Annual Report 2016
Construction Materials & Cement external revenue
Concrete placing 4%
Other 4%
Cement 10%
Asphalt 22%
Concrete 46%
Quarries 14%
Asphalt
Asphalt delivered steady earnings through improved margins
despite weaker volumes following the completion of key projects
in WA during the year, and in QLD in the prior period. While new
projects have been announced in QLD and SA, underlying
conditions are highly competitive and interstate crews with excess
capacity continue to migrate to NSW where activity is stronger
and includes the ongoing Pacific Highway work. New road
projects have been delayed in VIC and QLD but the pipeline
remains encouraging.
Cement
External revenue increased by 3% to $303m, benefiting from a
6% increase in cement volumes due to stronger NSW activity
and 2% higher average prices, partially offset by lower wholesale
clinker volumes due to kiln availability. Earnings also grew with
cost improvement initiatives, including improved utilisation of
assets and sourcing of lower cost raw materials and energy.
Concrete Placing
Revenue increased with stronger activity in Sydney’s inner city
high-rise multi-residential and commercial markets. The
business delivered positive earnings although slightly down on
the prior year.
Landfill
Contributed $9m lower earnings following the sale of the
business on 1 March 2015. Boral now receives a royalty-based
payment from the new owner.
Property
Contributed $28m to EBIT, compared to $46m in FY2015. The
FY2016 result included the first settlement at Nelsons Ridge,
NSW (with the second contract expected to settle in FY2017)
and sale of land at the former Stapylton quarry, QLD.
Boral Australia1 Boral Building Products performance
Revenue
Reported revenue decreased by 23% to $372m; however,
adjusting for the impact of equity accounting which excludes our
share of revenue from the Boral CSR Bricks JV, underlying
revenue increased by 1%.
Timber
Revenue was up, with a 4% price rise in Hardwood. However,
earnings benefits delivered from Hardwood operational
improvements were more than offset by the impact of continued
strong competition from imported Softwood products creating
price pressure. A reduction in Hardwood inventory was achieved
and managing working capital remains a priority.
EBIT1
EBIT increased 11% to $33m with strength in Bricks, Roofing,
Masonry and Hardwood Timber offsetting ongoing import
competition in Softwood Timber. There were energy cost
savings, operational efficiency improvements from investments
made in the Hardwood business and depreciation savings from
the $70m asset write-down in FY2015.
An equity accounted post-tax earnings contribution of $11.7m
from Boral’s 40% interest in the Boral CSR Bricks JV for the full
year compares with $1.5m in the two months following the
transaction in FY2015. Strong earnings growth was delivered
with continued strength in housing activity across the East
Coast and solid pricing outcomes. To date, $5m of synergies
have been realised and synergies of ~$10m in FY2017 remain
on track.
Building Products external revenue
Timber 40%
Bricks &
Roofing 60%
Bricks & Roofing
Bricks & Roofing delivered stronger earnings with price
increases of between 1% and 4%, as well as a shift towards
higher-priced roofing products, lower energy costs and
depreciation savings. This is despite lower reported earnings
from the East Coast bricks business as it moved from fully-
consolidated pre-tax to equity accounted post-tax earnings
despite underlying profit growth. In WA, slower housing activity
in 2H FY2016 and restructuring costs following the mothballing
of Kiln 8 were offset by stronger masonry volumes.
Outlook
CM&C businesses are expected to continue to deliver strong
results with slightly higher EBIT expected in FY2017 compared
with FY2016 (including property earnings in both years).
Continued strength in the Sydney construction markets and
stronger infrastructure volumes are expected to benefit Boral’s
downstream concrete and asphalt operations, offsetting the
weaker WA market, while conditions in QLD and VIC are
expected to remain broadly steady.
Typically, earnings from CM&C (excluding property) are skewed
towards the first half of the year, reflecting available working
days. However, in FY2017 earnings are expected to be broadly
balanced between the first and second half, due to softer major
project and WA activity ahead of the expected ramp-up of
materials demand for infrastructure projects and the timing of
announced price increases. A strong focus remains on
commercial and operational excellence programs, with price
rises overall aiming to at least offset cost inflation, and benefits
from ongoing improvement initiatives and prior year
restructuring expected to drive earnings growth.
The majority of the earnings contribution from property sales at
Nelsons Ridge, totalling around $20m, was recognised in 2H
FY2016 with the remaining ~$5m expected on settlement of the
second contract in FY2017, subject to completion. Additional
property sales are expected and while there is not yet visibility
around the earnings impact, the contribution from property in
FY2017 is currently expected to be lower than the contribution
delivered in FY2016.
Building Products businesses are expected to continue to
benefit from the strong pipeline of work in East Coast residential
markets as well as the improvement initiatives in the Timber
business. However, slightly softer earnings are expected
primarily due to the impacts of weaker housing conditions in
WA and SA.
1. Excluding significant items.
Boral Limited Annual Report 2016 13
DIVISIONAL
PERFORMANCE
The Boral Gypsum division represents Boral’s 50% share of the
USG Boral joint venture.
External revenue
Other 13%
Performance
Boral Gypsum reported equity accounted income of $59m, up
21% on the prior year. This represents Boral’s 50% share of the
post-tax earnings of USG Boral, and is reflected in Boral’s
EBIT result.
Earnings growth reflects strong business performance, with the
continued penetration of Sheetrock® plasterboard and adjacent
(non-board) products, stronger board volumes in Australia and
strong cost management driving margin expansion. Plant
utilisation remained broadly unchanged at 70%.
Underlying USG Boral result
Revenue
Revenue increased by 10%, with growth in premium Sheetrock®
plasterboard sales resulting in higher pricing, and growth in
adjacent product (non-board) sales. Strong volume growth in
Australia was offset by contraction in key Asian markets and
price competition in Korea.
Sheetrock® brand products attracted a price premium of around
5%, with adoption rates at year end ranging from 11% in China
to over 70% in Vietnam. These outcomes are in line with
expectations only 20 months after their launch across Australia,
Korea, Thailand, Indonesia, China and Vietnam. The new
product strengthens our leading positions in increasingly
competitive markets.
EBIT1
EBIT increased 27% to $179m, reflecting ongoing strong cost
management, including manufacturing efficiency improvements,
procurement savings, benefits from prior restructuring and
improvement initiatives, as well as falling energy and fuel prices.
Australia/NZ
Revenue increased by 17% to $504m, with board volumes up
13%, reflecting higher activity across all regions except SA, and
stronger non-board sales. Average selling prices rose 4%,
supported by the introduction of Sheetrock® products, with a
further 4% price rise announced effective 1 September 2016.
Indonesia 6%
Thailand 14%
Australia 36%
China 11%
Korea 20%
Asia
Revenue increased by 7% to $893m in AUD terms. Earnings
growth was delivered despite activity contracting in some
key markets.
Korea achieved earnings growth with lower fuel and production
costs. Stronger volumes were partially offset by intense price
competition in the context of a key competitor overcoming
production supply constraints in the prior year.
Thailand reported revenue and earnings growth with lower fuel
and production costs. Stable market share and slightly higher
prices offset contracting domestic activity.
Indonesia results were impacted by a decline in the domestic
plasterboard market and lower margins, offsetting strong
Sheetrock® sales.
Other regions delivered significant revenue and earnings
growth, while China also delivered stronger earnings despite
softer activity.
Outlook
USG Boral is expected to deliver further performance
improvements on the back of continued penetration of new
Sheetrock® products, strong cost and price discipline, and
synergy realisation from the expanded product portfolio and
technology roll-out. Continued strong volumes are expected in
Australia together with some volume improvements in key
markets in Asia.
1. Excluding significant items.
14
Boral Limited Annual Report 2016
Boral Gypsum Performance
Revenue
Boral USA revenue increased by 8% on the prior period to
US$751m, with growth in Cladding, Roofing and Construction
Materials. Australian dollar revenue increased by 23% to A$1.0b.
The business continued to benefit from increased housing
construction activity. US single-family starts grew 13% year on
year, but grew 16% in Boral’s Tile States and only 6% in Boral’s
Brick States.
EBIT1
EBIT improved by US$27m to a US$32m profit. Margins
improved with volume and price gains, operational cost savings
and easing of freight, fuel and energy costs offsetting cost
inflation and increasing costs associated with the accelerated
growth plan in the Trim and Siding business. This result also
includes a profit of US$7m from the sale of resumed land in
Denver to make way for a new rail line.
Cladding
Revenue from the Cladding business, which includes Bricks,
Cultured Stone and Trim, grew 8% to US$405m.
Bricks revenue increased by 8% to US$266m, supported by a
14% increase in re-sale product revenue. Brick volumes
increased ~4% compared to a ~6% rise in housing starts in
Brick States, as activity remains skewed towards entry-level
housing with lower brick intensity, as well as differences in
geographic mix. Importantly, while single-family starts were
down ~2% in Texas, Boral’s brick volumes were steady in Texas
and there was modest price growth. Overall, average prices
were up 1%.
Cultured Stone volumes increased 7% while our second brand,
ProStone, and the lightweight Versetta panel product
experienced strong volume growth from a small base. Average
prices rose 2% with solid price rises, particularly in lower-priced
regions.
Brick plant utilisation remains broadly steady at 55%, while
Stone utilisation rose to 40%, and inventories remain largely
unchanged.
The Trim and Siding lightweight business continues to make
progress with volume and price growth. Dealer stocking
locations increased from 500 to 650. Costs rose in 4Q FY2016
as manufacturing and marketing plans were accelerated. The
business is targeting a breakeven result in FY2017.
External revenue
Fly Ash & Construction
Materials 23%
Roofing 23%
Cladding 54%
Roofing
Revenue increased 11% to US$176m. Volumes rose 11%,
including 16% growth in the traditional Tile States of California,
Arizona, Nevada and Florida, while emerging regions were more
challenged. While like-for-like prices were up ~2%, average
prices were steady, reflecting an adverse geographic mix shift.
Concrete roofing plant utilisation increased to 31%.
Fly Ash and Construction Materials
Revenue of US$170m increased 5%, reflecting strong pricing
gains and strength in the Denver construction market, despite
some volume interruptions during commissioning of the new
Holton Morton quarry and constrained Fly Ash availability,
impacted by a mild winter and lower natural gas prices.
Outlook
Boral USA is expected to report further growth in earnings on
the back of increased housing activity. If the market
improvement trajectory of the past three years of around 10%
per annum continues in the US, housing starts in FY2017 will
be around 1.26 million. On average, external forecasters are
projecting housing starts to increase to approximately
1.3 million starts2 in FY2017. We are positioned well to
continue to supply the recovering market and continuing to
grow Boral’s lightweight products portfolio.
1. Excluding significant items.
2. Average of analysts’ forecasts (Dodge, Wells Fargo, NAR, NAHB, Fannie Mae, Freddie Mac,
MBA) between June and July 2016.
Boral Limited Annual Report 2016 15
BoralUSA DIVISIONAL
PERFORMANCE
SUMMARY OF OUR
RISKS AND
CHALLENGES
To deliver on our goals, we recognise
the need to manage a number of risks
and be responsive to the dynamic
environments in which we operate.
Here, we summarise the current
challenges that we face and the
responses we are taking.
16
Boral Limited Annual Report 2016
OUR DIVISIONS
SPECIFIC CHALLENGES
SPECIFIC RESPONSES
BORAL
AUSTRALIA1
STRATEGIC DIRECTION
Maintaining and strengthening Boral’s
leading integrated construction materials and
cement positions and optimising returns
across all building products and construction
materials businesses
PRODUCTS
Concrete Asphalt
Placing
Quarries
Cement
Property
Bricks
Roofing
Masonry
Timber
1.
Effective 1 July 2016, Construction Materials & Cement and Building
Products combined to form a new Boral Australia division
cycle
USG
BORAL
STRATEGIC DIRECTION
Delivering USG Boral synergies, and
leveraging this long-term growth platform
through market growth, increasing product
penetration, innovation and adjacent products
PRODUCTS
Plasterboard, ceilings and adjacent products
via 50%-owned USG Boral
BORAL
USA
STRATEGIC DIRECTION
Growing through market recovery, new
product development and portfolio refinement,
with potential for strategic M&A opportunities
PRODUCTS
Bricks
Trim
Roofing
Siding
Stone
Construction materials
Fly ash
• Safely managing 1,100 Company-owned
• Heavy vehicle and technology improvements,
and 1,500 contracted heavy fleet vehicles
driver behaviour training, eg. Imarda i360 to
• Challenging pricing environment and
monitor speed and fatigue and rollover limitation
competition in some markets
technologies
• Declining demand and excess capacity in
• Commercial excellence program commenced
some markets, eg. WA
• Ongoing cost reduction programs and integrated
• Taking advantage of shift from resources
business model to drive competitive advantage
to roads, highways and infrastructure-
• Leading resource positions including Peppertree
based projects
Quarry (NSW) and Deer Park (VIC) redevelopment
• High costs of manufacturing, eg. cement
• Strengthening contracting and major projects
versus lower cost imports
capability, including bid and tender management
• Maintaining community support for
• Efficient and reliable importation of clinker to
Australia
operations
environments
• Increasingly complex contracting
• Active community consultation programs including
• Complex environmental consent and
campaign, and in-house community liaison officers
operating licence requirements
• Regional environmental management experts
• Building products businesses not
• East Coast brick business joint venture with CSR
delivering acceptable returns through
• Long-term hardwood timber supply contract with
Marulan limestone community awareness
• Changes in consumer demand with
imported, composite and substitute
timber and roofing products
Forestry Corporation of NSW (FCNSW) aligned
to demand forecasts; improving Hardwood
operations and working with FCNSW to manage
harvesting costs
• Management of enterprise bargaining
• Proactive involvement in all enterprise bargaining
agreements
agreements from a dedicated team
• Maintaining an effective IT environment
• Defined IT investment strategy to meet the needs
of the businesses
• Continued roll-out of new technologies
• Roll-out of Sheetrock® technologies ahead of
and associated high-performance
original plan and achieving price premium
Sheetrock® products
• Focus on product diversification to adjacent
• Delivering joint venture synergies including
products, compounds, substrates, ceiling tiles, etc
price premiums and penetration rates for
• Operations in high-growth economies with leading
Sheetrock® products
• Decline in market activity in some
markets, eg. Indonesia and Thailand
• Pricing pressure through increased
market share positions
• Regional sales and marketing plans centred on
advanced technology product and supported
centrally
competition and new market entrants in
• US$50m pa of synergies within three years of
key regional markets
technology roll-out remains on track
• Long-term regional resource and reserve
• Focus on high-end construction market in China
• Supplying the expected demand growth
programs
access
in key markets
• Ongoing cost reduction and management
• Regionally-focused gypsum resource strategies
• Plans in place to increase capacity in Korea
• Slower than expected USA housing
• Development of new lightweight products through
dedicated innovation centre
recovery
markets
• Overcapacity in brick, stone and roofing
• New products introduced through existing
channels, eg. thin brick and Versetta stone
• Strengthening regional and national
products
production builders
• Focused price strategies and targeted customer
• Brick and stone intensity and share of wall
incentive programs
• Less favourable housing mix remains,
• Working with custom builders who are returning
with lower proportion of single-family
to the market as well as production builders, who
housing relative to past
represent a high proportion of current activity
• Shifting from high fixed cost base to more
• Diversifying exposure to commercial construction
variable cost model
through bricks and stone
• Continuing review of bricks business
• Strategic deployment of capital and risk-based
maintenance scheduling
• Assessing strategic M&A opportunities to optimise
portfolio
OUR DIVISIONS
BORAL
AUSTRALIA1
STRATEGIC DIRECTION
Maintaining and strengthening Boral’s
leading integrated construction materials and
cement positions and optimising returns
across all building products and construction
materials businesses
PRODUCTS
Concrete Asphalt
Quarries
Cement
Placing
Property
Bricks
Roofing
Masonry
Timber
1.
Effective 1 July 2016, Construction Materials & Cement and Building
Products combined to form a new Boral Australia division
USG
BORAL
STRATEGIC DIRECTION
Delivering USG Boral synergies, and
leveraging this long-term growth platform
through market growth, increasing product
penetration, innovation and adjacent products
PRODUCTS
Plasterboard, ceilings and adjacent products
via 50%-owned USG Boral
BORAL
USA
STRATEGIC DIRECTION
Growing through market recovery, new
product development and portfolio refinement,
with potential for strategic M&A opportunities
PRODUCTS
Bricks
Roofing
Stone
Fly ash
Trim
Siding
Construction materials
SPECIFIC CHALLENGES
SPECIFIC RESPONSES
GENERAL RISKS
• Safely managing 1,100 Company-owned
and 1,500 contracted heavy fleet vehicles
• Challenging pricing environment and
competition in some markets
• Declining demand and excess capacity in
some markets, eg. WA
• Taking advantage of shift from resources
to roads, highways and infrastructure-
based projects
• Heavy vehicle and technology improvements,
driver behaviour training, eg. Imarda i360 to
monitor speed and fatigue and rollover limitation
technologies
• Commercial excellence program commenced
• Ongoing cost reduction programs and integrated
business model to drive competitive advantage
• Leading resource positions including Peppertree
Quarry (NSW) and Deer Park (VIC) redevelopment
• High costs of manufacturing, eg. cement
• Strengthening contracting and major projects
versus lower cost imports
capability, including bid and tender management
• Maintaining community support for
• Efficient and reliable importation of clinker to
operations
Australia
• Increasingly complex contracting
• Active community consultation programs including
environments
• Complex environmental consent and
operating licence requirements
• Building products businesses not
delivering acceptable returns through
cycle
• Changes in consumer demand with
imported, composite and substitute
timber and roofing products
• Management of enterprise bargaining
agreements
Marulan limestone community awareness
campaign, and in-house community liaison officers
• Regional environmental management experts
• East Coast brick business joint venture with CSR
• Long-term hardwood timber supply contract with
Forestry Corporation of NSW (FCNSW) aligned
to demand forecasts; improving Hardwood
operations and working with FCNSW to manage
harvesting costs
• Proactive involvement in all enterprise bargaining
agreements from a dedicated team
• Maintaining an effective IT environment
• Defined IT investment strategy to meet the needs
of the businesses
• Continued roll-out of new technologies
• Roll-out of Sheetrock® technologies ahead of
and associated high-performance
Sheetrock® products
original plan and achieving price premium
• Focus on product diversification to adjacent
• Delivering joint venture synergies including
price premiums and penetration rates for
Sheetrock® products
• Decline in market activity in some
markets, eg. Indonesia and Thailand
• Pricing pressure through increased
competition and new market entrants in
key regional markets
• Long-term regional resource and reserve
access
products, compounds, substrates, ceiling tiles, etc
• Operations in high-growth economies with leading
market share positions
• Regional sales and marketing plans centred on
advanced technology product and supported
centrally
• US$50m pa of synergies within three years of
technology roll-out remains on track
• Focus on high-end construction market in China
• Ongoing cost reduction and management
• Supplying the expected demand growth
programs
in key markets
• Regionally-focused gypsum resource strategies
• Plans in place to increase capacity in Korea
• Slower than expected USA housing
• Development of new lightweight products through
recovery
• Overcapacity in brick, stone and roofing
markets
• Strengthening regional and national
dedicated innovation centre
• New products introduced through existing
channels, eg. thin brick and Versetta stone
products
production builders
• Focused price strategies and targeted customer
• Brick and stone intensity and share of wall
• Less favourable housing mix remains,
with lower proportion of single-family
housing relative to past
incentive programs
• Working with custom builders who are returning
to the market as well as production builders, who
represent a high proportion of current activity
• Shifting from high fixed cost base to more
• Diversifying exposure to commercial construction
variable cost model
through bricks and stone
• Continuing review of bricks business
• Strategic deployment of capital and risk-based
maintenance scheduling
• Assessing strategic M&A opportunities to optimise
portfolio
Health, Safety & Environment
(HSE) Risks
• Licence to operate
• Injury and accidents
• Environmental damage
• Regulatory requirements
Industry and Market Risks
• High input costs and inflationary
pressures
• Structural and cyclical changes
in demand
• Political cycles/uncertainty and
impact on infrastructure spend
Competition Risks
• New market entrants,
competition and legislative
requirements
• Technology/R&D
Business Interruption Risks
• Plant and systems failure
• Cyber security
• Weather impacts
• Geopolitical impacts
• Industrial action
Foreign Exchange Risks
• Currency translation of overseas
earnings in AUD
• Capital equipment transactions
GENERAL RESPONSES
• Formal, bottom-up risk
management process
• Best practice HSE standards,
policies, procedures and training
• Central support and monitoring
of legislative/regulatory
requirements
• Divisional strategies aligned to
Group priorities to deliver strong
earnings, balance sheet and
growth
• Divisional cost management
programs and global
procurement discipline
• People strategy to attract, retain
and develop talent with deep
industry experience
• Business continuity planning
and tested disaster recovery
programs
• Cyber security maturity
assessments, roadmaps
and action plans
• US net assets matched with
USD debt and other instruments
to hedge against currency
fluctuations
Boral Limited Annual Report 2016 17
SUSTAINABILITY
OVERVIEW
At Boral, we recognise that sustainability is fundamental to our
future success and our ability to Build Something Great. This
means providing a safe, diverse and rewarding workplace for
our people, minimising our environmental impacts and taking a
socially responsible approach to how we operate. Delivering
world-class safety performance and developing less resource-
and energy-intensive products for our customers are also central
to our vision of delivering performance excellence and
sustainable growth.
In addition to this Sustainability Overview, information on Boral’s
sustainability performance is also provided in:
•
•
the Corporate Governance, Remuneration, and Risks and
Challenges sections of this Annual Report;
case studies and information contained in Boral’s Annual
Review and Boral’s employee magazine − Boral News;
• Boral’s website, which includes supporting policies and
information on our community engagement programs;
• pollutant emissions data reported to the National Pollutant
Inventory for 94 of our Australian operations; and
• our voluntary response to the Carbon Disclosure Project.,
This Sustainability Overview covers Boral’s wholly owned
operations and joint ventures that were at least 50% owned by
Boral for the year ended 30 June 2016, unless stated otherwise.
Our people
Having a highly skilled, safe, motivated, and productive
workforce is essential to delivering on our strategy. Our
human resource strategies are focused on developing our
people, building a diverse and inclusive culture, identifying
and building talent, and enhancing productivity through
strong engagement.
As at 30 June 2016, Boral employed 8,334 full-time equivalent
(FTE) employees and approximately 4,800 contractors across
our global operations, and 3,724 FTE employees and
approximately 3,400 contractors in our joint venture operations.
The average length of service of a Boral employee remains
broadly consistent with previous years − in Australia it is
approximately 9.1 years, and in the US approximately 7.6 years.
Overall, 12% of our workforce has been working for Boral for
more than 20 years.
At a glance
FY2016
FY2015
FY2014
Boral employees, FTE
Boral contractors, FTE
JV employees, FTE
JV contractors, FTE
8,334
~4,800
3,724
~3,400
8,356
~4,400
3,676
~3,000
8,953
~4,000
3,498
~2,600
Average length of service
Australia
USA
9.1 years
9.2 years
9.1 years
7.6 years
7.8 years
7.5 years
Women in Boral
Women on the Board
14%
50%
14%
38%
14%
25%
Overall employee turnover in Australia remains broadly
consistent with last year at 18%, with an increase in the USA to
17% in FY2016 from 15% in the prior year. The rate of employee-
initiated turnover remains broadly consistent with last year at
10% in Australia and 8% in the USA.
The average age of an employee in Boral is 45 years, with 38%
of all employees aged 50 years and over.
Diversity
We are committed to delivering benefits through improved
diversity throughout Boral, from senior leadership through to our
operations, and embedding diversity in our culture. Our Diversity
Policy underpins our actions and approach in fostering a positive
work culture and inclusive workplace.
In FY2016, management, supported by Boral’s Diversity Council,
focused on delivering targeted outcomes outlined in Boral’s
diversity strategy and implementation plan, which was revised in
FY2015. The plan outlines measurable objectives set by the
Board across six strategic elements: leadership, communication
and education, system and process design, gender equality and
pay equity, generational diversity, and Indigenous relations.
Age profile of employees (years)
Length of service of employees (years)
Employees by occupation
<20
20-29
30-39
40-49
50-59
60+
0-5
6-10
11-15
16-20
21+
Executive
Managers
Professionals
Sales
Clerical & admin
Technicians & trade
Operators & drivers
0% 5% 10% 15% 20% 25% 30%
0% 10% 20% 30% 40% 50% 60%
0% 10% 20% 30% 40% 50% 60%
Male
Female
Male
Female
Male
Female
18
Boral Limited Annual Report 2016
Sustainability Overview Increasing the representation of women across Boral, particularly
in leadership roles, continues to be an important objective.
At senior levels, Boral has a good representation of women.
Four out of eight (50%) of our Directors of the Board and three out
of 11 (27%) of our Executive Committee team are women, namely
the Chief Financial Officer, Group Communications & Investor
Relations Director and Group Human Resources Director. Women
also fill 11% of Boral’s management positions.
Across Boral, women represented 14% of Boral’s employees at
30 June 2016, unchanged on the previous year, with the
proportion of female employees continuing to vary by
occupation. Women occupy 68% of clerical positions, 33% of
sales positions and 32% of professional positions. In contrast,
men accounted for 94% of Boral’s trade, machinery operator
and transport roles. In FY2016, 17% of new hires were women,
with variation across occupations.
A comprehensive annual gender pay equity review was
completed for our Australian and Asian operations during
FY2016. This review indicated that while the female to male
average base salary ratio was 1.01:1.00, on a total compensation
basis, there remains opportunity to improve pay equity
outcomes in Australia.
We strive to increase Indigenous employment in our workforce
through proactive recruitment and retention strategies. The level
of retention of Indigenous employees is over 85% for employees
who joined Boral under a number of Indigenous employment
programs since 2013.
For more information on Diversity refer to pages 39-41.
People development and leadership
Boral is focused on building a safe, capable and engaged
workforce and attracting, developing and retaining talented leaders.
We have a structured and supportive approach to employee
development. This encompasses three elements: we identify
talent and assess capability, provide development pathways,
and support this with a performance review process. Through
the performance review process, managers work with
employees to develop goals that incorporate business and
personal development objectives, thereby establishing a plan to
help employees fully develop their potential.
Learning@Boral, Boral’s centre of excellence for training and
development, delivers a wide range of training programs to build
our people capability. In FY2016, we delivered:
•
tailored learning solutions through our ‘Skilled 4 Action’
training program, which continued to focus on building
capability of our employees and managers in safety, people
development, Boral Production System, sales and
marketing excellence, and innovation;
• Certificate II, III, IV or Diploma qualifications in disciplines such
as Surface Extraction Operations, Civil Construction and
Manufactured Mineral Products, Laboratory Skills and
Techniques and Driving Operations, to over 170 employees
through our Registered Training Organisation (RTO);
• Certificate III and IV qualifications in Boral’s Competitive
Systems and Practices and Work Health & Safety, which were
completed by 115 employees;
• over 2,700 units of competency across a wide range of
disciplines such as working at heights, conducting asphalt
paver operations, conducting risk assessments and
implementing traffic management plans;
•
‘Creating Value Through Finance’, a training initiative developed
in partnership with Deloitte, to enhance skills and capability in
finance and business partnering; more than 100 finance
employees completed the first phase of this initiative; and
• Boral’s refreshed online Code of Business Conduct training to
over 2,200 employees.
These programs and units of competency, complemented with
on-the-job support and local initiatives, work to ensure that our
people have the opportunity to develop their careers with us, and
have skills and knowledge to deliver Boral’s plans and objectives.
Ongoing development of our leadership teams is vital for
delivering on Boral’s vision of performance excellence and
sustainable growth. Boral has a multi-pronged approach to
leadership development encompassing: training programs,
work experience, placements, and coaching to develop leaders’
capability to effectively engage our people, combined with
learning from experienced leaders through mentoring,
interactions and conversations. Our approach is set out below:
In FY2016, Boral’s ‘Learn from Leaders’ series saw employees
from across Boral participating in lunches with the CEO &
Managing Director, the Board and key executives, as well as
Diversity in Leadership Forums to provide learning opportunities
and access to our senior leaders.
During the year, 43 employees participated in specialised
leadership programs, developed and delivered in partnership
with the Australian Graduate School of Management, and our
top 100 leaders participated in a new, tailored program focused
on improving organisational effectiveness through enhancing
self-competence.
Boral Limited Annual Report 2016 19
SUSTAINABILITY
OVERVIEW
We believe that building a culture of engagement is crucial to our
ability to retain our people and leadership talent. To identify
opportunities to further engage and develop our people, we
measure employee engagement through an independent
employee survey across at least one division on a biennial basis.
The last survey was completed last year with the next one to be
completed in FY2017.
Health, safety and environment
Our goal is Zero Harm Today to people and the
environment. Ensuring that our people, customers and the
communities in which we operate are free from harm is a
key driver in our decision making and is central to how
we operate.
Boral’s commitment to achieving Zero Harm was renewed and
strengthened following a two day Leadership Summit held on
Zero Harm in November 2015. Sponsored by Boral’s CEO &
Managing Director, the summit brought together over 100 of
Boral’s senior leaders, Board members and managers from our
global operations to consider how the next stage of our safety
journey to Zero Harm could be achieved. Our goal of Zero Harm
became Zero Harm Today – reflecting the commitment and
heightened urgency by our leaders to deliver Zero Harm, today
and every day. Cascading initiatives are being implemented
throughout our businesses, including Zero Harm Today safety
workshops, which are successfully engaging all of our people in
this goal.
From an environmental perspective, we acknowledge that the
very nature of our operations means there will be impacts on the
environment. However, we remain committed to a goal of Zero
Harm and working to eliminate adverse environmental impacts.
Where elimination is not possible, we seek to minimise the
adverse environmental impacts of our operations and, wherever
practicable, secure improved environmental outcomes.
20
Boral Limited Annual Report 2016
Management approach
Boral’s line management is accountable for health, safety and
environment (HSE) performance, with HSE objectives
considered an integral component of their leadership role rather
than part of any incentive payment. They are supported by a
network of HSE professionals working in Boral’s divisions, and a
small corporate team headed by Boral’s Group HSE Director.
All employees are expected to lead by example, take personal
responsibility for HSE outcomes, and adhere to Boral’s strict
HSE requirements. Our contractors must satisfy selection and
qualification criteria incorporating Boral’s HSE requirements, as
outlined in Boral’s contractor safety requirements. We also
actively work with our customers to ensure delivery of their HSE
targets when working on major projects and other work.
Safety training is provided through a number of means including:
internal leadership courses, front line manager and supervisors
(eg. ‘Skilled 4 Action’) and operator level training. In Australia,
Boral is a registered training organisation and offers many
vocational courses including safety and LEAN related courses at
the Certificate II, III and IV and Diploma level.
Divisional management teams and the corporate HSE function
provide formal reports on HSE performance, risks and
management actions to the Board’s HSE Committee on a
quarterly basis, and to Boral’s Executive Committee on a
monthly basis. At a site level, safety performance and actions
are discussed in various forums including daily pre-start
meetings. More serious HSE incidents, including near miss
events, are directly communicated to the CEO & Managing
Director, with formal investigations and discussions involving
local line management, relevant divisional executives and the
Group HSE Director.
Our HSE reporting framework and systems, in conjunction with
a culture of transparent reporting, ensure that reliable HSE
information is provided both to our internal and external
stakeholders. Open and transparent engagement in respect of
HSE matters forms an integral part of our community
consultation programs.
In FY2016, Boral commenced implementation of its revised
Health, Safety, Environment and Quality Management System
(HSEQ MS) which integrates a number of previously separate
management systems. The HSEQ MS is a Group-level system
which clarifies and targets the responsibilities and actions
needed to deliver improved performance and strong
governance.
Strategy
Boral’s Group strategy for HSE, which was revised and re-
initiated in FY2014, is focused on incorporating 20 improvement
programs within five focus areas across the themes of people,
systems, and products, plant and equipment.
In FY2016, we made substantial progress in implementing a
broad range of new HSE initiatives including ambitious change
programs to effect further cultural change and accelerate the
rate of HSE performance improvements – these apply to
leadership development and further transferring ownership of
HSE activities into line management.
Enabling high performing leadersOur leadership programs build the knowledge and capability of managers to motivate and stimulate their teams towards superior organisational performance. In FY2016, we established a new program focused on our leaders recognising and developing the qualities of great leadership – through building self-awareness of their strengths and limitations, and their understanding of how to connect who they are with how they lead their people most effectively.More than 30 facilitated sessions were held with Boral’s top 100 leaders, accounting for 13% of our executive and middle managers. Over 90% of Australian senior leaders subsequently completed a Boral “Working Together” session with their teams. This program helps teams constructively engage to establish how they will work together to achieve performance excellence. PEOPLE
Objective 1 – Capable and confident leaders
• HSE stewardship
• Skilled 4 Action
Objective 2 – Engaged, empowered and
competent workforce
• Human error reduction
• Manual handling interventions
• Leveraging LEAN
• Roles and responsibilities
• Consequence management
SYSTEMS
Objective 3 – Fit-for-purpose systems
• Contractor safety
• Learning management system
• Serious harm prevention
•
• 1Boral SMS review
• Self insurance
Incident management system
‘Leading Zero Harm’ summit, and cascading activity to engage entire
workforce in Zero Harm Today goal
‘Skilled 4 Action’ program now considered ‘business as usual’ with
operational managers better equipped to manage day-to-day HSE
activities without direct support of HSE experts
Continued roll-out of human error reduction and allied behavioural programs
across Boral Building Products, most of Construction Materials & Cement
(CM&C), and USG Boral JV
Clearer definition of HSE-related roles and responsibilities providing focus to
training content development and delivery
Adoption of LEAN skills and techniques, including LEAN safety principles in
some areas, supporting continual improvement culture
‘Safety Absolutes’ program (key safety rules), engrained across CM&C and
introduced to other businesses
Phase 1 of contractor safety program (selection and qualification) underway
in CM&C
Roll-out of Boral’s new learning management system, My Learning Space,
completed across Asphalt and progressing into Concrete, Quarries and
Cement
Serious Harm Prevention program further progressed, including reporting
and phased review of controls around Serious Harm Precursors
HSE incident management system, adopted in Australia in FY2015, further
developed; new system introduced within USG Boral JV
Commenced implementation of revised and integrated Health, Safety,
Environment and Quality Management System (HSEQ MS)
PRODUCTS, PLANT AND EQUIPMENT
Objective 4 – Sustainable solutions
• Lifecycle analysis and environmental
product disclosures
• Occupational health and hygiene
• Chemical management
Increased resource capacity for hygiene assessments
Greater governance of material issues and programs, and greater
systemisation of procedures and protocols around occupational health
and hygiene key hazards and risks
Objective 5 – Fit-for-purpose plant and equipment
• Energy efficiency
• Driver safety
• Plant and equipment procurement
• Product Council support
Development and adoption of higher-stability concrete agitator design, and
specification of advanced driver aids and technology across segments of
heavy vehicle fleet; enhanced driver ‘onboarding’ process being
introduced
Product Councils well established within CM&C, with senior HSE
personnel assigned to support the development and adoption of operating
standards and practices consistent with Zero Harm Today
Boral Limited Annual Report 2016 21
SUSTAINABILITY
OVERVIEW
Work health and safety
Performance
27% improvement in Recordable Injury Frequency Rate to 8.8
28% improvement in Lost Time Injury Frequency Rate to 1.3
Nil fatalities since 2013
Our safety performance continued to show solid improvement in
FY2016. The rate of improvement in the Recordable Injury
Frequency Rate (RIFR) for employees and contractors, our
preferred indicator of injury performance, was well over twice the
annual average improvement experienced over the past
five years.
Employee and contractor injury rates
23.8
22.7
21.4
LTIFR
MTIFR
19.0
17.4
13.6
12.1
21.8
20.5
19.4
17.2
15.5
11.7
10.3
8.8
7.5
)
s
r
u
o
h
n
o
i
l
l
i
m
r
e
p
s
e
i
r
u
n
j
I
(
R
F
R
I
2.0
FY09
2.2
FY10
2.0
FY11
1.8
FY12
1.9
FY13
1.9
FY14
1.8
FY15
1.3
FY16
RIFR includes both Medical Treatment Injury Frequency Rate (MTIFR) and LTIFR for employees
and contractors per million hours worked.
Boral’s Construction Materials & Cement division achieved the
largest improvement in RIFR, with Building Products and the
USA division reporting solid improvements, and the USG Boral
JV maintaining a low injury rate including a Lost Time Injury
Frequency Rate (LTIFR) below one – considered by many to be a
threshold into world best practice.
Recordable Injury
Frequency Rate (RIFR)
Boral Construction
Materials & Cement
Boral USA
Boral Building Products
Boral Gypsum
Boral Corporate
Boral total
FY2016
FY2015
Improvement
12.2
5.2
14.2
3.0
0
8.8
18.7
6.1
16.4
3.0
0
12.1
35%
15%
13%
0%
–
27%
Percentage Hours Lost1, and Hours Away on Restricted or
Transferred Duties1, both measures of the impact of injuries at an
organisational level, were largely unchanged at historically low
levels of 0.03% and 0.16% respectively.
Boral also tracks Near Miss Events, which are those incidents that
could have resulted in loss. The rate of reporting continued to
increase across Boral in FY2016, which we view positively, as it
reflects greater maturity in our safety reporting and allows us to
secure learnings from a broader pool of incidents.
1. Defined as a percentage of total hours worked for employees and contractors in
Boral’s fully owned businesses.
22
Boral Limited Annual Report 2016
During FY2016, a number of enhancements to Boral’s HSE
information management systems were made in Australia and
within the USG Boral JV. These have improved our ability to:
monitor and report additional metrics; incorporate corrective and
preventative action management, and behavioural observations;
and facilitate advanced analysis to better focus our interventions
and resources. Hazard reporting was also formally included in
management reporting across Boral, although the identification
and management of hazards has long been a standard
operational practice.
Injury analysis
Injury analysis assists in the development of corrective action
plans, training and process redesign. In Australia, our systems
allow us to analyse our injury experience in further detail for our
fully owned businesses.
Of all injuries reported in FY2016, 34% required no treatment,
39% required first aid only, 23% required medical treatment
without lost time, and 4% resulted in lost time.
Lost time injury
Medical treatment injury
First aid injury
No treatment
100%
80%
60%
40%
20%
0%
Total
Employees
Contractors
Building knowledge and awareness of Serious Harm Exposures While we seek to eliminate all injuries, our HSE strategy places greater emphasis on eliminating events that do, or have the potential to, cause fatalities, or life threatening and life changing injuries – referred to as Serious Harm Exposures. Boral’s Serious Harm Prevention program, initiated in FY2015, is helping us better understand our operational risk profiles and focus management resources and on-the-ground operations teams on the more critical safety controls. Key to this program is understanding and managing Serious Harm Precursors, which are high hazard activities such as driving, and elevated and electrical work. In FY2016, Boral joined a global research project conducted by DEKRA, where like-minded companies share data to better understand these events and the precursors to them, and improve preventative strategies. As part of this project, we identified that the vast majority of our Serious Harm Events are Near Miss Events that do not result in loss. This emphasises the importance of mature reporting systems that ensure heightened organisational attention on responding to, and preventing, serious Near Miss Events.
Mechanism of injury – describing the action, exposure or event
that led to an injury
Fall from height 3%
Vehicle accident 1%
Hit object with
body part 17%
Fall on same
level 18%
Other 19%
Muscular
stress 23%
Hit by moving
object 19%
The marked decline in the relative contribution of ‘Other’ injuries
from 31% last year to 19% in FY2016 reflects this reclassification.
Muscular stress injuries rose to 23%, from 13% in FY2015,
largely reflecting the reclassification of the ‘Other’ category.
Injuries from being hit by a moving object declined slightly, while
injuries from hitting an object and falling on the same level
increased slightly. Vehicle incidents decreased from 2% to 1%,
which encourages the efforts being made in regard to driver
training, GPS tracking and chain of responsibility compliance.
In FY2016, contractors were less likely than employees to be
involved in falls on the same level. Similarly, employees continue
to be more likely to be injured than contractors by incidents
involving falls from height, muscular strains, vehicle incidents,
being hit by an object and hitting an object with their body.
In FY2016, an in-depth review of the ‘Other’ mechanism of injury
category was undertaken, resulting in a reclassification of a
significant proportion of these injuries to the six defined
categories. This improved reporting accuracy is further enabling
management focus and resources to be directed to the
right areas.
Boral Limited Annual Report 2016 23
Outperforming industry safety benchmarksThe broader industries in which Boral operates in Australia experience lost time accidents six to eight times more frequently than Boral’s employees and contractors. In Australia, Boral has around 6,000 full-time equivalent (FTE)employees and 4,700 FTE contractors in our Construction Materials & Cement and Building Products divisions. Across these divisions, we have businesses that pour concrete and lay asphalt across major projects and construction sites. In addition, we have over 100 quarries and over 300 manufacturing operations producing cement, concrete, asphalt, bricks, roof tiles and timber products. With a fleet of around 3,000 Company-owned and contracted heavy vehicles transporting Boral products and materials, we are also one of Australia’s largest transport managers. Boral’s safety performance can therefore be benchmarked against the transport, construction and manufacturing sectors. The latest figures published by Safe Work Australia report the average injury rate across the transport, construction and manufacturing industries to range from 7.2 to 9.3 injuries1 for every million hours worked. This compares with Boral’s injury rate in Australia for employees and contractors in FY2016, measured on the same basis, of 1.1. Managing our heavy vehicle road transport risksHeavy vehicle road transport comes with risks, but we are very good at managing them through operational, engineering and compliance management. We take a highly proactive and focused approach to managing safety risks across all our operations, striving for Zero Harm, but this is particularly so for vehicle transport. We work with suppliers, customers, regulators, contractors and industry groups to innovate, share knowledge and implement the safest standards, train our people on safe use of plant and equipment and identifying behavioural triggers that contribute to critical errors and unsafe behaviour. Our long-term safety performance in relation to truck-related work fatalities is better than the national average, and Boral has not experienced a fatality in any of its businesses since 2013. Nevertheless, between 2007 and 2013 there were four fatalities associated with Boral’s operations in Australia – all involving contractors in transport-related accidents. So ensuring that our operations remain fatality free is critically important to us.8.6Boral’s relative performance to Australian industryaverage lost time injuries1 7.97.24.61.19.3Per million hoursAgricultureForestryTransport, Postal,WarehousingManufacturingConstructionMiningBoral Australia1. Source: Safe Work Australia data 2013-14. Based on Safe Work Australia’s definition of Lost Time Injury Frequency Rate using injuries that resulted in five or more days lost time from work. Boral data for Australia only for comparative purposes for FY2016. SUSTAINABILITY
OVERVIEW
Environment
Priorities
As outlined in Boral’s Environmental Policy, we are committed to:
•
•
•
complying with environmental legislation, regulations,
standards and codes of practice relevant to the particular
business as the absolute minimum requirement in each of
the communities in which we operate;
reducing greenhouse gas emissions from our processes,
operations and facilities, including appropriate use of
alternative fuels and/or carbon offsets;
eliminating waste in all its forms, by application of LEAN
manufacturing principles, leading to:
–
–
efficient use of energy;
conservation of water;
– minimising and recycling of waste production materials
–
–
and energy;
prevention of pollution; and
effective use of virgin and recovered resources and
supplemental materials;
• open, constructive engagement with communities
surrounding our operations; and
• protecting biodiversity values at and around our facilities.
n
o
i
l
l
i
M
Environmental management system
In FY2016, our environmental management system was
reviewed and integrated into our revised HSEQ MS. Boral’s
revised HSEQ MS is providing a clearer definition of the
standards we expect our operations to achieve, and the
practices required to achieve them. It is also requiring re-
assessment of the environmental risks posed by each of our
operations. For example, while handling of toxic chemicals or
hazardous wastes are not material issues at a Boral Group level,
at a particular local level these risks may be more relevant. Our
system is ensuring that the framework and procedures in place
at each of our operations are appropriate to optimally manage
such risks.
The HSEQ MS has also enhanced our capacity to certify
operations to the international environmental management
standard ISO 14001, if and when required by tender processes
or customers. Currently, 22 Boral locations across NSW, QLD
and the ACT, mainly asphalt businesses, are ISO 14001 certified.
We have continued to strengthen our internal controls and
systems to improve our compliance with the increasingly
stringent regulatory requirements in Australia. In FY2016, we
implemented a new online safety information management
system that is also helping us more effectively manage breaches
of environmental licence conditions. Formal regulatory
notifications continue to be reviewed by our internal HSE
function and reported to Boral’s Executive Committee, with any
material breaches also reported and discussed at Board
Committee level, even if no penalty results.
Greenhouse gas emissions and energy use
In FY2016, Boral’s greenhouse gas (GHG) emissions (Scope 1
and 2) totalled 2.46 million tonnes of carbon dioxide equivalent
(CO2-e), down 7% from FY2015. Compared to the prior year,
emissions from Boral’s Australian operations were down by 8%,
the US operations down 2%, and Asian operations down 6%.
Boral’s operations consumed 20 petajoules of energy during
FY2016, down 8% from FY2015. Energy consumption in our
Australian operations declined by 12%, US operations increased
by 3%, and Asian operations fell by 6% compared to the
prior year.
GHG emissions from operations
Asia
USA
Australia
GHG intensity (RHS)
2
e
-
O
C
s
e
n
n
o
t
0.4
0.2
0.5
0.2
0.5
0.2
0.2
0.2
0.2
0.2
2.9
20.5
2.7
2.5
2.2
10.3
2.0
2.2
1.9
FY12
FY13
FY14
FY15
FY16
1
e
u
n
e
v
e
r
m
$
r
e
p
e
-
2
O
C
s
e
n
n
o
T
Changes in Boral’s business portfolio during FY2015 under-
pinned the reported decline in GHG emissions and energy use
in our Australian operations in FY2016. These portfolio changes
included: formation of the Boral CSR Bricks joint venture in May
2015 (40% owned by Boral) which resulted in CSR thereafter
fully reporting emissions and energy use of the joint venture,
divestment of the Western Landfill business in March 2015, and
cessation of operations at Maldon clinker kiln in October 2014.
On a like-for-like basis, GHG emissions were broadly flat while
energy use was marginally up for Australia and Boral overall in
FY2016. Increased activity in NSW, resulting in higher production
at cement manufacturing operations, offset reductions in
emissions and energy use across other businesses. The
Cement business accounted for 75% of our GHG emissions and
52% of our energy use in Australia during the year.
Boral’s emissions intensity, based on GHG tonnes of CO2-e per
$m revenue, declined 6% year on year1. This improvement
largely reflects the changes in our business portfolio in FY2015
combined with revenue growth of our less energy-intensive
Gypsum business.
Boral’s businesses continue to focus on energy and emission
reduction initiatives including through LEAN management
principles, plant efficiency projects and fuels programs. At the
Berrima cement works, an alternative fuels program is being
developed to lower local manufacturing costs and emissions. In
the Timber business, a ‘biofutures’ project is exploring a range
of opportunities to increase the use of residues, including for
electricity generation and as new additives in the formulation of
asphalt for roads to improve the properties of bitumen.
1. Boral reported revenue adjusted to include underlying revenue of Boral’s 50% interest in the USG Boral.
24
Boral Limited Annual Report 2016
Boral’s Australian GHG emissions
Natural gas 10%
Diesel & Liquid
Fuels 11%
Electricity 19%
Calcination 39%
Coal 21%
Climate change and carbon policy
The safeguard mechanism of the Federal Government’s
Emissions Reduction Fund (ERF), which forms part of the
Government’s strategy to meet emissions reduction targets of
5% by 2020, came into force on 1 July 2016. The safeguard
mechanism establishes emissions baselines for facilities with
high levels of emissions and applies to Boral’s operations at
Berrima (Cement) and Marulan (Lime). We are currently in
negotiation with the federal regulator in respect of appropriate
emissions baselines to be used for the two facilities.
Boral continues to investigate potential ways that we may
access funds from the ERF to apply towards improving the
emissions efficiency of our operations.
In FY2016, we commenced developing programs to increase
resilience and adaptation of Boral’s operations to extreme
weather events, with an initial focus on extreme rainfall events on
Australia’s East Coast.
1. Fines are directly issued by the regulator and penalties by a court hearing.
Water, waste, recycling and re-use
While the management of water and waste materials is not
considered a material risk for Boral at a Group level, Boral’s
businesses are committed to conserving water, minimising
production of waste, and maximising recycling and re-use
opportunities. For example, throughout Boral’s operations, our
own returned waste materials are re-used to produce the same
product, including concrete washout slurry, recycled asphalt
pavement (RAP), plasterboard waste from production and building
sites, brick bats and bricks from customers’ sites. External waste
products or secondary resources that we use to manufacture our
products include: cementitious waste materials including fly ash in
our lightweight composite building products in the USA, by-
products in cement, and crushed demolition concrete in new
concrete and asphalt.
Boral’s businesses only deal with minor amounts of hazardous
waste, and this is managed in accordance with government
regulations. Similarly, we only use relatively small amounts of
packaging, as the vast majority of our products are delivered in
bulk. Boral businesses that do use some packaging, such as
Midland Brick and USG Boral, are signatories to the Australian
Packaging Covenant; Boral Cement, through its membership of
Cement Concrete Aggregates Australia, is also a signatory.
Infringements and penalties
Number
Fines1
Penalties1
Undertakings
FY2016
FY2015
FY2014
FY2013
9
3
15
7
$33,888
$11,658
$26,849
$31,960
$250,000
$0
$0
$0
$12,000
$100,000
In FY2016, Boral was charged with eight regulatory
infringements related to environmental contraventions in
Australia and the USA, resulting in $33,888 in fines, in addition
to one major penalty from the prosecution discussed below. The
fines relate to:
•
•
•
•
turbid water discharge during a high rainfall event at
Peppertree Quarry in NSW;
a breached stormwater bund at a remote QLD quarry;
noise from a before approved hours concrete delivery; and
five separate fines in the USA for various reporting non-
compliances.
In May 2016, there was one regulatory infringement in China;
however at the time of publication, the potential penalty
is unknown.
Legal proceedings in relation to aggregate allegedly being
washed into a water course at Narangba Quarry, QLD, were
resolved in September 2015. After pleading guilty to a reduced
number of charges in relation to discharge of aggregate into
Browns Creek, Boral received a penalty of $250,000 and was
required to pay the prosecuting authority’s legal costs. No
conviction was recorded. A portion ($27,154) of the penalty was
allocated to impacted landowners and a further $75,000 to three
regional environmental groups to fund various land
rehabilitation projects.
Boral Limited Annual Report 2016 25
Strengthening our resilience to extreme weather eventsExpansion of operations at our Ormeau Quarry in QLD necessitated compliance with various environmental conditions for managing stormwater discharges into the Pimpama Creek, which flows through the site. In response, a comprehensive new stormwater system was designed which draws on best practice remediation processes and considered numerous other challenges including: ensuring flood immunity, preserving the creek riparian zone, and providing sufficient operational area to meet increased activity demands. The new stormwater management infrastructure, which incorporates sediment pre-treatment basins, an engineered construction system using waste tyres and steep-sided walls made from waste concrete, is setting new standards within the quarrying industry. Importantly, it is also strengthening the quarry’s resilience to extreme rain events. SUSTAINABILITY
OVERVIEW
At the time of publication, Boral is engaged in legal proceedings
with the Victorian Environment Protection Authority, which has
commenced proceedings on three counts related to accepting
concrete material at our Cosgrove Quarry near Shepparton.
The material had been received for processing and recycling into
construction materials.
Boral Timber
Boral Timber is the largest customer of Forestry Corporation of
NSW, the state-owned largest manager of commercial native
and plantation forests in NSW. With a substantial proportion of
volumes supplied to Boral being valuable blackbutt timber, it is
vitally important that we work closely with the Government to
ensure sustainable harvesting of the north coast forests.
Forestry Corporation of NSW is certified to meet the Australian
Forestry Standard (AFS), an independently audited forest
management standard that provides assurance that it is
managing its forests in a sustainable manner.
Boral Timber’s solid hardwood products are certified to the AFS
Chain of Custody standard, which provides our customers with
assurance that our products are sourced from certified, legal
and sustainable resources by tracking our products back to their
source of supply.
Biodiversity and heritage management
Protecting Australia’s biodiversity and cultural heritage at our
operational sites and in our local communities is a core
component of our land management efforts to minimise our
environmental footprint. Our long-standing community
partnerships with Conservation Volunteers Australia and
Taronga Conservation Society are also aimed at biodiversity,
conservation and education, both in our local communities and
more broadly.
In addition to our land rehabilitation efforts to re-establish natural
ecosystems as part of our licensing requirements, we have
undertaken a number of projects to protect biodiversity and
Aboriginal heritage in the communities in which we operate,
including:
• maintaining and inspecting bat boxes at our Dunmore
Quarry in NSW for a number of threatened species;
•
the ongoing supply of koala fodder from our plantations at
our Narangba and Petrie quarries in QLD which
commenced in 2002;
• working with local Aboriginal representatives at our
Peppertree Quarry, which has resulted in the identification of
nearly 100,000 Aboriginal artefacts; and
•
relocating an Aboriginal scarred tree from our Dunmore
Quarry to Killalea State park, where it was presented to the
public in an official ‘Close the Gap’ ceremony.
26
Boral Limited Annual Report 2016
Community partnerships
$880,000 contributed to 10 community partnerships and other
corporate support initiatives
We have a strategic approach to community investment,
focusing on supporting community groups and
organisations that share our values and where there is
relevance to our people, places and products. We want our
community investment to provide a valued and sustained
contribution to the communities in which we operate. Our
focus is therefore on building meaningful long-term
relationships with non-profit community organisations that
are mutually beneficial.
In FY2016, Boral contributed approximately $830,000 of cash to
10 corporate community partnerships and other corporate
community support initiatives; a small increase on the $820,000
contributed in the prior year. In addition, we provided
approximately $50,000 of materials in-kind support to assist
with building projects undertaken by four of our partners: Habitat
for Humanity Australia, Conservation Volunteers Australia,
Touched by Olivia and HomeAid.
Boral’s businesses and employees also support local activities,
including charities, emergency services and sporting and
environmental groups. Boral entered a two year sponsorship of
the Australian Baseball League All-Star Game and
Championship Series in FY2016, providing very cost-effective
brand exposure through international television broadcasts to
countries where Boral operates including Australia, the USA and
Korea. This partnership also supports the growth of the sport at
the grass roots in Australia and has allowed Boral employees
and their families to experience baseball at the elite level.
Boral does not participate in or donate to any political or
politically associated organisations.
Demonstrating our commitment to Peppertree’s heritage managementDuring the initial approval process of Boral’s Peppertree Quarry, a number of sites of significant heritage value were identified. Recognising the cultural importance of these sites, Boral revised the initial Aboriginal Heritage Management Plan in conjunction with the Ngunawal people and Pejar Local Aboriginal Land Council, which went over and beyond our regulatory approval requirements. Representatives from the site’s Aboriginal Heritage Management Committee were invited to undertake topsoil monitoring of any excavation work undertaken within an agreed identified area − involving an additional investment of 24,000 hours to salvage the areas. To date, nearly 100,000 artefacts have been salvaged which will be returned to Country within the quarry site under the direction of local Aboriginal leaders. Anzac Centenary Public Fund
Our donations to the Anzac Centenary Public Fund are
supporting nationally significant Anzac centenary projects and
commemoration events taking place between 2014 and 2018,
marking 100 years since Australia’s involvement in the First
World War.
Bangarra Dance Theatre
Boral has been supporting Bangarra, Australia’s leading
Indigenous contemporary dance company, for 13 years. As
Bangarra’s Production Partner, this enabled Boral employees,
families, customers and suppliers to attend Bangarra
performances in Sydney, Melbourne, Brisbane and Townsville
during the year.
Boral’s sponsorship funding also contributed to supporting two
graduate dancers selected through Bangarra’s Graduate
Program, and the employment and training of a behind-the-
scenes production trainee.
Conservation Volunteers Australia (CVA)
We have been supporting conservation efforts around Australia
through our partnership with CVA since 1988. Last year, Boral
and CVA refreshed our approach and launched the Connected
Communities Program, which is strategically linked to our
community engagement program, forming an integral part of our
commitment to supporting local communities. With the help of
CVA volunteers, the program aims to assist in educating and
inspiring youth to take action for the future of their environment.
In FY2016, 45 schools and communities relevant to Boral’s
operational footprint across Australia received assistance to
undertake practical conservation and biodiversity projects
through the partnership. Boral employees also joined CVA
volunteers in working on these projects.
Habitat for Humanity Australia
Our partnership with Habitat for Humanity Australia, formed two
years ago, is helping to provide decent and affordable housing
solutions for families in need. As Habitat for Humanity Australia’s
Building Community Resilience partner, Boral is providing
support to disaster resilience projects in the Quang Nam
province in Vietnam and two urban slum projects in the
Yogyakarta region in Indonesia.
In Australia, Boral and USG Boral donated in-kind building and
construction materials for four homes in Yea, VIC and two
homes in Tamworth, NSW. Over 30 Boral and USG Boral staff
also volunteered with Habitat’s Australian Build and Brush with
Kindness programs.
HomeAid
In the USA, we continued to support HomeAid, our partner
since 2006, through a cash donation and in-kind contribution
towards housing projects for homeless families and individuals.
The in-kind materials, including bricks and concrete roofing,
were used for a shelter for at-risk children and an apartment
building providing transitional housing.
Boral employees also supported HomeAid Atlanta’s annual
Christmas and Baby Essentials fundraising drives by donating
goods and gifts.
Outward Bound
As part of our commitment to our local communities, we
continued to support Outward Bound’s Youth Leadership
Program to assist disadvantaged youth.
The program provided an opportunity for 26 Year 9 students
from the Southern Highlands and Southern Tablelands in NSW
to engage in personal development through a seven day
leadership program and camp. In addition to providing financial
scholarships, Boral staff provided ongoing mentoring support to
help the students implement their community service projects.
Redkite
Boral supports Redkite’s Financial Assistance Program, which
helps families of a child with cancer meet their day-to-day
needs, such as paying utility bills and accommodation relating to
treatment. Over the last four years, Boral and our staff have
contributed more than $500,000 to Redkite.
In FY2016, Boral’s support assisted more than 156 families
across Australia through our corporate donation and an
additional $43,000 in funds raised by Boral employees.
Taronga Conservation Society
With a focus on wildlife conservation and employee
engagement, Boral’s partnership with Taronga Zoo and Taronga
Western Plains Zoo has been in place for 13 years. For the past
10 years, Boral has also sponsored the Youth at the Zoo (YATZ)
educational program, which focuses on connecting teenagers
with nature. More than 1,350 teenagers have participated in the
program since 2006.
As Boral is a Crown Partner of Taronga Zoo, Boral staff can
benefit from free entry and discounted tickets, with 1,474 visits
made by Boral families during FY2016. More than 600
employees and their families attended Family Days at Taronga
Zoo in October 2015.
Touched by Olivia Foundation
Through our partnership with Touched by Olivia Foundation, we
help create vibrant, all abilities playgrounds that provide all
children, including children with disabilities, the opportunity
to play.
In FY2016, Touched by Olivia publicly opened Livvi’s Place
Casey and Livvi’s Place Ballarat in VIC, both inclusive
playgrounds to which Boral donated concrete. We also
committed to donating concrete to Livvi’s Place Jordan Springs,
NSW and Livvi’s Place Craigieburn, VIC.
University of Sydney
Boral has partnered with the University of Sydney’s US Studies
Centre in a multi-year public policy research program supported
by the Australian Government. The Alliance 21 Program focuses
on the relationship between Australia and the US, and the
challenges and opportunities as it evolves in a changing Asian
economy. The research program encompasses public and
private conferences, seminars and roundtables as well as
research studies and publications.
Boral Limited Annual Report 2016 27
Mike Kane
Chief Executive Officer &
Managing Director
Joseph Goss
Divisional Chief
Executive, Boral Australia
David Mariner
President and CEO,
Boral Industries Inc
Frederic de Rougemont
CEO, USG Boral
Ross Harper
Executive General
Manager, Boral 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 and
Engineering.
Joined in 2010 and was
previously Executive General
Manager, Boral Building
Products in Australia until June
2016, and prior to that, Chief
Operating Officer for the Boral
USA Cladding Division. Prior
to joining Boral, David held a
variety of management roles
with Holcim, Daimler Chrysler
and Detroit Diesel. He has a
Civil Engineering degree and
an MBA.
Joined in 2011 and was
previously CEO of LBGA. Prior
to joining Boral, Frederic held
senior roles with Lafarge in
South Africa and South Korea,
as well as research roles in
France and the USA. He has
a PhD in Physical Sciences.
Since 28 February 2014
on formation of USG Boral,
Frederic has been employed
by the USG Boral Building
Products joint venture.
Joined in January 2006 and
held senior roles in Boral’s
Cement division. Ross has
over 30 years’ experience with
industrial process industries
including the energy, pulp and
paper and building material
sectors. He holds a PhD in
Chemistry and completed
the Executive Management
Programme at the University of
Michigan, Ann Arbor.
Dominic Millgate
Company Secretary
Joined in 2010 and was
previously Boral’s Assistant
Company Secretary. Prior to
joining Boral, he held legal
counsel and company secretary
roles in Australia and Singapore
and legal roles in London and
Sydney. Dominic has a finance
degree and a Master of Laws.
Kylie FitzGerald
Group Communications
& Investor Relations
Director
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.
Linda Coates
Group Human
Resources Director
Joined Boral in 2000 and
previously held Group and
divisional HR roles in Boral. Prior
to joining Boral, Linda was with
Pioneer International in HR roles
covering Australia and Asia. She
has a degree in Economics and
Political Science and an MBA.
Rosaline Ng
Chief Financial Officer
Damien Sullivan
Group General Counsel
Michael Wilson
Group Health, Safety &
Environment Director
Joined in 1995 and held senior
finance roles in Boral’s Building
Products division. Rosaline 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.
Rosaline has a Bachelor of
Commerce and is a member of
Chartered Accountants Australia
and New Zealand.
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 Boral in 2013. Michael has
held senior roles overseeing the
management and governance
of safety, environment and
quality in mining and industrial
companies in Australia and the
UK, as well as in the Australian
Department of Defence and the
Environment Department. Michael
has an Applied Science degree
and a Master of Environmental
Engineering Science.
28
Boral Limited Annual Report 2016
Executive Committee Brian Clark
Non-executive Chairman, Age 67
Dr Brian Clark joined the Boral Board
in May 2007 and became Chairman
at the conclusion of Boral’s 2015
AGM. Dr Clark has experience as an
executive and director in Australasia,
Japan, China, Italy, the UK and South
Africa. He was previously a Director
of AMP Limited and Chairman of
AMP Capital Limited, and was
previously on the Board of National
Australia Bank and a member of
the Merrill Lynch Australian Advisory
Board. 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 holds a Doctorate in physics
from the University of Pretoria, South
Africa and completed the Advanced
Management Program at the Harvard
Business School.
Eileen Doyle
Non-executive Director, Age 61
Dr Eileen Doyle joined the Boral
Board in March 2010. Dr Doyle is
a Director of GPT Group Limited
and Oil Search Limited. She was
previously the Deputy Chairman
of CSIRO, a Director of Bradken
Limited, OneSteel Limited and
Ross Human Directions Limited
and Chairman of Port Waratah Coal
Services Limited.
Her extensive executive and non-
executive experience includes
manufacturing and marketing in
building and industrial materials
throughout Australasia, Asia and
North America. She holds 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 & Risk
Committee.
Mike Kane
CEO & Managing Director, Age 65
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. Mr Kane 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.
His 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. He holds 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.
Karen Moses
Non-executive Director, Age 58
Karen Moses joined the Boral
Board in March 2016. Ms Moses
is a Director of Orica Limited,
Sydney Symphony Limited, SAS
Trustee Corporation and Sydney
Dance Company. She has also
been appointed as a Director of
Charter Hall Group, which will take
effect from 1 September 2016. Ms
Moses was previously a Director of
Australia Pacific LNG Pty Limited,
Origin Energy Limited, Contact
Energy Limited, Energia Andina S.A.,
Australian Energy Market Operator
Ltd, VENCorp and Energy and Water
Ombudsman (Victoria) Limited. Ms
Moses has over 30 years’ experience
in the energy industry spanning oil,
gas, electricity and coal commodities
and upstream production, supply and
downstream marketing operations.
This experience has been gained
both within Australia and overseas.
She holds a Bachelor of Economics
and a Diploma of Education from the
University of Sydney.
Ms Moses is a member of the Audit
& Risk Committee and a member
of the Health, Safety & Environment
Committee.
Catherine Brenner
Non-executive Director, Age 45
Catherine Brenner joined the
Boral Board in September 2010.
Ms Brenner is Chairman of AMP
Limited, a Director of Coca-Cola
Amatil Limited and SCEGGS
Darlinghurst Limited, and Panel
Member of Adara Partners. She
was previously Chairman of AMP
Life Limited and the National Mutual
Life Association of Australasia.
Ms Brenner also previously held
directorships including Centennial
Coal Company Limited and the
Australian Brandenburg Orchestra,
and was previously a member of the
Takeovers Panel. She has extensive
experience in corporate finance and
capital markets, previously 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 & Risk Committee and of
the Remuneration & Nomination
Committee.
Kathryn Fagg
Non-executive Director, Age 55
Kathryn Fagg joined the Boral Board
in September 2014. Ms Fagg is
a Board member of the Reserve
Bank of Australia and a Director of
Incitec Pivot Limited and Djerriwarrh
Investments Limited. She is also
the Chair of the Melbourne Recital
Centre and the Breast Cancer
Network Australia. Ms Fagg is an
experienced senior executive, having
worked across a range of industries
in Australia and Asia, including
logistics, manufacturing, resources,
banking and professional services.
She was previously President of
Corporate Development with the
Linfox Logistics Group and prior
to that she held executive roles
at BlueScope Steel and ANZ and
consulted for McKinsey and Co.
She holds an Honorary Doctor of
Business and a Master of Commerce
in Organisation Behaviour from
UNSW and a chemical engineering
degree from the University of
Queensland.
Ms Fagg is Chairman of the
Remuneration & Nomination
Committee and a member of the
Health, Safety & Environment
Committee.
John Marlay
Non-executive Director, Age 67
John Marlay joined the Boral Board
in December 2009. Mr Marlay is a
Director of Incitec Pivot Limited and
Independent Chairman of Flinders
Ports Holdings Pty Limited. He was
previously Chairman of Cardno
Limited and has senior executive
experience in the global materials
and cement industries as well as
non-executive director experience
in companies with significant North
American business operations. 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 holds a
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 62
Paul Rayner joined the Boral Board
in September 2008. Mr Rayner
is the Chairman of Treasury Wine
Estates Limited, a Director of Qantas
Airways Limited and a Director of
the Murdoch Childrens Research
Institute. He was previously a
Director of Centrica plc, a UK listed
company. He brings to the Board
extensive international experience in
markets relevant to Boral including
North America, Asia and Australia.
He has worked in the fields of
Finance, Corporate Transactions
and General Management in
consumer goods, manufacturing
and resources industries. His last
role as an Executive was Finance
Director of British American
Tobacco plc, based in London from
January 2002 to 2008. He holds
an Economics Degree from the
University of Tasmania and a Masters
of Administration from Monash
University.
Mr Rayner is Chairman of the Audit &
Risk Committee.
Boral Limited Annual Report 2016 29
Board of Directors CORPORATE
GOVERNANCE
Introduction
This corporate governance statement outlines Boral’s governance
framework. Boral is committed to ensuring that its policies and
practices reflect a high standard of corporate governance.
Throughout FY2016, Boral’s governance arrangements were
consistent with the Corporate Governance Principles and
Recommendations (3rd edition) 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.
This Corporate Governance Statement is current as at 30 June
2016 and has been approved by the Board of Boral Limited.
The Board and its role
Responsibilities of the Board
Directors are accountable to shareholders for the Company’s
performance and governance. 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 and other
senior executives have written agreements in place which set out
their terms of appointment, and all executives are to operate in
accordance with Board approved policies and delegated limits of
authority, as set out in Boral’s management guidelines.
The diagram below summarises Boral’s governance framework
and the functions reserved for the Board in accordance with the
Board Charter.
BOARD OF DIRECTORS
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;
• guiding the development of the Group’s strategy and monitoring its implementation;
• monitoring business performance and ensuring that appropriate resources are available;
• approving the Company’s financial statements and annual budget, and monitoring financial
performance against the approved budget;
• reviewing, ratifying and monitoring systems of risk management and internal control, codes of
conduct and legal compliance (including in respect of matters of sustainability, safety, health and
environment);
• 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.
Delegation
and oversight
Recommendations
and reporting
BOARD COMMITTEES
Audit & Risk
Committee
Remuneration &
Nomination Committee
Health, Safety &
Environment Committee
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.
Delegation
and oversight
Accountability
and reporting
COMPANY
SECRETARY
The Company
Secretary plays an
important role in
supporting the
effectiveness of the
Board and its
Committees
CEO & MANAGING
DIRECTOR
i
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A
SENIOR
MANAGEMENT
Board and Committee Charters and the Company’s Constitution are available on Boral’s website.
30
Boral Limited Annual Report 2016
Corporate Governance Statement
Non-executive Directors spend at least 35 days each year (considerably more in the case of the Chairman) 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 Board visited operations at a number of sites, including USG Boral’s plasterboard operations in Ho Chi Minh,
Vietnam, Boral’s fly ash operations at the Deely Spruce power plant in the USA and Boral’s Innovation Factory at its newly opened
facility known as the Discovery Centre in San Antonio, USA. Health, Safety & Environment Committee members also visited Boral’s
operations at Seaham Quarry in New South Wales.
Composition of the Board
Membership
The accompanying diagram illustrates the current composition
of the Board.
Boral’s Constitution provides that there will be a minimum of
three Directors and a maximum of 12 Directors on the Board.
The Board of Directors comprises seven non-executive Directors
(including the Chairman) and one executive Director, being the
CEO & Managing Director.
The roles of Chairman and CEO & Managing Director are not
exercised by the same individual.
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 effective function of
the Board. 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.
oses
n M
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r
a
K
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F
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t
a
K
C l a r k
a i r m a n
B ri a
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Mike Kane
CEO & Managing Dire
Executiv
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Board
Composition
N
t
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Independe
C
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e
B
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e
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e
r
P
a
ul R
yner
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John Marla
Eile
e
n
Doyle
Boral Limited Annual Report 2016 31
CORPORATE
GOVERNANCE
Skills and diversity of the Board
Matters relating to Board and Board Committee composition are
considered by the Remuneration & Nomination Committee in
accordance with the framework set out in the Remuneration
& Nomination Committee Charter and through processes
implemented by the Board.
The Board actively seeks to ensure that it has an appropriate
mix of diversity (including gender diversity), skills, experience
and expertise to enable it to discharge its responsibilities
effectively and to be well equipped to assist our Company to
navigate the range of opportunities and challenges we face.
Diversity includes differences that relate to gender, age and
cultural background, as well as differences in background and
life experience, communication styles, interpersonal skills,
education, functional expertise and problem solving skills.
To assist in identifying areas of focus and maintaining an
appropriate and diverse mix in its membership, the Board
utilises a skills matrix which is reviewed by the Board on a
regular basis. It is an important, but not the only, basis of criteria
applying to Board appointments.
The Board skills matrix sets out the mix of skills, experience and
expertise that the Board currently has and is looking to achieve
in its membership. It supports the Company’s overarching
strategy to “Fix, Execute and Transform” the business, as well as
other areas of relevance to the composition of the Board. The
areas addressed in the matrix are as follows:
Board skills matrix –
skills and experience across the Board as a whole support
Boral’s strategy to “Fix, Execute and Transform”
Element
Skills
Leadership
Executive Leadership
Health, Safety & Environment
Portfolio
Strategy / M&A
Financial acumen
Risk management
Global experience
Market and customer knowledge
Innovation
Change and transition
Information technology
People
Organisational sustainability
Remuneration and rewards
Governance
Governance and regulation
Board experience
Each of these areas is currently well represented on the Board.
The Board benefits from the combination of Directors’ individual
skills, experience and expertise in particular areas, as well as the
varying perspectives and insights that arise from the interaction
of Directors with diverse backgrounds.
The Board skills matrix was utilised in the Company’s
appointment of Ms Karen Moses in March 2016, and as part of
the Board’s orderly succession planning process with
Dr Brian Clark appointed as Chairman in place of Dr Bob Every,
who stepped down from the Board at the conclusion of Boral’s
2015 Annual General Meeting.
The skills, experience and expertise of each Director are set out
on page 29 of the Annual Report.
Director independence
The Board has assessed the independence of each of the
non-executive Directors (including the Chairman) in light of their
interests, positions, associations 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;
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;
has not within the last three years been a partner, director or
senior employee of a provider of material professional
services to a Boral company;
has not been within the last three years, in a material
business relationship (ie. as a supplier or customer) with a
Boral company, or an officer of or otherwise associated with
someone with such a relationship;
has no material contractual relationship with a Boral
company other than as a Director;
• does not have close family ties with any person who falls
within any of the categories described above; or
•
has not been a Director of Boral for such a period that his or
her independence may have been compromised.
It is considered that none of the interests of Directors (or the
interests of persons with whom Directors have close family ties)
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.
32
Boral Limited Annual Report 2016
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, the Code of Business
Conduct and the Share Trading Policy, site visits to some of
Boral’s key operations and discussions with other Directors.
In FY2015, the induction process for new non-executive
Directors was refreshed and modernised. The new process
provides non-executive Directors with greater exposure to the
Company’s strategy and operations and its governance
arrangements before joining the Board.
The Company also offers ongoing opportunities for Directors to
continue to develop their professional skills.
Tenure
Under Boral’s Constitution, and as required by the ASX Listing
Rules, a Director must not hold office (without re-election) past
the longer of the third Annual General Meeting and three years
following that Director’s last election or appointment. Retiring
Directors are eligible for re-election. When a vacancy is filled by
the Board during a year, the new Director must stand for election
at the next Annual General Meeting. The requirements relating to
retirement from office do not apply to the Managing Director of
the Company.
The length of service of each current Director is set out on
page 29 in the Annual Report, and shows that the Board is well
served with an appropriate and diverse mix of tenure.
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.
The Board has determined that as a general rule, the Chairman
must retire from that position at the expiration of 10 years in that
role unless the Board decides otherwise. Dr Every stepped down
from the Board as Chairman and Dr Clark succeeded him at the
conclusion of Boral’s 2015 AGM.
Boral Limited Annual Report 2016 33
CORPORATE
GOVERNANCE
Succession planning
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 re-appointment of Directors is to ensure that the Board possesses
an appropriate range of skills, experience and expertise to enable the Board to carry out its responsibilities most effectively. The
Board is also committed to maintaining gender diversity in its membership. Currently, four 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 non-executive Directors meet on a regular basis without management present in a forum intended to allow for open discussion,
including in relation to Board and management performance.
Process
Board review
Explanation
•
•
The appointment of Directors follows a process during which the full Board (with the
assistance of external search consultants) assesses the necessary and desirable
competencies of potential candidates and considers a number of candidates before deciding
on the most suitable candidate for appointment.
The selection process includes obtaining background checks on candidates and assistance
from an external consultant, where appropriate, to identify and assess suitable candidates.
Background checks are conducted before appointing a Director and putting forward to
shareholders a candidate.
• 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.
Remuneration & Nomination
Committee recommendation
•
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.
Appointment
• 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.
Shareholder communications
• When candidates are submitted to shareholders for election or re-election, the Company
includes in the notice of meeting all information in its possession that is material to the decision
whether to elect or re-elect the candidate.
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, who is accountable to the Board through the Chairman, provides advice and support to the Board and is
responsible for all matters to do with the proper functioning of the Board.
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.
34
Boral Limited Annual Report 2016
Both the external and internal auditors attend each scheduled
meeting of the Committee and report to the Committee as
appropriate on the outcome of their audits and the quality of
controls throughout Boral. As part of its agenda, the Audit &
Risk 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 & Risk Committee reports to the full
Board after Committee Meetings. Minutes of Meetings of the
Audit & Risk Committee are included in the papers for the next
full Board Meeting after each Committee Meeting.
Responsibilities in relation to the internal and external audit
Boral’s external auditor is KPMG. At least annually, as occurred
in FY2016, the Audit & Risk Committee reviews the scope of the
external audit and evaluates the quality of the performance, the
effectiveness and the independence of the external auditor.
If circumstances arise where it becomes necessary to replace
the external auditor, the Audit & Risk 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 & Risk Committee monitors procedures to ensure the
rotation of external audit engagement partners every five years
as required by the Corporations Act.
The Audit & Risk Committee has approved a process for the
monitoring and reporting of non-audit work to be undertaken by
the external auditor. The type of services of 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 and where the external
auditor would be required to review their work as part of
the audit.
The Independence Declaration by the external auditor is set out
on page 50. The Committee’s role in relation to the internal audit
function is discussed on page 38.
Board Committees
The qualifications and experience of each Committee member are
set out on page 29 of the Annual Report. Details of the number of
Committee meetings Directors attended during the reporting
period are set out on page 47 in the Directors’ Report.
Audit & Risk Committee
Composition and role
Boral has an Audit & Risk Committee which assists the effective
operation of the Board. The Audit & Risk Committee comprises
only independent non-executive Directors. Its members are:
Paul Rayner (Chairman)
Eileen Doyle
Catherine Brenner
Karen Moses
The Committee met four times during FY2016.
The Audit & Risk Committee has a formal Charter which sets
out its role and responsibilities, composition, structure and
membership requirements. Its responsibilities include review
and oversight of:
•
•
•
the financial information provided to shareholders and the
public;
the integrity and quality of Boral’s financial statements and
disclosures;
the systems and processes that the Board and
management have established to identify and manage areas
of significant risk; and
• Boral’s auditing, accounting and financial reporting processes.
The Committee has the necessary power and resources to meet
its responsibilities under its Charter, including rights of access to
management and auditors (internal and external) and to seek
explanations and additional information.
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 & Risk Committee reviews the carrying value of assets,
provisions and other accounting issues. Questionnaires
completed by divisional management are reviewed by the
Committee half yearly.
Boral Limited Annual Report 2016 35
CORPORATE
GOVERNANCE
Remuneration & Nomination Committee
Composition and role
The Board has a Remuneration & Nomination Committee which
comprises three independent non-executive Directors.
Health, Safety & Environment Committee
Composition and role
The Board has a Health, Safety & Environment Committee which
comprises four independent non-executive Directors.
The members of the Committee are:
The members of the Committee are:
Kathryn Fagg (Chairman)
Eileen Doyle (Chairman)
Catherine Brenner
John Marlay
The Committee met on four occasions during FY2016.
The Remuneration & Nomination Committee has a formal
Charter which sets out its role and responsibilities, composition,
structure and membership requirements.
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. In 2015, the Remuneration & Nomination Committee
oversaw the search for a new independent non-executive
Director by an external service provider. The Remuneration &
Nomination Committee recommended the final candidate to the
Board for approval, which resulted in the appointment of Karen
Moses in March 2016. In accordance with the Company’s
Constitution, Ms Moses will offer herself for election by
shareholders at Boral’s Annual General Meeting in
November 2016.
Kathryn Fagg
John Marlay
Karen Moses
The Committee met on three occasions during FY2016.
The Committee’s responsibilities include the review and
monitoring of:
•
•
•
•
•
•
•
the Group’s strategy for health, safety and environment
(HSE) and management’s plans to improve HSE
performance;
the effectiveness of the Group’s policies, systems and
governance structure for identifying and managing HSE
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 HSE matters;
the performance of the Group, assessed by reference to
agreed targets and measures, in relation to HSE 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
HSE 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.
In performing its role, the Committee seeks to support the
activities of Management and enhance the HSE culture of the
Group through its interactions with employees and others during
meetings and site visits.
36
Boral Limited Annual Report 2016
Performance evaluation and remuneration
Performance evaluation process
The following table explains the Company’s performance evaluation processes for the Board, Committees, individual Directors and
senior executives.
Board, Committees and Directors
CEO & Managing Director
Senior executives
The Board undertakes an evaluation of
the performance of the Board, its
Committees, individual Directors and the
Chairman at least annually.
Periodically, this review is undertaken with
the assistance of an external facilitator.
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, its Committees and individual
Directors took place in FY2016 in
accordance with the process
described above.
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.
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.
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 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.
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 took place in
FY2016 in accordance with the process
described above.
An evaluation of the performance of senior
executives of Boral took place in FY2016
in accordance with the process described
above.
Remuneration
Remuneration of non-executive Directors
The remuneration of the non-executive Directors is fixed. The
non-executive Directors do not receive any options, at risk
remuneration or other performance related incentives. Nor are there
any schemes for retirement benefits for non-executive Directors.
The remuneration arrangements for non-executive Directors are
distinct from the arrangements for senior executives.
Remuneration of senior executives
Boral’s remuneration policy and practices for senior executives,
including the CEO & Managing Director, 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 at risk reward;
remuneration be linked to Boral’s performance and the
creation of shareholder value;
at risk remuneration for executives has both short- and
long-term components; and
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.
Further information relating to the remuneration of the
non-executive Directors and senior executives is set out
in the Remuneration Report from page 51.
Boral Limited Annual Report 2016 37
CORPORATE
GOVERNANCE
Boral policies and risk framework
Risk identification and management
The Board (through the Audit & Risk 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 seeks assurance 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.
The managers of Boral’s businesses are responsible for
identifying and managing risks. Under 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. This comprises the
identification of core strategic, operational, financial and
compliance risks, and encompasses the assessment,
monitoring and mitigation of identified risks.
On a twice yearly basis, the Group Audit and Risk Manager
facilitates a formal bottom-up, organisation-wide risk
management process with the business. Outcomes are shared
with the Audit & Risk Committee and Management, which also
receive presentations by senior divisional management on a
regular basis. The process is governed centrally through Boral’s
risk management framework and directed by policies and
procedures within functional areas such as Treasury, Health,
Safety and Environment, Human Resources and Learning,
Group Legal and Finance.
Boral’s senior management has reported to the Board (through the
Audit & Risk Committee) on the effectiveness of the management
of the material business risks faced by Boral during FY2016. The
Audit & Risk Committee has reviewed the risk management
framework and is satisfied that it continues to be sound.
Boral’s Risk Management Policy is available on Boral’s website.
Internal audit
The internal audit function is carried out by Group Audit and
Risk, which provides independent and objective assurance to
Management and the Board on the effectiveness of Boral’s
internal control, risk management and governance systems and
processes. The function is led by the Group Audit and Risk
Manager, who oversees the execution of the internal audit plan
as approved by the Audit & Risk Committee. The Group Audit
and Risk Manager has a reporting line to the Chief Financial
Officer as well as to the Audit & Risk Committee.
The function comprises a dedicated in-house team of qualified
professionals based in Australia, Asia and the USA, with
targeted support as required from external specialists.
The internal audit function is independent of Management and
has full access to all Boral entities, records and personnel.
The internal audit plan is formulated using a risk-based
approach to align audit activity with the key risks of Boral.
Internal audit activity and outcomes are reported to the Audit
& Risk Committee on at least a quarterly basis.
38
Boral Limited Annual Report 2016
Business and sustainability risks
Details regarding our approach to managing business and
sustainability risks are contained in the OFR (pages 2 to 17 of
the Annual Report), Sustainability Overview (pages 18 to 27 of
the Annual Report) and the risks section of the Annual Report
(including at pages 16 to 17 and 44 to 45). These explain the
Company’s exposure to economic, environmental and social
sustainability risks and how that exposure is managed.
Chief Executive Officer and Chief Financial
Officer declaration
The CEO & Managing Director and the Chief Financial Officer
give a declaration to the Board, before the Board resolves that
the Directors’ Declaration accompanying the full year and half
year financial statements be signed, that in their opinion, the
Company’s financial records have been properly maintained,
and the financial reports comply with the appropriate accounting
standards and give a true and fair view of the financial position
and performance of the Company, and that their opinion has
been formed on the basis of a sound system of risk
management and internal control which is operating effectively.
The CEO & Managing Director and the Chief Financial Officer
gave this declaration to the Directors for the full year ended
30 June 2016 and the half year ended 31 December 2015.
Compliance with laws and policies
The Company has adopted policies to monitor 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 believes 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.
During FY2016, Boral Legal led the formation of the Boral
Compliance Council. Compliance within Boral is achieved
through collaboration across functional areas including Legal,
Risk, Internal Audit, HSE, Property Group, Product Councils,
Insurance, Finance, Tax, HR / IR and other areas of expertise.
Given the multidisciplinary nature of the compliance effort within
Boral, regular, open communication facilitating collaboration
across those groups is critical. The Compliance Council
provides a regular forum connecting the relevant expertise to
foster and improve communication and collaboration and to
ensure that the right functional experts are engaged and
working together to achieve business-wide regulatory
compliance.
Diversity at Boral
Diversity at Boral is led by the CEO & Managing Director, with the support of the Board overseeing the strategy and plan initiatives
and progress on diversity objectives.
Management, supported and assisted by the Boral Diversity Council, 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.
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.
We believe that a diverse workforce is fundamental to implementing the strategy for the growth and success of the business.
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.
Diversity – Measurable objectives for FY2016
Boral’s diversity plan has six strategic elements against which the Board has set measurable objectives for FY2016, as outlined below:
Strategic Element and Objective
Status
Key Outcomes
1 Leadership
1.1 Leadership Engagement: engage
senior leaders to take carriage of
deploying diversity communication,
education
Completed
• Australian executives attended Executive Diversity Awareness
and unconscious bias training sessions.
•
Leadership Development Program curriculums include
modules on leaders’ role and responsibility for diversity.
In progress
• Deployment of Senior Leader Diversity Awareness and
unconscious bias training across Boral.
2 Communication & Education
2.1 Communication: develop
Completed
communications engagement
framework and packages to raise
knowledge and understanding of
diversity
• Consultation with employees on Diversity and narrative to shape
future education and communication programs and initiatives.
• Boral intranet updated to provide easier access to information
on diversity strategy and how employees can be more
involved in diversity initiatives.
In progress
• Diversity narrative being deployed across Boral to
communicate the purpose of Boral’s Diversity program.
2.2 Education: develop diversity
Ongoing
•
educational framework to provide
management with capability to lead
and manage diversity and diverse
teams
Increasing the representation of women in leadership
development programs with a target of 20% in the next intake
and up to 25% in subsequent intakes.
• Participation of women in Leadership Development Programs
increased in FY2016 to 19% of all participants, from 13% in
FY2015.
Boral Limited Annual Report 2016 39
CORPORATE
GOVERNANCE
Diversity – Measurable objectives for FY2016 (continued)
Strategic Element and Objective
Status
Key Outcomes
2.3 Networking: establish Women in
Completed
• Diversity in Leadership Forum series attended by 31
Leadership Forum series to provide
networking opportunities for key
leaders, with an emphasis on women
leaders, across Boral
participants in FY2016 and 90% of the participants were
women in leadership roles. Forums provide opportunities for
women leaders to develop networks, discuss gender issues in
leadership and consult with key leaders on issues of gender
and diversity in their businesses. Forum series is sponsored by
the CEO & Managing Director and is chaired by the Chair of the
Diversity Council.
• Since FY2014, 73 employees have participated in a Forum, 92%
of participants were women in leadership roles.
•
Forum Alumni established to provide networking, advocacy and
other opportunities to contribute to Diversity matters for Boral.
Ongoing
• The forum series is an ongoing initiative with two forums
scheduled for each financial year. Target of 90% of
participants being female adjusted to 80% to broaden the
participation in the diversity and gender equality discussion.
2.4 Track and Report: develop key
Completed
performance indicators to measure,
track and report on change and
progress
2.5 Benchmark: adopt external metric to
Completed
measure and benchmark effectiveness
of diversity strategy
In progress
• Reporting and analysis of workforce by gender, pay levels,
selection, retention and promotion trends completed with
results provided to the Diversity Council for planning and
program development.
• Diversity Dashboard established to provide standardised
metrics and reporting to leadership teams.
•
•
Founding member of Construction and Infrastructure Industry
Roundtable on Diversity to work on industry initiatives to
progress diversity and gender equality.
Long-term partnership with the Diversity Council of Australia
continuing to identify best practice and benchmark the
effectiveness of Boral’s diversity strategy and plan against
external organisations.
3 System and Process Design
3.1 Search and Selection: embed diversity
Completed
• Targeted process embedded in Executive Recruitment Strategy
principles in standardised recruitment
to place women in key leadership roles.
• 66% of hires in senior management and executive roles were
women, 39% of recruitment into professional roles were women
and 27% of the new graduate intake were women in
professional disciplines.
•
Focus for FY2016 is to increase the intake of women graduates,
targeting 50% of the total graduate intake.
3.2 Flexibility and flexible work practices:
Completed
• Development of policy, guidelines and education program to
develop and implement policy,
guidelines and education program to
improve flexibility and flexible work
outcomes
improve availability of flexible work practices.
• Research on best practice approaches to improve return and
retention of women on maternity leave scheduled for FY2017.
• Parental Leave policy updated to provide 14 weeks of paid
maternity leave.
In progress
• Deployment of policy, communication and education on flexible
work practices.
40
Boral Limited Annual Report 2016
Strategic Element and Objective
Status
Key Outcomes
4 Gender Equality and Equity
4.1 Analysis: complete an analysis of Boral
pay equity at least annually to monitor
pay rates and identify issues
5 Generational Diversity
5.1 Investigate: work/life needs of different
generations to understand needs to
develop programs to lift capability of
managers to effectively lead multi-
generational teams
6
Indigenous Relations
6.1 Indigenous Employment: through
Indigenous Employment strategy
increase the representation of
Indigenous employees in Boral’s
workforce
Completed
• High level external industry benchmarking of pay equity
completed.
• Annual comprehensive gender remuneration gap analysis
completed for the last four years.
• Ratio of female to male average base salary is 1.01:1.00,
renewed focus on improving pay equity outcomes on a total
compensation basis.
In progress
• Analysis of work/life needs of generations is underway to
identify programs to assist leaders in managing cross
generational teams.
Completed
•
Implemented Indigenous Employment and Training Plan from
2016-2020 as follow up to work in previous plans from 2006
to 2015.
• 85% of Indigenous employees employed through Indigenous
employment initiatives such as the FY2011 Indigenous
Relations and Employment Plan continue to work at Boral.
In progress
• Development of Reconciliation Action Plan is underway to
build on relationships, respect and opportunities for
Indigenous communities.
Proportion of female and male employees at Boral
The table below is a detailed representation of women and men
working in Boral1 as at 30 June 2016:
Role
Board
Executive
Management2
Middle
Management3
Other Roles4
Total
Female
Male
Number Percentage Number Percentage
4
31
64
50%
16%
4
160
12%
458
1,086
1,181
14% 6,587
14% 7,206
50%
84%
88%
86%
86%
1. Includes all full time, part time and casual employees of Boral, its wholly owned subsidiaries,
excluding employees in joint ventures and contractors.
2. Executive management includes leadership positions three reporting levels from the CEO &
Managing Director.
3. Middle management includes management and leadership positions four and more reporting
levels from the CEO & Managing Director, excluding supervisor and team leader positions.
4. Other Roles includes key functional support roles such as finance, legal, human resources,
technical, support services and front line employees.
In accordance with the requirements of the Workplace Gender
Equality Act 2012 (Cth), Boral submitted its Workplace Gender
Equality Public Report with the Workplace Gender Equality
Agency. The Report can be viewed at www.wgea.gov.au.
Boral’s Diversity Policy is available on Boral’s website.
For more information regarding People and Diversity see the
Sustainability Overview at pages 18 to 27.
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. As part of Boral’s commitment to continually promoting
ethical and responsible decision making, the Group rolled out its
refreshed online Code of Business Conduct training in FY2016.
Boral’s management guidelines include the new Code of
Business 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 new Code also guides
compliance with legal and other obligations to stakeholders.
Boral’s Code of Business Conduct is available on Boral’s website.
Boral Limited Annual Report 2016 41
CORPORATE
GOVERNANCE
Dealings in Boral shares
Under Boral’s Share Trading Policy, trading in Boral shares by Directors, senior executives and other designated employees and their
close associates is restricted to the following trading windows:
•
•
•
•
the 30 day period commencing at 10.00am (Sydney time) on the day after the release of Boral’s half year results announcement
to the ASX;
the 30 day period commencing at 10.00am (Sydney time) on the day after the release of Boral’s full year results;
the 30 day period commencing at 10.00am (Sydney time) on the day after the Annual General Meeting; and
any additional period designated by the Board (or its delegate) from time to time (for example, during a period of enhanced
disclosure).
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.
Breaches of the Policy are treated seriously and may lead to disciplinary action being taken against the executive, including
dismissal.
Trading in Boral shares at any time is of course subject to the overriding prohibition on trading while in possession of inside
information.
Boral’s Share Trading Policy is available on Boral’s website.
Directors’ shareholdings
Under Boral’s Constitution, Directors must hold a minimum of 1,000 ordinary shares in the Company.
To align the interests of non-executive Directors with the interests of our shareholders, the Board established minimum shareholding
guidelines which encourage non-executive Directors to accumulate over time a holding of ordinary shares in the Company
equivalent in approximate value to the gross annual base fee paid to each non-executive Director.
Under the guidelines, the minimum shareholding may be held directly or indirectly by a Director, and may be accumulated over a
period of up to five years from the later of 1 July 2014 or the date of appointment.
Progress is monitored on an ongoing basis and Boral’s non-executive Directors are continuing to track well against these guidelines.
The timeframe to allow Directors to build their minimum shareholding is a necessary reflection of the fact that Directors are very
limited in the opportunities they have to acquire shares, given their exposure to price sensitive information from time to time
regarding the Company.
Details of Directors’ shareholdings in the Company are set out on page 48 of this Annual Report.
Continuous disclosure
The Company appreciates the importance of timely and adequate disclosure to the market. It is committed to making timely and
balanced disclosure of all material matters and maintaining effective communication with its shareholders and investors so as to give
them ready access to balanced and understandable information.
The Company has in place mechanisms designed to ensure compliance with all relevant disclosure laws and ASX Listing Rule
requirements under 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 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.
42
Boral Limited Annual Report 2016
Communications with shareholders
The Company’s policy is to promote effective two-way communication with shareholders and other investors so that they
understand Boral’s business, governance, financial performance and prospects, as well as how to assess relevant information about
Boral and its corporate activities.
Annual reporting
Company announcements
General meetings
Shareholders may elect to receive annual reports electronically or to receive notifications via email
when reports are available online. Hard copy 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.
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. These documents are also
available for download by mobile devices from Boral’s Investor Relations (IR) App, which is available
for no cost from the App Store or Google Play. Furthermore, Boral has an email list of investors,
analysts and other interested parties who are sent relevant announcements via email alert after
those announcements have been lodged with the ASX. Announcements are also sent to major
media outlets and newswire services for broader dissemination.
Boral encourages shareholders to attend and participate in all general meetings including annual
general meetings. Shareholders are entitled to ask questions about the management of the
Company and of the auditor as to its conduct of the audit and preparation of its reports.
Notices of Meeting are accompanied by explanatory notes to provide shareholders with information
to enable them to decide whether to attend and how to vote upon the business of the meeting.
Full copies of Notices of Meeting and explanatory notes are posted on Boral’s website.
If shareholders are unable to attend general meetings, they may vote by appointing a proxy using
the form attached to the Notice of Meeting or an online facility.
Annual General Meeting
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.
At the Annual General Meeting, shareholders have a reasonable opportunity to ask the external
auditor questions in relation to the conduct of the audit, the preparation and content of the
Auditor’s Report, the accounting policies adopted by the Company in relation to the preparation of
the financial statements of the Company, and the independence of the external auditor in relation to
the conduct of the audit.
Investor relations
To encourage two-way communication, the Company’s dedicated investor relations team and
share registry can be contacted directly by shareholders by telephone or electronically via email.
The links to these contacts are available on the Boral website at www.boral.com.au.
Boral’s policy on Communications with Shareholders is available on Boral’s website.
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.
Boral Limited Annual Report 2016 43
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 2016:
(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, the Chief Executive’s Review,
the Financial Review and Divisional Performance on pages 2 to
17 of the Annual Report accompanying the Directors’ Report.
(2) State of affairs
The following significant changes in Boral’s state of affairs
occurred during the year:
• The Group reported a net profit after tax of $256 million after
recognising a net significant item loss of $12 million as
detailed in Note 2.6 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).
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, Risks & Challenges section and
Sustainability Overview section of this Annual Report. The
Group’s broader risk identification and management framework
is also set out in the Corporate Governance Statement on pages
30 to 43 of the Annual Report.
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 manages
short-term fluctuations in fuel and energy costs through the use
of hedging instruments and electricity demand management.
44
Boral Limited Annual Report 2016
Directors’ Report 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 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. Boral operates a fleet of over 2,600 on-road
heavy vehicles, exposing it to a risk of traffic accidents. 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. Further
details regarding our approach to managing health, safety and
environment risks are contained in the OFR and in the
Sustainability Overview on pages 18 to 27 of the Annual Report.
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 24 to 26
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
Business interruption risks
financial years.
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 shortages of raw material which are critical
to Boral’s ability to manufacture certain products and to meet
market demand, as a result of force majeure type events.
Boral Limited Annual Report 2016 45
DIRECTORS’
REPORT
(8) Dividends paid or resolved to be paid
Dividends paid to shareholders during the year were:
the final dividend of 9.5 cents per ordinary
share (fully franked at the 30% corporate tax
rate) for the year ended 30 June 2015 was paid
on 28 September 2015
the interim dividend of 11.0 cents per ordinary
share (fully franked at the 30% corporate tax
rate) for FY2016 was paid on 11 March 2016
Total dividend
$m
72.4
81.8
The Directors have resolved to pay a final dividend of 11.5 cents
per ordinary share (fully franked at the 30% corporate tax rate)
for FY2016. The dividend is expected to be paid on
26 September 2016.
(9) Names of Directors
The names of persons who have been Directors of the Company
during or since the end of the year are:
Brian Clark
Mike Kane
Catherine Brenner
Bob Every
Eileen Doyle
Kathryn Fagg
John Marlay
Karen Moses
Paul Rayner
Dr Clark, Mr Kane, Ms Brenner, Dr Doyle, Ms Fagg, Mr Marlay
and Mr Rayner have been Directors at all times during and since
the end of the year. Ms Moses was appointed a Director on
1 March 2016 and has been a Director at all times since that
date. Dr Every was a Director from 1 July 2015 through to
Boral’s Annual General Meeting on 5 November 2015, on which
date he stepped down from the Board.
(10) Options
Boral has no outstanding options granted over unissued shares of the Company, no options that lapsed during the year and no
shares of the Company that were issued during the year as a result of the exercise of options. The last outstanding options expired
6 November 2014.
46
Boral Limited Annual Report 2016
(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
subsection 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 2016 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 2017. 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,
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 29 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 (in the case of Bob Every, as at the date on
which he ceased to be a Director) and the period for which such
directorships have been held are:
Brian Clark
AMP Limited from January 2008 to May 2016
Mike Kane
No other directorships to be disclosed
Catherine Brenner
AMP Limited from June 2010 (current)
Coca-Cola Amatil Limited from April 2008 (current)
Eileen Doyle
GPT Group Limited from March 2010 (current)
Bradken Limited from July 2011 to November 2015
Oil Search Limited from February 2016 (current)
Bob Every
Wesfarmers Limited from February 2006 to November 2015
Kathryn Fagg
Djerriwarrh Investments Limited from May 2014 (current)
Incitec Pivot Limited from April 2014 (current)
John Marlay
Incitec Pivot Limited from December 2006 (current)
Cardno Limited from November 2011 to January 2016
Karen Moses
Origin Energy Limited from March 2009 to October 2015
Contact Energy Limited from October 2004 to August 2015
Paul Rayner
Qantas Airways Limited from July 2008 (current)
Treasury Wine Estates Limited from May 2011 (current)
Centrica plc from September 2004 to 31 December 2014
(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
Meetings
held while a
Director
Audit & Risk
Committee
Remuneration
& Nomination
Committee
Health, Safety
& Environment
Committee
Meetings
held while
a member
Meetings
attended
Meetings
held while
a member
Meetings
attended
Meetings
held while
a member
Meetings
attended
Catherine Brenner
Brian Clark
Eileen Doyle
Bob Every
Kathryn Fagg
Mike Kane
John Marlay
Karen Moses
Paul Rayner
9
9
9
4
9
9
9
2
9
9
9
9
4
9
9
8
2
9
4
–
4
1
–
–
–
1
4
4
–
4
1
–
–
–
1
4
4
1
–
1
4
–
4
–
–
4
1
–
1
4
–
4
–
–
–
–
3
–
3
–
3
–
–
–
–
3
–
3
–
3
–
–
Boral Limited Annual Report 2016 47
DIRECTORS’
REPORT
(14) Company Secretary
Dominic Millgate was appointed Company Secretary of the
Company in July 2013, after 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 Governance Institute of Australia
and holds a Master of Laws from the University of New South
Wales, a finance degree from the University of New England and
a law degree from the University of Sydney.
(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 (in the case of Bob Every, as at the date
on which he ceased to be a Director):
Catherine Brenner
Brian Clark
Eileen Doyle
Bob Every
Kathryn Fagg
Mike Kane b
John Marlay
Karen Moses
Paul Rayner
Non-executive
Directors’
a
Share Plan
–
5,329
–
4,616
–
–
–
–
1,790
Shares
33,371
75,558
27,541
65,605
26,586
363,566
27,101
15,000
69,326
The shares are held in the name of the Director except in the
case of:
• Catherine Brenner, 28,000 shares are held by Brenner
Super Pty Ltd for and on behalf of the Brenner Super Fund;
• Brian Clark, 47,198 shares are held by MCG Wealth
Management Australia Nominees Pty Limited – and 26,565 shares are held by MCG
Wealth Management Australia Nominees Pty Limited –
JBC Investment Holdings Pty Ltd ;
• Eileen Doyle, 26,215 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 ;
•
John Marlay, 23,069 shares are held by Bond Street
Custodians Limited on behalf of The Marlay Superannuation
Fund; and
• Paul Rayner, 26,981 shares are held by Yarradale
Investments Pty Limited and 41,000 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 Director 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 FY2016.
b Mike Kane holds Share Acquisition Rights (SARs) under
Boral’s Equity Incentive Plan, details of which are set out in
the Remuneration Report on pages 51 to 72.
48
Boral Limited Annual Report 2016
(16) No officers are former auditors
No officer of the Company has been a partner in an audit firm,
or a Director of an audit company, that is an auditor of the
Company during the year or was such a partner or Director at
a time when the audit firm or the audit company undertook an
audit of the Company.
(17) Non-Audit Services
Amounts paid or payable to Boral’s auditor, KPMG, for non-audit
services provided during the year by KPMG totalled $1,026,000.
These services consisted of:
Taxation compliance in Australia
Taxation compliance/due diligence related
services in jurisdictions other than in Australia
$185,000
$319,000
Australian due diligence and other services
$522,000
In accordance with advice from the Company’s Audit & Risk
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 & Risk
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 & Risk 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 50 of the
Annual Report and forms part of this Report.
(19) Remuneration Report
The Remuneration Report is set out on pages 51 to 72 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
Unless otherwise expressly stated, amounts have been rounded
off to the nearest whole number of millions of dollars and one
place of decimals representing hundreds of thousands of dollars
in accordance with ASIC Corporations Instrument 2016/191,
dated 24 March 2016.
Signed in accordance with a resolution of the Directors.
Dr Brian Clark
Director
Mike Kane
Director
Sydney, 24 August 2016
Boral Limited Annual Report 2016 49
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 2016 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
Kenneth Reid
Partner
Sydney, 24 August 2016
KPMG, an Australian partnership and a member
firm of the KPMG network of independent member
firms affiliated with KPMG International Cooperative
(“KPMG International”), a Swiss entity.
Liability limited by a scheme approved under
Professional Standards Legislation.
50
Boral Limited Annual Report 2016
2016 REMUNERATION
REPORT
Introduction from the Chairman of the Remuneration & Nomination Committee
Dear Shareholders
I am pleased to present our Remuneration Report for 2016. The Report is designed to provide a clear summary of the remuneration
strategy arrangements and outcomes for your Directors and members of the Senior Executive team.
Our remuneration framework is intended to ensure remuneration arrangements align with the Company’s strategy, business
performance and shareholder expectations. Following previous years of structural change, we have not introduced any material
remuneration changes in FY2016.
In order to ensure stable leadership and continuity in delivering business transformation initiatives, in FY2016 the Board introduced a
one-off additional retention incentive for certain key executives who report to the CEO or to members of the Executive Committee.
For FY2016, Boral delivered total shareholder returns (TSR) of 11.7%1, a 12% increase in earnings before interest and tax (EBIT)2 and
an 8% increase in profit after tax (PAT)2. It was pleasing to see EBIT financial targets for the Group and for most of Boral’s
businesses achieved or exceeded. This triggered the payment of $3.57 million of short-term incentives (STI) to executive Key
Management Personnel (KMP) for FY2016 which was 9% higher than STI payments for FY2015.
In FY2016, the long-term incentive (LTI) performance hurdle was achieved for the 2012 grant, with Boral delivering top quartile total
shareholder returns relative to the ASX100 comparator group for the three year period from September 2012 to September 2015.
Boral also delivered a solid TSR of 11.7% in FY2016, ranking 42nd in the ASX100 group of companies, and Boral’s EBIT return on
average funds employed (ROFE)2 lifted from 8.5% to 9.1%.
On behalf of the Board and Remuneration & Nomination Committee, I invite you to read the 2016 Remuneration Report and
welcome your feedback on our approach to, and disclosure of, Boral’s remuneration arrangements.
Kathryn Fagg
Chairman, Remuneration & Nomination Committee
Contents
Introduction
Section 1:
Senior Executive remuneration outcomes
Section 2:
Senior Executive remuneration governance and framework
Section 3:
Senior Executive remuneration structure
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
Section 8:
Senior Executive and non-executive Director transactions
Section 9:
Glossary of key terms
53
55
57
63
66
67
69
70
72
1. Total shareholder returns is calculated based on the change in Boral’s share price, reinvestment of dividends and franking credits applied to dividends for the period from 1 July 2015 to 30 June 2016.
2. Excludes financial impact of significant items. See note titled ‘Non-IFRS information’ on page 1 of the Annual Report.
Boral Limited Annual Report 2016 51
2016 Remuneration Report 2016 REMUNERATION
REPORT
Introduction
The Directors of Boral Limited present the Remuneration Report (the “Report”) for the Company and its controlled entities for the
year ended 30 June 2016 (FY2016). This Report forms part of the Directors’ Report and has been audited in accordance with
section 300A of the Corporations Act 2001. The Report sets out remuneration information for the Company’s Key Management
Personnel (KMP).
Key Management Personnel
The table below details the KMP for FY2016. For those who served in a KMP role for only part of FY2016, this Report only sets out
the amounts they received as remuneration in their capacity as a KMP.
Name
Position
Senior Executives
Mike Kane
Al Borm
Joseph Goss
Ross Harper
David Mariner
Rosaline Ng
Non-executive Directors
Chief Executive Officer & Managing Director (CEO)
President and CEO, Boral Industries USA
Divisional Managing Director, Boral Construction Materials & Cement
Executive General Manager, Cement (effective as KMP from 1 July 2014)
Executive General Manager, Boral Building Products (appointed 1 January 2015)
Chief Financial Officer
Brian Clark
Chairman and non-executive Director (appointment as Chairman effective 5 November 2015)
Catherine Brenner
Non-executive Director
Eileen Doyle
Bob Every
Kathryn Fagg
John Marlay
Karen Moses
Paul Rayner
Non-executive Director
Chairman and non-executive Director (ceased as Director, effective 5 November 2015)
Non-executive Director (appointment effective 15 September 2014)
Non-executive Director
Non-executive Director (appointment effective 1 March 2016)
Non-executive Director
FY2017 Executive KMP changes
Effective 1 July 2016, David Mariner, Executive General Manager of Boral’s Building Products division in Australia, returned to the
USA to take up the role of CEO and President, Boral Industries USA. Al Borm, who has held the position of President and CEO of
Boral Industries USA since October 2012, retired from that role and ceased to be a KMP effective 1 July 2016. To ensure Boral does
not lose the benefit of Mr Borm’s experience and deep business knowledge of Boral’s operations and the gypsum industry, Mr Borm
will continue in his role as a director on the Board of the USG Boral joint venture and in an advisory capacity to Boral for a
transition period.
With David Mariner’s return to the USA, effective 1 July 2016, the smaller Building Products division in Australia was combined with
Boral’s Construction Materials & Cement division to form a new Boral Australia division. This will further reduce costs and improve
efficiencies. Joe Goss, previously Divisional Managing Director Construction Materials & Cement, became Divisional Chief Executive
Boral Australia, responsible for the new merged division, effective 1 July 2016.
52
Boral Limited Annual Report 2016
Section 1: Senior Executive remuneration outcomes
Outcomes summary
FY2016 was another year in which Boral achieved good returns for shareholders. Group EBIT was up 12% to $398 million.
These positive results for shareholders have been reflected in Senior Executive remuneration outcomes in FY2016. The key
remuneration outcomes for Boral’s Senior Executives in FY2016 were as follows:
Component
Key FY2016 Outcomes
Fixed Annual Remuneration
(FAR)
During FY2016:
– CEO FAR was increased by 3% to $1,789,000
–
the FAR of other Senior Executives was increased on average by 2.9%.
Short-Term Incentive (STI)
Boral’s continued strong financial performance in FY2016 resulted in:
–
–
–
–
–
–
–
the CEO receiving an STI of $2.09 million representing 116.6% of his target STI, with 80% of
this amount paid in cash and 20% deferred into equity for two years
the total value of STI paid to other Senior Executives (excluding the CEO) was $2.38 million,
with 80% of this amount paid in cash and 20% deferred into equity for two years
for Senior Executives, outcomes reflected an overall performance achievement of 136.5% on
average for target STI and 76.74% on average for the maximum STI potential
the total STI payments for FY2016 was $23.7 million (including both cash and deferred equity)
to 309 participants including Senior Executives, who received 18.9% of the total.
The 2012 LTI grant was subject to its first performance test on 1 September 2015. The
Company achieved a superior relative TSR performance outcome, reaching the 78th percentile
of the comparator group. This outstanding outcome for shareholders resulted in 100% vesting
for participating executives.
The 2010 LTI grant failed to vest on its second performance test in November 2015 and will be
tested for the final time in November 2017.
The 2008 LTI grant failed to vest on its final performance test in November 2015 and as a
result the equity lapsed.
It should be noted that effective 1 September 2013, multiple performance tests were removed and
performance is currently tested once on the third anniversary of the grant date.
Boral’s success as a company and the resulting benefits for shareholders are dependent upon the
contribution and ongoing commitment of key executives. This one-off targeted retention incentive
is intended to ensure stable leadership and continuity for Boral’s business transformation initiatives.
It is also intended to ensure we minimise the risk of further targeted approaches from our
competitors and retain our key talent for potential future succession opportunities across a number
of senior roles. The Board approved a one-off grant of TRIs to eight executives in FY2016, effective
1 September 2015. Further details are provided on pages 62 and 68 of this report.
Long-Term Incentive (LTI)
Targeted Retention Incentive
(TRI)
Boral Limited Annual Report 2016 53
2016 REMUNERATION
REPORT
The remuneration outcomes table below has been prepared to provide shareholders with a view of the remuneration that was
actually paid to current Senior Executives for FY2016. The Board believes that presenting information this way provides shareholders
with increased clarity and transparency.
Remuneration details prepared in accordance with statutory obligations and accounting standards are contained on page 67
of this Report. The totals in the table below differ from the amounts shown in the statutory remuneration table, because:
1.
2.
the statutory remuneration table captures annual and long service leave movements (which are generally movements in statutory
accruals rather than cash payments)
the value of rights in the table below reflects the realised value of rights that have vested during the year (the statutory table
amortises the value of rights over the vesting period, regardless of future vesting outcomes)
3. only the 2012 grant of LTI rights vested during the year. As in previous years, the value of unvested rights – including deferred
STI Rights – is not included in the table below, unless and until those rights vest. Unvested rights remain subject to forfeiture and
executives may not realise any value from them.
FY2016 remuneration outcomes table
Fixed
remunerationa
Superannuation
or pension
payments
STIb
Expat
allowances
Other
non-cashe
LTIc
Other benefitsd
1,780.3
1,668.1
730.0
796.6
540.4
744.1
746.3
290.1
565.3
305.3
247.1
494.8
FBT
282.9
–
–
3,720.9
123.3
193.3
329.1
–
10.0
61.3
–
19.3
82.5
19.3
–
149.1
10.1
122.4
205.8
170.3
227.3
–
390.5
43.1
5.3
4.9
4.2
298.1
10.0
41.8
Total
7,791.3
1,398.0
1,643.5
1,080.3
1,937.5
1,582.6
A$’000s
Mike Kane
Al Borm
Joseph Goss
Ross Harper
David Marinerf
Rosaline Ng
a. Fixed remuneration is cash salary paid to the Senior Executive for their period as a KMP.
b. The value of short-term incentives (STI) represents 80% of the total STI with the remaining 20% deferred into equity for two years.
c. The value of 2012 LTI grant which vested during the year is calculated using the VWAP of Boral ordinary shares traded in the five days following the release of the FY2015 results which was
$5.5814 multiplied by the number of rights that vested.
d. Expat allowances, other non-cash benefits and associated FBT are not taken into account for the purposes of calculating an executive’s STI or LTI opportunity.
e. Other non-cash comprises non-monetary benefits, such as car parking, or in the case of Mr Borm who is based in the USA and aligned to USA remuneration market practice, the cost of
providing a company vehicle, medical and life insurances. These amounts are not taken into account for the purposes of calculating an executive’s STI or LTI opportunity.
f. Expat allowances for David Mariner relates to a one-off relocation allowance for relocating Mr Mariner and his family from Sydney back to his base in USA, an amount of $103,872 in tax
equalisation costs, incurred to ensure that as an expatriate employee he is not disadvantaged by US tax regulations in his home state for the period of his expatriate assignment. No tax
equalisation costs were required for any other expatriates in the preceding table, due to different taxation rules applicable in their respective home states in the USA. David Mariner’s relocation
allowance and tax equalisation benefits are not taken into account for the purposes of calculating his STI and LTI opportunities.
Other benefits
Other benefits noted in the above table are not included in FAR when determining STI payments or LTI grants. They may be paid as
cash or non-cash benefits and in addition to associated Fringe Benefits Tax (FBT), the benefits fall into two broad categories:
expatriate allowances and other non-cash payments.
For expatriate allowances, where Senior Executives have been recruited from overseas, appropriate arrangements to secure their
employment were negotiated. This can include overseas relocation benefits in accordance with our relocation policies or the Senior
Executive’s contract of employment. The range of benefits and services provided to these Senior Executives under those
arrangements may include:
•
•
•
•
•
•
travel to Australia for themselves and their immediate family on commencement and return flights at the end of their tenure;
a defined number of home trips for themselves and their family during their tenure;
furniture storage and removal costs, and rental assistance while in Australia;
a relocation allowance to cover incidental and miscellaneous expenses on expatriation and repatriation;
health, life and disability insurance; and
tax advice and in some cases (excluding the CEO) tax equalisation.
Other non-cash payments provided to Senior Executives may include the value of car parking, or in the case of Mr Borm who
is based in the USA and aligned to USA remuneration market practice, the cost of providing a company vehicle, medical and
life insurances.
54
Boral Limited Annual Report 2016
Section 2: Senior Executive remuneration 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 non-executive Directors, the CEO & Managing Director, other Senior Executives and other
executives. This includes recommendations relating to Directors’ fees, annual executive remuneration reviews, short-term incentive
(STI) and long-term incentive (LTI) structures, grants, measures, targets and outcomes. The Committee also advises the Board on
remuneration policies and practices for Boral generally.
The Committee comprises four independent non-executive Directors: Kathryn Fagg (Committee Chairman), Brian Clark, Catherine
Brenner, and John Marlay. The responsibilities of the Committee are outlined in its Charter, which is reviewed annually by the Board.
A copy of the Charter is available at the corporate governance section of Boral’s website at www.boral.com.au.
Independent remuneration consultant
The Committee seeks information and advice regarding remuneration directly from its external remuneration consultant EY, which is
independent of the Company’s management.
During FY2016, EY provided information only. No advice was provided by EY that contained “remuneration recommendations”
relating to the remuneration of KMP.
The main information received from the Committee’s remuneration consultant related to benchmarking of the CEO, the CEO’s direct
reports and non-executive Director remuneration.
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 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. This arrangement
was reviewed in FY2016 by the Remuneration & Nomination Committee and no changes were considered necessary.
Boral Limited Annual Report 2016 55
2016 REMUNERATION
REPORT
Remuneration framework
Boral’s remuneration framework provides the foundation of our remuneration structure, policies and processes. The key elements of
this framework are:
REMUNERATION STRATEGY
Align reward to business strategy and shareholder value creation
Attract and retain high calibre employees with market competitive and flexible reward
ALIGNED TO SHAREHOLDERS
Short and long-term incentives are
based on performance measures
designed to drive sustainable value
creation for shareholders
REMUNERATION PRINCIPLES
MARKET COMPETITIVE
High calibre employees with ability to
deliver required financial and non-
financial outcomes are attracted and
retained with fixed rewards that reflect
seniority and complexity of roles
LINKED TO BUSINESS CONDITIONS
At risk reward outcomes are reflective
of financial performance objectives
APPLICATION OF REMUNERATION PRINCIPLES
Short-term incentives are based on
earnings before interest and tax (EBIT)
and long-term incentives are based on
relative TSR and ROFE
External market data and
benchmarking information are reviewed
to ensure that remuneration is set at
competitive levels relative to both ASX
listed and industry peers
Short-term incentives have threshold
and stretch targets that are
differentiated based on Group and/or
divisional results and individual
performance
Individuals with unsatisfactory
performance are not rewarded
Deferral of a portion of short-term
incentives into performance rights
promotes retention and encourages
sustained performance, aligned with
the shareholder experience
Minimum shareholding requirements
apply to Senior Executives
Equity participants do not receive
dividends on unvested equity
Unvested equity is generally forfeited
on resignation
Treatment of USG Boral Building Products employees
The USG Boral joint venture Board has assumed accountability for the remuneration arrangements of USG Boral Building Products
employees. Remuneration for those employees continues to be aligned to the market conditions of the countries in which the joint
venture operates. In designing at risk remuneration components, there is a strong alignment to achieving Boral’s financial objectives
by measuring performance outcomes based on earnings before interest, tax, depreciation and amortisation (EBITDA) and ROFE.
Performance hurdles for joint venture executives are tied back to the specific performance targets necessary for Boral to achieve up
to US$75 million over five years as earnout payments under the joint venture agreement.
56
Boral Limited Annual Report 2016
Section 3: Senior Executive remuneration structure
The total target remuneration (TTR) arrangements of the Senior Executives are made up of the following components:
FIXED ANNUAL REMUNERATION
+
AT RISK REMUNERATION
SHORT-TERM INCENTIVES
LONG-TERM INCENTIVES
ANNUAL CASH INCENTIVE
(STI)
TWO YEAR DEFERRED INCENTIVE
(DEFERRED STI)
THREE YEAR LONG-TERM INCENTIVE
(LTI)
Performance measures based on
Group and/or divisional and/or
business EBIT and individual
performance
20% of STI deferred into equity and
forfeited if executive resigns within
two years or is terminated for cause
Performance measures based on
relative TSR and ROFE
=
TOTAL TARGET REMUNERATION
Total target remuneration mix for FY2016
CEO
Other Current
Senior Executives
Fixed
34%
At Risk Remuneration
33%
33%
50-60%
20-25%
20-25%
FAR
STI
LTI
The actual remuneration mix will vary due to the variable nature of the at risk remuneration components. The FY2016 TRI awards are
not included in the mix due to their one-off nature.
Fixed annual remuneration (FAR)
FAR includes base salary, non-cash benefits such as provision of a vehicle (including any fringe benefits tax) and superannuation
contributions. FAR does not include costs associated with relocation or tax equalisation payments, as these are considered to be
compensation for reasonable costs and expenses incurred by the Senior Executive when moving or performing duties in a different
location at the request of the Company, as opposed to being part of their normal salary. These expenses are not taken into account
when determining a Senior Executive’s LTI and STI opportunity.
Total remuneration levels are reviewed annually by the Committee and the Board through a process that ensures Senior Executives’
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. The comparator
group comprises S&P/ASX 200 entities within 50% and 200% of Boral’s market capitalisation and revenue plus an overlay of
industrials or materials sector entities in the S&P/ASX 200 within 33% and 300% of Boral’s market capitalisation and revenue. For
FY2016 the industrials and materials sector’s range was broadened to ensure a meaningful sample size for comparison. In
determining each Senior Executive’s FAR, the Committee considers the median FAR within the comparator group. 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.
Boral Limited Annual Report 2016 57
2016 REMUNERATION
REPORT
STI plan
A summary of the STI plan in effect during FY2016 is provided below:
Feature
Objective
Participation
STI value
Description
To support Boral’s strategic objectives by providing rewards that are based on achievement against
financial performance targets.
Executives who have significant influence on annual financial outcomes of Boral and its businesses.
Position
CEO
Target STI
100% of FAR
Maximum STI potential
140% of FAR
Senior Executivesa
between 35% and 50% of FAR
between 70% and 100% of FAR
a. Varies depending on their role.
The Board has agreed total expenditure on STI awards should not exceed 4% to 6% of annual EBIT.
Performance hurdle
Boral continued to use a single financial hurdle for STI awards in FY2016 to create a clear line of sight
for Senior Executives and transparency for shareholders as to how STI awards are determined.
While safety is not used as an additional determinant for STI payments, managing safety well is
considered a fundamental part of everyone’s role at Boral, and is taken into consideration in reviewing
performance and setting fixed remuneration.
EBIT (excluding significant items) was chosen as the financial target because the Board believes that
it effectively aligns rewards for Senior Executives with Boral’s strategic focus on delivering strong
earnings through the business cycle. The focus on EBIT is considered appropriate in light of difficult
market conditions Boral has faced over the past few years, and continues to face in some markets.
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. No STI awards are made if
relevant EBIT performance targets are not met. The table below provides an overview of the STI
performance targets for FY2016 for current Senior Executives.
Position
CEO, CFO
Weighting and target
100% Group EBIT
Other current Senior
Executives
50% Group EBIT plus
or 50% Group EBIT plus
or 50% Group EBIT plus
50% relevant
divisional EBIT
20% relevant
divisional EBIT plus
50% relevant
business EBIT
30% relevant
business EBIT
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 FY2016 the evaluations were conducted in July and August 2016.
STI plan outcomes are assessed against EBIT performance in the September pay cycle. The
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, the CEO’s direct reports and other executives.
80% of any STI that becomes payable will be paid in cash. The remaining 20% will be deferred into
equity and will only convert to shares after a further two years’ employment. The Board believes that
this additional exposure to the share price for Senior Executives will assist to drive behaviours aimed
at increasing shareholder value. No dividends are paid on deferred STI rights, and those rights will
lapse on cessation of employment except for “good leavers”, eg. redundancy, bona fide retirement.
The Board has the discretion to apply clawback provisions in circumstances where an employee has
acted fraudulently or dishonestly, has breached their obligations to the Group, in the event that 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.
The Board also 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 before the final award is determined.
Assessment of
performance
Payment of STI
Board discretions and
clawback
58
Boral Limited Annual Report 2016
LTI plan
A summary of the LTI plan in effect during FY2016 is provided below:
Feature
Objective
Participation
Equity type
LTI value
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.
The CEO, Senior Executives and other executives.
Awards are delivered in the form of performance rights. Refer to Glossary on page 72.
The CEO has a maximum LTI equal to 100% of FAR. Senior Executives have a maximum LTI equal to
35% to 50% of FAR.
The number of performance rights allocated depends on each executive’s maximum LTI and the fair
value of the rights as determined by an independent valuer (see Glossary for more information).
Fair value takes into account the likelihood of an executive deriving value from the LTI award at
vesting. A fair value approach, transparently and consistently applied, assists stakeholders in
understanding the value of what an executive will receive at the time of grant of their LTI award.
FY2016 Grants
•
•
The CEO was granted 606,440 LTI rights following approval of shareholders at the 2015 AGM,
calculated by dividing his total fixed remuneration as at 1 September 2015 (being $1,789,000) by
the fair value determined by the independent valuer PricewaterhouseCoopers (being $2.95).
The face value of this grant to the CEO may be calculated as approximately $3.38 million, based
on the volume weighted average price (VWAP) of ordinary shares in the Company on the ASX
over the five trading days following the release of the FY2015 full year results (being $5.5814),
multiplied by the number of rights allocated.
• On the same basis described above, other Senior Executives were granted 447,844 LTI rights,
which reflected an approximate fair value of $1.32 million and approximate face value of
$2.5 million.
•
Importantly, the actual value that executives will receive from any LTI award cannot be determined
until after the end of the three year performance period, because it depends on whether the
performance hurdles are achieved and the share price at the time of vesting.
In the interests of transparency, the face value and fair value of the FY2016 awards have been
disclosed above. While the Company has for many years utilised fair value for setting the quantum of
the LTI award opportunity, in light of investor feedback, the Company will consider moving to LTI
allocations based on face value for next year. This change is not expected to alter the remuneration
package of executives that is made up of LTI, nor is it meant to change the value of LTI awards
delivered.
Boral Limited Annual Report 2016 59
2016 REMUNERATION
REPORT
LTI plan (continued)
Feature
Description
Performance hurdles
The FY2016 LTI awards are measured against two performance hurdles:
Relative TSR Component
ROFE Component
Hurdle
Relative TSR measured against the
S&P/ASX 100 Index
EBIT in year of testing as a percentage
of average funds employed
Portion of LTI grant
Two thirds
One third
Performance period
1 September 2015 to 1 September
2018
Year ending 30 June 2018
The Board believes that a relative TSR hurdle ensures alignment between comparative shareholder
return and reward for the executive.
The ROFE performance hurdle is intended to reward achievement linked to improving the Company’s
ROFE performance through the cycle. Our longer term goal is to exceed the weighted average cost of
capital and the ROFE targets for annual LTI awards are set progressively with a view to achieving
this goal.
By way of background, ROFE was adopted as a second LTI performance hurdle in FY2014. At that
time, the Board considered a number of return measures with EBIT return on average funds employed
selected as the most appropriate measure because it encourages appropriate use of capital, while
utilising measures that are readily understood and reported. It also allows divisional performance to
be easily tracked which helps executives to drive overall performance against the target.
The Board will continue to review the appropriateness of each performance hurdle in promoting the
longer term objectives of the Company.
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.
TSR comparator group
Relative TSR vesting
schedule
If at the end of the performance period,
the TSR of the Company:
The percentage of the TSR
Component which will vest is:
Does not reach the 50th percentile of the TSRs of the S&P/ASX 100 NIL
Reaches the 50th percentile of the TSRs of the S&P/ASX 100
50%
Exceeds the 50th percentile of the TSRs of the S&P/ASX 100 but
does not reach the 75th percentile
Progressive pro rata vesting
from 50% to 100% (ie. on a
straight-line basis)
Reaches or exceeds the 75th percentile of the TSRs of the
S&P/ASX 100
100%
ROFE vesting schedule
The ROFE vesting schedule to be applied for the FY2016 LTI grant is:
If the Company’s ROFE performance for FY2018 is:
Less than 11.5%
11.5%
Greater than 11.5% and less than 12.0%
12.0% or above
The percentage of the ROFE
Component which will vest is:
NIL
50%
Progressive pro rata vesting
from 50% to 100% (ie. on a
straight-line basis)
100%
The ROFE vesting schedule to be applied for the proposed FY2017 grants is disclosed on page 62.
60
Boral Limited Annual Report 2016
LTI plan (continued)
Feature
Description
Cessation of employment
Forfeiture and clawback
Change of control
For “good leavers” (including cessation of employment due to death, permanent disablement, bona
fide retirement, redundancy, sale of a subsidiary or business assets) rights will remain on foot beyond
termination (with a pro rata scale-back based on the portion of the performance period elapsed
at the cessation date) and will be tested on the usual test date against the performance hurdles
before vesting.
For other leavers, rights will lapse upon cessation of employment unless the Board determines
otherwise.
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.
The Board has a further discretion to apply clawback provisions in the event that 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.
The Board may exercise its discretion to allow all or some unvested rights to vest if a change of
control event occurs. 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.
Dividends
Retesting
Total shares issued
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.
No dividends are paid on unvested LTI awards.
There is no retest. Rights that do not vest based on performance over the three year measurement
period will lapse on the third anniversary of the grant date.
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.
Boral Limited Annual Report 2016 61
2016 REMUNERATION
REPORT
LTI grant for FY2017
The FY2017 LTI grant, expected to be made in September 2016, will be on similar terms to the plan in effect during FY2016, except
that 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 2019 in accordance with the following vesting schedule:
If the Company’s ROFE performance for FY2019 is:
The percentage of the ROFE Component which will vest is:
Less than 12.0%
12.0%
NIL
50%
Greater than 12.0% and less than 12.5%
Progressive pro rata vesting in a straight line from 50% to 100%
12.5% or above
100%
For each subsequent year’s LTI grant, the ROFE targets, and the continued appropriateness of ROFE as a performance hurdle, will
be reviewed.
The Company’s ROFE performance will be reported annually in the Company’s Remuneration Report. Refer to the table in Section 4
for the Company’s ROFE performance (EBIT to average funds employed) from FY2012 to FY2016. For FY2016, the Company’s
ROFE performance was 9.1%.
In light of investor feedback, the Company will consider moving to LTI allocations based on face value from next year. However, this
change is not expected to alter the remuneration package of executives that is made up of LTI, nor is it meant to change the value of
LTI awards delivered.
Targeted retention incentive (TRI) grant
In FY2016, the Board approved a grant of performance rights as an additional retention incentive for eight key executives. This
one-off targeted retention incentive is intended to ensure stable leadership and continuity for Boral’s business transformation
initiatives. It is also intended to ensure we minimise the risk of further targeted approaches from our competitors and retain our key
talent for potential future succession opportunities across a number of senior roles.
The quantum of the award was based on 50% of the annual FAR of the relevant executive divided by the face value of an ordinary
share in Boral Limited (in this case, the volume weighted average price traded on the ASX over the five trading days following the
release of Boral’s FY2015 full year results, being $5.5814). TRI grants to Senior Executives are included in the equity grants and
movement table on page 68. Mr Kane and Mr Borm did not receive a TRI award.
TRI awards are subject to a continuous service condition for three years, with 100% vesting on the third anniversary of the grant.
If the executive resigns or is terminated for cause during the three year period, any unvested TRI awards will be forfeited.
The Board has the discretion to apply clawback provisions in circumstances where an executive has acted fraudulently or
dishonestly, has breached their obligations to the Group, and in the event that there is a material misstatement or omission in Boral’s
financial statements.
Minimum shareholding requirements
To further align the interests of the Company’s key executives with the interests of shareholders, the Board established minimum
shareholding requirements effective from 1 July 2013 for the CEO & Managing Director and all other Senior Executives.
Senior Executives are required to accumulate a minimum shareholding in the Company over a period of up to five years from the
later of 1 July 2013 or their date of appointment as a KMP. The CEO & Managing Director is required to build a minimum
shareholding equivalent to 100% of fixed annual remuneration and other Senior Executives must build a minimum shareholding
equivalent to 50% of their fixed annual remuneration.
The Company’s policy for non-executive Directors’ minimum shareholdings is set out on page 42 of the Corporate
Governance Statement.
62
Boral Limited Annual Report 2016
Section 4: Linking remuneration to performance
Overview of 2016 financial performance
Strategic decisions regarding organisational structure, portfolio alignment, cost structures and growth are intended to ensure that
Boral is 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 in recent years.
The effect of the business cycle on Boral’s performance is demonstrated in the charts below.
In FY2016, Boral’s improved returns reflect the benefits of business improvement initiatives and portfolio realignment, together with
strong housing in most Australian markets, early stages of market recovery in the USA, and earnings growth in Asia.
Earnings Per Share1, cents
Dividend Per Share, cents
40
35
30
25
20
15
10
5
0
31.9
35.8
13.6
13.6
22.0
FY12
FY13
FY14
FY15
FY16
25
20
15
10
5
0
22.5
18.0
15.0
11.0
11.0
FY12
FY13
FY14
FY15
FY16
Return on Equity1, %
Boral share price
10
8
6
4
2
0
7.1
7.6
3.0
3.2
5.1
FY12
FY13
FY14
FY15
FY16
$8.00
$7.00
$6.00
$5.00
$4.00
$3.00
$2.00
$1.00
$0.00
FY11
FY12
FY13
FY14
FY15
FY16
1. Excludes financial impact of significant items.
Short-term performance – FY2016
EBIT performance and STI outcomes
While it is too commercially sensitive for Boral to disclose future budgeted EBIT targets, we do disclose performance against target
for the prior year, as can be seen in the Senior Executive remuneration table on page 67 of this Report.
On average, 136.5% of target STI was paid out to current Senior Executives for FY2016 performance, which means that overall the
Business, Divisional and Group EBIT targets were exceeded. In the prior year, 133% of target STI was paid for FY2015 performance,
reflecting improvements in the delivery of EBIT (before significant items) versus target at the Business, Divisional and Group level.
Boral’s EBIT was higher in FY2016 versus FY2015 as a result of ongoing improvement programs including cost management and
revenue enhancement initiatives and portfolio enhancements, together with the benefits of volume improvements in some markets,
particularly in the USA.
Boral’s EBIT over the past five years is shown in the chart below.
Earnings Before Interest & Tax (EBIT)1, $ millions
450
400
350
300
250
200
150
100
50
0
200
228
294
357
398
FY12
FY13
FY14
FY15
FY16
1. Before significant items.
Boral Limited Annual Report 2016 63
2016 REMUNERATION
REPORT
Long-term performance
TSR performance
In FY2016, Boral’s relative TSR performance was strong. Taking into account share price appreciation and dividends paid, Boral
delivered a TSR of 11.7% for shareholders between 1 July 2015 and 30 June 2016. As shown in the graph below, this TSR ranked
Boral in the second quartile of ASX 100 companies for FY2016 or 42nd out of the 99 companies that were in the ASX100 at the start
of the year and remained listed on the ASX for the period.
FY2016 Total Shareholder Return (TSR) for Boral vs. ASX 100 companies
1st Quartile
2nd Quartile
3rd Quartile
4th Quartile
11.7%
BLD
150%
100%
50%
0%
-50%
-100%
ROFE performance
Boral’s performance as measured by EBIT return on average funds employed (ROFE) continued to improve in FY2016 from a low of
4.7% in FY2012 and FY2013.
At 9.1%, Boral’s ROFE performance in FY2016 is an improvement on 8.5% achieved in FY2015, but remains short of our longer term
goal to exceed the cost of capital.
The LTI ROFE targets of 8.0% in FY2016, 11.5% in FY2017, 12% in FY2018 and 12.5% in FY2019 which are set with a three year time
horizon, are on a challenging but achievable improvement trajectory. For every 1% lift in ROFE, an EBIT improvement of
approximately $44 million or around 11% is required assuming a constant level of funds employed at current levels.
EBIT1 Return on Average Funds Employed (ROFE), %
10
8
6
4
2
0
4.7
4.7
6.6
8.5
9.1
FY12
FY13
FY14
FY15
FY16
1. Before significant items.
64
Boral Limited Annual Report 2016
LTI performance outcomes
For the 2012 LTI grant which was subject to its first performance test on 1 September 2015, the Company achieved a superior
relative TSR performance outcome for the period 1 September 2012 to 1 September 2015, ranking Boral at the 78th percentile or
top quartile of the comparator group. This outstanding outcome for shareholders resulted in 100% vesting for participating
executives. This result is reflective of improved Company performance since 2012 and clearly demonstrates an alignment between
LTI outcomes and Company performance.
The other LTI grants that were available for testing in FY2016 were the grants for FY2008 and FY2010. Grants from FY2008 to
FY2012 are tested at years 3, 5 and 7.
The FY2008 grant failed to vest on its third test and lapsed in November 2015. The FY2010 grant failed to vest on its second test
date in November 2015 and will be tested for the final time in November 2017.
The following table sets out additional information on the level of performance achieved on the most recent tests for each of the
outstanding LTI grants up to 30 June 2016.
Grant date
Next test date
Expiry date
Nov 08
Nov 09
Nov 15
Nov 16
Nov 15
Nov 16
100% Relative TSR
Applicable performance
hurdles
Performance against hurdle(s)
Vesting level
100% Relative TSR
Grant lapsed on final test (Nov 2015)
0%
Nov 10
Nov 15
Nov 17
100% Relative TSR
Sep 11
Sep 16
Sep 18
100% Relative TSR
Sep 12
Sep 15
Sep 19
100% Relative TSR
29th percentile at 2nd test date
(Nov 2014)
49th percentile at 2nd test date
(Nov 2015)
44th percentile as at 1st test date
(Sep 2014)
0%
0%
0%
78th percentile at 1st test date
(Sep 2015)
100%
Sep 13
Sep 14
Sep 15
N/A
N/A
N/A
Sep 16
67% Relative TSR
Test date Sep 2016
33% ROFE
Sep 17
67% Relative TSR
Test date Sep 2017
33% ROFE
Sep 18
67% Relative TSR
Test date Sep 2018
33% ROFE
N/A
N/A
N/A
Boral Limited Annual Report 2016 65
2016 REMUNERATION
REPORT
Section 5: Senior Executive contracts and transitions
Remuneration structure and contract terms for Mr Mike Kane
Mr 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 S&P/ASX 200 Index with a 12 month average market
capitalisation and revenue of between 50% and 200% of Boral, as well as industrials and materials
sector companies with market capitalisation and revenue between 33% and 300% of Boral’s.
Total reward summary
FAR of $1.789 million as at 1 September 2015.
STI entitlement is 100% of FAR for “target” performance with a maximum of 140% of FAR for
“stretch” performance.
LTI entitlement is a maximum of 100% of FAR and is granted under the terms of the LTI plan
(described on pages 59 to 61 of this Report).
Shareholders approved a grant of 606,440 performance rights to Mr Kane at the 2015 Annual
General Meeting (AGM).
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.
Performance expectations
The remuneration structure for Mr Kane includes short and long-term incentives linked to Boral’s
financial performance and shareholder returns. The Board also considers the management of
non-financial performance when setting CEO remuneration and assessing the CEO’s
performance.
For example, managing safety well is considered a fundamental part of the CEO’s role. The Board
believes that attracting and retaining a leader who has the right focus, commitment and track
record in safety management, and reflecting this in the fixed remuneration component of the CEO,
will lead to a more sustainable journey towards a zero harm workplace. As such, the Board takes
safety performance into consideration in reviewing the performance of the CEO and setting the
fixed remuneration, rather than it being an additional determinant of STI payments.
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 (ie. the STI is not pro rated), unless the Board determines otherwise.
In relation to the FY2016 LTI award, any performance rights that are unvested will remain on foot
and vest on the usual test date if the performance hurdles are satisfied. If vesting does not occur
at that time, the rights will lapse.
For 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.
Mr Kane is entitled to relocation expenses to and from Sydney. 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
66
Boral Limited Annual Report 2016
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 up to
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.
Senior Executive remuneration table
Short-term
Post-employment
Share-based paymentsa
Other
Total
At Risk Remuneration
Short-term
incentivec
Non-
monetary
benefitsd
Super-
annuation
Termin-
ation
benefit
Deferred
Rights
equity Retention
Long
service
leave
accrual
% of
remuneration
related to
performance
Total
% of target
STI paid
A$’000s
Cash salaryb
Senior Executives
Mike Kanef
Al Borme
Joseph Gossf
Ross Harper
David Marinerg
Rosaline Ngh
Total
2016 1,837.9
1,668.1
622.0
2015
1,773.0
1,687.4
548.4
–
–
– 2,410.8
393.4
– 1,691.4
254.4
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
730.0
290.1
61.3
123.3
629.0
391.9
44.6
76.2
801.9
565.3
281.6
763.6
385.8
227.6
–
–
552.3
305.3
537.5
202.8
9.5
2.9
19.3
18.8
750.4
247.1
693.5
82.5
379.7
163.8
299.3
702.1
494.8
726.0
447.2
94.9
41.6
18.9
19.3
18.8
–
–
–
–
–
–
–
–
–
–
–
–
–
–
31.3
6,963.5
64.2% 116.6%
28.5
5,983.1
60.7%
121.4%
–
–
1,647.2
44.5% 98.9%
1,426.8
47.4%
156.1%
367.6
74.9
240.6
44.5
567.7
105.6
133.3
13.6
2,469.0
50.2% 145.0%
290.1
58.5
–
28.1
1,753.7
41.9% 123.6%
297.1
56.4
93.8
12.6
1,346.3
48.9% 193.7%
155.9
31.0
–
10.0
958.9
40.6% 155.5%
282.0
53.1
98.0
9.6
2,216.2
26.3% 123.4%
74.5
20.3
–
4.5
961.0
26.9% 176.8%
665.3
103.1
125.0
16.6
2,221.1
59.9% 141.4%
328.0
61.9
–
15.4
1,638.9
51.1% 153.6%
2016 5,374.6
3,570.7
1,762.8
244.4
– 4,590.5
786.5
450.1
83.7 16,863.3
53.1% 136.5%
2015
4,808.8
3,278.9
1,164.4
132.7
– 2,780.5
470.6
–
86.5 12,722.4
–
–
a. The fair market value of the options and rights is calculated at the date of grant using the Monte Carlo simulation analysis. For the grants prior to FY2013, the value is allocated to each reporting
period evenly over the period of five years from the grant date. For the grants issued from FY2014 the value is allocated evenly over the period of three years from the grant date. The value
disclosed above is the portion of the fair market value of the options and rights for each relevant reporting period, including the value of deferred equity.
b. Cash salary includes all fixed salary, relocation allowances and accrued annual leave.
c. STI values for current KMP represent 80% of total STI with the remaining 20% to be deferred into equity and expensed over three years in accordance with the deferred STI plan introduced
from FY2014. The deferred component is included in the “Deferred equity” column.
d. Non-monetary benefits includes parking, medical, life and disability insurance, home leave, housing allowances, vehicle costs, and applicable fringe benefits tax payable by the Company upon
providing these benefits.
e. Al Borm’s remuneration has been converted at the foreign exchange rate of AUD 1 = USD 0.727, being the average conversion for the FY2016 period (0.8287 for the FY2015 period).
f. Under the terms of their expatriate agreements, superannuation contributions have not been made for Mike Kane or Joseph Goss.
g. Cash salary for David Mariner for FY2016 includes an amount of $56,080 as a one-off relocation allowance for relocating Mr Mariner and his family from Sydney to his base in USA.
“Non-monetary benefits” for David Mariner for FY2016 includes an amount of $103,872 in tax equalisation costs, incurred to ensure the expatriate employee is not disadvantaged by US tax
regulations in his home state for the period of his expatriate assignment. No tax equalisation costs were required for any other expatriates in the preceding table, due to different taxation rules
applicable in their respective home states in the USA. “Superannuation” for David Mariner includes a $76,261 contribution into the US Supplemental Executive Retirement Plan (SERP) under
the terms his employment contract. David Mariner’s FY2015 details relate to the period 1 January 2015 to 30 June 2015.
h. The cash salary disclosed for Rosaline Ng is lower in FY2016 due to the impact of annual leave taken. That is, more annual leave was taken than accrued in the period, which resulted in
Ms Ng’s disclosed cash salary reflecting a lower value in FY2016 compared to the prior year.
Boral Limited Annual Report 2016 67
2016 REMUNERATION
REPORT
Equity grants and movement during the year
The following table provides details of rights granted during the year under the Boral Equity Incentive Plan, as well as the movement
during the year in options and rights granted under the plan in previous financial years.
Equity type
Balance as at
30 June 2015
Granted during
the year as
remunerationa
Value of grantb
Exercised/
Vested during
the Year
Value of rights
vestedc
Lapsed/
Cancelled
during the
yeard
Balance as at
30 June 2016
No.
No.
$
No.
$
No.
No.
LTI Rights
2,196,081
606,440
2,239,785
(666,666)
3,720,930
Deferred STI Rights
62,382
75,583
LTI Rights
293,680
109,050
Mike Kane
Al Borm
Deferred STI Rights
LTI Rights
Joseph Goss
Deferred STI Rights
TRI Rights
LTI Rights
Ross Harper
Deferred STI Rights
TRI Rights
LTI Rights
David Mariner
Deferred STI Rights
TRI Rights
LTI Rights
Rosaline Ng
Deferred STI Rights
TRI Rights
5,373
306,114
14,456
–
243,551
7,730
–
182,709
3,631
–
426,376
13,496
–
17,553
135,560
17,282
71,649
66,796
9,082
50,435
70,045
17,236
52,684
127,118
20,032
67,187
421,859
402,758
97,970
500,668
96,458
399,902
246,700
50,690
281,498
258,700
96,201
294,050
469,489
111,807
374,998
–
–
(34,640)
193,340
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
2,135,855
137,965
368,090
22,926
441,674
31,738
71,649
(36,866)
205,764
(19,086)
254,195
–
–
–
–
(30,520)
170,344
–
–
–
–
–
–
–
–
–
16,812
50,435
222,234
20,867
52,684
(40,718)
227,263
(16,798)
495,978
–
–
–
–
–
–
33,528
67,187
a. All rights were granted to Senior Executives effective 1 September 2015.
b. The fair market value of LTI Rights granted on 1 September 2015, calculated using a Monte Carlo simulation analysis, is $2.95 per right for two-thirds of the grant relating to the TSR measure
and $5.18 per right for one-third of the grant relating to the ROFE hurdle. The fair market value of the Deferred STI Rights and TRI Rights is $5.5814 per right, reflecting a face value at time of
grant calculated by taking the volume weighted average price traded on the ASX over the five trading days following the release of Boral’s FY2015 full year results.
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.
d. Rights that lapsed during the year were granted to Senior Executives in FY2008.
68
Boral Limited Annual Report 2016
The number of rights included in the balance at 30 June 2016 for the Senior Executives is set out below:
Year of grant
2009
2010
2011
2012
2013
2014
2015
Balance as
at 30 June
2016
Senior Executives
Mike Kane
Al Borm
LTI Rights
Deferred STI Rights
LTI Rights
Deferred STI Rights
LTI Rights
Joseph Goss
Deferred STI Rights
TRI Rights
–
–
–
–
–
–
–
78,717
102,285
–
–
14,582
34,318
–
–
–
–
–
–
–
–
LTI Rights
18,670
26,319
36,136
Ross Harper
Deferred STI Rights
TRI Rights
LTI Rights
David Mariner
Deferred STI Rights
TRI Rights
–
–
–
–
–
–
–
–
–
11,512
30,236
–
–
–
–
Rosaline Ng
Deferred STI Rights
TRI Rights
–
–
–
–
–
–
LTI Rights
16,792
29,519
39,962
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
732,456
615,957
606,440 2,135,855
–
62,382
75,583
137,965
109,242
100,898
109,050
368,090
–
5,373
17,553
22,926
167,763
138,351
135,560
441,674
–
–
14,456
17,282
31,738
–
71,649
71,649
58,114
48,160
66,796
254,195
–
–
7,730
9,082
16,812
–
50,435
50,435
57,352
53,089
70,045
222,234
–
–
3,631
17,236
20,867
–
52,684
52,684
153,509
129,078
127,118
495,978
–
–
13,496
20,032
33,528
–
67,187
67,187
Section 7: Non-executive Directors’ remuneration
The non-executive Directors receive fixed fees only, which includes base fees and Board Committee fees. It is structured on a total
fee basis which is paid in the form of cash and superannuation contributions. The Directors do not receive any at risk 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 $1,750,000 per annum was approved at the Company’s AGM in November 2014.
Non-executive Director fee levels for FY2016 were as follows:
Fees
Board
Audit & Risk
Remuneration & Nomination
Health, Safety & Environment
2016
2015
Chair
428,200
38,900
29,200
29,200
Member
142,500
19,900
14,600
14,600
Chair
417,800
38,000
28,540
28,540
Member
139,100
19,500
14,270
14,270
The total annual non-executive Director remuneration for the current Board of seven non-executive Directors for FY2016 was
$1,465,125 including superannuation.
A comprehensive review of the level of fees paid to Boral’s non-executive Directors was undertaken during the year, and included a
review of market benchmarking information prepared by EY, Boral’s external remuneration consultant. The review considered the
elements of size and complexity of the business, time commitments and fees paid for non-executive Directors of companies of a
comparable size. As a result of the market review, with effect from 1 July 2016, base and committee fees for non-executive Directors
were increased by 3.0%.
Boral Limited Annual Report 2016 69
2016 REMUNERATION
REPORT
Non-executive Directors’ total remuneration
The remuneration of the non-executive Directors is set out in the following table.
A$’000s
Brian Clark, Chairmana
Catherine Brenner
Eileen Doyle
Bob Every, Chairmana
Kathryn Faggb
John Marlay
Karen Mosesc
Paul Rayner
Total
2016
2015
Short-term
Board and
Committee fees
Post-
employment
superannuation
Short-term
Board and
Committee fees
Post-
employment
superannuation
Total fees
Total fees
324.9
161.7
175.2
152.5
165.7
156.9
53.9
165.8
17.8
15.4
16.6
7.2
15.7
14.9
5.1
15.8
342.7
177.1
191.8
159.7
181.4
171.8
59.0
181.6
1,356.6
108.5
1,465.1
153.1
157.9
170.9
399.0
121.8
153.1
–
161.7
1,377.8
14.5
15.0
16.2
18.8
11.6
14.5
–
15.4
111.8
167.6
172.9
187.1
417.8
133.4
167.6
–
177.1
1,489.6
a. Brian Clark was appointed Chairman effective 5 November 2015 following Bob Every stepping down at the conclusion of the 2015 Annual General Meeting.
b. Kathryn Fagg was appointed on 15 September 2014.
c. Karen Moses was appointed on 1 March 2016.
Section 8: Senior Executive and non-executive Director transactions
Movements in shares
The number of shares held in Boral Limited during the financial year by each Senior Executive and non-executive Director of Boral
Limited, including their personally related entities, are set out below:
Current Senior Executives
Mike Kane
Al Borm
Joseph Goss
Ross Harper
David Mariner
Rosaline Ng
Balance at the
beginning of the year
Number
10,233
10,233
–
–
–
–
7,978
7,978
–
–
28,586
28,586
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
Received during
the year on the exercise of
rights
Number
666,666
–
34,640
–
–
–
36,866
–
30,520
–
40,718
–
Other changes
during the year
Number
Balance at the end
of the year
Number
(313,333)
–
(12,000)
–
–
–
(36,866)
–
(12,020)
–
(35,718)
–
363,566
10,233
22,640
–
–
–
7,978
7,978
18,500
–
33,586
28,586
70
Boral Limited Annual Report 2016
Non-executive Directors
Brian Clark, Chairman
Catherine Brenner
Eileen Doyle
Bob Every
Kathryn Fagg
John Marlay
Karen Moses
Paul Rayner
Balance at the
beginning of the year
Number
76,887
76,887
15,371
15,371
15,076
15,076
70,221
70,221
26,586
–
25,101
25,101
–
50,116
50,116
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
2016
2016
2015
Received during
the year on the exercise of
rights
Number
Other changes
during the year
Number
Balance at the end
of the year
Number
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
4,000
–
18,000
–
12,465
–
–
–
–
26,586
2,000
–
15,000
21,000
–
80,887
76,887
33,371
15,371
27,541
15,076
70,221
70,221
26,586
26,586
27,101
25,101
15,000
71,116
50,116
Loans
There were no loans made or outstanding to Senior Executives or non-executive Directors during FY2016.
Other transactions
Transactions entered into during the year with non-executive Directors or Senior Executives 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 2016 71
2016 REMUNERATION
REPORT
Section 9: Glossary of key terms
Term
Description
Committee
The Remuneration & Nomination Committee.
Fair market value of LTI
performance rights
FAR
KMP
The fair market value of LTI performance rights is determined from the face value of a Boral share on
1 September, discounted for a number of factors that impact the value of a TSR tested right, such as
the possibility that the TSR performance hurdle will not be met. Other factors that are taken into
account when determining the discount from face value include the time to vesting, expected volatility
of the share price and the dividends expected to be paid in relation to the shares. This approach is in
line with the methodology used for valuing TSR tested rights for accounting purposes. The fair value is
determined by an independent valuer (being PwC).
Fixed Annual Remuneration (FAR) includes base salary, non-cash benefits such as provision of a
vehicle (including any fringe benefits tax) and superannuation contributions.
The key management personnel of the Company. Defined as the people accountable for planning,
directing and controlling the affairs of the Company and its controlled entities. Includes each of the:
–
–
non-executive Directors; and
Senior Executives.
Performance right
Upon vesting, each performance right entitles the executive to one ordinary share.
Relative TSR
Relative Total Shareholder Return (TSR) measures the compound growth in the Company’s TSR over
the performance measurement period compared with the TSR performance over the same period of a
comparator group.
ROFE
TSR represents the change in capital value of a listed entity’s share price over a three year
performance period, plus reinvested dividends, expressed as a percentage of the opening value.
Return on Funds Employed (ROFE) tests the efficiency and profitability of the Company’s capital
investments and is determined by the Board based on earnings before interest and tax (EBIT) (before
significant items) in the year of testing as a percentage of average funds employed (where funds
employed is the sum of net assets and net debt).
Senior Executives
The CEO & Managing Director as well as other current and former members of the senior executive
team who are KMP of the Company.
The broader management group (who also participate in the various reward programs) are referred to
as executives.
72
Boral Limited Annual Report 2016
FINANCIAL
STATEMENTS
Boral Limited Annual Report 2016 73
FinancialStatements FINANCIAL
STATEMENTS
Introduction
Boral Limited and Controlled Entities
This is the financial report of Boral Limited (the “Company”) and its controlled entities (the “Group”), including the Group’s interest in
associates and jointly controlled entities.
Over the past year, we have reviewed the content and structure of the financial report looking for opportunities to make them less
complex and more relevant to users. This included:
•
•
a thorough review of content to eliminate immaterial disclosures that may undermine the usefulness of the financial report by
obscuring important information;
reorganisation of the notes to the financial statements into sections to assist users in understanding the Group’s performance;
and
•
improvements to the presentation of certain notes.
The purpose of these changes is to provide users with a clearer understanding of what drives the financial performance and the
financial position of the Group and linkage to the Group’s strategy, whilst still complying with the provisions of the Corporations
Act 2001.
What’s new in this financial report
Note disclosures are split into eight distinct sections to enable a better understanding of how the Group has performed.
We have included an introduction at the start of each section to explain its purpose and content. Accounting policies and critical
accounting judgements applied to the preparation of the financial statements have been moved to where the related accounting
balance or financial statement matter is discussed. We have also refined wording of the policies to allow them to be easily understood
by users of this report.
Information is only being included in the financial report to the extent it has been considered material and relevant to the understanding
of the financial statements. Factors that influence if a disclosure is considered material and relevant, include whether:
•
•
•
•
the dollar amount is significant in size and/or nature;
the Group’s results cannot be understood without the specific disclosure;
it is critical to allow a user to understand the impact of significant changes in the Group’s business during the period; and
it relates to an aspect of the Group’s operations that is important to its future performance.
74
Boral Limited Annual Report 2016
FINANCIAL
STATEMENTS
Contents
Boral Limited and Controlled Entities
INCOME STATEMENT
STATEMENT OF COMPREHENSIVE INCOME
BALANCE SHEET
STATEMENT OF CHANGES IN EQUITY
STATEMENT OF CASH FLOWS
NOTES TO THE FINANCIAL STATEMENTS
Section 1: About this report
Section 2: Business performance
2.1 Segments
2.2 Profit for the period
2.3 Results of equity accounted investments
2.4 Dividends
2.5 Earnings per share
2.6 Significant items
2.7 Notes to Statement of Cash Flows
Section 3: Operating assets and liabilities
3.1 Receivables
3.2 Inventories
3.3 Property, plant and equipment
3.4 Intangible assets
3.5 Carrying value assessment
3.6 Provisions
Section 4: Capital and financial structure
4.1 Loans and borrowings
4.2 Financial risk management
4.3 Issued capital
4.4 Reserves
Section 5: Taxation
5.1 Income tax expense
5.2 Deferred tax assets and liabilities
Section 6: Group structure
6.1 Discontinued operations
6.2 Equity accounted investments
6.3 Controlled entities
76
77
78
79
80
81
82
85
86
87
88
89
92
93
94
94
96
97
99
101
103
111
112
113
115
117
119
121
Section 7: Employee benefits
7.1 Employee liabilities
7.2 Employee benefits expense
7.3 Share-based payments
7.4 Key management personnel disclosures
Section 8: Other notes
8.1 Subsequent events
8.2 Contingent liabilities
8.3 Commitments
8.4 Auditors’ remuneration
8.5 Related party disclosures
8.6 Parent entity disclosures
8.7 Deed of cross guarantee
STATUTORY STATEMENTS
123
123
123
125
126
126
127
128
128
129
130
132
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 2.6 to
the financial statements and relate to income and expenses that
are associated with significant business restructuring, impairment
or individual transactions.
Boral Limited Annual Report 2016 75
FINANCIAL
STATEMENTS
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
Results of equity accounted investments
Profit before net financing costs and income tax
Financial income
Financial expenses
Net financing costs
Profit before income tax
Income tax expense
Profit from continuing operations
Discontinued operations
Profit from discontinued operations (net of income tax)
Net profit
Attributable to:
Members of the parent entity
Non-controlling interests
Net profit
Basic earnings per share
Diluted earnings per share
Continuing operations
Basic earnings per share
Diluted earnings per share
Note
2.2
2.2
2.2
2.3
2.2
2.2
5.1
6.1
2.5
2.5
2.5
2.5
2016
$m
2015
$m
4,311.2
(2,927.2)
(819.4)
(302.9)
4,297.6
(3,039.2)
(767.6)
(270.1)
(4,049.5)
(4,076.9)
45.2
(50.6)
91.1
347.4
7.6
(70.8)
(63.2)
284.2
(32.2)
252.0
4.0
256.0
256.0
–
256.0
34.2c
33.8c
33.7c
33.3c
166.3
(103.5)
68.7
352.2
12.8
(76.5)
(63.7)
288.5
(45.1)
243.4
13.6
257.0
257.0
–
257.0
32.9c
32.6c
31.2c
30.9c
The Income Statement should be read in conjunction with the accompanying notes which form an integral part of the financial statements.
76
Boral Limited Annual Report 2016
Statement of Comprehensive Income
Boral Limited and Controlled Entities
For the year ended 30 June
Net profit
Other comprehensive income
Note
2016
$m
2015
$m
256.0
257.0
Items that may be reclassified subsequently to Income Statement:
Net exchange differences from translation of foreign operations taken to
equity
Fair value adjustment on cash flow hedges
4.4
Income tax on items that may be reclassified subsequently to Income
Statement
Total comprehensive income
Total comprehensive income is attributable to:
Members of the parent entity
Non-controlling interests
Total comprehensive income
(7.0)
(7.7)
10.4
99.7
8.7
45.1
251.7
410.5
251.7
–
251.7
410.5
–
410.5
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 2016 77
FINANCIAL
STATEMENTS
Balance Sheet
Boral Limited and Controlled Entities
As at 30 June
CURRENT ASSETS
Cash and cash equivalents
Receivables
Inventories
Financial assets
Other assets
TOTAL CURRENT ASSETS
NON-CURRENT ASSETS
Receivables
Inventories
Investments accounted for using the equity method
Financial assets
Property, plant and equipment
Intangible assets
Deferred tax assets
Other assets
TOTAL NON-CURRENT ASSETS
TOTAL ASSETS
CURRENT LIABILITIES
Trade creditors
Loans and borrowings
Financial liabilities
Current tax liabilities
Employee benefit liabilities
Provisions
TOTAL CURRENT LIABILITIES
NON-CURRENT LIABILITIES
Deferred income
Loans and borrowings
Financial liabilities
Employee benefit liabilities
Provisions
TOTAL NON-CURRENT LIABILITIES
TOTAL LIABILITIES
NET ASSETS
EQUITY
Issued capital
Reserves
Retained earnings
TOTAL EQUITY
Note
2.7
3.1
3.2
3.1
3.2
6.2
3.3
3.4
5.2
4.1
7.1
3.6
4.1
7.1
3.6
4.3
4.4
2016
$m
452.1
623.9
556.9
18.9
32.4
2015
$m
505.8
659.8
537.8
9.6
28.3
1,684.2
1,741.3
16.0
12.6
1,054.6
23.1
2,517.7
234.7
237.4
20.2
4,116.3
5,800.5
607.9
352.4
7.8
36.6
118.8
58.2
1,181.7
30.8
992.8
18.6
11.3
59.0
1,112.5
2,294.2
3,506.3
2,246.2
162.0
1,098.1
3,506.3
75.4
21.6
1,048.1
29.7
2,448.4
227.1
243.6
30.2
4,124.1
5,865.4
641.5
1.8
5.8
94.8
115.9
63.4
923.2
15.8
1,320.8
0.8
11.9
68.8
1,418.1
2,341.3
3,524.1
2,361.6
166.2
996.3
3,524.1
The Balance Sheet should be read in conjunction with the accompanying notes which form an integral part of the financial statements.
78
Boral Limited Annual Report 2016
Statement of Changes in Equity
Boral Limited and Controlled Entities
For the year ended 30 June 2016
Balance at 1 July 2015
Net profit
Other comprehensive income
Translation of net assets of overseas entities
Translation of long-term borrowings and foreign currency
forward contracts
Fair value adjustment on cash flow hedges
Income tax relating to other comprehensive income
Total comprehensive income
Transactions with owners in their capacity as owners
On-market share buy-back
Share acquisition rights vested
Dividends paid
Share-based payments
Issued capital
$m
Reserves
$m
2,361.6
166.2
–
–
–
–
–
–
(115.4)
–
–
–
–
20.4
(27.4)
(7.7)
10.4
(4.3)
–
(14.6)
–
14.7
0.1
Retained
earnings
$m
996.3
256.0
Total equity
$m
3,524.1
256.0
–
–
–
–
256.0
–
–
(154.2)
–
(154.2)
20.4
(27.4)
(7.7)
10.4
251.7
(115.4)
(14.6)
(154.2)
14.7
(269.5)
Total transactions with owners in their capacity as owners
(115.4)
Balance at 30 June 2016
2,246.2
162.0
1,098.1
3,506.3
For the year ended 30 June 2015
Balance at 1 July 2014
Net profit
Other comprehensive income
Translation of net assets of overseas entities
Translation of long-term borrowings and foreign currency
forward contracts
Fair value adjustment on cash flow hedges
Income tax relating to other comprehensive income
Total comprehensive income
Transactions with owners in their capacity as owners
On-market share buy-back
Dividends paid
Share-based payments
Total transactions with owners in their capacity as owners
Balance at 30 June 2015
Issued capital
Reserves
$m
2,477.6
–
–
–
–
–
–
(116.0)
–
–
(116.0)
2,361.6
$m
2.1
–
259.5
(159.8)
8.7
45.1
153.5
–
–
10.6
10.6
166.2
Retained
earnings
$m
868.4
257.0
Total equity
$m
3,348.1
257.0
–
–
–
–
257.0
–
(129.1)
–
(129.1)
996.3
259.5
(159.8)
8.7
45.1
410.5
(116.0)
(129.1)
10.6
(234.5)
3,524.1
The Statement of Changes in Equity should be read in conjunction with the accompanying notes which form an integral part of the
financial statements.
Boral Limited Annual Report 2016 79
FINANCIAL
STATEMENTS
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
Restructure costs paid
Note
2016
$m
2015
$m
4,635.7
(4,069.5)
566.2
75.9
8.5
(69.2)
(69.4)
(34.5)
4,847.4
(4,317.5)
529.9
41.2
8.8
(72.1)
(45.4)
(44.1)
Net cash provided by operating activities
2.7
477.5
418.3
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property, plant and equipment
Purchase of intangibles
Repayment of loans by associates
Proceeds on disposal of non-current assets
Proceeds on disposal of controlled entities (net of transaction costs)
6.1
Net cash used in investing activities
CASH FLOWS FROM FINANCING ACTIVITIES
On-market share buy-back
Dividends paid
Proceeds from borrowings
Repayment of borrowings
Net cash used in financing activities
NET CHANGE IN CASH AND CASH EQUIVALENTS
Cash and cash equivalents at the beginning of the year
Effects of exchange rate fluctuations on the balances of cash and cash
equivalents held in foreign currencies
(320.3)
(243.6)
(3.5)
8.8
55.5
–
(259.5)
(115.4)
(154.2)
2.2
(6.0)
(273.4)
(55.4)
505.8
1.7
(6.3)
–
45.0
149.2
(55.7)
(116.0)
(129.1)
245.2
(251.7)
(251.6)
111.0
383.2
11.6
Cash and cash equivalents at the end of the year
2.7
452.1
505.8
The Statement of Cash Flows should be read in conjunction with the accompanying notes which form an integral part of the financial
statements.
80
Boral Limited Annual Report 2016
Notes to the Financial Statements
Boral Limited and Controlled Entities
Section 1: About this report
Statement of compliance
These financial statements represent the consolidated results of
Boral Limited (ABN 13 008 421 761), a for profit company limited
by shares, incorporated and domiciled in Australia whose shares
are publicly traded on the Australian Securities Exchange. The
consolidated financial statements comprise Boral Limited and
its controlled entities (the “Group”). The consolidated financial
statements are general purpose financial statements which
have been prepared in accordance with Australian Accounting
Standards (AASBs) adopted by the Australian Accounting
Standards Board (AASB) and the Corporations Act 2001. The
consolidated financial statements comply with International
Financial Reporting Standards (IFRS) adopted by the International
Accounting Standards Board (IASB).
The nature of the operations and principal activities of the Group
are described in note 2.1.
The financial statements were authorised for issue by the Board
of Directors on 24 August 2016.
Basis of preparation
The financial statements have been prepared on a historical cost
basis, except for the revaluation of certain financial instruments.
Cost is based on the fair values of the consideration given in
exchange for assets. All amounts are presented in Australian
dollars, unless otherwise noted.
The accounting policies and methods of computation in the
preparation of the financial statements are consistent with those
adopted and disclosed in Boral’s Annual Report for the financial
year ended 30 June 2015, except in relation to the relevant
amendments and their effects on the current period or
prior periods as described in note 1C “Changes in
accounting policies”.
Accounting estimates and judgements
Preparation of the financial statements requires management
to make judgements, estimates and assumptions about future
events. Information on material estimates and judgements
considered when applying the accounting policies can be found
in the following notes:
Accounting estimates and judgements
Note
Page
Revenue
Receivables
Property, plant and equipment
Intangible assets
Carrying value assessment
Provisions
Income tax expense
Deferred tax assets
Share-based payments
2.2
3.1
3.3
3.4
3.5
3.6
5.1
5.2
7.3
85
93
94
96
97
99
113
115
123
Rounding of amounts
Unless otherwise expressly stated, amounts have been rounded
off to the nearest whole number of millions of dollars and one
place of decimals representing hundreds of thousands of dollars
in accordance with ASIC Corporations Instrument 2016/191,
dated 24 March 2016. Amounts shown as “-” represent zero
amounts and amounts less than $50,000 which have been
rounded down.
Significant accounting policies
Accounting policies are selected and applied in a manner that
ensures that the resulting financial information satisfies the
concepts of relevance and reliability, thereby ensuring that the
substance of the underlying transactions or other events is
reported. Other significant accounting policies are contained in
the notes to the consolidated financial statements to which they
relate to.
A. Principles of consolidation
The financial report incorporates the financial statements of
the Company and entities controlled by the Group and its
subsidiaries. The Group controls an entity when it is exposed
to, or has rights to, variable returns from its involvement with
the entity and has the ability to affect those returns through its
involvement and power over the entity.
The financial report includes the information and results of each
entity from the date on which the Company obtains control, until
the time the Company ceases to control the entity.
In preparing the financial report, all intercompany balances,
transactions, and unrealised profits arising within the Group, are
eliminated in full.
B. Foreign currencies
Transactions, assets and liabilities denominated in foreign
currencies are translated into Australian dollars at reporting date
using the following applicable exchange rates:
Foreign currency amount
Applicable exchange rate
Transactions
Monetary assets and
liabilities
Non-monetary assets and
liabilities carried at fair value
Date of transaction
Reporting date
Date fair value is determined
Foreign exchange gains and losses resulting from translation are
recognised in the Income Statement, except for qualifying cash
flow hedges which are deferred to equity.
On consolidation, the assets, liabilities, income and expenses of
foreign operations are translated into Australian dollars using the
following applicable exchange rates:
Foreign currency amount
Applicable exchange rate
Income and expenses
Assets and liabilities
Equity
Reserves
Average exchange rate
Reporting date
Historical date
Reporting date
Boral Limited Annual Report 2016 81
FINANCIAL
STATEMENTS
Notes to the Financial Statements
Boral Limited and Controlled Entities
Section 1: About this report (continued)
Section 2: Business performance
B. Foreign currencies (continued)
Foreign exchange differences resulting from translation of long-
term borrowings, foreign currency forward contracts and net
assets of overseas entities are initially recognised in the foreign
currency translation reserve and subsequently transferred to the
profit or loss on disposal of the foreign operation.
C. 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 has not resulted in any material
changes to the Group’s financial statements.
D. New accounting standards and interpretations not yet
adopted:
The Group has not adopted the following new accounting
standards which are available for early adoption for periods
beginning after 1 July 2015:
• AASB 9 Financial Instruments: Assessment impact has
determined that there would be no significant impact on
Boral's financial performance or position.
• AASB 15 Revenue from Contracts with Customers: The
impact on Boral’s Income Statement and Balance Sheet
is being assessed. No significant impact is currently
anticipated.
• AASB 16 Leases: The impact on Boral’s Income Statement
and Balance Sheet is being assessed. It is likely the new
standard will result in the recognition of a material value of
right of use assets and borrowings on the Balance Sheet,
as well as changes to the classification and phasing of
expenses in the Income Statement.
This section provides the information that is most relevant to
understanding the financial performance of the Group during the
financial year and, where relevant, the accounting policies applied
and the critical judgements and estimates made.
2.1 Segments
An operating segment is a component of an entity that engages
in business activities from which it may earn revenue and incur
expenses, whose operating results are regularly reviewed by the
Group’s chief operating decision maker in order to effectively
allocate Group resources and assess performance.
The Group has identified its operating segments based on the
internal reports that are reviewed and used by the CEO and
Managing Director in assessing performance and in determining
the allocation of resources. The operating segments are identified
by the Group based on consideration of the nature of the
services provided as well as the geographical region. Discrete
financial information about each of these operating businesses is
reported to the CEO and Managing Director on a recurring basis.
The following summary describes the operations of the Group’s
reportable segments:
Construction
Materials &
Cement
Building
Products*
Boral Gypsum
Joint Venture
–
–
–
–
–
Quarries, concrete, asphalt, transport,
landfill, property, cement and concrete
placing.
Australian bricks (comprising West Coast
bricks, East Coast bricks up to 30 April
2015 and Boral CSR bricks joint venture
from 1 May 2015), roofing and masonry,
and timber products.
50/50 joint venture between USG
Corporation and Boral Limited
responsible for the manufacture and sale
of plasterboard and associated products.
Bricks, cultured stone, trim, roof tiles, fly
ash, concrete and quarries.
Non-trading operations and unallocated
corporate costs.
E. Trade creditors
Trade creditors and other creditors are initially recognised at fair
value when the Group becomes obliged to make future payments
resulting from the purchase of goods and services. Payables are
subsequently measured at their amortised cost.
Boral USA
Unallocated
*
The results of the East Coast bricks operations for the prior comparative period is
shown as part of “Discontinued Operations” in the Income Statement.
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.
82
Boral Limited Annual Report 2016
Section 2: Business performance (continued)
2.1 Segments (continued)
Reconciliations of reportable segment revenues and profits
External revenue
Less: Revenue from discontinued operations
Revenue from continuing operations
Profit before tax
Profit before net financing costs and income tax from reportable segments
Less: Profit before net financing costs and income tax from
discontinued operations
Profit before net financing costs and income tax from continuing operations
Net financing costs from continuing operations
Profit before tax from continuing operations
Note
6.1
6.1
2016
$m
4,311.2
–
4,311.2
351.4
(4.0)
347.4
(63.2)
284.2
2015
$m
4,414.7
(117.1)
4,297.6
358.6
(6.4)
352.2
(63.7)
288.5
(a) Reportable segments
TOTAL REVENUE
INTERNAL REVENUE
EXTERNAL REVENUE
Construction Materials & Cement
2,926.9
3,110.9
2016
$m
2015
$m
Building Products*
Boral USA
372.0
1,032.5
4,331.4
485.4
840.1
4,436.4
20.2
2016
$m
20.2
–
–
2015
$m
20.2
–
1.5
21.7
2016
$m
2015
$m
2,906.7
3,090.7
372.0
1,032.5
4,311.2
485.4
838.6
4,414.7
Construction Materials & Cement
Building Products*
Boral Gypsum Joint Venture
Boral USA
Unallocated
Significant items (refer to note 2.6)
OPERATING PROFIT
(EXC EQUITY
ACCOUNTED INCOME)
EQUITY ACCOUNTED INCOME
2016
$m
272.4
20.9
–
44.4
(30.9)
306.8
(46.5)
260.3
2015
$m
276.2
28.0
–
6.2
(28.8)
281.6
8.3
289.9
2016
$m
20.6
11.7
59.0
(0.2)
–
91.1
–
91.1
2015
$m
25.2
1.5
48.7
(0.3)
–
75.1
(6.4)
68.7
PROFIT BEFORE NET
FINANCING COSTS AND
INCOME TAX EXPENSE
2016
$m
2015
$m
293.0
301.4
32.6
59.0
44.2
(30.9)
397.9
(46.5)
351.4
29.5
48.7
5.9
(28.8)
356.7
1.9
358.6
* The results of the East Coast bricks operations for the prior comparative period is shown as part of “Discontinued Operations” in the Income Statement.
Boral Limited Annual Report 2016 83
TOTAL ASSETS
2016
$m
2015
$m
2,611.6
2,643.6
411.7
951.1
1,078.9
57.7
404.9
950.5
1,010.6
106.4
5,116.0
505.8
243.6
FINANCIAL
STATEMENTS
Notes to the Financial Statements
Boral Limited and Controlled Entities
Section 2: Business performance (continued)
2.1 Segments (continued)
(a) Reportable segments (continued)
SEGMENT ASSETS
(EXC EQUITY ACCOUNTED
INVESTMENTS)
EQUITY ACCOUNTED
INVESTMENTS
2016
$m
2015
$m
Construction Materials & Cement
2,597.0
2,629.9
Building Products*
Boral Gypsum Joint Venture
Boral USA
Unallocated
322.8
–
1,078.9
57.7
321.0
–
1,010.6
106.4
2016
$m
14.6
88.9
951.1
–
–
2015
$m
13.7
83.9
950.5
–
–
Cash and cash equivalents
Tax assets
452.1
237.4
505.8
243.6
–
–
–
–
452.1
237.4
4,056.4
4,067.9
1,054.6
1,048.1
5,111.0
4,745.9
4,817.3
1,054.6
1,048.1
5,800.5
5,865.4
LIABILITIES
ACQUISITION OF
SEGMENT ASSETS**
DEPRECIATION AND
AMORTISATION
Construction Materials & Cement
Building Products*
Boral USA
Unallocated
2016
$m
547.0
65.0
192.8
107.6
912.4
2015
$m
557.9
76.7
183.7
105.6
923.9
Loans and borrowings
Tax liabilities
1,345.2
1,322.6
36.6
94.8
2016
$m
222.0
22.3
78.7
0.8
323.8
–
–
2015
$m
189.1
13.9
45.9
1.0
249.9
–
–
2016
$m
187.4
9.8
48.8
0.6
246.6
–
–
2015
$m
183.9
20.2
44.3
0.4
248.8
–
–
* The results of the East Coast bricks operations for the prior comparative period is shown as part of “Discontinued Operations” in the Income Statement.
** Excludes amounts attributable to the acquisition of controlled entities and businesses.
2,294.2
2,341.3
323.8
249.9
246.6
248.8
(b) Geographic location
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.
EXTERNAL REVENUE
SEGMENT NON-CURRENT
ASSETS ***
2016
$m
2015
$m
2016
$m
2015
$m
3,278.7
3,576.1
2,473.8
2,509.3
–
1,032.5
4,311.2
–
838.6
642.0
740.0
646.5
695.0
4,414.7
3,855.8
3,850.8
Australia
Asia
USA
*** Excludes deferred tax assets and other financial assets.
84
Boral Limited Annual Report 2016
Section 2: Business performance (continued)
2.2 Profit for the period
(a) Revenue
Sales revenue is revenue earned from the provision of products or services, net of returns, discounts and allowances.
Significant accounting judgements, estimates and assumptions
Revenue from the sale of goods is recognised when the significant risks and rewards of ownership have been transferred to the
buyer, recovery of the consideration is probable, the associated costs and possible return of goods can be estimated reliably, there
is no continuing management involvement with the goods and the amount of revenue can be measured reliably.
Revenue from contracting businesses is included in sale of goods and is recognised in proportion to the stage of completion of the
contract. An expected loss is recognised immediately as an expense.
Revenue from the sale of services is recognised when the service has been provided to the customer and where there are no
continuing unfulfilled service obligations.
For the year ended 30 June
Revenue from continuing operations
Sale of goods
Rendering of services
Revenue from continuing operations
2016
$m
2015
$m
4,246.2
65.0
4,311.2
4,217.0
80.6
4,297.6
(b) Other income and expenses
Other income is recognised on a systematic basis over the periods necessary to match it with the related costs for which it is intended
to compensate. If the costs have already been incurred, the amount is recognised in the period the entitlement is confirmed.
Income from the sale of land is recognised when all of the following conditions have been met:
•
•
contracts are exchanged;
an appropriate non-refundable deposit is received; and
• material conditions contained within the contract are met.
Other income and expenses also include significant items recorded in the period. These items relate to material transactions which are
disclosed separately in order to better explain financial performance. Further information is included in note 2.6.
For the year ended 30 June
Other income from continuing operations
Significant items
Net profit on sale of assets
Net foreign exchange gain
Other income
Other income from continuing operations
Other expenses from continuing operations
Significant items
Net foreign exchange loss
Other expenses from continuing operations
Note
2.6
2.6
2016
$m
–
27.3
–
17.9
45.2
50.5
0.1
50.6
2015
$m
116.7
41.0
5.7
2.9
166.3
103.5
–
103.5
Boral Limited Annual Report 2016 85
FINANCIAL
STATEMENTS
Notes to the Financial Statements
Boral Limited and Controlled Entities
Section 2: Business performance (continued)
2.2 Profit for the period (continued)
(c) Net financing costs
Financing costs comprise mainly of interest expense on borrowings and amortisation of ancillary costs incurred in connection with the
arrangement of borrowings. They are recognised in profit or loss when they are incurred, except to the extent the expenses are directly
attributable to the acquisition, construction or production of a qualifying asset. Such financing costs are capitalised as part of the cost
of the asset up to the time it is ready for its intended use and are then amortised over the expected useful economic life.
For the year ended 30 June
Interest income received or receivable from:
Associated entities
Other parties (cash at bank and bank short-term deposits)
Unwinding of discount
Interest expense paid or payable to:
Other parties (bank overdrafts, bank loans and other loans)*
Finance charges on capitalised leases
Unwinding of discount
Net financing costs from continuing operations
2016
$m
0.6
7.0
–
7.6
67.6
0.5
2.7
70.8
(63.2)
2015
$m
0.1
9.6
3.1
12.8
72.7
0.7
3.1
76.5
(63.7)
* FY2016 included interest of $1.0 million paid to other parties and capitalised in respect of qualifying assets. The capitalisation rate used was 5.4%.
2.3 Results of equity accounted investments
The Group’s share of the results of equity accounted investments is reported in the Income Statement. The results of equity accounted
investments are summarised below:
USG Boral Building Products
Total
Note
2016
$m
2015
$m
2016
$m
2015
$m
Summarised Income Statement at 100%
Revenue
Profit before income tax
Income tax expense
Non-controlling interest
Net profit before significant items
Restructure costs disclosed as significant item net of tax
Net profit – equity accounted relating to continuing operations
The Group’s share based on % ownership:
Net profit before significant items
Restructure costs disclosed as significant item
2.6
Net profit – equity accounted relating to continuing operations
1,397.1
1,268.0
174.8
(49.6)
(7.1)
118.1
–
118.1
59.0
–
59.0
140.7
(36.0)
(7.3)
97.4
–
97.4
48.7
–
48.7
1,970.7
277.3
1,641.3
194.5
(80.9)
(7.1)
189.3
–
189.3
91.1
–
91.1
(46.5)
(7.3)
140.7
(16.0)
124.7
75.1
(6.4)
68.7
Further information regarding equity accounted investments is located in note 6.2.
86
Boral Limited Annual Report 2016
Section 2: Business performance (continued)
2.4 Dividends
Franked Dividends Paid or Declared
(cents per share)
2015
2016
22.5
18.0
11.0
8.5
11.5
9.5
$66.5m
paid on
13/03/151
$81.8m
paid on
11/03/161
$72.4m
paid on
28/09/151
$85.5m
payable on
26/09/162
$138.9m
paid
$167.3m
paid/payable
Interim
Final
Annual Declared
1. Declared and paid.
2. Estimated final dividend payable, subject to variations in number of shares up to record date. The financial effect of the final dividend for the year ended 30 June 2016 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 2016 is $57.5 million (2015: $77.3 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 $36.6 million (2015: $31.1 million).
Dividend Reinvestment Plan
The Group’s Dividend Reinvestment Plan, which was suspended following the interim dividend paid on 24 March 2014, will remain
suspended until further notice.
Boral Limited Annual Report 2016 87
FINANCIAL
STATEMENTS
Notes to the Financial Statements
Boral Limited and Controlled Entities
Section 2: Business performance (continued)
2.5 Earnings per share
Basic earnings per share
Basic earnings per share (EPS) is calculated by dividing the net profit attributable to members of the parent entity, by the weighted
average number of ordinary shares of Boral Limited, adjusted for any bonus issue.
Diluted earnings per share
Diluted EPS is calculated by dividing the net profit attributable to members of the parent entity, by the weighted average number of
ordinary shares after adjustment for the effects of all dilutive potential ordinary shares and bonus issue.
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.
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
2016
2015
747,618,114
780,336,204
8,972,636
8,327,214
756,590,750
788,663,418
Continuing
operations
Discontinued
operations
2016
$m
2016
$m
Total
2016
$m
Continuing
operations
Discontinued
operations
2015
$m
2015
$m
Total
2015
$m
268.0
–
268.0
242.0
7.2
249.2
(16.0)
252.0
33.7c
33.3c
35.8c
35.4c
4.0
4.0
0.5c
0.5c
–
–
(12.0)
1.4
6.4
7.8
256.0
243.4
13.6
257.0
34.2c
33.8c
35.8c
35.4c
31.2c
30.9c
31.0c
30.7c
1.7c
1.7c
0.9c
0.9c
32.9c
32.6c
31.9c
31.6c
Earnings reconciliation
Net profit attributable to members
of the parent entity excluding
significant items
Net significant items
(refer note 2.6)
Net profit attributable to
members of the parent entity
Basic earnings per share
Diluted earnings per share
Basic earnings per share
(excluding significant items)
Diluted earnings per share
(excluding significant items)
The average market value of the Company’s shares for the purpose of calculating the dilutive effect of share options and performance
rights was based on quoted market prices for the period that the options were outstanding.
88
Boral Limited Annual Report 2016
Section 2: Business performance (continued)
2.6 Significant items
Net profit includes the following significant items, which relate to material transactions that are disclosed separately in order to better
explain financial performance.
2016 Significant items
Non-current
receivable
impairment
(i)
Finalisation
of tax
matters (ii)
Note
$m
$m
Other (iii)
$m
Total
$m
Summary of significant items from continuing operations
Loss before interest and tax
Income tax benefit
Net significant items from continuing operations
Summary of significant items from discontinued operations
Profit before interest and tax
Income tax benefit
Net significant items from discontinued operations
2.2
6.1
Summary of significant items
Profit/(loss) before interest and tax
Income tax benefit
Net significant items
(50.5)
5.6
(44.9)
–
28.9
28.9
–
–
–
(50.5)
5.6
(44.9)
–
–
–
–
28.9
28.9
–
–
–
4.0
–
4.0
4.0
–
4.0
(50.5)
34.5
(16.0)
4.0
–
4.0
(46.5)
34.5
(12.0)
(i) Non-current receivable impairment
A carrying value assessment of the USG Boral earnout receivable recorded on commencement of the Gypsum Joint Venture has
concluded that, due primarily to the deterioration of Australian and Asian currencies against the US Dollar, the recoverability of the
earnout was no longer probable. An impairment of A$50.5 million was recorded to fully impair the receivable at 30 June 2016.
(ii) Finalisation of tax matters
The Group finalised a number of outstanding tax matters during the year. This led to a tax benefit of A$28.9 million being recorded.
(iii) Other
Relates to additional proceeds attributable to final working capital adjustments from the sale of the Indonesia Construction Materials
business in 2012.
Boral Limited Annual Report 2016 89
FINANCIAL
STATEMENTS
Notes to the Financial Statements
Boral Limited and Controlled Entities
Section 2: Business performance (continued)
2.6 Significant items (continued)
2015 Significant items
Gain on disposal of Western Landfill
Impairment of Building Products businesses
Construction Materials & Cement restructure
Loss on disposal of East Coast Bricks
Boral CSR Bricks Joint Venture restructure
Other
Other
Continuing
Continuing
Continuing
Discontinued
Continuing
Continuing
Discontinued
Continuing operations
Other income
Other expenses
Share of equity accounted income
Discontinued operations
Summary of significant items from continuing operations
Profit/(loss) before interest and tax
Income tax benefit/(expense)
Net significant items from continuing operations
Summary of significant items from discontinued operations
Loss before interest and tax
Income tax benefit*
Net significant items from discontinued operations
Summary of significant items
Profit/(loss) before interest and tax
Income tax benefit/(expense)
Net significant items
*
Includes tax benefits attributable to tax losses recovered from previous sale transactions.
90
Boral Limited Annual Report 2016
Asset
impairment
$m
Redundancies
and restructure
$m
Sale of
business
$m
Note
Total
$m
–
115.0
115.0
(i)
(ii)
(iii)
(iv)
(v)
(vi)
(vi)
Note
2.2
2.2
2.3
6.1
–
(70.1)
(13.3)
–
–
–
–
(2.5)
(17.6)
–
(6.4)
–
–
–
–
(1.7)
–
1.7
(3.2)
(83.4)
(26.5)
111.8
Asset
impairment
$m
Redundancies
and restructure
$m
Sale of
business
$m
–
(83.4)
–
–
–
116.7
(20.1)
(6.4)
–
–
–
(4.9)
(83.4)
(26.5)
111.8
Asset
impairment
$m
Redundancies
and restructure
$m
Sale of
business
$m
(83.4)
25.0
(58.4)
–
–
–
(83.4)
25.0
(58.4)
(26.5)
6.0
(20.5)
–
–
–
(26.5)
6.0
(20.5)
116.7
(36.4)
80.3
(4.9)
11.3
6.4
111.8
(25.1)
86.7
(72.6)
(30.9)
(1.7)
(6.4)
1.7
(3.2)
1.9
Total
$m
116.7
(103.5)
(6.4)
(4.9)
1.9
Total
$m
6.8
(5.4)
1.4
(4.9)
11.3
6.4
1.9
5.9
7.8
Section 2: Business performance (continued)
2.6 Significant items (continued)
2015 Significant items (continued)
(i) Gain on disposal of Western Landfill
In February 2015, the Group sold its Western Landfill business for net cash proceeds of $139.0 million, and generated a profit before
tax of $115.0 million.
(ii) Impairment of Building Products businesses
Our ongoing review of the Building Products segment resulted in impairments of Building Products assets reflecting results and
forecasts at the time. A value in use methodology was used to determine the recoverable amount of the West Coast Bricks and
Roofing and Masonry businesses, leading to an impairment of $31.3 million for West Coast Bricks and $29.9 million for Roofing and
Masonry. A pre-tax discount rate of 15% was used in the value in use model.
In the Hardwood business, a structural improvement program was implemented to improve operational efficiency and restructure its
warehousing and distribution network, which led to an asset impairment of $8.9 million and restructuring costs of $2.5 million
being incurred.
(iii) Construction Materials & Cement restructure
In response to market conditions at the time, a review of the asset portfolio of Construction Materials was performed, resulting in
impairment costs of $13.3 million and restructuring costs of $7.6 million being incurred in the second half of the year. This related to
the mothballing and closure of a number of operating sites, predominantly in Queensland, as well as make safe demolition costs at the
Waurn Ponds clinker manufacturing facility. In addition, restructuring costs in the first half of $10.0 million were incurred to streamline
the division and align with current market conditions.
(iv) Loss on disposal of East Coast Bricks
During 2015, the Group received clearance by the Australian Competition and Consumer Commission for the East Coast Bricks
business to enter into a joint venture with CSR Limited. On disposal of its interest, Boral deconsolidated its existing East Coast Bricks
business and recognised an equity accounted investment in respect of its 40% shareholding in the Boral CSR Bricks Joint Venture.
This resulted in a net loss of $1.7 million.
(v) Boral CSR Bricks Joint Venture restructure
Following formation of the Boral CSR Bricks Joint Venture, the joint venture incurred restructuring and stamp duty costs of $6.4 milion
(Boral’s share) in order to realise overhead savings from consolidation of management structures and efficiency gains in sales and
administration functions.
(vi) Other
Other items include the gain on disposal of the Oklahoma Quarries business of $1.7 million, and a loss of $3.2 million as a result of
finalisation of completion adjustments associated with the disposal of the Gypsum shareholding.
Asset impairment
Property, plant and equipment
Receivables
Inventory
Summary of significant items before interest and tax by segment
Construction Materials & Cement
Building Products
Boral USA
Discontinued operations
Unallocated
2016
$m
–
(50.5)
–
(50.5)
2016
$m
–
–
–
4.0
(50.5)
(46.5)
2015
$m
(74.2)
–
(9.2)
(83.4)
2015
$m
84.1
(79.0)
1.7
(4.9)
–
1.9
Boral Limited Annual Report 2016 91
FINANCIAL
STATEMENTS
Notes to the Financial Statements
Boral Limited and Controlled Entities
Section 2: Business performance (continued)
2.7 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 at bank and on hand
Bank short-term deposits
The bank short-term deposits mature within 90 days and pay interest at a weighted average
interest rate of 2.27% (2015: 2.28%).
(ii) Reconciliation of net profit to net cash provided by operating activities:
Net profit
Adjustments for non-cash items:
Depreciation and amortisation
Discount unwinding
Gain on sale of assets and businesses
Impairment of assets, businesses and restructure costs
Share-based payment expense
Unrealised foreign exchange gains
Non-cash equity income
Net cash provided by operating activities before change in assets and liabilities
Changes in assets and liabilities net of effects from acquisitions/disposals
Receivables
Inventories
Payables
Provisions
Current and deferred taxes
Other
Net cash provided by operating activities
2016
$m
2015
$m
124.1
328.0
452.1
87.9
417.9
505.8
256.0
257.0
246.6
2.7
(27.3)
50.5
14.7
–
(15.2)
528.0
50.1
(6.4)
(23.1)
(18.0)
(37.2)
(15.9)
248.8
–
(156.8)
106.7
10.6
(6.3)
(27.5)
432.5
81.3
(16.5)
(15.9)
(53.8)
(7.5)
(1.8)
477.5
418.3
92
Boral Limited Annual Report 2016
Section 3: Operating assets and liabilities
This section provides information relating to the operating assets and liabilities of the Group. Boral is committed to maintaining a
strong Balance Sheet through continued focus on cash conversion. The Group’s strategy also considers expenditure, growth and
acquisition requirements.
3.1 Receivables
Trade and other receivables are initially recognised at the value of the invoice issued to the customer and subsequently at the amount
considered recoverable from the customer (amortised cost using the effective interest rate method).
Current
Trade receivables
Associated entities
Less: Allowance for impairment
Other receivables
Less: Allowance for impairment
2016
$m
2015
$m
589.1
0.1
589.2
(12.4)
576.8
47.2
(0.1)
47.1
623.9
603.3
0.4
603.7
(13.8)
589.9
70.0
(0.1)
69.9
659.8
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 $46.7 million (2015: $50.5 million), which are past due but not impaired. These relate to a number of
debtors with no significant change in credit quality or history of default. The ageing analysis is as follows:
Trade receivables – past due 0 – 60 days
Trade receivables – past due > 60 days
44.8
1.9
46.9
3.6
Total bad and doubtful debts expense for the period amounts to $1.1 million (2015: $2.4 million).
Significant accounting judgements, estimates and assumptions
The Group has considered the collectability and recoverability of trade receivables. An allowance for doubtful debts has been
made for the estimated irrecoverable trade receivable amounts arising from the past rendering of services, determined by
reference to past default experience.
Non-current
Loans to associated entities
Other receivables*
14.6
1.4
16.0
21.0
54.4
75.4
* Decrease primarily due to impairment of the USG Boral earnout receivable. Refer to note 2.6 for further information.
No amounts owing by associates or included in other receivables were past due as at 30 June 2016.
Boral Limited Annual Report 2016 93
FINANCIAL
STATEMENTS
Notes to the Financial Statements
Boral Limited and Controlled Entities
Section 3: Operating assets and liabilities (continued)
3.2 Inventories
Inventories are valued at the lower of cost and net realisable value. Net realisable value represents the estimated selling price less all
estimated costs of completion and costs to be incurred in marketing, selling and distribution.
For land development projects, cost includes the cost of acquisition, development and holding costs during development. Costs
incurred after completion of development are expensed as incurred.
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
3.3 Property, plant and equipment
2016
$m
158.4
50.1
335.7
12.7
556.9
2015
$m
145.7
53.9
330.9
7.3
537.8
12.6
21.6
3.6
21.7
25.3
6.2
22.7
28.9
Owned assets
The value of property, plant and equipment is measured as the cost of the asset, minus accumulated depreciation and impairment
losses (see note 3.5). The cost of the asset is the consideration provided plus incidental costs directly attributable to the acquisition.
The value of self-constructed assets includes the cost of material and direct labour and any other costs directly attributable to bringing
the asset to a working condition for its intended use.
Subsequent costs in relation to replacing a part of property, plant and equipment are capitalised in the carrying amount of the item if it
is probable that future economic benefits will flow to Boral and its cost can be measured reliably. All other costs are recognised in the
Income Statement as incurred.
Depreciation
Depreciation is calculated to expense the cost of items of property, plant and equipment (excluding freehold land) less their estimated
residual values on a straight-line basis over their estimated useful lives.
Depreciation is recognised in the Income Statement from the date of acquisition or, in respect of internally constructed assets, from
the time an asset is completed and held ready for use.
Quarry stripping assets are amortised over the expected life of the identified resources using the units of production method.
Depreciation rates and methods, useful lives and residual values are reviewed at each balance sheet date. When changes are made,
adjustments are reflected prospectively in current and future financial years only.
The depreciation and amortisation rates used for each class of asset are as follows:
Buildings
Mineral reserves and licences
Plant and equipment
2016
2015
1 – 10%
1 – 5%
1 – 10%
1 – 5%
5 – 33.3%
5 – 33.3%
Significant accounting judgements, estimates and assumptions
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.
94
Boral Limited Annual Report 2016
Section 3: Operating assets and liabilities (continued)
3.3 Property, plant and equipment (continued)
Reconciliation of movements in property, plant and equipment
Land and buildings
Mineral reserves, licences
and quarry stripping
Plant and equipment
Total
2016
$m
2015
$m
2016
$m
2015
$m
2016
$m
2015
$m
2016
$m
2015
$m
893.3
916.7
163.2
161.6
1,391.9
1,483.6
2,448.4
2,561.9
0.4
(14.1)
–
0.3
(18.9)
(55.4)
–
–
–
(9.1)
(14.5)
–
(7.3)
(43.0)
7.4
28.0
312.5
215.3
320.3
243.6
24.8
37.0
14.9
–
(39.7)
(37.0)
(28.6)
–
–
–
(26.2)
(107.5)
–
(74.2)
–
–
(15.2)
–
(1.6)
–
(57.4)
(1.7)
6.8
(0.3)
(2.7)
(1.3)
4.1
(3.3)
(17.0)
(15.9)
(20.4)
(20.3)
(206.0)
(209.9)
(243.4)
(246.1)
8.0
46.4
0.7
4.9
8.2
48.9
16.9
100.2
895.4
893.3
172.6
163.2
1,449.7
1,391.9
2,517.7
2,448.4
1,086.6
1,076.4
310.8
284.7
4,179.1
4,039.4
5,576.5
5,400.5
(191.2)
(183.1)
(138.2)
(121.5)
(2,729.4)
(2,647.5)
(3,058.8)
(2,952.1)
895.4
893.3
172.6
163.2
1,449.7
1,391.9
2,517.7
2,448.4
Balance at the beginning
of the year
Additions
Disposals
Disposals of entities or
operations
Transferred (to)/from
other property, plant and
equipment
Impairment disclosed as
significant items
Transfer (to)/from other
assets or liabilities
Depreciation or
amortisation expense
Net foreign currency
exchange differences
Balance at the end of
the year
At cost
Less: Accumulated
depreciation, amortisation
and impairment
Balance at the end of
the year
Operating leases
Payments made under operating leases are expensed on a straight-line basis over the term of the lease, except where an alternative
basis is more representative of the pattern of benefits to be derived from the leased property. Minimum lease payments include fixed
rate increases.
Total operating lease rental charges for the year is $73.9 million (2015: $75.5 million).
Boral Limited Annual Report 2016 95
FINANCIAL
STATEMENTS
Notes to the Financial Statements
Boral Limited and Controlled Entities
Section 3: Operating assets and liabilities (continued)
3.4 Intangible assets
Goodwill
All business combinations are accounted for by applying the acquisition method. Goodwill represents the difference between the cost
of the acquisition and the fair value of the net identifiable assets acquired.
Goodwill is stated at cost less any accumulated impairment losses. Goodwill is tested annually for impairment.
Other intangible assets
Other intangible assets, comprising brand names, technology, software development and government grant of carbon credits, are
acquired individually or through business combinations and are stated at cost less accumulated amortisation and impairment losses.
Amortisation
Amortisation is calculated to expense the cost of the intangible asset less its estimated residual values on a straight-line basis over
their estimated useful lives. Where appropriate, other intangible assets are amortised from the date that they are available for use at
rates from 5% to 20%.
Amortisation is recognised in the Income Statement from the date the assets are available for use unless their lives are indefinite.
Goodwill and intangible assets with an indefinite useful life are systematically tested for impairment annually.
Significant accounting judgements, estimates and assumptions
Judgements are made with respect to identifying and valuing intangible assets on acquisition of new businesses.
2016
$m
2015
$m
213.1
208.6
44.0
(22.4)
21.6
234.7
208.6
4.5
213.1
18.5
3.5
(0.4)
(3.2)
2.7
0.5
21.6
38.3
(19.8)
18.5
227.1
183.1
25.5
208.6
13.0
6.3
(0.7)
(2.7)
–
2.6
18.5
Goodwill
Other intangible assets
Less: Accumulated amortisation
Total
Reconciliation of movements in goodwill
Balance at the beginning of the year
Net foreign currency exchange differences
Balance at the end of the year
Reconciliation of movements in other intangible assets
Balance at the beginning of the year
Additions
Australian carbon credit units
Amortisation expense
Transfer from other assets
Net foreign currency exchange differences
Balance at the end of the year
96
Boral Limited Annual Report 2016
Section 3: Operating assets and liabilities (continued)
3.5 Carrying value assessment
Boral annually tests goodwill and other intangible assets with indefinite useful lives for impairment. Other non-financial assets, with the
exception of inventories (see note 3.2) and deferred tax assets (see note 5.2), are tested if there is any indication of impairment or if
there is any indication that an impairment loss recognised in a prior period may no longer exist or may have decreased.
An asset that does not generate independent cash flows and its individual value in use cannot be estimated is tested for impairment
as part of a cash generating unit (CGU).
An impairment loss is recognised in the Income Statement when the carrying amount of an asset or CGU exceeds its recoverable
amount. The asset’s recoverable amount is estimated based on the higher of its value in use and fair value less costs to sell.
An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment
loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been
determined, net of depreciation or amortisation, if no impairment loss had been recognised. An impairment loss in respect of goodwill
is not reversed.
Significant accounting judgements, estimates and assumptions
Management is required to make significant estimates and judgements in determining whether the carrying amount of non-financial
assets has any indication of impairment, in particular in relation to:
•
the forecasting of future cash flows – these are based on the Group’s latest approved forecasts and reflect expectations of
sales growth, operating costs, margin, capital expenditure and cash flows, based on past experience and management’s
expectation of future market changes, taking into account external forecasts.
• discount rates applied to those cash flows – pre-tax discount rates used are the weighted average cost of capital determined
by current market inputs and adjusted for the risks specific to the asset or CGU.
•
the expected long-term growth rates – cash flows beyond the forecast period are extrapolated using estimated growth rates.
The growth rates are based on the long-term performance of each CGU in their respective market.
Such estimates and judgements are subject to change as a result of changing economic and operational conditions. Actual cash flows
may therefore differ from forecasts and could result in changes in the recognition of impairment charges in future periods.
Impairment testing for cash generating units containing goodwill
For the purposes of 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 CGU are as follows:
US Bricks
Other*
* Relates to multiple business units, none of which are considered individually significant.
2016
$m
109.0
104.1
213.1
2015
$m
105.6
103.0
208.6
Boral Limited Annual Report 2016 97
FINANCIAL
STATEMENTS
Notes to the Financial Statements
Boral Limited and Controlled Entities
Section 3: Operating assets and liabilities (continued)
3.5 Carrying value assessment (continued)
US Bricks
Recognising the cyclical nature of the USA building industry, cash flow projections for the US Bricks business cover a period of
10 years, reflecting a full business cycle. Cash flows beyond the projection period are extrapolated using growth rates of 0.8%. 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 rate applied to pre-tax cash flows
was 13.9%.
Key assumptions relate to the number of housing starts, market share and the average selling price of bricks through the forecast
period for the bricks business in the USA.
These assumptions have been determined with reference to current and historical performance and taking into account external
forecasts. Housing start forecasts utilised in the cash flow projections are based on historical experiences in the relevant geographies
and independent economists’ forecasts.
The recoverable amount of the CGU based on value in use exceeds its carrying value as at 30 June 2016. A key assumption used in
determining the recoverable amount is a continued recovery in US housing starts towards levels historically seen in previous market
cycles. In the event that housing starts do not recover to these anticipated levels, the carrying value of the CGU may exceed its
recoverable amount.
Impairment testing for other cash generating units
The recoverable amount of other CGUs has been reviewed and exceed their carrying values as at 30 June 2016. No reasonable
changes in the key assumptions on which the estimates have been based for these businesses would cause the carrying amount to
exceed the recoverable amount, nor have similar key assumptions been used in determining the recoverable amount.
98
Boral Limited Annual Report 2016
Section 3: Operating assets and liabilities (continued)
3.6 Provisions
A provision is recognised in the Balance Sheet when:
• Boral has a present obligation (legal or constructive) as a result of a past event;
•
•
a reliable estimate can be made of the amount of the obligation; and
it is probable that an outflow of economic benefits will be required to settle the obligation.
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 the risk specific to the liability.
Provision
Description
Rationalisation
and restructuring
Claims
Restoration and
environmental
rehabilitation
Provisions for rationalisation and restructuring are recognised when the
Group has a detailed formal plan identifying the business or part of the
business concerned, the location and approximate number of employees
affected, a detailed estimate of the associated costs, and an appropriate
timeline, and the restructuring has either commenced or been publicly
announced. Costs related to ongoing activities are not provided for.
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.
The restoration and environmental rehabilitation provision comprise mainly:
• make-good provisions included in lease agreements for which the
Group has a legal or constructive obligation;
•
restoration and decommissioning costs associated with environmental
risks.
At a number of sites, there are areas of restoration and environmental
rehabilitation required of areas from which natural resources are extracted.
The provision includes costs associated with the clean-up of sites the
Group owns, or contamination that the Group caused, to enable ongoing
use of the land as an industrial property or development to a higher value
end use, and costs associated with the decommissioning, removal or repair
of sites.
Other
Other primarily includes provision for onerous contracts.
A provision for onerous contracts is recognised when the expected benefits
to be derived by the Group from a contract are lower than the unavoidable
costs of meeting the obligations under the contract. The provision is
measured as the lower of the cost of fulfilling the contract and any
compensation or penalties arising from the failure to fulfil it and is recognised
only in respect of the onerous element of the contract.
Significant accounting
judgements, estimates
and assumptions
Future costs associated
with the restructuring and
the expected time period.
Likelihood of settling
customer and insurance
claims.
Future costs associated
with dismantling and
removing assets and
restoring sites to their
original condition, requiring
assumptions on closure
dates, application of
environmental legislation,
available technologies,
regulatory requirements,
expected future use of
the site and consultant
cost estimates.
Profitability assessment
of contracts.
Boral Limited Annual Report 2016 99
FINANCIAL
STATEMENTS
Notes to the Financial Statements
Boral Limited and Controlled Entities
Section 3: Operating assets and liabilities (continued)
3.6 Provisions (continued)
As at 30 June 2016
Reconciliations
Balance at the beginning of the year
Provisions made during the year
Unwind of discount
Payments made during the year
Net foreign currency exchange differences
Balance at the end of the year
Current
Non-current
Total
As at 30 June 2015
Reconciliations
Balance at the beginning of the year
Provisions made during the year
Unwind of discount
Decrease through disposal of entity
Payments made during the year
Transferred to investments accounted for using the
equity method
Net foreign currency exchange differences
Balance at the end of the year
Current
Non-current
Total
Rationalisation
and
restructuring
$m
11.2
12.7
–
(12.4)
0.1
11.6
11.6
–
11.6
Rationalisation
and
restructuring
$m
23.8
13.2
–
–
(27.1)
–
1.3
11.2
11.2
–
11.2
Restoration and
environmental
rehabilitation
$m
Claims
$m
Other
$m
Total
$m
11.9
68.3
40.8
132.2
–
–
(2.2)
0.1
9.8
8.3
1.5
9.8
Claims
$m
11.5
1.4
–
(0.3)
(1.4)
–
0.7
11.9
10.7
1.2
11.9
–
1.8
(9.2)
–
3.0
0.9
(9.8)
–
60.9
34.9
16.5
44.4
60.9
Restoration and
environmental
rehabilitation
$m
88.3
3.8
1.9
(9.9)
(16.0)
–
0.2
68.3
21.5
46.8
68.3
21.8
13.1
34.9
Other
$m
48.8
10.4
1.2
(0.3)
(17.0)
(2.4)
0.1
40.8
20.0
20.8
40.8
15.7
2.7
(33.6)
0.2
117.2
58.2
59.0
117.2
Total
$m
172.4
28.8
3.1
(10.5)
(61.5)
(2.4)
2.3
132.2
63.4
68.8
132.2
100
Boral Limited Annual Report 2016
Section 4: Capital and financial structure
This section provides information relating to the Group’s capital structure and its exposure to financial risk, how they affect the Group’s
financial position and performance, and how the risks are managed.
The capital structure of the Group consists of debt and equity. The Directors determine the appropriate capital structure of Boral,
specifically how much is raised from shareholders (equity) and how much is borrowed from financial institutions (debt) in order to
finance the current and future activities of the Group. The Directors review the Group’s capital structure and dividend policy regularly
and do so in the context of the Group’s ability to continue as a going concern, to invest in opportunities that grow the business and
enhance shareholder value.
This section also provides information around the Group’s risk management policies and how Boral uses derivatives to hedge the
underlying exposure to changes in interest rates, foreign exchange rate fluctuations and commodity prices.
4.1 Loans and borrowings
Loans and borrowings are recognised initially at fair value less attributable transaction costs. Subsequently, loans and borrowings
are stated at amortised cost, with any difference between amortised cost and redemption value being recognised in the Income
Statement over the period of the borrowings on an effective interest rate basis.
Current
Other loans – unsecured
Finance lease liabilities
Non-current
Other loans – unsecured
Finance lease liabilities
Total
TERM AND DEBT REPAYMENT SCHEDULE
Terms and conditions of outstanding loans were as follows:
2016
$m
351.1
1.3
352.4
990.0
2.8
992.8
1,345.2
2015
$m
0.4
1.4
1.8
1,317.1
3.7
1,320.8
1,322.6
Current
US senior notes – unsecured
Other loans – unsecured
Finance lease liabilities
Non-current
US senior notes – unsecured
CHF notes – unsecured
Other loans – unsecured
Finance lease liabilities
Total
Effective
interest rate
2016
Calendar
year of
maturity
Currency
30 June 2016
30 June 2015
Carrying
amount
$m
Fair value
$m
Carrying
amount
$m
Fair value
$m
USD
Multi
AUD
USD
CHF
Multi
AUD
5.85%
2017
351.0
355.2
5.00% 2016 – 2017
6.01% 2016 – 2017
0.1
1.3
0.1
1.3
352.4
356.6
–
0.4
1.4
1.8
–
0.4
1.4
1.8
6.11% 2018 – 2030
2.25%
–
2020
–
5.90% 2017 – 2021
784.6
205.4
–
2.8
810.9
1,104.9
1,152.8
220.8
208.9
222.3
–
2.8
3.3
3.7
3.3
3.7
992.8
1,034.5
1,320.8
1,382.1
1,345.2
1,391.1
1,322.6
1,383.9
Boral Limited Annual Report 2016 101
FINANCIAL
STATEMENTS
Notes to the Financial Statements
Boral Limited and Controlled Entities
Section 4: Capital and financial structure (continued)
4.1 Loans and borrowings (continued)
US SENIOR NOTES – UNSECURED
Borrower
Boral USA
Boral USA
Boral USA
Boral Limited
Boral Limited
Boral Limited
Boral Limited
Boral Limited
Total
Notional amount
US$m
Issue date
Interest rate
Maturity date
AUD equivalent
$m
53.5
30.0
76.2
200.0
276.0
135.0
41.0
24.0
835.7
05/2002
04/2008
04/2008
05/2005
04/2008
05/2015
05/2015
03/2015
7.11%
7.12%
7.22%
5.52%
7.12%
4.01%
4.16%
4.31%
05/2017
04/2018
04/2020
05/2017
04/2018
05/2025
05/2027
03/2030
72.0
40.4
102.5
279.0
371.1
183.6
55.5
31.5
1,135.6
CHF NOTES – UNSECURED
Borrower
Boral Limited
Notional amount
CHF $m
Issue date
Interest rate
Maturity date
AUD equivalent
$m
150.0
02/2013
2.25%
02/2020
205.4
BANK FACILITIES
Syndicated loan facility
A committed US$400 million multi-currency syndicated loan facility was established on 1 July 2015 to provide liquidity for general
corporate purposes. The maturity date of the facility is 1 July 2020. The facility was undrawn as at 30 June 2016.
Bank overdraft, lease liabilities and other
The Group operates unsecured bank overdraft facility arrangements in Australia and USA that have combined limits of A$20.0 million
(2015: A$24.7 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 are subject to lease terms of various maturities.
For the above named facilities, the Group has complied with the respective borrowing covenants throughout the year ended
30 June 2016.
102
Boral Limited Annual Report 2016
Section 4: Capital and financial structure (continued)
4.2 Financial risk management
Boral’s Treasury function provides 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.
Derivative financial 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. Any gains or losses arising from changes in fair value of derivatives, except those that qualify as effective hedges, are
immediately recognised in the Income Statement.
Fair value hedge
Fair value hedges are used to hedge exposure to changes in the fair value of recognised assets, liabilities or firm commitments.
Changes in the fair value of derivatives, together with any changes in the fair value of the hedged asset or liability that are attributable
to the hedged risk, are immediately recognised in the Income Statement.
Cash flow hedge
Cash flow hedges are used to hedge risks associated with highly probable forecast transactions. For cash flow hedges, changes
in the fair value of the derivative are recognised in equity in the hedging reserve. The gain or loss relating to the ineffective portion is
recognised immediately in the Income Statement.
Amounts deferred in equity are transferred to the Income Statement in the periods the hedged item is recognised in profit or loss.
When the forecast transaction that is hedged results in the recognition of a non-financial asset or liability, the gains and losses
previously deferred in equity are transferred to form part of the initial cost and carrying amount of the asset or liability.
If a forecast transaction is no longer expected to occur, the cumulative gain or loss that was deferred in equity is immediately
recognised in the Income Statement. If the hedging instrument expires or is sold, terminated, or no longer qualifies for hedge
accounting, any gain or loss deferred in equity remains in equity until the forecast transaction occurs.
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
The Group enters into derivative transactions under International Swaps and Derivatives Association (ISDA) master netting
agreements. The ISDA agreements do not meet the criteria for offsetting in the Balance Sheet. Accordingly, derivatives have been
disclosed on a gross basis on the Balance Sheet.
CREDIT RISK
Credit risk is the risk of loss if a counterparty fails to fulfil their obligations under a financial instrument contract. The Group is exposed
to credit risk arising from financing activities including cash at bank, trade and other receivables and other financial instruments.
Management has a counterparty credit risk policy in place and the exposure to credit risk is monitored on an ongoing basis.
Exposure to credit risk
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.
For information on the management of credit risk relating to trade and other receivables, see note 3.1.
No more than 40% of Boral’s total credit exposure is to be with any individual eligible counterparty.
Boral Limited Annual Report 2016 103
FINANCIAL
STATEMENTS
Notes to the Financial Statements
Boral Limited and Controlled Entities
Section 4: Capital and financial structure (continued)
4.2 Financial risk management (continued)
CREDIT RISK (continued)
The following table indicates the Group’s maximum credit exposure from non-derivative financial assets.
Non-derivative financial assets
Loans to and receivables from associates
Trade and other receivables
Cash at bank, on hand and bank short-term deposits
Equity securities
Carrying amount
Carrying amount
2016
$m
14.7
625.2
452.1
15.3
2015
$m
21.4
713.8
505.8
14.1
1,107.3
1,255.1
The following table indicates the Group’s maximum credit exposure for derivative financial assets, 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 2016
Derivative financial assets
Forward exchange contracts1
Interest rate swaps2
Commodity swaps1
Cross currency swaps2
30 June 2015
Derivative financial assets
Forward exchange contracts1
Interest rate swaps2
Commodity swaps1
Cross currency swaps2
1. Designated as cash flow hedges.
2. Designated as fair value hedges.
Carrying
amount
$m
Fair value
$m
Contractual
cash flows
$m
6 months
or less
$m
6-12
months
$m
1-2 years
$m
2-5 years
$m
More than
5 years
$m
0.1
7.7
1.2
17.7
26.7
0.1
7.7
1.2
17.7
26.7
0.1
7.8
1.2
17.7
26.8
0.1
(1.4)
1.2
–
(0.1)
–
1.3
(0.1)
17.7
18.9
–
2.5
0.1
–
2.6
–
5.4
–
–
5.4
–
–
–
–
–
Carrying
amount
$m
Fair value
$m
Contractual
cash flows
$m
6 months
or less
$m
6-12
months
$m
1-2 years
$m
2-5 years
$m
More than
5 years
$m
0.4
1.5
2.7
20.6
25.2
0.4
1.5
2.7
20.6
25.2
0.4
1.4
2.7
21.3
25.8
0.4
(1.0)
1.3
2.6
3.3
–
1.4
0.8
4.0
6.2
–
1.5
0.6
14.7
16.8
–
(0.5)
–
–
(0.5)
–
–
–
–
–
104
Boral Limited Annual Report 2016
Section 4: Capital and financial structure (continued)
4.2 Financial risk management (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 liquidity risk by ensuring that:
(a) Boral has a well spread debt maturity profile with a target of > 3.5 years;
(b) Current debt less cash deposits, is not to exceed 20% of the sum of Total Debt plus Committed Undrawn Facilities > 1 year;
(c) Committed Undrawn Facilities plus cash is > A$500 million.
30 June 2016
Non-derivative financial liabilities
Carrying
amount
$m
Contractual
cash flows
$m
6 months
or less
$m
6-12
months
$m
1-2 years
$m
2-5 years
$m
More than
5 years
$m
US senior notes – unsecured
1,135.6
(1,330.5)
(21.6)
(374.7)
(459.4)
(150.3)
(324.5)
CHF notes – unsecured
Other loans – unsecured
Finance lease liabilities
Trade creditors
Derivative financial liabilities
Forward exchange contracts1
Commodity swaps1
Cross currency swaps1,2
Cross currency swaps1
30 June 2015
Non-derivative financial liabilities
205.4
(222.7)
0.1
4.1
(0.1)
(4.0)
–
–
(0.5)
607.9
(607.9)
(607.9)
(2.9)
(0.1)
(0.7)
–
(4.6)
(215.2)
–
–
(1.3)
(1.5)
–
–
–
–
–
–
1,953.1
(2,165.2)
(630.0)
(378.4)
(465.3)
(367.0)
(324.5)
0.8
4.5
20.8
0.3
26.4
(0.8)
(4.5)
(22.0)
(0.3)
(27.6)
(0.8)
(3.8)
(3.0)
(0.2)
(7.8)
–
(0.7)
0.1
(0.1)
(0.7)
–
–
–
–
(4.4)
(14.7)
–
–
(4.4)
(14.7)
–
–
–
–
–
1,979.5
(2,192.8)
(637.8)
(379.1)
(469.7)
(381.7)
(324.5)
Carrying
amount
$m
Contractual
cash flows
$m
6 months
or less
$m
6-12
months
$m
1-2 years
$m
2-5 years
$m
More than
5 years
$m
US senior notes – unsecured
1,104.9
(1,354.5)
(20.9)
(32.8)
(395.9)
(579.9)
(325.0)
CHF notes – unsecured
Other loans – unsecured
Finance lease liabilities
Trade creditors
Derivative financial liabilities
Forward exchange contracts1
Commodity swaps1
Cross currency swaps1,2
Cross currency swaps1
1. Designated as cash flow hedges.
2. Designated as natural investment hedge.
208.9
(231.5)
3.7
5.1
(5.2)
(5.6)
–
(0.6)
(0.8)
641.5
(641.5)
(641.5)
(3.0)
(0.1)
(0.8)
–
(4.7)
(223.8)
(0.7)
(1.7)
–
(1.9)
(2.3)
–
–
(1.9)
–
–
1,964.1
(2,238.3)
(663.8)
(36.7)
(403.0)
(807.9)
(326.9)
0.3
2.7
2.8
0.8
6.6
(0.3)
(2.8)
(2.1)
(0.8)
(6.0)
(0.1)
(1.8)
(2.9)
(0.2)
(5.0)
(0.2)
(0.8)
0.3
(0.2)
(0.9)
–
(0.2)
(4.0)
(0.4)
(4.6)
–
–
4.5
–
4.5
–
–
–
–
–
1,970.7
(2,244.3)
(668.8)
(37.6)
(407.6)
(803.4)
(326.9)
Boral Limited Annual Report 2016 105
FINANCIAL
STATEMENTS
Notes to the Financial Statements
Boral Limited and Controlled Entities
Section 4: Capital and financial structure (continued)
4.2 Financial risk management (continued)
FOREIGN CURRENCY RISK
The Group is exposed to fluctuations in foreign currency as a result of purchase of raw materials, interest expenses related to
non Australian dollar borrowings, imported plant and equipment, some export related receivables and the translation of its investments
in overseas assets.
The Group manages this risk by adopting the following policies:
(a) All global operational foreign exchange 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$0.5 million must be 100% hedged at the time of Capex approval.
(c) Net investments, including net intercompany loans, in overseas domiciled investments are hedged, where regulatory conditions
and available hedge instruments permit.
The Group uses forward exchange contracts to hedge foreign exchange risk. Most of the forward exchange contracts have maturities
of less than one year. Where necessary and in accordance with policy compliance, forward exchange contracts can be rolled over
at maturity.
(i) Translation risk
Foreign currency translation risk is the risk that upon consolidation for financial reporting the value of the Group’s investment in foreign
domiciled entities will fluctuate due to changes in foreign currency rates.
The Group uses foreign currency denominated borrowings and cross currency swaps to hedge the Group’s net investment in
overseas domiciled assets. The related exchange gains/losses on foreign currency movements are taken to the Foreign Currency
Translation Reserve.
The table below shows the Group’s net exposure to translation risk. The Group’s investment in foreign operations is partially offset
against foreign currency borrowings, reducing the Group’s overall exposure to translation risk. Amounts below are calculated based on
notional amounts:
Currency
30 June 2016
Balance sheet
Net investment in overseas domiciled entities
Cash
Foreign currency borrowings
Cross currency swaps
Currency
30 June 2015
Balance sheet
Net investment in overseas domiciled entities
Cash
Foreign currency borrowings
Cross currency swaps
USD
Euro
GBP
Multi*
Notional A$ equivalent ($m)1
940.3
10.0
(1,147.8)
278.9
81.4
1.7
–
–
–
1.7
(2.0)
642.0
–
–
–
–
–
–
(2.0)
642.0
USD
Euro
GBP
Multi*
Notional A$ equivalent ($m)1
874.3
8.9
(1,123.4)
281.7
41.5
1.7
–
–
–
1.7
(2.2)
646.5
–
–
–
–
–
–
(2.2)
646.5
* Exposure relates to investment in USG Boral Building Products Pte Ltd, which is denominated in multiple Asian currencies.
1. The notional amount shows the principal face value for each instrument.
106
Boral Limited Annual Report 2016
Section 4: Capital and financial structure (continued)
4.2 Financial risk management (continued)
FOREIGN CURRENCY RISK (continued)
(ii) Transaction risk
Foreign currency transaction risk is the risk that the value of financial commitments, recognised monetary assets or liabilities or cash
flows will fluctuate due to changes in foreign currency rates.
The Group’s foreign currency transaction risk is managed through the use of forward exchange contract derivatives. A forward
exchange contract is an agreement between two parties to exchange two currencies at a given exchange rate at some point in the
future with the aim of mitigating foreign currency transaction risk.
Based on notional amounts, the forward exchange contracts taken out to hedge foreign exchange transactional risk at balance date
were as follows:
Notional amount AUD1
Average exchange rate
2016
$m
2015
$m
2016
2015
US dollars
Buy USD/sell AUD – One year or less
38.7
51.1
0.7280
0.7666
Euros
Buy EUR/sell AUD – One year or less
Buy EUR/sell AUD – One to two years
NZD
Buy NZD/sell AUD – One year or less
CNY
Buy CNY/sell AUD – One year or less
1. The notional amount shows the principal face value for each instrument.
11.9
–
–
–
25.1
3.5
7.7
3.8
0.6620
–
–
–
0.6731
0.6588
1.1225
4.7905
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. There was no significant cash flow hedge ineffectiveness in the
current or prior year.
As at balance date, most of the Group’s US senior notes interest payables were hedged using forward exchange contracts.
The unhedged foreign currency payables and receivables were Nil at 30 June 2016 (2015: A$1.0 million). The related exchange
gains/losses on foreign currency movements are taken to the Income Statement.
Sensitivity
At 30 June 2016, had the Australian dollar weakened/strengthened by 10% against the respective foreign currencies where all other
variables remain constant, the Group’s pre-tax change to earnings would have been a (loss)/gain respectively of around equivalent
A$0.3 million (2015: equivalent A$0.4 million) and equity would have increased/decreased respectively by around equivalent
A$10.6 million (2015: equivalent A$8.0 million).
The following significant exchange rates applied during the year:
USD
Euro
GBP
NZD
Average rate
Reporting date spot rate
2016
2015
2016
2015
0.7270
0.6572
0.4948
1.0868
0.8287
0.6958
0.5263
1.0803
0.7432
0.6692
0.5532
1.0479
0.7673
0.6872
0.4887
1.1284
Boral Limited Annual Report 2016 107
FINANCIAL
STATEMENTS
Notes to the Financial Statements
Boral Limited and Controlled Entities
Section 4: Capital and financial structure (continued)
4.2 Financial risk management (continued)
INTEREST RATE RISK
Interest rate risk is the risk that the Group is impacted by significant changes in interest rates. Borrowings issued at or swapped to
floating rates expose the Group to interest rate risk.
Interest rate swaps and cross currency swaps have been transacted to assist with achieving an appropriate mix of fixed and floating
interest rate borrowings. All interest rate derivative instruments mature progressively over the next six years, with the duration
applicable to the interest rate and cross currency swaps consistent with maturities applicable to the underlying borrowings.
The Group adopts a policy that ensures a minimum of 35% and a maximum of 75% of its borrowings are fixed interest rate
borrowings. The use 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.
At the reporting date, all term funding for the Group was sourced from fixed rate instruments, which required pay floating swaps in
order to meet the target range of fixed interest borrowings of between 35% and 75% of borrowings.
Borrowings are held at amortised cost, meaning that the borrowing’s effective rate of interest is charged as a finance cost to the
Income Statement (not the interest paid in cash) and changes in market rates of interest are ignored. Whilst generally close, the
carrying value at amortised cost may be different to the principal face value.
At the reporting date, the interest rate profile of the Group’s interest bearing financial instruments was:
Fixed rate instruments
US senior notes – unsecured1,2
CHF notes – unsecured3
Other loans – unsecured
Finance lease liabilities
Pay variable interest rate derivatives
Interest rate swap pay floating US$ LIBOR2
Cross currency swap pay floating A$ BBSW1
Other interest rate derivatives
Cross currency swap pay fixed US$ / receive fixed CHF3
2016
Carrying
amount
$m
2016
Notional
amount4
$m
1,135.6
1,124.5
205.4
206.0
0.1
4.1
0.1
4.1
2015
Carrying
amount
$m
1,104.9
208.9
3.7
5.1
2015
Notional
amount4
$m
1,089.1
209.7
3.7
5.1
1,345.2
1,334.7
1,322.6
1,307.6
(7.7)
(17.4)
(25.1)
20.9
20.9
228.5
278.9
507.4
205.4
205.4
(1.5)
(19.8)
(21.3)
2.8
2.8
222.8
281.7
504.5
208.9
208.9
1. US$200 million (equivalent A$278.9 million) fixed rate senior notes due May 2017 have been swapped to AUD floating rates via cross currency swaps.
2. US$169.8 million (equivalent A$228.5 million) fixed rate senior notes due February 2020 have been swapped to USD floating rate via interest rate swaps.
3. CHF150 million (equivalent A$205.4 million) fixed rate notes due February 2020 have been swapped to USD fixed rate via cross currency swaps.
4. The notional amount shows the principal face value for each instrument.
Sensitivity
At 30 June 2016, 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$0.3 million higher/lower (2015: A$0.4 million) and the change in equity would have been
A$0.5 million (2015: A$0.3 million) mainly as a result of a higher/lower interest cost applying to interest rate derivatives.
108
Boral Limited Annual Report 2016
Section 4: Capital and financial structure (continued)
4.2 Financial risk management (continued)
COMMODITY PRICE RISK
Commodity price risk is the risk that the Group is exposed to fluctuations in commodity prices from the purchase of diesel, natural gas,
electricity and coal purchases under variable price contract arrangements. The Group uses commodity swaps to hedge these exposures.
The Group’s policy is to hedge a minimum of 50% of purchases of diesel for the Australian business, for a period of six months. Other
global commodity exposures may be hedged at the discretion of the Group. The maximum hedging levels are:
• 75% for Year 1 (months 1 to 12); and
• 50% for Year 2 (months 13 to 24).
The maximum permitted term for a hedge transaction is two years.
Commodities hedging activities
The notional and fair value of commodity derivative instruments at year end is as follows:
Singapore gasoil 0.05%
Natural gas (NYMEX)
Newcastle Coal
Electricity
2016
Notional A$
equivalent1
$m
2016
Fair value/
Carrying amount
$m
2015
Notional A$
equivalent1
$m
2015
Fair value/
Carrying amount
$m
30.8
7.1
–
11.8
(4.3)
(0.2)
–
1.2
45.8
10.7
5.9
–
1.0
1.7
(2.7)
–
1. The notional amount shows the principal face value for each instrument.
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 a $0.3 million loss in 2016 (2015: Nil).
Sensitivity
At 30 June 2016, 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 (2015: unchanged) and the change in equity would have been
A$4.4 million (2015: A$6.2 million).
FAIR VALUE
The fair value of all financial instruments approximates its carrying value. The following describes the methodology adopted to derive
fair values:
Financial instrument
Valuation method
Carried at fair
value?
Commodity swaps and options The fair value is based on a valuation calculation using closing commodity
Yes
market prices.
Forward exchange contracts
and cross currency swaps
The fair value is based on a valuation calculation using market derived spot
and forward rates applicable to the respective currency.
Interest rate swaps
Cash, deposits, loans and
receivables, payables and
short-term borrowings
Long-term borrowings
The fair value is calculated from the present value of expected future cash
flows for each instrument. The expected future cash flows are derived
from yield curves constructed from market sources reflecting their term to
maturity.
The carrying value approximates fair value due to the short-term nature of
these assets and liabilities.
Loans and borrowings are recognised initially at fair value less attributable
transaction costs. Fair value on inception reflects the present value of
expected cash flows using interest rates derived from market sources
reflecting their term to maturity. Subsequently, loans and borrowings are
stated at amortised cost, with any difference between amortised cost and
redemption value being recognised in the Income Statement over the
period of the borrowings on an effective interest rate basis.
Yes
Yes
No
No
Equity securities
The fair value represents the market value of the underlying securities.
Yes
Boral Limited Annual Report 2016 109
FINANCIAL
STATEMENTS
Notes to the Financial Statements
Boral Limited and Controlled Entities
Section 4: Capital and financial structure (continued)
4.2 Financial risk management (continued)
INTEREST RATES USED FOR DETERMINING FAIR VALUE
Where appropriate, the Group uses BBSW, LIBOR and Treasury Bond yield curves as of 30 June 2016 plus an adequate credit spread
to discount financial instruments. The interest rates used are as follows:
Derivatives
Interest bearing loans and borrowings
Finance leases
2016
% pa
2015
% pa
2.30 – 3.00
2.40 – 4.00
2.25 – 7.12
2.25 – 8.94
5.64 – 6.09
5.64 – 8.49
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 following table presents the Group’s financial assets and liabilities that are measured at Level 1 and Level 2 fair value:
Assets
Equity securities
Derivative financial assets
Total assets
Liabilities
Derivative financial liabilities
Total liabilities
Level 1
2016
$m
15.3
–
15.3
–
–
2015
$m
14.1
–
14.1
–
–
Level 2
2016
$m
–
26.7
26.7
26.4
26.4
2015
$m
–
25.2
25.2
6.6
6.6
The Group does not have financial instruments that have been valued at Level 3.
110
Boral Limited Annual Report 2016
Section 4: Capital and financial structure (continued)
4.3 Issued capital
Ordinary shares issued are classified as equity and are fully paid, have no par value and carry one vote per share and the right to
dividends. Incremental costs directly attributable to the issue of new shares or the exercise of options are recognised as a deduction
from equity, net of any related income tax effects.
Where the Group purchases the Company’s own equity instruments, as the result of a share buy-back, those instruments are
deducted from equity and the associated shares are cancelled. The amount of the consideration paid, including directly attributable
costs, is recognised as a deduction from contributed equity, net of any related income tax effects.
During the year, the Company completed the buy-back of 20,641,950 shares, at an average price of $5.59. This is part of the
Company’s on-market share buy-back program which commenced on 18 March 2015 and completed on 22 September 2015.
The total consideration for shares bought back on market during the buy-back period is $231.4 million, at an average price of $5.91.
The consideration paid was allocated to share capital.
In the event of a winding up of Boral Limited, ordinary shareholders rank after creditors and are fully entitled to any proceeds
of liquidation.
Issued and paid up capital
743,599,437 (2015: 764,241,387) ordinary shares, fully paid
2,246.2
2,361.6
Movements in ordinary issued capital
Balance at the beginning of the year
20,641,950 (2015: 18,494,862) on-market share buy-back
Balance at the end of the year
2,361.6
(115.4)
2,246.2
2,477.6
(116.0)
2,361.6
2016
$m
2015
$m
Boral Limited Annual Report 2016 111
FINANCIAL
STATEMENTS
Notes to the Financial Statements
Boral Limited and Controlled Entities
Section 4: Capital and financial structure (continued)
4.4 Reserves
Foreign currency translation reserve (FCTR)
Exchange differences arising on translation of foreign operations are recognised in FCTR, together with foreign exchange differences
from the translation of liabilities that hedge the Group’s net investment in a foreign operation. Gains or losses accumulated in equity
are recognised in the Income Statement when a foreign operation is disposed of.
Balance at the beginning of the year
Net gain on translation of assets and liabilities of overseas entities
Net loss on translation of long-term borrowings and foreign currency forward contracts net of
tax benefit $8.1 million (2015: $47.7 million)
Balance at the end of the year
2016
$m
97.4
20.4
(19.3)
2015
$m
(50.0)
259.5
(112.1)
98.5
97.4
Hedging reserve
The hedging reserve records the portion of the gain or loss on a hedging instrument in a cash flow hedge that is determined to be an
effective hedge relationship.
Balance at the beginning of the year
Transferred to the Income Statement
Transferred to initial carrying amount of hedged item
Gain/(loss) taken directly to equity
Tax (expense)/benefit
Balance at the end of the year
Other reserve
The other reserve relates to prior year acquisitions.
Balance at the beginning of the year
Balance at the end of the year
1.5
0.2
0.2
(8.1)
2.3
(3.9)
(6.9)
(6.9)
Share-based payments reserve
The share-based payments reserve is used to recognise the fair value of options and rights recognised as an expense.
Balance at the beginning of the year
Option/rights expense
Share acquisition rights vested
Balance at the end of the year
74.2
14.7
(14.6)
74.3
(4.6)
1.1
(0.3)
7.9
(2.6)
1.5
(6.9)
(6.9)
63.6
10.6
–
74.2
Total reserves
162.0
166.2
112
Boral Limited Annual Report 2016
Section 5: Taxation
This section provides the information that is most relevant to understanding the taxation treatment by the Group during the
financial year.
Boral Limited and its wholly owned Australian controlled entities are part of a tax consolidated group. As a consequence, all members
of the tax consolidated group are taxed as a single entity. The head entity within the tax consolidated group is Boral Limited.
5.1 Income tax expense
Income tax expense includes current and deferred tax. Current and deferred tax are recognised in the Income Statement except to the
extent that they relate to items recognised directly in other comprehensive income or equity.
Current tax is the expected tax payable or receivable on the taxable income or loss for the year and any adjustment to tax payable in
respect of previous years. It is measured using tax rates enacted or substantively enacted at the reporting date.
Significant accounting judgements, estimates and assumptions
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.
Boral Limited Annual Report 2016 113
FINANCIAL
STATEMENTS
Notes to the Financial Statements
Boral Limited and Controlled Entities
Section 5: Taxation (continued)
5.1 Income tax expense (continued)
For the year ended 30 June
(i) Income tax expense
Current income tax expense
Deferred income tax expense/(benefit)
Over provision for tax in previous years
Income tax expense attributable to profit
(ii) Reconciliation of income tax expense to prima facie tax
Income tax expense on profit:
– at Australian tax rate 30% (2015: 30%)
– adjustment for difference between Australian and overseas tax rates
Income tax expense on pre-tax profit at standard rates
Tax effect of amounts which are not deductible/(taxable) in calculating taxable income:
Tax losses not recognised
Non-deductible depreciation and amortisation
Capital losses from prior year’s brought to account
Share of associates’ net profit (excluding significant items)
Tax benefit arising from share acquisition rights vested
Finalisation of tax matters
Non deductible significant items and other items
Income tax expense on profit
Over provision for tax in previous years
Income tax expense attributable to profit
Income tax expense/(benefit) from continuing operations
Income tax expense excluding significant items
Income tax expense/(benefit) relating to significant items
Income tax expense/(benefit) from discontinued operations
Income tax expense excluding significant items
Income tax 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:
Net exchange differences taken to equity
Fair value adjustment on cash flow hedges
Recognised in comprehensive income
114
Boral Limited Annual Report 2016
Note
2.6
2.6
2.6
6.1
2016
$m
15.5
19.4
(2.7)
32.2
86.5
4.3
90.8
–
(0.4)
(2.5)
(27.3)
(4.4)
(28.9)
7.6
34.9
(2.7)
32.2
66.7
(34.5)
32.2
–
–
–
32.2
(8.1)
(2.3)
(10.4)
2015
$m
55.4
(13.7)
(3.8)
37.9
88.5
(0.4)
88.1
0.5
0.9
(27.0)
(20.7)
–
–
(0.1)
41.7
(3.8)
37.9
39.7
5.4
45.1
4.1
(11.3)
(7.2)
37.9
(47.7)
2.6
(45.1)
Section 5: Taxation (continued)
5.2 Deferred tax assets and liabilities
Deferred tax is recognised on all temporary differences between the carrying amounts of assets and liabilities for financial reporting
and taxation purposes.
The measurement of deferred tax mirrors the tax consequences that the Group expects to recover or settle the carrying amount of its
assets and liabilities.
Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse.
A deferred tax asset is recognised to the extent that it is probable that future taxable profits will be available against which they can be
utilised. Deferred tax assets are reviewed at each reporting date and are reduced if it is no longer probable that the related tax benefit
will be realised.
Significant accounting judgements, estimates and assumptions
The assumptions regarding future realisation, and the recognition of deferred tax assets, may change due to future operating
performance and other factors.
Recognised deferred tax balances
Deferred tax asset
Unrecognised deferred tax assets
The potential deferred tax asset has not been taken into account in respect of
tax losses where recovery is not probable
2016
$m
2015
$m
237.4
243.6
134.7
133.9
The gross amount of capital and revenue tax losses carried forward that have not been recognised and the range of expiry dates for
recovery by tax jurisdiction are as follows:
Tax jurisdiction
Germany
United Kingdom*
Expiry date
No restriction
No restriction
United States of America
30 June 2029 – 30 June 2034
* Unbooked capital losses.
2016
$m
46.2
42.0
295.6
2015
$m
45.0
47.6
291.6
Boral Limited Annual Report 2016 115
FINANCIAL
STATEMENTS
Notes to the Financial Statements
Boral Limited and Controlled Entities
Section 5: Taxation (continued)
5.2 Deferred tax assets and liabilities (continued)
Movement in temporary differences during the year
As at 30 June 2016
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 2015
Receivables
Inventories
Property, plant and equipment
Intangible assets
Payables
Loans and borrowings
Provisions
Other
Unrealised foreign exchange
Tax losses carried forward
Balance at
the beginning
of the year
$m
Recognised
in income
$m
Recognised
in equity Other movements
$m
$m
3.5
(5.5)
(68.3)
(35.4)
2.9
(4.1)
92.3
(13.4)
7.2
264.4
243.6
(0.2)
2.0
(9.6)
(0.7)
(0.3)
(3.7)
(1.2)
8.6
(3.7)
(10.6)
(19.4)
–
–
–
–
–
2.3
–
–
8.1
–
10.4
–
–
(2.0)
(1.5)
–
–
(2.8)
0.3
–
8.8
2.8
Balance at
the beginning
of the year
$m
Recognised
in income
$m
Recognised
in equity Other movements
$m
$m
3.0
(6.2)
(79.1)
(27.9)
6.4
(2.7)
96.6
(22.4)
(31.5)
217.9
154.1
0.3
0.7
22.0
(0.5)
(3.5)
1.2
(3.8)
8.7
(9.0)
(2.4)
13.7
–
–
–
–
–
(2.6)
–
–
47.7
–
45.1
0.2
–
(11.2)
(7.0)
–
–
(0.5)
0.3
–
48.9
30.7
Balance at
the end
of the year
$m
3.3
(3.5)
(79.9)
(37.6)
2.6
(5.5)
88.3
(4.5)
11.6
262.6
237.4
Balance at
the end
of the year
$m
3.5
(5.5)
(68.3)
(35.4)
2.9
(4.1)
92.3
(13.4)
7.2
264.4
243.6
116
Boral Limited Annual Report 2016
Section 6: Group structure
This section explains significant aspects of Boral’s group structure, including equity accounted investments that the Group has
interest in, its controlled entities and how changes have affected the Group structure. When applicable, it also provides information on
business acquisitions and disposals made during the financial year.
6.1 Discontinued operations
A discontinued operation is a component of the Group’s business that represents a separate major line of business or geographical
area of operations that has been disposed of or is held for sale. An operation would be classified as held for sale if the carrying value
of the assets of the operation will be principally recovered through a sale transaction rather than continuing use. Classification as a
discontinued operation occurs upon disposal or when the operation meets the criteria to be classified as held for sale, if earlier. When
an operation is classified as discontinued, the comparative Income Statement is restated as if the operation had been discontinued
from the start of the comparative period.
There were no discontinued operations as at 30 June 2016.
Prior year comparatives include the discontinued operations relating to the former East Coast bricks business, which was disposed of
during the financial year ended 30 June 2015.
In addition, there were various significant items in relation to discontinued operations. Refer to note 2.6 for further information.
Results of discontinued operations
Revenue
Expenses
Trading profit before significant items, net financing costs and
income tax
Net profit/(loss) on sale of discontinued operations
Profit before net financing costs and income tax
Net financing costs
Profit before income tax
Income tax benefit
Net profit
Attributable to:
Members of the parent entity
Non-controlling interest
Net profit
Cash flows from discontinued operations
Net cash from operating activities
Net cash used in investing activities
Net cash from discontinued operations
Note
2.6
5.1
2016
$m
–
–
–
4.0
4.0
–
4.0
–
4.0
4.0
–
4.0
–
–
–
2015
$m
117.1
(105.8)
11.3
(4.9)
6.4
–
6.4
7.2
13.6
13.6
–
13.6
10.4
(3.3)
7.1
Boral Limited Annual Report 2016 117
FINANCIAL
STATEMENTS
Notes to the Financial Statements
Boral Limited and Controlled Entities
Section 6: Group structure (continued)
6.1 Discontinued operations (continued)
Effect of disposal on the financial position of the Group
(i) Disposal of discontinued businesses
No businesses classified as discontinued operations were disposed in the financial year ended 30 June 2016.
Prior year comparatives include the disposal entries relating to the former East Coast bricks business.
Fair value of interest in new Joint Venture
Less: Transaction costs
Total consideration
Receivables
Inventories
Property, plant and equipment
Other assets
Payables
Provisions
Net assets disposed
Loss on disposal of discontinued operations before income tax
Cash consideration
Less: Transaction costs
Cash consideration net of transaction costs
2016
$m
–
–
–
–
–
–
–
–
–
–
–
–
–
–
2015
$m
100.8
(2.2)
98.6
(20.4)
(30.3)
(65.6)
(0.3)
11.3
5.0
(100.3)
(1.7)
–
(2.2)
(2.2)
(ii) Disposal of other businesses
In the prior year, the Western Landfill and Oklahoma Quarries businesses were disposed. These disposals were not recorded as a
discontinued operation as they were not a separate major line of business of the Group.
(iii) Summary of cash consideration (after transaction costs)
Boral Limited and CSR Limited Joint Venture
Western Landfill
Oklahoma Quarries
Total
2016
$m
–
–
–
–
2015
$m
(2.2)
139.0
12.4
149.2
118
Boral Limited Annual Report 2016
Section 6: Group structure (continued)
6.2 Equity accounted investments
The Group’s investment in its equity accounted investments is initially recorded at cost and subsequently accounted for using the
equity method. The carrying amount of the investment is adjusted to recognise changes in the Group’s interest in the net assets of
the investees. Dividends received from the investees are recognised as a reduction in the carrying amount of the investment. Goodwill
relating to the investees is included in the carrying amount of the investment and is not tested for impairment individually.
The Group’s share of the results of the investees is reported in the Income Statement and its share of movements in other
comprehensive income is recognised in other comprehensive income.
When the Group’s share of losses from an equity accounted investment exceed the Group’s investment, the losses are initially taken
against any long-term receivables relating to the equity accounted investment. 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.
OWNERSHIP
INTEREST
INVESTMENT
CARRYING AMOUNT
Name
Principal
activity
Country of
incorporation
Balance
date
2016
%
2015
%
2016
$m
2015
$m
Details of equity accounted investments
Bitumen Importers Australia Pty Ltd
Bitumen importer Australia
Caribbean Roof Tile Company Limited
Roof tiles
Boral CSR Bricks Pty Limited*
Bricks
Trinidad
Australia
Flyash Australia Pty Ltd
Fly ash collection Australia
Highland Pine Products Pty Ltd
Timber
Penrith Lakes Development Corporation Ltd Property
30-Jun
31-Dec
31-Mar
31-Dec
30-Jun
30-Jun
30-Jun
30-Jun
30-Jun
development
Asphalt
Cement
manufacturer
Plasterboard
Australia
Australia
Australia
Australia
Australia/
Singapore
Roof tiles
USA
31-Dec
South East Asphalt Pty Ltd
Sunstate Cement Ltd
USG Boral Building Products
US Tile LLC
TOTAL
50
50
40
50
50
40
50
50
50
50
50
50
40
50
50
40
50
50
1.6
–
0.2
–
88.9
83.9
2.6
2.1
–
–
0.7
9.7
–
–
0.8
10.6
50
951.1
950.5
50
–
–
1,054.6
1,048.1
* The Group has a 40% interest in the Boral CSR Bricks Pty Limited joint venture. The results were equity accounted from 1 May 2015 when the joint venture was formed.
Note
2016
$m
Movements in carrying value of equity accounted investments
Balance at the beginning of the year
Acquired during the year
Share of equity accounted income
Impairment and restructure costs disclosed as significant item
2.6
Dividends received
Results recognised against losses previously taken to non-current
receivables/provisions
Share of movement in currency reserve
Net foreign currency exchange differences
Other
Balance at the end of the year
1,048.1
–
91.1
–
(75.9)
(2.5)
(26.4)
21.9
(1.7)
2015
$m
851.8
88.9
75.1
(6.4)
(41.2)
(11.4)
(29.9)
121.2
–
1,054.6
1,048.1
Boral Limited Annual Report 2016 119
FINANCIAL
STATEMENTS
Notes to the Financial Statements
Boral Limited and Controlled Entities
Section 6: Group structure (continued)
6.2 Equity accounted investments (continued)
USG Boral Building Products1
Total
Note
2016
$m
2015
$m
2016
$m
2015
$m
Summarised Income Statement at 100%
Revenue
Profit before income tax
Income tax expense
Non-controlling interest
Net profit before significant items
Restructure costs disclosed as significant item net of tax
Net profit – equity accounted relating to continuing operations
The Group’s share based on % ownership:
Net profit before significant items
Restructure costs disclosed as significant item
2.6
Net profit – equity accounted relating to continuing operations
1,397.1
1,268.0
174.8
(49.6)
(7.1)
118.1
–
118.1
59.0
–
59.0
140.7
(36.0)
(7.3)
97.4
–
97.4
48.7
–
48.7
1,970.7
277.3
1,641.3
194.5
(80.9)
(7.1)
189.3
–
189.3
91.1
–
91.1
(46.5)
(7.3)
140.7
(16.0)
124.7
75.1
(6.4)
68.7
USG Boral Building Products2
Total
2016
$m
2015
$m
2016
$m
2015
$m
Summarised Balance Sheet at 100%
Current assets
Non-current assets
Total assets
Current liabilities
Non-current liabilities
Total liabilities
Non-controlling interest
Net assets
534.1
1,882.4
2,416.5
(246.5)
(113.7)
(360.2)
(154.0)
522.9
1,903.8
2,426.7
(300.0)
(101.8)
(401.8)
(124.0)
1,902.3
1,900.9
The Group’s share of net assets based on % ownership
951.1
950.5
1. Includes depreciation and amortisation of $72.2 million (2015: $59.7 million).
2. Includes:
• cash and cash equivalents of $173.7 million (2015: $193.8 million);
• current financial liabiliites of $11.2 million (2015: $34.0 million);
• non-current financial liabilities of $56.1 million (2015: $56.7 million).
723.0
2,186.0
2,909.0
(333.7)
(267.6)
(601.3)
(154.0)
2,153.7
1,054.6
708.8
2,230.2
2,939.0
(393.1)
(283.7)
(676.8)
(124.0)
2,138.2
1,048.1
120
Boral Limited Annual Report 2016
Section 6: Group structure (continued)
6.3 Controlled entities
The consolidated financial statements include Boral Limited (parent entity) and the following wholly owned subsidiaries, unless stated
otherwise, in the table below.
Country of
incorporation
Beneficial ownership by
Group
2016
%
Group
2015
%
Boral Limited
Boral Cement Limited>*
Barnu Pty Ltd*
Boral Building Materials Pty Ltd>*
Boral International Pty Ltd>*
MJI (Thailand) Ltd
Boral Concrete (Thailand) Ltd
Boral USA<
Boral International Holdings Inc.
Boral Construction Materials LLC
Ready Mixed Concrete Company
Sprat-Platte Ranch Co. LLLP
Morton Lakes LLC
Aggregate Investments LLC
BCM Oklahoma LLC
McCanne Ditch and Reservoir Company
Boral Industries Inc.
Boral Lifetile Inc.
Boral Roofing de Mexico S. de R.L. de C.V.
Boral Concrete Tile Inc.
Boral Roofing LLC
Tile Service Company LLC
E.U.M. Teja de Concreto Servicio
Compania S.R.L. de C.V.
Boral Bricks Inc.
Dennis Brick Distributors
Boral Composites Inc.
Boral Material Technologies LLC
Boral Stone Products LLC
Boral IP Holdings LLC
Boral (UK) Ltd
Boral Investments BV
Boral Industrie GmbH
Boral Klinker GmbH
Boral Mecklenburger Ziegel GmbH
Boral Investments Pty Ltd>*
Boral Construction Materials Ltd>*
Boral Resources (WA) Ltd>*
Boral Contracting Pty Ltd*
Boral Construction Related Businesses Pty Ltd>*
Australia
Australia
Australia
Australia
Australia
Thailand
Thailand
USA
USA
USA
USA
USA
USA
USA
USA
USA
USA
USA
Mexico
USA
USA
USA
Mexico
USA
USA
USA
USA
USA
USA
UK
Netherlands
Germany
Germany
Germany
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
50
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
50
100
100
100
100
100
100
100
100
100
100
100
100
100
100
Boral Limited Annual Report 2016 121
FINANCIAL
STATEMENTS
Notes to the Financial Statements
Boral Limited and Controlled Entities
Section 6: Group structure (continued)
6.3 Controlled entities (continued)
Country of
incorporation
Beneficial ownership by
Group
2016
%
Group
2015
%
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>*
Bayview Pty Ltd*
Dandenong Quarries Pty Ltd*
Boral Insurance Pty Ltd
Allen Taylor & Company Ltd>*
Oberon Softwood Holdings Pty Ltd>*
Duncan's Holdings Ltd>*
Boral Bricks Pty Ltd>*
Boral Masonry Ltd>*
Boral Hollostone Masonry (South Aust) Pty Ltd>*
Boral Montoro Pty Ltd>*
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
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
100
100
100
> Granted relief by the Australian Securities and Investments Commission from specified accounting requirements in accordance with Class Order (refer to note 8.7).
* Entered into cross guarantee with Boral Limited (refer to note 8.7).
< A Delaware general partnership.
All the shares held by Boral Limited in controlled entities are ordinary shares.
122
Boral Limited Annual Report 2016
Section 7: Employee benefits
This section provides a breakdown of the various programs Boral uses to reward and recognise employees and key executives,
including Key Management Personnel (KMP). Boral believes that these programs reinforce the value of ownership and incentives and
drive performance both individually and collectively to deliver better returns to shareholders.
7.1 Employee liabilities
Liabilities for wages and salaries, including non-monetary benefits, and annual leave expected to be settled with 12 months of the
reporting date, is measured at the amounts expected to be paid when the liabilities are settled.
Liabilities for long service leave are measured as the present value of estimated future payments for the services provided by
employees up to the reporting date. Liabilities which are not expected to be settled within 12 months are discounted at the reporting
date using market yields of high quality corporate bonds or government bonds for countries where there is no deep market for
corporate bonds. The rates used reflect the terms to maturity and currency that match, as closely as possible, the estimated future
cash outflows.
Employee liabilities
Current
Non-current
2016
$m
118.8
11.3
130.1
2015
$m
115.9
11.9
127.8
7.2 Employee benefits expense
Employee benefits expense include salaries and wages, defined contribution expenses, share-based payments and other entitlements.
Employee benefits expense *
* Total defined contribution expense for the period was $41.6 million (2015: $44.5 million).
2016
$m
2015
$m
891.3
946.8
7.3 Share-based payments
The Group provides benefits to senior executives in the form of share-based payment transactions, whereby senior executives render
services in exchange for options and/or rights over shares.
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, and amortised over the expected vesting period with a corresponding increase in equity. The amount recognised is adjusted
to reflect the actual number of rights that vest, except for those that fail to vest due to market conditions not being achieved.
Significant accounting judgements, estimates and assumptions
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.
Share Acquisition Rights (SAR)
During the current year, SARs were issued under the Boral Equity Plan Rules. SARs issued with a TSR hurdle were valued at $2.95
per right, while SARs with a ROFE target were valued at $5.18 per right.
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
2016
$5.76
1.78%
3.56%
25%
2015
$5.45
2.56%
3.46%
25%
Boral Limited Annual Report 2016 123
FINANCIAL
STATEMENTS
Notes to the Financial Statements
Boral Limited and Controlled Entities
Section 7: Employee benefits (continued)
7.3 Share-based payments (continued)
Share Acquisition Rights (SAR) (continued)
In addition, SARs were issued during the year for:
• Deferred STI – representing the deferral of 20% of short-term incentive payments into equity, subject to a vesting requirement for
the employee to remain with the Company for two years following grant date.
• Targeted retention incentive (TRI) – specific to eight key executives, subject to a vesting requirement for the executive to remain
with the Company for three years following grant date.
Both rights were valued at $5.5814 per right, being the volume weighted average price traded on the ASX over the five trading days
following the release of the FY2015 full year results.
Further details of the terms and conditions of the issue of rights are contained in the Remuneration Report.
Set out below are summaries of share acquisition rights granted under the plans.
Rights
Grant date
Expiry date
Consolidated – 2016
Exercise
price
Balance at
beginning of
the year
Issued
during the
year
Cancelled
during the
year
Vested and
exercised
during the
year
Balance at
end of the
year
Number
Number
Number
Number
Number
–
–
–
–
–
–
–
–
–
–
(802,339)
(21,305)
(319,148)
(18,425)
–
–
– 1,224,423
–
1,415,343
– 2,544,057
(47,467) (2,633,349)
–
(75,076)
(37,538)
(77,438)
(38,719)
(16,030)
– 2,379,807
–
1,189,903
–
1,780,477
–
–
890,239
563,657
TSR
TSR
TSR
TSR
TSR
TSR
ROFE
TSR
ROFE
Deferred STI
TSR
ROFE
TRI
Deferred STI
Consolidated – 2015
TSR
TSR
TSR
TSR
TSR
TSR
TSR
ROFE
TSR
ROFE
Deferred STI
3/11/2008
5/11/2009
3/11/2015
5/11/2016
$0.00
802,339
$0.00 1,245,728
12/11/2010
12/11/2017
$0.00 1,734,491
$0.00 2,562,482
$0.00 2,680,816
$0.00 2,454,883
$0.00 1,227,441
$0.00 1,857,915
$0.00
928,958
$0.00
579,687
1/9/2011
1/9/2012
1/9/2013
1/9/2013
1/9/2014
1/9/2014
1/9/2014
1/9/2015
1/9/2015
1/9/2015
1/9/2015
1/9/2018
1/9/2019
1/9/2016
1/9/2016
1/9/2017
1/9/2017
1/9/2016
1/9/2018
1/9/2018
1/9/2018
1/9/2017
6/11/2007
3/11/2008
5/11/2009
6/11/2014
3/11/2015
5/11/2016
$0.00
$0.00
51,642
911,244
$0.00
1,397,351
12/11/2010
12/11/2017
$0.00 1,778,206
1/9/2011
1/9/2012
1/9/2013
1/9/2013
1/9/2014
1/9/2014
1/9/2014
1/9/2018
1/9/2019
1/9/2016
1/9/2016
1/9/2017
1/9/2017
1/9/2016
$0.00 3,243,321
$0.00 2,929,230
$0.00 2,760,235
$0.00
1,380,117
$0.00
$0.00
$0.00
$0.00
–
1,932,703
(20,165)
–
1,912,538
–
–
–
966,352
(10,082)
427,463
–
849,927
(14,940)
–
–
–
956,270
427,463
834,987
16,074,740
4,176,445 (1,498,672) (2,633,349) 16,119,164
–
–
–
–
–
–
–
–
(51,642)
(108,905)
(151,623)
(43,715)
(680,839)
(248,414)
(305,352)
(152,676)
–
–
–
–
–
–
–
–
–
–
–
–
802,339
1,245,728
1,734,491
2,562,482
2,680,816
2,454,883
1,227,441
1,857,915
928,958
579,687
$0.00
$0.00
$0.00
–
–
–
1,962,920
(105,005)
981,460
(52,502)
606,580
(26,893)
During the year ended 30 June 2016, the Group recognised an expense of $14.7 million (2015: $10.6 million) in relation to
share-based payments.
124
Boral Limited Annual Report 2016
14,451,346
3,550,960
(1,927,566)
– 16,074,740
Section 7: Employee benefits (continued)
7.4 Key management personnel disclosures
Key management personnel compensation
Key management personnel compensation is set out below. Detailed remuneration disclosures are provided in the audited
Remuneration Report section in the Directors’ Report.
Short-term employee benefits
Post-employment benefits
Share-based payments
Long-term employee benefits
June 2015 comparatives include key management personnel for that year.
2016
$‘000
2015
$‘000
12,064.7
10,888.5
352.9
5,828.1
83.7
252.3
3,251.1
81.8
18,329.4
14,473.7
Boral Limited Annual Report 2016 125
FINANCIAL
STATEMENTS
Notes to the Financial Statements
Boral Limited and Controlled Entities
Section 8: Other notes
This section provides details on other required disclosures relating to the Group to comply with the accounting standards and other
pronouncements.
8.1 Subsequent events
On 24 August 2016, the Group announced that it had reached an agreement with an affiliate of Forterra, Inc. (“Forterra”), which is the
owner of Forterra Brick, to combine their brick businesses in North America. The proposed Joint Venture, to be 50% owned by Boral
and 50% owned by Forterra, will bring together Boral’s US clay brick operations and distribution network, with Forterra’s clay brick
and concrete brick businesses in the USA and Canada. There is no cash consideration as part of the proposed joint venture, other
than standard working capital adjustments.
Completion remains subject to regulatory approval and other standard closing conditions. The transaction is expected to be completed
at the end of calendar year 2016.
8.2 Contingent liabilities
Details of contingent liabilities where the probability of future payments/receipts is not considered remote are set out below.
Unsecured contingent liabilities:
Bank guarantees
Other items
2016
$m
24.7
0.2
24.9
2015
$m
13.7
–
13.7
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. 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, from time to time, subject to various lawsuits, claims, regulatory investigations, and
on occasion, prosecution.
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.
126
Boral Limited Annual Report 2016
Section 8: Other notes (continued)
8.3 Commitments
The Group leases property, equipment and vehicles under operating leases expiring from one to 15 years. Leases generally provide
the Group 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.
Capital expenditure commitments
Contracted but not provided for are payable as follows:
Not later than one year
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
2016
$m
2015
$m
8.6
9.3
1.5
2.9
4.4
(0.3)
4.1
66.5
124.3
31.8
222.6
1.7
4.1
5.8
(0.7)
5.1
65.3
125.5
29.2
220.0
Boral Limited Annual Report 2016 127
FINANCIAL
STATEMENTS
Notes to the Financial Statements
Boral Limited and Controlled Entities
Section 8: Other notes (continued)
8.4 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 services:
KPMG Australia – taxation services
KPMG Australia – due diligence
KPMG Australia – advisory
KPMG Australia – other
KPMG overseas firms – due diligence and advisory
KPMG overseas firms – taxation services
8.5 Related party disclosures
Controlled entities
Interests held in controlled entities are set out in note 6.3.
2016
$‘000
1,322
401
144
–
2015
$‘000
1,426
358
176
19
1,867
1,979
185
312
154
56
287
32
1,026
2,893
203
445
64
55
–
33
800
2,779
Associated entities
Interests held in associated entities are set out in note 6.2. 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, interest and loans. 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.
128
Boral Limited Annual Report 2016
Section 8: Other notes (continued)
8.6 Parent entity disclosures
For the year ended 30 June
RESULT OF THE PARENT ENTITY
Profit after tax
Other comprehensive income/(loss) after tax
Total comprehensive income for the period
FINANCIAL POSITION OF PARENT ENTITY
Current assets
Non-current assets
Total assets
Current liabilities
Non-current liabilities
Total liabilities
Net assets
Issued capital
Reserves
Retained earnings
Total equity
BORAL LIMITED
2016
$m
35.1
(2.7)
32.4
4,616.3
478.2
5,094.5
1,182.1
870.3
2,052.4
3,042.1
2,246.2
73.3
722.6
2015
$m
155.7
6.4
162.1
6,989.8
543.0
7,532.8
3,142.1
1,111.6
4,253.7
3,279.1
2,361.6
75.8
841.7
3,042.1
3,279.1
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
24.5
13.7
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.
The Company, from time to time, may be subject to 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.
Boral Limited Annual Report 2016 129
FINANCIAL
STATEMENTS
Notes to the Financial Statements
Boral Limited and Controlled Entities
Section 8: Other notes (continued)
8.7 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 6.3.
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 6.3), after eliminating all transactions between parties
to the Deed.
STATEMENT OF COMPREHENSIVE INCOME
Continuing operations
Revenue
Profit before income tax expense
Income tax expense
Profit from continuing operations
Discontinued operations
Profit from discontinued operations (net of income tax)
Net profit
Other comprehensive income
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
Total comprehensive income
Attributable to:
Members of the parent entity
Non-controlling interest
Reconciliation of movements in retained earnings
Balance at the beginning of the year
Net profit attributable to members of the parent entity
Dividends recognised during the year
Balance at the end of the year
2016
$m
2015
$m
3,278.7
3,462.6
221.8
(17.1)
204.7
4.0
208.7
(12.5)
(7.7)
2.3
190.8
190.8
–
190.8
842.8
208.7
(154.2)
897.3
94.4
(3.9)
90.5
13.6
104.1
66.7
8.7
(2.6)
176.9
176.9
–
176.9
867.8
104.1
(129.1)
842.8
130
Boral Limited Annual Report 2016
Section 8: Other notes (continued)
8.7 Deed of cross guarantee (continued)
BALANCE SHEET
CURRENT ASSETS
Cash and cash equivalents
Receivables
Inventories
Financial assets
Other assets
TOTAL CURRENT ASSETS
NON-CURRENT ASSETS
Receivables
Inventories
Investments accounted for using the equity method
Financial assets
Property, plant and equipment
Intangible assets
Deferred tax assets
Other assets
TOTAL NON-CURRENT ASSETS
TOTAL ASSETS
CURRENT LIABILITIES
Payables
Loans and borrowings
Financial liabilities
Current tax liabilities
Employee benefit liabilities
Provisions
TOTAL CURRENT LIABILITIES
NON-CURRENT LIABILITIES
Deferred income
Loans and borrowings
Financial liabilities
Deferred tax liabilities
Employee benefit liabilities
Provisions
TOTAL NON-CURRENT LIABILITIES
TOTAL LIABILITIES
NET ASSETS
EQUITY
Issued capital
Reserves
Retained earnings
TOTAL EQUITY
2016
$m
2015
$m
358.1
564.9
341.5
18.9
28.5
425.9
541.2
336.0
9.6
25.6
1,311.9
1,338.3
16.0
12.6
1,054.7
1,346.9
1,941.8
74.0
62.4
13.9
4,522.3
5,834.2
958.3
352.3
7.8
28.8
113.7
51.5
74.8
28.9
1,048.1
1,355.0
1,914.7
69.7
64.4
23.9
4,579.5
5,917.8
950.1
1.7
5.8
85.3
111.1
56.4
1,512.4
1,210.4
30.8
992.8
18.6
–
11.4
56.6
1,110.2
2,622.6
3,211.6
2,246.2
68.1
897.3
3,211.6
15.7
1,320.7
0.8
1.3
11.9
66.7
1,417.1
2,627.5
3,290.3
2,361.6
85.9
842.8
3,290.3
Boral Limited Annual Report 2016 131
STATUTORY
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 73 to 131 and the Remuneration Report in the Directors’
Report, set out on pages 51 to 72, 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 2016 and of its performance for the financial
year ended on that date; and
(ii) complying with Australian Accounting Standards and the Corporations Regulations 2001;
(b) there are reasonable grounds to believe that the Group will be able to pay its debts as and when they become due
and payable.
2.
3.
4.
There are reasonable grounds to believe that Boral Limited and the controlled entities identified in note 6.3 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 2016.
The Directors draw attention to note 1 to the consolidated financial statements, which includes a statement of compliance with
International Financial Reporting Standards.
Signed in accordance with a resolution of the Directors:
Dr Brian Clark
Chairman
Mike Kane
CEO & Managing Director
Sydney, 24 August 2016
132
Boral Limited Annual Report 2016
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 2016, 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 8.7 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 2016 and of its performance for the year ended on
that date; and
(ii) complying with Australian Accounting Standards and the Corporations Regulations 2001.
(b) the financial report also complies with International Financial Reporting Standards as disclosed in note 1.
Report on the Remuneration Report
We have audited the Remuneration Report included in clause 19 of the Directors’ Report for the year ended 30 June 2016. 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 2016 complies with Section 300A of the
Corporations Act 2001.
KPMG
Kenneth Reid
Partner
Sydney, 24 August 2016
KPMG, an Australian partnership and a member
firm of the KPMG network of independent member
firms affiliated with KPMG International Cooperative
(“KPMG International”), a Swiss entity.
Liability limited by a scheme approved under
Professional Standards Legislation.
Boral Limited Annual Report 2016 133
SHAREHOLDER
INFORMATION
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.
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 +61 1300 730 644
Facsimile +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 FY2016 of 11.5 cents per share is expected
to be paid by Boral on 26 September 2016. The dividend will be
fully franked.
Dividend Reinvestment Plan (DRP)
Following payment of the interim dividend on 24 March 2014,
Boral’s DRP was suspended until further notice. Additional
amendments to the terms and conditions of the DRP were
notified to shareholders on 24 March 2014. For further
information on the suspension and amendments to the DRP,
please visit Boral’s website. In future, if the DRP is reactivated,
it will be notified by way of an ASX announcement.
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.
134
Boral Limited Annual Report 2016
Shareholder Information Boral Limited and Controlled Entities Annual report mailing list
Shareholders (whether Issuer or Broker Sponsored) not wishing
to receive the Annual Report should advise the share registry in
writing so that their names can be removed from the mailing list.
Shareholders are also able to update their preference via the
Link Market Services or Boral websites, and can nominate to
receive email notification of the release of the Annual Report and
then access it via a link. The share registry can provide forms for
making annual report delivery elections.
While companies are not required to send annual reports to
shareholders other than those who have elected to receive
them, any shareholder who has not made an election is sent
an easy-to-read summary called the Boral Review.
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 +61 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 Mellon (BNY Mellon). Each ADR represents four
ordinary Boral shares.
Holders of Boral’s ADRs should contact BNY Mellon on all
matters relating to their ADR holdings.
By mail:
BNY Mellon Shareowner Services
PO Box 30170
College Station, TX 77842-3170
USA
By telephone:
To speak directly to a BNY Mellon representative, please call
1-888-BNY-ADRS (1-888-269-2377) if you are calling from within
the United States. If you are calling from outside the United
States, please call 201-680-6825.
By email:
You may also send an email enquiry to shrrelations@bnymellon.
com or visit the website at www.bnymellon.com/shareowner
Share information as at 16 August 2016
Substantial shareholders
Perpetual Limited, by a notice of change of interests of
substantial holder dated 23 June 2016, advised that it and its
associates were entitled to 102,135,258 ordinary shares.
Commonwealth Bank of Australia, by a notice of change of
interests of substantial holder dated 1 July 2016, advised that it
and its associates were entitled to 41,306,896 ordinary shares.
Change of address
Shareholders who are Issuer Sponsored should notify any
change of address to the share registry promptly. This can be
done via the Link Market Services website or in writing quoting
their Securityholder Reference Number, previous address and
new address. Application forms for Change of Address are also
available for download via the Link Market Services or Boral
websites. Broker Sponsored (CHESS) holders must advise their
sponsoring broker of the change.
Information on Boral
Boral has a comprehensive internet site featuring news items,
announcements, corporate information and a wide range of
product and service information. Boral’s internet address is
www.boral.com.au
The Annual Report is the main source of information for
shareholders. Other sources of information include:
•
February – the interim results announcement for the
December half year.
• August – the annual results announcement for the year
ended 30 June.
• November – the Annual General Meeting.
Requests for publications and other enquiries about Boral’s
affairs should be addressed to:
Group Communications & Investor Relations Director
Boral Limited
PO Box 1228
North Sydney NSW 2059
Enquiries can also be made via email: info@boral.com.au or
visit Boral’s website at www.boral.com.au
Share trading and price
Boral shares are traded on the Australian Securities Exchange
Limited (ASX). The stock code under which they are traded is
“BLD” and the details of trading activity are available on the
internet and published in most daily newspapers under
that abbreviation.
Boral Limited Annual Report 2016 135
SHAREHOLDER
INFORMATION
Shareholder Information
Boral Limited and Controlled Entities
Distribution schedule of shareholders as at 16 August 2016
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 (72 shares)
Number of
shareholders % of ordinary shares
23,362
23,523
4,114
2,442
107
53,548
1,137
1.55
7.26
3.94
6.71
80.53
100.00
0.001
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 share buy-back
During the year, the Company completed the buy-back of 20,641,950 shares at an average price of $5.59. This was part of the
Company’s on-market share buy-back program for up to 5% of Boral’s issued capital or approximately 39 million ordinary shares
which commenced on 18 March 2015 and completed on 22 September 2015. The total consideration for shares bought back on
market during the buy-back period was $231.4 million, at an average price of $5.91.
Twenty largest shareholders as at 16 August 2016
Ordinary shares % of ordinary shares
1 HSBC CUSTODY NOMINEES
2 J P MORGAN NOMINEES AUSTRALIA LIMITED
3 CITICORP NOMINEES PTY LIMITED
4 NATIONAL NOMINEES LIMITED
5 RBC DEXIA INVESTOR SERVICES
6 BNP PARIBAS NOMS PTY LIMITED
7 UBS WEALTH MANAGEMENT AUSTRALIA
8 AMP LIFE LIMITED
9 AUSTRALIAN FOUNDATION INVESTMENT
10 EQUITAS NOMINEES PTY LIMITED
11 ARGO INVESTMENTS LIMITED
12 BRISPOT NOMINEES PTY LIMITED
13 GWYNVILL INVESTMENTS PTY LIMITED
14 BOND STREET CUSTODIANS LIMITED
15 MILTON CORPORATION LIMITED
16 SHARE DIRECT NOMINEES PTY LIMITED
17 WARBONT NOMINEES PTY LIMITED
18 INVIA CUSTODIAN PTY LIMITED
19 NAVIGATOR AUSTRALIA
20 PORTMAN TRADING PTY LIMITED
136
Boral Limited Annual Report 2016
164,567,391
118,442,368
90,133,640
78,234,519
45,332,751
38,146,521
19,906,404
7,455,476
4,008,492
3,532,841
3,075,132
2,411,141
1,987,750
1,956,898
1,666,463
1,108,650
776,279
746,578
741,135
730,000
22.13
15.93
12.12
10.52
6.10
5.13
2.68
1.00
0.54
0.48
0.41
0.32
0.27
0.26
0.22
0.15
0.10
0.10
0.10
0.10
FINANCIAL
HISTORY
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 tax1
Net financing costs1
Profit before tax1
Income tax expense1
Non-controlling interests
Net profit after tax1
Significant items – net of tax
Net profit/(loss) attributable to
members of Boral Limited
Total assets
Total liabilities
Net assets
2016
$m
2015
$m
2014
$m
2013
$m
2012
$m
2011
$m
2010
$m
2009
$m
2008
$m
2007
$m
4,311
4,415
5,204
5,286
5,010
4,711
4,599
4,875
5,199
4,909
645
605
556
519
473
522
505
539
688
762
247
398
(63)
335
(67)
–
268
(12)
256
249
357
(64)
293
(44)
–
249
8
257
261
294
(83)
211
(37)
291
228
(97)
130
(20)
(3)
(6)
171
2
173
104
(316)
(212)
273
200
(88)
111
(9)
(1)
101
75
177
245
277
(64)
213
(40)
2
175
253
252
263
276
(97)
(127)
155
149
(22)
(1)
132
(8)
(222)
168
(91)
(17)
–
131
11
142
240
448
(112)
336
(90)
1
231
531
(111)
420
(122)
–
247
298
(4)
–
243
298
5,801
5,865
5,559
6,316
6,499
5,668
5,209
5,491
5,895
5,817
2,294
2,341
2,211
2,923
3,096
2,512
2,583
2,738
2,985
2,829
3,506
3,524
3,348
3,394
3,403
3,156
2,626
2,754
2,910
2,987
Shareholders’ funds
3,506
3,524
3,348
3,394
3,403
3,156
2,626
2,754
2,910
2,987
Net debt
Funds employed
893
817
718
1,446
1,518
505
1,183
1,514
1,515
1,482
4,399
4,341
4,066
4,840
4,921
3,662
3,809
4,268
4,425
4,470
Dividends paid or declared
167
139
117
85
82
105
88
77
202
203
Statistics
Dividend per ordinary share
22.5c
18.0c
15.0c
11.0c
11.0c
14.5c
13.5c
Dividend payout ratio1
Dividend cover1
62%
56%
68%
1.6
1.8
1.5
81%
1.2
81%
60%
67%
1.2
1.7
1.5
13c
59%
1.7
34c
82%
1.2
34c
68%
1.5
Earnings per ordinary share1
35.8c
31.9c
22.0c
13.6c
13.6c
24.4c
22.1c
22.2c
41.4c
50.0c
Return on equity1
EBIT to sales1
7.6%
7.1%
5.1%
3.2%
3.0%
5.6%
5.0%
4.8%
8.5% 10.0%
9.2%
8.1%
5.7%
4.3%
4.0%
5.9%
5.5%
5.7%
8.6% 10.8%
EBIT to funds employed1
9.0% 8.2%
7.2%
ROFE2 (EBIT to average funds
employed1)
Net interest cover (times)1
Gearing (net debt to equity)
Gearing (net debt to net debt plus
equity)
9.1% 8.5%
6.6%
6.3
25%
20%
5.6
23%
19%
3.5
21%
18%
4.7%
4.7%
2.3
43%
30%
4.1%
7.6%
6.6%
6.5% 10.1% 11.9%
4.7%
7.4%
6.2%
6.3% 10.1% 12.1%
2.3
45%
31%
4.4
16%
14%
2.6
45%
31%
2.2
55%
35%
4.0
52%
34%
4.8
50%
33%
Net tangible asset backing per share
$4.40
$4.31
$4.03
$3.17
$3.31
$3.91
$3.92
$4.12
$4.41
$4.41
1. Excludes the impact of significant items from 2008 to 2016.
2. Refer to the Remuneration Report for a discussion of how ROFE is used as an additional performance hurdle under the Company’s long-term incentive plan.
Results have been prepared under Australian equivalents to International Financial Reporting Standards (A-IFRS).
Figures may not add due to rounding.
Boral Limited Annual Report 2016 137
Boral Limited
ABN 13 008 421 761
Level 3, 40 Mount Street, North Sydney NSW 2060
PO Box 1228, North Sydney NSW 2059
Telephone: +61 2 9220 6300
Internet: www.boral.com.au
Email: info@boral.com.au
Share Registry
c/- Link Market Services Limited
Level 12, 680 George Street, 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
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