BORAL
ANNUAL
REPORT
2017
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BORAL LIMITED
ANNUAL REPORT
FOR THE YEAR
ENDED 30 JUNE 2017
Boral Limited
ABN 13 008 421 761
The Annual General Meeting
of Boral Limited will be held at
the Civic Pavilion, The Concourse,
Chatswood, NSW, on Thursday
2 November 2017 at 10.30am.
Financial calendar
Please note, dates are subject to review.
Record date for final dividend
6 September 2017
Final dividend payable
Annual General Meeting
Half year end
3 October 2017
2 November 2017
31 December 2017
Half year results announcement
13 February 2018
Ex dividend share trading commences
19 February 2018
Record date for interim dividend
20 February 2018
Interim dividend payable
Year end
9 March 2018
30 June 2018
Boral Limited
Annual Report
For the year ended 30 June 2017
Chairman’s Review
Chief Executive’s Review
Financial Review
Divisional Performance
Sustainability Overview
Executive Committee
Board of Directors
Corporate Governance
Directors’ Report
2017 Remuneration Report
Financial Statements
Statutory Statements
Shareholder Information
Financial History
2
4
6
10
20
28
29
30
44
51
72
135
141
144
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 2017
1
CHAIRMAN’S
REVIEW
From the
Chairman
A year of transformation for Boral
As you may recall, a year ago I said that we were assessing
strategic merger and acquisition (M&A) opportunities,
particularly in the USA, where Boral has four decades
of experience.
After months of rigorous due diligence, the Board determined
that Headwaters Inc. presented a compelling acquisition
opportunity for Boral, offering substantial long-term value
creation for shareholders. It presented an undeniably strong
fit with Boral’s existing business and was well-aligned with our
strategic goals.
On 21 November 2016, we announced the transaction and a
A$2 billion capital raising.
Your support for this transformative strategic move was
overwhelming and for that, your Board thanks you.
Completed on 8 May 2017, the acquisition more than
doubles our position in the USA, increasing Boral’s product
offerings, geographic breadth, multi-channel distribution and
diversification across broader and growing US construction
markets.
We expect in excess of US$100 million per annum of synergies
within four years, including US$30–35 million in the first full year.
We are pleased with how the initial period of integration has
progressed and, in line with guidance, Headwaters contributed
US$21 million to Boral’s earnings before interest and tax (EBIT1)
in FY2017, representing the first eight weeks of consolidation.
1. Before significant items.
2. ROFE is EBIT (excluding significant items) on funds employed as at
30 June. However, Boral’s Group FY2017 ROFE is based on the average
monthly funds employed to recognise the impact of the Headwaters
acquisition. USG Boral’s underlying ROFE is on an EBIT basis whereas
Boral’s Group reported ROFE includes post-tax earnings from USG Boral.
2
Boral Limited Annual Report 2017
A year of strong performance
For the year ended 30 June 2017, sales revenue of $4.4 billion
was up 2% on the prior year, reflecting additional revenue from
Headwaters as well as growth in Australia and in the underlying
US business. Excluding US Bricks revenue in both years, which
is now equity accounted following the formation of the Meridian
Brick joint venture, revenue was up 8%.
Group EBIT1 increased 16% to $460 million and underlying profit
after tax1 increased by a substantial 28% to $343 million. The
result benefited from eight weeks of earnings from Headwaters
as well as underlying growth in all three divisions.
The reported profit result was also helped by a lower net interest
expense due to the positive cash balance for part of the year
following the equity raising, and a steady income tax expense
because of previously unrecognised tax losses and a benefit
arising from the vesting of long-term incentives.
Significant items of $46 million, primarily related to transaction
costs for the Headwaters acquisition, resulted in net profit after
tax after significant items of $297 million, up 16%.
Boral Australia delivered an EBIT return on funds employed
(ROFE2) of 14.6% for the year and USG Boral delivered
underlying ROFE2 of 11.6% – strong divisional returns that
exceed the cost of capital. Returns from Boral North America
are expected to exceed the cost of capital in coming years, and
the Headwaters acquisition strengthens Boral’s ability to deliver
returns above the cost of capital through the cycle.
Boral’s ROFE2 was 9.2% using the average monthly funds
employed for the year, compared with reported ROFE2 of 9.0%
in FY2016.
Net debt at 30 June 2017 of $2.3 billion was up from $893
million last year due to the acquisition of Headwaters.
For several years now, we have been working to deliver performance excellence, as well as more sustainable growth, through strategic acquisitions and innovation. In FY2017 we delivered on both fronts.Dr Brian Clark, Chairmanv However, Boral remains well within its funding covenants and
our balance sheet remains robust.
The Board declared a final dividend of 12.0 cents per share,
which was 50% franked, for a full year dividend of 24.0 cents
per share. This represents a payout ratio for the full year of
82%. While this exceeds Boral’s Dividend Policy of between
50% and 70% of earnings before significant items, subject
to the Company’s financial position, it is in line with Boral’s
commitment to maintain the level of dividends while the
Headwaters acquisition was being finalised.
Boral delivered a total shareholder return3 of 23.4% for the year
– ahead of the average of 16.9% for ASX 100 companies.
A strong safety culture
The transformation of Boral to deliver performance excellence
includes targeting world class health and safety outcomes
based on Zero Harm.
In FY2017, Boral’s safety performance as measured by a
recordable injury frequency rate (RIFR4) of 8.1 improved by 8%,
and compares with a rate of 19.0 in FY2012.
Boral’s lost time injury frequency rate (LTIFR4) at 1.5 is down
from 1.8 in FY2012 but up slightly from 1.3 in FY2016 – a
reminder that there is still work to do.
The Board
Boral’s Board benefits from diversity of gender, tenure and
experience across a range of sectors, functions and professions.
While the Board was stable during FY2017, we have been
developing succession plans and identifying opportunities to
strengthen certain Board skills and experience over time.
During the year, the Board spent time with Boral’s people and
visited several operations, providing the opportunity to see
first-hand how we are managing safety, quality, operations and
employee engagement. We are encouraged by what we
have seen.
In March 2017, the Board visited USG Boral in India and
Thailand. The visit to the Research & Development Centre in
Saraburi reinforced for us the strength of our innovation efforts
and the technical talent we have in our organisation.
In September this year, all members of the Board will spend
several days in various parts of the North American business,
meeting our people and inspecting our operations. This will
provide another opportunity to assess the integration program
and early progress against delivery of synergies.
Shareholder feedback on Remuneration Report
At our 2016 Annual General Meeting, the Board received a
clear message from shareholders, with 26% voting against
our Remuneration Report, constituting a “first strike” for the
purposes of the Corporations Act 2001.
The basis for the “first strike” was primarily the one-off targeted
retention incentives for eight key executives, to ensure stable
leadership. While all eight executives remain highly engaged
in Boral’s transformation agenda, the Board understands
shareholders’ views and we are committed to no further
retention awards.
3. Total shareholder return based on share price appreciation, dividends and
franking benefits.
4. Per million hours worked. Includes employees and contractors in
100%-owned businesses and 50%-owned joint venture businesses.
We have taken on board feedback received from shareholders
and as a result, I expect that our 2017 Remuneration Report
will be more widely supported. Details of the issues raised and
changes made are communicated in this year’s Remuneration
Report on pages 51 to 71.
A key change made during the year was the restructuring
of CEO & Managing Director Mike Kane’s remuneration
arrangements. The new arrangements reflect the fact that
he is now spending approximately half his time in the USA,
demonstrating the importance of Headwaters integration and
synergy delivery to Boral’s future growth.
Boral is Australian-listed and headquartered in Sydney and
as such, we continue to remunerate the CEO having regard
to Australian practice. The increased time Mike is spending in
North America provides an opportunity to pay him out of the
USA. This has allowed us to cease paying expatriate benefits
and associated fringe benefits tax, which has impacted the level
and positioning of the CEO’s fixed pay.
Boral’s people
The Board has every confidence in Mike’s leadership and we
commend him for the excellent job he has done over the past
five years as Boral’s CEO. Following discussions with Mike, the
Board currently expects he will continue in the role for another
three to five years.
In the meantime, Boral’s CEO succession development program
continues and executives have taken on more responsibilities
and increased role complexity.
At the start of FY2017, Joe Goss took on the new position of
Divisional Chief Executive, Boral Australia, as a result of the
Boral Building Products and Construction Materials & Cement
divisions coming together.
Also effective 1 July 2016 was the promotion of David Mariner
from Executive General Manager, Building Products in Australia
to President & CEO, Boral North America.
Ros Ng, Boral’s Chief Financial Officer, took on a larger and
more complex role, including responsibility for the Corporate
Development and M&A function and project management of the
Headwaters transaction.
Together with Frederic de Rougemont, who has demonstrated
excellent leadership as CEO of USG Boral, these key executives,
and the other members of the Executive Committee, and all
of Boral’s people, are to be congratulated for their efforts and
commitment to delivering Boral’s goals and strategic priorities.
I thank Mike Kane and all of Boral’s people for delivering strong
results in FY2017, with safety at the forefront.
Dr Brian Clark
Chairman
Boral Limited Annual Report 2017
3
CHIEF EXECUTIVE’S
REVIEW
Message from
Mike Kane
A year of significant progress
The US$2.6 billion Headwaters acquisition, completed in May
2017, is a major milestone in Boral’s transformation.
It strengthens Boral as a global building products and
construction materials group with three very strong divisions.
Boral North America delivered an EBIT1 of A$66 million (or
US$50 million), which was 50% higher than the prior year. This
included an EBIT contribution of US$21 million from Headwaters,
which was consolidated from 8 May 2017, with benefits also
from price and volume gains in the underlying business.
We have our high-performing, well-positioned Boral Australia
capitalising on a growing pipeline of infrastructure work and
strength in other construction markets. We have our fast-
growing USG Boral business in Asia, Australasia and the Middle
East, which is leading the way in product innovation in attractive,
high growth markets. And now we have Boral North America
– a scaled building products and fly ash business with greater
geographic reach, more diverse product offerings and strong
growth prospects.
Our strategy to position Boral for improved performance and
growth is delivering benefits, as reflected in the 28% increase
in underlying profit after tax1 to $343 million for the year and
the 16% increase in earnings before interest and tax (EBIT1) to
$460 million. The lift in EBIT comprises 7% from eight weeks
of earnings from Headwaters, and 9% from growth in the
underlying businesses.
Boral Australia’s EBIT1 of $349 million was up 11% on last
year, with strong east coast volumes, pricing gains and margin
improvements supported by growth in infrastructure activity.
USG Boral delivered an impressive 18% increase in post-tax
equity income to $70 million and a 21% lift in underlying EBIT1 to
$217 million, reflecting its strength in manufacturing, distribution
and technology across its markets. This outstanding business is
delivering on its growth and performance promises.
1. Before significant items.
2. Per million hours worked. Includes employees and contractors in
100%-owned businesses and 50%-owned joint venture businesses.
4
Boral Limited Annual Report 2017
Boral delivered a credible safety result for the year, with a further
8% reduction in recordable injury frequency rate to 8.1 and a lost
time injury frequency rate of 1.52.
A strong FY2018 outlook
Boral's outlook for FY2018 is encouraging:
• Boral Australia is expected to deliver further EBIT growth
(excluding Property earnings in both years), underpinned by
the uplift in roads and infrastructure activity and continued
margin improvements. The contribution from Property in
FY2018 is expected to be at the lower end of the $8 million
to $46 million EBIT range of the past five years.
• USG Boral is expected to deliver continued earnings growth
supported by the strength of Sheetrock® delivering price,
volume and cost benefits. While Indonesia and Thailand
should improve, residential activity in Australia and Korea
should soften. Overall, profit should grow in FY2018 at a
high single-digit rate.
• Boral North America is expected to deliver significant EBIT
growth with a full year from Headwaters and year one
synergies of ~US$30–35 million, in addition to underlying
market growth.
Building a transformative culture is the enabler we need to continue this journey to Build something great for Boral’s shareholders, customers, employees and the communities in which we operate.Mike Kane, CEO & Managing Director OUR STRATEGY TO POSITION
BORAL FOR IMPROVED
PERFORMANCE AND GROWTH IS
DELIVERING BENEFITS
Reducing our footprint while growing our business
As part of Boral’s transformation, while we have fundamentally
altered our portfolio to better compete across mature and
maturing markets, we are taking the lead on a less energy- and
less resource-intensive path, taking advantage of opportunities
to be more sustainable.
Building a transformative culture
In 2010, we introduced Boral’s tagline – Build something great –
and we are continuing to do that.
Over the past five years, through our Fix, Execute, Transform
program, we have been fixing the things that have been
holding us back, refining our operational execution skills and
transforming the way Boral does business, including our
product portfolio.
Our values of Excellence, Integrity, Collaboration and Endurance
have underpinned our approach, and they are best captured in
our commitment to keep our people safe at work, reflected in
our Zero Harm Today mission which is shared by all
employees, collectively.
In 2017, we are taking the next step in our strategy, with an
even greater emphasis on our customers, a commitment to
innovation, and an enhanced ability to capture growth and
drive change.
We have a new strategic framework to support the organisation
in its direction and decision-making – we are Building a
transformative culture. The culture we are building can be
defined by the words: agility, grit, transparency and courage.
Agility means we will be nimble and responsive to a changing
world. Grit is having the mental toughness and persistence
to deliver excellence without giving up. Transparency means
being truthful, inclusive and straightforward in our approach.
And fostering courage among our people will drive us forward
in the face of challenges and help us to embrace risk in order to
achieve great things.
A transformative culture is one that looks beyond the horizon,
identifies threats and opportunities, and shapes itself to respond
to traditional, commercial, technological, environmental and
other societal forces. These forces can be a positive catalyst
helping us deliver on our uncompromising commitments
to our shareholders, the communities in which we operate,
our customers who we serve, our fellow employees and the
environment, which we have an obligation to protect.
We have identified attractive positions for sustained value
creation in our traditional Australian materials business. We
are able to formulate solutions for our customers using the
latest in materials science to deliver lighter-weight, higher-
strength materials with lower environmental impacts and greater
productivity options around speed, space and total cost.
Across Asia, Australasia and the Middle East, we are delivering
game-changing performance characteristics in plasterboard-
based products: lighter weight, greater strength and superior
sag resistance. At the same time, we are on track to dramatically
reduce water, energy and raw material usage through globally
patented proprietary technologies.
In North America, we are the unquestioned leader in fly
ash technologies, enhancing the use of coal combustion
by-products in construction. We have developed patented
technologies, using more than 70% recycled by-products in
our high-performing TruExteriorTM Trim and Siding. We have
reconfigured our portfolio around a platform of variable cost,
scalable processes with reduced carbon footprints that can
better compete at all points in the cycle. We have driven
efficiencies so that our more mature product manufacturing
facilities are consuming less energy and materials at the lowest
possible costs.
In all aspects of our business, we are proudly working to
Build something great, and Building a transformative culture
is the enabler we need to continue to do this for Boral’s
shareholders, customers, employees and the communities in
which we operate.
Mike Kane
CEO & Managing Director
Boral Limited Annual Report 2017
5
FINANCIAL
REVIEW
Report from
the CFO
Income statement
Year ended 30 June
$ millions
Sales revenue
EBIT1
Finance costs1
Tax benefit/(expense)1
Underlying profit after tax1
Net significant items
Net profit after tax
2017
2016
Group
Continuing
operations
Discontinued
operations
Group
Continuing
operations
Discontinued
operations
4,388.3
4,257.8
130.5
4,311.2
3,945.2
366.0
459.9
(50.7)
(66.5)
342.7
(45.8)
296.9
455.4
(50.7)
(66.7)
338.0
(88.4)
249.6
4.5
–
0.2
4.7
42.6
47.3
397.9
(63.2)
(66.7)
268.0
(12.0)
256.0
394.8
(63.2)
(70.1)
261.5
(16.0)
245.5
3.1
–
3.4
6.5
4.0
10.5
Financial performance
Revenue
Reported revenue of $4.39b was up 2% on the prior year, with
growth in Boral Australia and Boral North America including
eight weeks of revenues from Headwaters, partially offset
by reduced revenues from US bricks following the formation
of the Meridian Brick joint venture. Revenue from continuing
operations, which excludes US bricks revenue, was up 8%.
• Boral Australia revenue of $3.30b was up 1%, with strong
east coast residential construction, growing infrastructure
activity and price gains driving growth in Quarries, Concrete
and Asphalt. The market downturn in WA impacted Bricks
WA, with lower revenues also experienced in Timber
due to Cyclone Debbie, and Concrete Placing due to
the completion of major project work in Barangaroo and
Warringah Mall.
• USG Boral underlying revenue of $1.48b was up 6% on
the prior year, driven by growth in premium Sheetrock®
plasterboard sales and adjacent products. Strong board
volume, price and share growth in Korea and Australia were
partially offset by softer revenues in Indonesia, Thailand
and China.
• Boral North America revenue of A$1.09b was up 6% on
the prior year. This includes A$259m of revenue from
the recently acquired Headwaters business, as well as
the impact of the formation of the Meridian Brick JV.
Excluding these items, revenue increased 9%, benefiting
from increased US housing construction activity. Total US
housing starts increased by 4% to 1.20 million starts during
FY2017, with single family starts up 7%2.
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.
2. US Census Bureau seasonally adjusted starts.
6
Boral Limited Annual Report 2017
Boral delivered strong earnings growth, underpinned by price increases, strong infrastructure and residential activity in Australia and the acquisition of Headwaters, along with a continued focus on cost improvements. Rosaline Ng, Chief Financial Officer Earnings before interest and tax (EBIT1)
Group EBIT before significant items of $459.9m was up 16% on
the prior year, including a $28m contribution from Headwaters
in the first eight weeks of ownership. Volume and price growth,
as well as cost improvement initiatives, have led to strong
performance across the Group.
Boral Australia EBIT of $348.7m was up 11%, with solid price
gains, infrastructure volume growth and efficiencies contributing
to the strong result. Excluding Property, which was down $4m on
FY2016, EBIT was up 14% despite the decline in earnings from
the LNG and Barangaroo projects, the one-off $4m of damages
received from the CFMEU settlement in the prior year and the
$9m year-on-year EBIT decline from Bricks WA.
USG Boral contributed $69.5m of equity accounted income to
the Group, an 18% increase on the prior year. The underlying
EBIT of the joint venture improved by 21%, reflecting price and
volume growth, cost management benefits including transport
and lower production costs, and growth in premium Sheetrock®
sales. Strong market conditions in Australia and Korea have
supported the result, partially offset by softer earnings in
Indonesia, Thailand and China due to pricing pressure.
Boral North America EBIT of A$66.3m was a A$22.1m
improvement on the prior year, and includes a A$28m
contribution from Headwaters since the acquisition date of
8 May 2017. Excluding Headwaters, EBIT was lower, with
FY2016 including a US$7m land sale benefit, while a US$2.4m
cost incurred in the Denver Construction Materials business for
rehabilitation of the Brighton Quarry impacted this year’s result.
Despite market growth being lower than expected, volumes
lifted, prices strengthened and underlying margins improved for
Boral’s legacy business. The Headwaters result also included
A$17.3m of post-acquisition purchase price accounting
adjustments. Excluding these adjustments, underlying EBIT from
Headwaters was A$45.2m.
Finance costs
Net underlying interest expense for FY2017 was $50.7m, a
decrease from the FY2016 expense of $63.2m due to increased
cash levels for part of the year following the equity raising
in December 2016, partially offset by higher debt after the
Headwaters transaction closed in May 2017. Underlying interest
cover improved from 6.3 times last year to 9.1 times in FY2017.
Tax expense1
Tax expense for the year was flat, with the average underlying
tax rate for the year decreasing from 20% in FY2016 to 16%
in FY2017. The current year benefited from the recognition of
previously unrecognised tax losses in Australia and the USA,
and a benefit arising from the vesting of share acquisition rights.
Excluding this, the effective tax rate for FY2017 was 22%.
Net profit after tax
Underlying profit after tax1 was $342.7m, a 28% increase on
the prior year. This improvement was due to a 16% increase in
EBIT, with reduced interest expense and tax expense remaining
constant despite the increased earnings. Reported net profit
after tax of $296.9m included a net loss of $45.8m from
significant items, and compares to a profit of $256.0m in the
prior year, which included a significant item loss of $12.0m.
Significant items
The Group recorded an after-tax net loss of $45.8m in respect
of significant items that were excluded from the underlying
trading result. This primarily relates to costs associated with the
acquisition and integration of Headwaters and an impairment
of the Bricks WA business, partially offset by a net gain from
divestments during the period.
Sale of businesses
The Group incurred the following gains and losses arising from
disposals of businesses in both the current and prior periods:
Boral CSR Bricks joint venture: On 31 October 2016, the Group
disposed of its 40% interest in the Boral CSR Bricks joint venture
for a net gain of $35.8m.
US bricks: The Group entered into an agreement with an
affiliate of Forterra Inc. to combine its US bricks business, and
Forterra’s US and Canadian businesses into two 50/50 owned
joint ventures. On disposal of its interest, Boral deconsolidated
its existing US bricks business, and recognised an equity
accounted investment in respect of its 50% shareholding in each
of the US and Canadian entities that operate as the Meridian
Brick joint venture. This resulted in a net gain of $13.2m.
Thailand Construction Materials: Additional costs were incurred
with respect to the finalisation of working capital adjustments
from the sale of the Thailand Construction Materials business in
December 2012.
Reconciliation of underlying results to reported results for FY2017
$ millions
Underlying results
Significant items
Sale of businesses
Acquisition costs
Integration costs
Asset impairment
Total significant items
Reported results
1. Excluding significant items.
EBIT
Finance costs
Tax
Profit after tax
459.9
(50.7)
(66.5)
342.7
38.5
(63.2)
(20.1)
(20.4)
(65.2)
394.7
–
–
–
–
–
(50.7)
4.1
10.4
4.9
–
19.4
(47.1)
42.6
(52.8)
(15.2)
(20.4)
(45.8)
296.9
Boral Limited Annual Report 2017
7
FINANCIAL
REVIEW
Acquisition costs
Costs of $63.2m were incurred in relation to the acquisition of
Headwaters, related to various due diligence costs, success
fees paid to advisers and certain change in control payments
to Headwaters executives.
Integration costs
The following integration costs were incurred during the period:
Meridian Brick: Restructuring and integration costs of
$8.4m were incurred, reflecting plant rationalisation, integration
of back office functions and an organisational restructure,
in order to achieve targeted synergies and streamline the
organisation for optimal performance.
Headwaters: $11.7m of costs have been incurred on the initial
integration of the business. The costs to date predominantly
relate to redundancies, employee incentives implemented by
Headwaters and consultant fees supporting the integration.
Additional costs are anticipated in FY2018 and FY2019.
Asset impairment
Deteriorating market conditions in Western Australia and our
ongoing review of the Bricks WA business has resulted in a
$20.4m impairment of assets during the period.
1. Excluding significant items.
(Figures may not add due to rounding).
8
Boral Limited Annual Report 2017
Cash flow
For year ended 30 June, $ millions
EBITDA1
Change in working capital
Fly ash contracts
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
2017
720
(34)
(12)
(38)
(50)
(42)
(12)
(14)
12
(117)
413
(340)
Acquisition of controlled entities
(3,637)
Proceeds on disposal of assets
Proceeds on disposal of controlled
entities
Cash acquired
Free cash flow
Equity raisings
Dividends paid
On-market share buy-back
Other items
Cash flow
39
123
75
(3,327)
2,019
(226)
-
9
(1,525)
2016
645
40
-
(15)
(61)
(69)
(15)
(27)
15
(35)
478
(324)
-
56
-
-
210
-
(154)
(115)
7
(52)
Operating cash flow decreased by $65m to $413m in FY2017,
with improved earnings and lower income tax offset by
Headwaters acquisition costs paid, an adverse working capital
movement and an increase in share acquisition rights vested.
Change in working capital
The current year was impacted by increased revenue in May and
June for the Boral Australia business in FY2017, which increased
debtor levels at 30 June 2017. There has also been an increase
in inventories in the US Cladding businesses due to higher
weighting towards the more expensive Versetta product, and
Siding & Trim to support the growth in the business.
Interest and tax
Interest decreased as a result of the increased cash levels
between the equity raising in December 2016 and the
Headwaters acquisition in May 2017, while tax decreased due to
FY2016 including additional tax payments to settle capital gains
tax obligations from the landfill sale in FY2015.
Restructuring, integration and acquisition costs paid
In FY2017, $82m of payments associated with the acquisition of
Headwaters were incurred, as well as integration costs of $12m
and continuation of spend from restructuring of $23m arising in
prior periods.
Capital expenditure
Capital expenditure at $340m in FY2017 was $16m higher
than in FY2016. Expenditure increased with ongoing quarry
upgrades in Deer Park (VIC), Orange Grove (WA) and Ormeau
(QLD), acquisition of quarry reserves at Bacchus Marsh (VIC),
NSW concrete plant upgrades, and the Lake Wales roofing plant
upgrade in the USA. Growth expenditure increased from $43m
in FY2016 to $52m in FY2017.
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 partially hedged its foreign exchange exposures
arising from its investment in its USA operations. Earnings from
foreign operations are not hedged.
Debt and gearing
As at 30 June, $ millions
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)
2017
2,571
238
2,333
5,441
43
30
9.1
2016
1,345
452
893
3,506
25
20
6.3
Net debt
Net debt increased by $1,440m to $2,333m at 30 June 2017,
primarily due to the acquisition of Headwaters in May 2017, offset
by cash proceeds from the equity raising in December 2016.
Gearing ratios
Boral’s gearing covenant with its financiers, measured as gross
debt to gross debt plus equity less intangibles, increased
slightly to 32%, remaining comfortably within the 60% threshold.
Gearing, as measured by net debt to net debt plus equity, is 30%
as at 30 June 2017.
Capital management
During the year, the Group undertook an equity raising
of $2,018.9m, net of transaction costs of $38.9m. The
equity raising consisted of a 1 for 2.22 pro rata accelerated
renounceable entitlement offer at an offer price of $4.80 per
share. The capital raising resulted in the issue of 93,750,000
ordinary shares under the Institutional Placement, 233,648,069
ordinary shares under the Institutional Entitlement Offer and
101,334,418 ordinary shares under the Retail Entitlement Offer.
In the prior year, the Company completed the buy-back of
20,641,950 shares for consideration of $115m at an average
price of $5.59 per share. 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 was $231m, at
an average price of $5.91 per share.
In FY2017, a fully franked interim dividend of 12.0 cents per
share and a 50% franked final dividend of 12.0 cents per share
were declared, for a full year dividend of 24.0 cents per share.
The Group’s Dividend Reinvestment Plan remains suspended
until further notice.
1. Excluding significant items.
Boral Limited Annual Report 2017
9
DIVISIONAL
PERFORMANCE
Boral Australia
(A$)
Revenue
EBITDA1,2
EBIT1,2
Net assets
ROFE1,3
Employees4
USG Boral
FY2017
$3,296m
$551m
$349m
$2,389m
14.6%
5,769
Boral’s full year reported result (A$)
Reported EBIT1 or equity income5
FY2017
$70m
Underlying USG Boral result (A$)
FY2017
Revenue
EBITDA1
EBIT1
Net assets
ROFE1,3
Employees
Boral North America
(A$)
Revenue
EBITDA1
EBIT1
Net assets
ROFE1,6
Employees4
$1,478m
$284m
$217m
$1,862m
11.6%
3,172
FY2017
$1,093m
$123m
$66m
$4,501m
4.3%
7,053
1%
8%
11%
18%
6%
13%
21%
6%
32%
50%
Revenue
EBIT1
b
b
8
8
2
2
3
3
$
$
.
.
b
b
0
0
3
3
3
3
$
$
.
.
m
9
4
3
$
m
4
1
3
$
6
1
Y
F
7
1
Y
F
6
1
Y
F
7
1
Y
F
Revenue
EBIT1
b
8
4
.
1
$
b
0
4
.
1
$
m
7
1
2
$
m
9
7
1
$
6
1
Y
F
7
1
Y
F
6
1
Y
F
7
1
Y
F
Revenue
EBIT 1
m
0
5
$
S
U
m
3
2
8
$
S
U
m
1
5
7
$
S
U
m
2
3
$
S
U
6
1
Y
F
7
1
Y
F
6
1
Y
F
7
1
Y
F
EBIT of $349m was $35m
higher than FY2016. Benefits of
solid price gains, infrastructure
volume growth and efficiencies
more than offset the decline
in earnings from LNG and
Barangaroo projects, $4m in
damages received in FY2016
and the $9m year-on-year EBIT
decline in Bricks WA.
Boral’s reported equity-
accounted income of $70m
represents our 50% share
of post-tax earnings from
the USG Boral joint venture
for FY2017, and is an $11m
increase on FY2016. Underlying
EBIT of $217m was up $38m
on FY2016, reflecting volume
growth and cost management
benefits, including transport
savings and lower production
and energy costs.
The FY2017 result includes
eight weeks of Headwaters
revenue and earnings,
four months of Boral Bricks
revenue and earnings, and
eight months of post-tax equity
income from the Meridian
Brick joint venture. FY2017
EBIT of US$50m is a US$18m
increase on FY2016. For Boral
businesses, volumes increased,
prices strengthened and
underlying margins improved
despite slower-than-expected
market growth.
1. Excluding significant items.
2. Excludes contribution from Boral CSR Bricks JV which was divested in October 2016, with earnings reported under Discontinued Operations.
3. EBIT return on divisional funds employed. USG Boral ROFE based on underlying EBIT.
4. Includes 50%-owned joint venture employees.
5. Post-tax equity income from Boral’s 50% share of the USG Boral joint venture.
6. EBIT return on divisional average monthly funds employed for FY2017.
10
Boral Limited Annual Report 2017
Divisional results at a glance In FY2017, Australian residential activity continued at strong
levels with roads and infrastructure activity growing. There were
further improvements in US housing markets, and ongoing
mixed conditions in Asian markets.
Highlights included:
• Boral is continuing to capitalise on historically strong levels
of activity in the Australian residential market and the strong
pick-up in major roads and infrastructure investments.
• Continued recovery of US housing market, with single-
family house construction growing. Boral is well positioned
to benefit from broader construction market growth with
improved scale, enlarged product offering and more
balanced portfolio.
• Strengthened market position in Asia through Sheetrock®
brand products, with ongoing penetration opportunities;
and strength in Korea, while activity in Indonesia, Thailand
and China was more subdued.
Boral proforma external revenue1 by market
USA infrastructure 6%
Other 2%
USA non-
residential 6%
USA Repair
& Remodel 8%
Australian RHS&B
and other
engineering
21%
Australian non-
residential 9%
USA residential
18%
Asia 7%
Australian A&A 8%
Australian detached
dwellings 10%
Australian multi-dwellings 5%
Australia
Boral’s largest exposure is to the roads, highways, subdivisions
& bridges (RHS&B) segment in Australia. RHS&B value of work
done2 (VWD) is estimated to have grown by 14% year-on-year in
FY2017, with a further 15% growth forecast in FY2018.
Other engineering activity2 contracted in FY2017, with the
continued slowdown of mining and LNG project activity
expected to have more than offset growth in railways and
electricity.
Australian housing starts3 moderated compared to the record
high of ~234,000 in FY2016, with an estimated 8% decline to
~216,000 in FY2017. Detached housing starts are down by an
estimated 3%, while multi-residential starts are down by 12%.
New South Wales housing activity was strong, with starts
up 3%. Starts in Victoria, Queensland, Western Australia and
South Australia declined by an estimated 7%, 14%, 22% and
9%, respectively. Detached housing as a proportion of total
starts remain at low levels at ~52%, compared to a 20-year
average of 64%.
Market forecasters4 expect Australian housing activity to be
down by ~12% to ~190,000 starts in FY2018, which is still at
historically strong levels of activity.
Australian alterations & additions (A&A) activity5 is estimated to
have grown 3% in FY2017 compared with the prior period, and
is expected to remain steady in FY2018.
Non-residential activity5 is estimated to be 3% lower in FY2017
compared with the prior period, but is expected to grow
in FY2018.
The list of Australian project work provided on page 12 includes
major RHS&B, larger non-residential and other engineering
work, and shows projects awarded to Boral and the potential
pipeline of work.
1. Based on FY2017 proforma revenues for a full year contribution from
Headwaters businesses, and includes Boral’s 50% share of revenues from
USG Boral and Meridian Brick joint ventures.
2. Average of Macromonitor and BIS Oxford Economics forecasts.
3. ABS original housing starts; Jun-17 quarter based on average of HIA,
Macromonitor and BIS Oxford Economics forecasts.
4. HIA, BIS Oxford Economics and Macromonitor.
5. ABS value of work done 2014/15 constant prices; average of
Macromonitor and BIS Oxford Economics forecasts used for Jun-17
quarter.
Boral Limited Annual Report 2017 11
Market conditions and competition DIVISIONAL
PERFORMANCE
Boral’s Australian project pipeline as at August 2017
Mitchell Freeway, WA
NorthLink Stage 1, WA
Est. completion 2017
Est. completion 2018
USA
Market conditions continued to strengthen with total US housing
starts1 increasing 4% in FY2017 to an annualised rate of
1.20 million starts.
Bringelly Road Stage 1, NSW
Est. completion 2018
Pacific Hwy, Nambucca, NSW
Est. completion 2018
Single-family starts increased by 7% nationally, up 10% in
Boral’s Tile States and up 10% in Boral’s Brick States2.
Toowoomba Second Range, Qld
Est. completion 2018
Warrego Highway Stage 2, Qld
Est. completion 2018
Gateway Motorway North, Qld
Est. completion 2019
NorthConnex, NSW
Est. completion 2019
Forrestfield-Airport Link, WA
Est. completion 2019
Amrun Project, Qld
Kingsford Smith Drive, Qld
Est. completion 2019
Est. completion 2019
Sydney Metro, City & SW (precast), NSW Est. completion 2019
Northern Connector, SA
Northern Road, NSW
Est. completion 2020
Currently tendering
Pacific Motorway M1 Widening, NSW
Currently tendering
Pacific Hwy W2B, NSW
NorthLink stages 2 & 3, WA
Melbourne Metro, Vic
Western Distributor, Vic
Currently tendering
Currently tendering
Currently tendering
Currently tendering
Sydney Metro, City & SW, NSW
Currently tendering
Brisbane Airport Runway, Qld
Currently tendering
Outer Sub. Arterial Roads, Vic
Currently tendering
Sunshine Coast Airport, Qld
Currently tendering
Melbourne Airport Runway, Vic
Currently tendering
Logan Motorway, Qld
Currently tendering
Western Sydney Stadium, NSW
WestConnex (Stage 3), NSW
Badgerys Creek Airport
Pre-tendering
Pre-tendering
Pre-tendering
Australian Inland Rail Expressway
Pre-tendering
Warrego Highway Stage 3, Qld
Pre-tendering
1. Seasonally adjusted US Census Housing Starts for national figures.
2. 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.
3. Average of analysts’ forecasts (Dodge, Wells Fargo, NAR, NAHB, Fannie
Mae, Freddie Mac, MBA) from July/August 2017.
12
Boral Limited Annual Report 2017
With multi-family starts down 1% nationally, single-family starts
as a proportion of total starts increased from 66% to 68%, but
remain below the long-term average of 71%1.
The housing activity momentum slowed in FY2017, mainly
driven by the slowing in multi-family activity. On average, market
forecasters3 expect total US housing starts to lift by 8% in
FY2018 to ~1.29 million starts.
Other US construction markets also strengthened during the
year including non-residential4 activity which was up 2%, and
the Repair & Remodel5 market which lifted by an estimated 6%.
US infrastructure activity was strong but based on estimated
Infrastructure-based Ready Mix Concrete volumes6, was
estimated to be 4% softer.
Asia
Market growth in Korea was underpinned by the strong
performing residential sector. Markets remained subdued in
Thailand, Indonesia and China in line with weaker economic
conditions. Emerging USG Boral markets of India, Vietnam and
the Philippines continue to grow.
Competition
In general, Boral faces robust competition from a range of
large and small players in most of its building products and
construction materials markets, with many of Boral’s large
competitors in Australia, Asia and North America having
global leadership positions.
Some of Boral's businesses experience 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. Boral aims to
differentiate itself through service excellence and product
innovation.
Specific challenges and responses relating to competition
are highlighted on page 19.
4. Dodge Data & Analytics, Non-Residential Value of Work, forecast used for
Jun-17 quarter.
5. Moody’s Retail Sales of Building Products.
6. Infrastructure Ready Mix Demand from McGraw Hill Dodge.
Market conditions and competition (continued) Revenue
Boral Australia revenue increased by 1% to $3.3b, driven by
strong levels of east coast residential construction, price gains in
all major businesses and growth in infrastructure activity, largely
offset by the WA market downturn impacting construction
materials businesses and Bricks WA, as well as lower revenues
in Timber and Concrete Placing.
Overall, weather impacts balanced out over the full year, with the
wetter than average Q1 and Q3 conditions offset by the benefit
of a drier Q2 and Q4.
EBIT1
Boral Australia EBIT of $349m increased by 11% or $35m.
EBIT excluding $24m from Property increased by 14%. The
benefits of solid price gains, infrastructure volume growth and
efficiencies more than offset the decline in earnings from LNG
and Barangaroo projects, the one-off $4m of damages received
from the CFMEU settlement in the prior year and the $9m year-
on-year EBIT decline from Bricks WA.
Concrete
Concrete delivered improved earnings from volume and price
growth, particularly in east coast metropolitan regions.
Overall, concrete volumes were up 1%, with strong growth in
NSW and positive contributions from all other states except
WA. Excluding the impacts of LNG projects (Curtis Island and
Wheatstone) and Barangaroo in the prior year, volumes were up
3% year-on-year.
On a like-for-like basis, concrete prices were up by an average of
3% nationally, with ~3 to 5% increases in metro regions across
the country except in WA. The solid price growth reflects overall
strong demand conditions and the implementation of
bi-annual price increases. A favourable product mix resulted in
the average selling price in concrete being up over 4% nationally.
Asphalt
Asphalt delivered improved earnings, with stronger margins and
volume growth contributing to the result. Increased volumes in
Qld, NSW and Vic on the back of growing infrastructure activity
were partially offset by weaker volumes in SA and project delays
in WA.
Boral Australia FY2017 external revenue
Timber 4%
Other 2%
Bricks and Roofing 6%
Concrete Placing
3%
Cement 9%
Concrete 42%
Asphalt 21%
Quarries 13%
Quarries
Quarries delivered stronger earnings, particularly supported
by growth in SE Qld and Vic. Quarry volumes were up 4%
nationally, with volume growth in all states except NSW, which
maintained its already high volumes. Increased infrastructure-
related activity was felt across the country.
On a like-for-like basis, quarry prices were up by an average
of over 2% nationally, with 4 to 10+% increases in eastern
state metro markets, and aggregate prices were up 4%. With
pricing pressure in WA and regional NSW and Qld, however, the
average selling price across all quarry materials was up just over
1% nationally.
Cement
External revenues were steady, underpinned by a 2% price
increase and lower wholesale volumes to support higher
volumes of cement sold internally. Overall, total volumes
(external and internal sales) were up 2%. Earnings grew strongly,
supported by price and volume gains as well as productivity and
material input cost benefits, partially offset by higher
energy costs.
Concrete Placing
Revenue was down during the year as expected, following the
completion of work on Barangaroo and Warringah Mall, with a
corresponding reduction in earnings.
Property
Property contributed EBIT of $24m, compared with $28m in
FY2016. The FY2017 result included Kirrawee and the second
settlement at Nelsons Ridge in NSW, with property sales a little
ahead of expectations.
1. Excluding significant items.
Boral Limited Annual Report 2017 13
Boral Australia DIVISIONAL
PERFORMANCE
Boral Australia continues to benefit from the strength of east
coast residential construction, as well as increasing activity in
major road and infrastructure work. This has helped offset the
transition from resource-based LNG projects, which reduced in
FY2016 and effectively ended in FY2017. The business continues
to see high levels of opportunity across the country in road, rail
and airport projects in the coming years.
Benefits from increased infrastructure activity during FY2017
included the Bringelly Road – Stage 1 project, Pacific Highway
upgrade, and concrete volumes at NorthConnex in NSW. In Qld,
Boral secured fixed plant concrete supply to the Toowoomba
Second Range Crossing project and the Gateway Upgrade
North project delivered early benefits, which will increase in
FY2018. In WA, the Mitchell Freeway Extension was completed
in FY2017, NorthLink Stage 1 was delayed but will deliver
substantial benefits in FY2018, and Boral has also commenced
concrete supply for Forrestfield-Airport Link which will continue
to FY2020.
Post year end, Boral secured concrete supply for the precast
package of the Sydney Metro project (City & south-west), which
will commence in 2H FY2018.
Outlook
Boral Australia is expected to deliver higher EBIT in
FY2018 compared with FY2017, excluding property in both
years. The pre-Property result is expected to be broadly
balanced between 1H and 2H.
The expected year-on-year improvement is underpinned by
infrastructure volume growth, with RHS&B activity forecast
to grow by ~15% in FY2018, driving a lift in volumes,
particularly in asphalt and associated pull-through of quarry
products, as well as continued strength in concrete and
cement. Margins are expected to continue to improve
through a combination of price and cost disciplines.
Over the past five years, Property earnings have ranged
from a low of $8m to a high of $46m. The contribution
from property in FY2018 is currently expected to be at the
low end of the historical range and weighted towards the
second half.
Based on this expected Property contribution, FY2018 EBIT
from Boral Australia is expected to be broadly similar to
FY2017, including Property in both years.
Building products
Building products businesses reported lower revenues and
earnings across Bricks WA and Timber businesses, with a
steady result from Roofing.
Bricks WA
Volumes were 26% lower and prices were down 5%.
Restructuring of the operations in FY2017 resulted in a reduction
of 52 positions and a one-off cost of $2m. With earnings down
on the prior year, the business delivered a breakeven EBIT and
cash flow positive result. Inventory levels continue to be carefully
managed and were broadly steady.
Boral’s 40% share of Boral CSR Bricks was sold to CSR in
October 2016, with earnings contribution for July–October 2016
reported under Discontinued Operations.
Roofing (including masonry operations in SA and Qld)
A 2.5% roofing price increase was offset by a 1% volume
decline, resulting in flat revenues and EBIT. Benefits from growth
in the supply & install market segment and new product sales
were offset by higher costs.
Timber
Revenues were lower in both Hardwood and Softwood. EBIT
was also lower, with a lift in Hardwood earnings more than offset
by lower earnings from the Softwood business.
Hardwood volumes were down 10%, largely due to the Cyclone
Debbie-associated flooding at our Murwillumbah operations in
March–April 2016, but average prices were up 5%.
In Softwood, volumes softened by 1% but prices were down 4%
in a competitive market threatened by imports. The Softwood
business was also impacted by poor quality logs delivered
during the period. Both businesses remain profitable.
Strategic priorities
As part of the division’s continuous improvement programs,
the commercial excellence program completed its roll-out
in the Southern Region and in Cement, delivering a 0.5%
margin improvement in those businesses so far, in line with
expectations. The program continues to be rolled out across the
entire business.
Operational excellence programs supported margin expansion
during the year. This included the initial scoping phase of the
multi-year supply chain transformation program, looking to
deliver improvements through our integrated supply chain,
from making of materials through to delivery of materials to
our customers.
14
Boral Limited Annual Report 2017
Boral Australia (continued) USG Boral is Boral’s 50%-owned joint venture in 14 countries
across Australia, New Zealand, Asia and the Middle East.
Boral’s equity accounted income1 of $70m, up 18% on the
prior year, represents Boral’s 50% share of USG Boral’s post-tax
earnings, and is reflected in Boral’s EBIT result.
Underlying USG Boral result
Underlying revenue increased by 6% to A$1.5b, supported
by continued growth in premium Sheetrock® plasterboard
sales. Strong board volume, price and share growth in Korea
and Australia, together with growth in USG Boral’s emerging
countries, especially Vietnam, were partially offset by softer
revenues in Indonesia, Thailand and China as conditions
moderated in these markets.
The highly-regarded Sheetrock® brand products are maintaining
a price premium of around 4%, with adoption rates ranging from
~13% in China to ~90% in Australia as at 30 June 2017.
Revenue from non-board sales, including compounds, mineral
fibre ceiling tiles, substrates and technical boards, increased by
4% and represented ~40% of USG Boral’s total revenue
in FY2017.
Underlying EBIT1 increased 21% to $217m, reflecting volume
growth and cost management benefits, including transport
savings and lower production and energy costs. Average plant
utilisation was ~76%, up substantially from ~70% in FY2016.
Overall prices were up, with growth in Australia and Korea
somewhat offset by competitive pricing pressure in Thailand
and Indonesia.
Australia/New Zealand
Revenue increased by 5% to $529m, with board volumes up
5%, reflecting strong activity in the eastern states, and continued
growth in non-board sales. Average selling prices rose 3%,
supported by growth of Sheetrock® volumes which command a
price premium of ~4%.
The business in Australia reported a strong lift in earnings over
the year.
Asia
Revenue increased by 6% to $949m in AUD terms, with strong
growth in Korea and newer markets, like Vietnam and India.
Korea reported record sales volumes and price growth of
over 10% to deliver a significant lift in earnings. New direct
distribution arrangements established during the year supported
the strong result. Sheetrock® adoption rate is now ~43%.
USG Boral FY2017 underlying revenue
Other 13%
China 9%
Indonesia 6%
Thailand 13%
Australia 36%
Korea 23%
Thailand experienced subdued domestic conditions and
competitive price pressure, and while cost management
initiatives and Sheetrock® price premiums benefited the result,
revenues and earnings were softer. USG Boral’s volumes were
down ~3%, while the estimated market decline was down more.
Indonesia revenue and earnings were lower, with higher board
volumes offset by competitive pressure, particularly around
price. While market conditions are expected to persist in the
near term, the business is focused on self-help operational and
marketing opportunities.
China recorded softer earnings, with increased Sheetrock®
sales, price increases and efficiencies offset by higher
production costs and a subdued economy.
Other regions delivered continued revenue and earnings growth,
including Vietnam and India.
Outlook
Profits from USG Boral are expected to continue to grow in
FY2018, underpinned by continued strength of Sheetrock®
across all markets delivering price, volume and cost
benefits, as well as expected performance improvements in
Indonesia and Thailand.
The rate of underlying profit growth is expected to be in the
high single-digits in FY2018, which is lower than FY2017
growth due to forecast softer demand in Australian and
Korean residential construction markets.
1. Excluding significant items.
Boral Limited Annual Report 2017 15
USG Boral DIVISIONAL
PERFORMANCE
With the acquisition of Headwaters Inc completed on
8 May 2017, the FY2017 result includes eight weeks of revenue
and earnings from Headwaters businesses. The Meridian Brick
joint venture formed on 1 November 2016 and as such, the
FY2017 result includes four months of Boral Bricks revenue
and earnings, and eight months of post-tax equity income from
Meridian Brick. As a result of equity accounting, Boral’s share of
revenue from Meridian Brick is not reported in Boral’s revenue.
Revenue
Reported revenue of A$1.1b for Boral North America was up 6%.
In USD, revenue of US$823m was up 10% on last year,
reflecting additional revenue from Headwaters partially offset by
the impact of equity accounting the Meridian Brick joint venture
for eight months.
Excluding Bricks and Headwaters, revenue was up 9%, with
growth in Cladding, Roofing and Denver Construction Materials.
Fly Ash revenues were broadly steady despite a Boral contract
being lost to Headwaters.
EBIT1
EBIT of A$66m was up 50% on FY2016. In USD, EBIT of
US$50m compares with US$32m reported last year. Excluding
the impact of Headwaters, FY2017 EBIT of US$29m compares
with US$32m in FY2016. Last year’s EBIT included a one-off
US$7m land sale benefit while this year included a US$2.4m
cost incurred in the Denver Constructiion Materials business for
rehabilitation of the Brighton Quarry.
While market growth was slower than expected, volumes lifted,
prices strengthened and underlying margins improved for
Boral’s legacy businesses.
Headwaters businesses
In FY2017, Headwaters businesses contributed US$195m of
revenue, US$35m of EBITDA and US$21m (A$28m) of EBIT,
in line with Boral’s guidance provided when the acquisition
completed.
Headwaters’ US$21m EBIT included US$13m of post-acquisition
purchase price accounting adjustments. Excluding these, EBIT
would have been US$34m.
For the eight week period from 8 May to 30 June 2017,
Headwaters Construction Materials businesses (Fly Ash and
Block) delivered 10% revenue growth and 12% EBIT growth on
the same eight week period in the prior year.
1. Excluding significant items.
2. Including Boral’s 50% share of underlying revenue from the Meridian Brick
joint venture, which is not included in reported revenue.
16
Boral Limited Annual Report 2017
Boral North America FY2017 external revenue2
Headwaters 20%
Cladding (Stone,
Trim and Siding) 16%
Roofing 20%
Bricks
25%
Denver Construction
Materials 10%
Fly Ash 9%
Headwaters Building Products businesses delivered 29%
revenue growth and 10% EBIT growth due primarily to the
contribution from the Windows business purchased during the
year. This impact was somewhat offset by softer earnings in
Roofing due to operational issues at its metal roofing plant
in California.
Modest synergy benefits in the first two months of integration
were offset by the impacts of issues in Roofing, which are
being resolved.
Confidence remains strong around delivery of FY2018 and
longer-term synergy targets, as integration and mobilisation
activities have successfully rolled out through the organisation in
the first three months.
Boral businesses
Cladding
Cladding revenue grew 13% to US$157m.
Stone volumes increased 4%, with growth broadly in line with
construction activity. On a like-for-like basis, prices were up 2%,
and average prices were up 1%. Stone manufacturing utilisation
rose to 44%.
Trim & Siding continued to grow with volumes up by more
than 50% and prices up by 3%. Dealer stocking locations have
reached 792.
Roofing
Revenue was up 6% to US$187m with strong growth in Florida,
Arizona and Nevada. Volumes rose 5%, underpinned by strong
growth in concrete tiles. Clay tile volumes were softer as custom
home builds and re-roof activity slowed in California. While like-
for-like prices were up ~2%, average prices were up 1%. Plant
utilisation was ~30%.
Boral North America Outlook
Boral North America will deliver a significant growth
in EBIT in FY2018, primarily as a result of a full year
contribution from Headwaters, coupled with delivery of
US$30–35m of year 1 synergies.
The Meridian Brick joint venture will also contribute to the
earnings uplift, with a much-improved positive earnings
contribution expected in FY2018. Meridian Brick will benefit
from market growth, as well as the ramp-up of synergies
which are targeted at US$25m per annum by
November 2020.
All of Boral’s North American businesses are expected to
benefit from market growth1, including housing starts which
are forecast to increase by ~8%, based on the average of
market analysts’ forecasts of ~1.29m starts in FY2018.
US infrastructure is expected to strengthen by ~5%,
non-residential activity by ~12% and the repair & remodel
market is expected to lift by ~6%.
Fly Ash
Revenues of US$88m were broadly steady on the prior year,
with the benefits of higher prices and underlying volume growth
offset by the loss of the Rockdale contract to Headwaters in the
second half of the year. Price increases ranged from zero to 11%
depending on location and source, with an average 8% price
increase achieved nationally. Celceram® product sales were
lower in FY2017 compared with the prior year. Fly Ash earnings
were higher than the prior year as margins strengthened.
Denver Construction Materials
Revenue grew strongly by 20%, underpinned by strong price
and volume growth in aggregates and concrete. Earnings
however, were down on the prior year due to the impact of a
US$2.4m quarry reclamation cost this year and a US$7m
one-off land resumption gain reported in the prior year.
While the intention to divest Denver Construction Materials was
reported in 1H FY2017, the transaction did not complete as
anticipated. As such, the business will continue to be reported
under Construction Materials as a continuing business.
Meridian Brick joint venture
In the first eight months of operations, the Meridian Brick joint
venture generated US$282m of revenue and delivered US$0.1m
of underlying EBIT.
Boral reported a breakeven result from Boral Bricks in the first
four months of the year and an eight month post-tax equity
contribution from the joint venture of a loss of US$1m.
Delivery of the joint venture’s targeted synergies of US$25m
per annum by year 4 is progressing well. An estimated synergy
run rate of ~US$8m per annum was achieved by 30 June 2017
through the closure of 12 distribution operations and six plants.
1. US market forecasts include: Housing starts based on average of
analysts’ forecasts (Dodge, Wells Fargo, NAR, NAHB, Fannie Mae,
Freddie Mac, MBA) from July/August 2017 forecast; Non-residential from
Dodge Data & Analytics; Repair & Remodel from Moody’s; and
Infrastructure Ready Mix Demand from McGraw Hill Dodge.
Boral Limited Annual Report 2017 17
SUMMARY OF OUR
RISKS AND RESPONSES
RESPONDING
TO A CHANGING
WORLD
To deliver on our goals, we recognise the need to
continually monitor external environmental factors
that could impact Boral’s long-term growth and
sustainability.
We have identified a range of near- and longer-
term risks and challenges across the Group.
We carefully manage these risks and, when
necessary, adapt our strategies to drive success.
Here we highlight some of the actions we are
taking in response to the challenges we face.
Page references indicate where the topics are covered
in the 2017 Boral Review, incorporating Boral’s 2017
Sustainability Report.
Further detail about Boral’s risks and the Company’s risk management
approach can be found in the Corporate Governance Statement on pages
30–43 and the Directors’ Report on pages 44–49.
18
Boral Limited Annual Report 2017
Monitoring megatrends
and positioning the
business to respond to
them takes place in a
coordinated Group wide
approach, with reporting
through to the Executive
Committee and Board.
Megatrends that are
shaping our strategies
• Climate-related
risks and
opportunities
42
• Innovative building
& construction
materials & methods 44
• Digital disruption
28
demographics
& urbanisation
44
S
K
S
R
I
Health, Safety, Environment
(HSE) and Social Risks
• Licence to operate
• Injuries & incidents
• Environmental damage
• Regulatory requirements
• Community impacts
• Workplace relations & human
rights
Industry & Market Risks
Competition Risks
Business Interruption
Megatrends
• Structural & cyclical demand changes
• Political cycles / uncertainty
• Economic growth / investment
• Input costs / inflation
• Regulatory & fiscal policy changes
• New capacity & market entrants
• Plant & systems failure
• Customer concentration
• Pricing dynamics
• Regulatory requirements
• Cyber security
• Weather impacts
• Reserves & resources
• Technology / R&D and product
• Supply chain
innovation
• Business conduct / reputational
damage
• Group-wide commitment to
• USD assets funded with USD
• Centralised competition law
• Business continuity planning
S
E
S
N
O
P
S
E
R
Zero Harm
• Group HSE standards, policies,
procedures and training to
support divisional strategies
• HSE performance monitoring,
reporting and accountability
frameworks
• Monitoring regulatory changes
• Group-led diversity program
• Leadership development
and suite of capability-building
activities
• Zero Harm and wellbeing
initiatives
• Heavy vehicle safety
32
32
31
31
34
management includes training,
vehicle monitoring and innovations 37
• Community consultation
programs
• Flood mitigation and
environmental rectification
programs
• Proactive engagement with
regulators
41
42
• Workplace relations supported
by proactive engagement with
unions and specialist advisers
31
• HSE standards applied
consistently across Asia, Australia
and the Middle East and are often
higher than in-country practices
• Safety engagement program
including communications
campaign, leadership workshops,
and a dedicated safety culture
month
33
17
• Use of CCTV to aid incident
investigations and improvements
• Headwaters acquisition
involved a rigorous review
of environmental and safety
exposures, including post-
completion audits and capital
allocation to bring all operations
up to Boral standards
• Focus on safety observations
and near miss reporting
• Safety is at the forefront of
Headwaters integration activities
37
37
P
U
O
R
G
L
A
R
O
B
I
A
L
A
R
T
S
U
A
L
A
R
O
B
L
A
R
O
B
G
S
U
I
A
C
R
E
M
A
H
T
R
O
N
L
A
R
O
B
XX Denotes 2017 Boral Review page reference
The Boral Review can be found on Boral’s website at boral.com/Annual_Reports
debt as much as possible to
significantly reduce foreign
exchange-related balance sheet
exposures
training
• Monitoring and reporting
regulatory changes and
industry trends
with regular crisis simulations
• Formal bottom-up enterprise
include:
risk management processes
in place
• Energy inputs (diesel, gas and
electricity) hedged to reduce
market cycle impacts
• Diversification to reduce impacts
existing products
of individual geographies and
markets
• Group procurement function
optimising Boral’s cost base
• Transformation Action Group
• Reserves planning and capital
to identify and foster new ways
allocation
to make and sell new and
• Developing Cyber Security
28
strategy with reporting through
• Utilisation of technology for
to Board level
more targeted sales and
marketing
• Centralised Code of Conduct
training and associated policies
29
• Changing
• Leveraging demand shift to major
• Realigning portfolio to reduce
• Restructure of Boral IT to Boral
infrastructure through investments
exposure to lower returning
in quarries, asphalt and concrete
building products and to
Digital Services, improving
agility and responsiveness
operations and strengthened
capability in contracting and
projects management
• Central oversight and tracking
of major projects to target
participation strategies
• Finalising plans to build clinker
import terminal in Victoria to
strengthen import capability
12
12
strengthen construction materials
• Monitoring and preparedness
• Commercial Excellence initiative
for weather-affected disruption
and customer centricity program
to improve customer service and
including water management
plans, flexible workforces and
enhance pricing outcome
13
additional equipment where
• Supply chain optimisation
through the introduction of
enhanced decision-making tools
and improved fleet utilisation
required
42
• Best practice monitoring and
reporting support Chain of
Responsibility compliance
and optimise cost base
10
• Maintaining Australian Building
• Dedicated property and
• Operational Excellence
program and cost reduction
and Construction Commission
(ABCC) compliance to enable
environmental experts to support
compliance and licence to operate
initiatives to offset inflation
13
bids on Federally funded work
• Capacity planning to respond
• Innovation investment to further
• Securing gypsum supply
to demand changes, including
upgrades in India and Korea, and
closure of underutilised plant in
strengthen competitive advantage
through acquisition of reserves
e.g. next generation Sheetrock®
and synthetic gypsum supply
being market tested
17
agreements (e.g. Panja in
Chengdu, China
• Product leadership and
differentiation strategy
underpinning performance
through market uncertainty in
Thailand and Indonesia
• Anti-corruption measures
including clear accountability,
policies, training, and internal and
external audits
17
29
14
• Differentiation strategy has
Thailand)
strengthened USG Boral’s
response to new capacity /
market entrants
• Repositioning Korean business
• Review of governance
structures to manage culture
and performance of third party
agreements and joint ventures
with increased premium products
• Strategic review of IT platforms
to market
• Multi-year roll-out of Sheetrock®
technologies has resulted in a
modern, upgraded plant network 14
• Shifting portfolio from high
• Dedicated Integration and
• Long-term availability of fly
fixed cost, energy-intensive to
lighter-weight products with a
more variable cost model; also
addresses excess brick capacity
• Headwaters acquisition
diversifies Boral’s exposure
growth opportunities
to US construction markets
20
• Regionally focused product price
systems
• Monitoring Trump administration
analytics and sales strategies
impacts – tax reform and
infrastructure investment
positive for Boral
Synergy Delivery program for
Headwaters acquisition
ash closely monitored and
future sources identified
42
• Cost and margin initiatives
• Prioritisation of capital
including LEAN and divisional
procurement leveraging volume
investment aligned with product
and market growth
• Streamlining and upgrading IT
•-
S
K
S
I
R
Health, Safety, Environment
(HSE) and Social Risks
• Licence to operate
• Injuries & incidents
• Environmental damage
• Regulatory requirements
• Community impacts
• Workplace relations & human
rights
• Group-wide commitment to
Zero Harm
• Group HSE standards, policies,
procedures and training to
support divisional strategies
32
• HSE performance monitoring,
reporting and accountability
frameworks
• Monitoring regulatory changes
• Group-led diversity program
• Leadership development
and suite of capability-building
activities
• Zero Harm and wellbeing
initiatives
• Heavy vehicle safety
management includes training,
vehicle monitoring and innovations 37
• Community consultation
programs
• Flood mitigation and
environmental rectification
• Proactive engagement with
programs
regulators
• Workplace relations supported
by proactive engagement with
unions and specialist advisers
31
32
31
31
34
41
42
• HSE standards applied
consistently across Asia, Australia
and the Middle East and are often
higher than in-country practices
33
• Safety engagement program
including communications
campaign, leadership workshops,
and a dedicated safety culture
month
17
• Use of CCTV to aid incident
investigations and improvements
• Headwaters acquisition
involved a rigorous review
of environmental and safety
exposures, including post-
completion audits and capital
allocation to bring all operations
up to Boral standards
• Focus on safety observations
and near miss reporting
• Safety is at the forefront of
Headwaters integration activities
37
37
P
U
O
R
G
L
A
R
O
B
A
I
L
A
R
T
S
U
A
L
A
R
O
B
L
A
R
O
B
G
S
U
A
C
I
R
E
M
A
H
T
R
O
N
L
A
R
O
B
S
E
S
N
O
P
S
E
R
Monitoring megatrends
and positioning the
business to respond to
them takes place in a
coordinated Group wide
approach, with reporting
through to the Executive
Committee and Board.
Megatrends that are
shaping our strategies
include:
• Climate-related
risks and
opportunities
42
• Innovative building
& construction
materials & methods 44
• Digital disruption
28
29
• Changing
demographics
& urbanisation
44
Industry & Market Risks
Competition Risks
Business Interruption
Megatrends
• Structural & cyclical demand changes
• Political cycles / uncertainty
• Economic growth / investment
• Input costs / inflation
• Regulatory & fiscal policy changes
• New capacity & market entrants
• Customer concentration
• Pricing dynamics
• Regulatory requirements
• Technology / R&D and product
innovation
• Plant & systems failure
• Cyber security
• Weather impacts
• Reserves & resources
• Supply chain
• Business conduct / reputational
damage
• USD assets funded with USD
debt as much as possible to
significantly reduce foreign
exchange-related balance sheet
exposures
• Energy inputs (diesel, gas and
electricity) hedged to reduce
market cycle impacts
• Diversification to reduce impacts
of individual geographies and
markets
• Group procurement function
optimising Boral’s cost base
• Leveraging demand shift to major
infrastructure through investments
in quarries, asphalt and concrete
operations and strengthened
capability in contracting and
projects management
12
• Central oversight and tracking
of major projects to target
participation strategies
• Finalising plans to build clinker
import terminal in Victoria to
strengthen import capability
and optimise cost base
• Operational Excellence
program and cost reduction
initiatives to offset inflation
• Capacity planning to respond
to demand changes, including
upgrades in India and Korea, and
closure of underutilised plant in
Chengdu, China
• Product leadership and
differentiation strategy
underpinning performance
through market uncertainty in
Thailand and Indonesia
• Anti-corruption measures
12
10
13
14
17
including clear accountability,
policies, training, and internal and
external audits
29
• Centralised competition law
training
• Monitoring and reporting
regulatory changes and
industry trends
• Transformation Action Group
to identify and foster new ways
to make and sell new and
existing products
• Utilisation of technology for
more targeted sales and
marketing
• Business continuity planning
with regular crisis simulations
• Formal bottom-up enterprise
risk management processes
in place
• Reserves planning and capital
allocation
28
• Developing Cyber Security
strategy with reporting through
to Board level
• Centralised Code of Conduct
training and associated policies
• Realigning portfolio to reduce
exposure to lower returning
building products and to
strengthen construction materials
• Commercial Excellence initiative
and customer centricity program
to improve customer service and
enhance pricing outcome
• Supply chain optimisation
through the introduction of
enhanced decision-making tools
and improved fleet utilisation
• Maintaining Australian Building
and Construction Commission
(ABCC) compliance to enable
bids on Federally funded work
• Restructure of Boral IT to Boral
Digital Services, improving
agility and responsiveness
• Monitoring and preparedness
for weather-affected disruption
including water management
plans, flexible workforces and
additional equipment where
required
42
13
• Best practice monitoring and
reporting support Chain of
Responsibility compliance
• Dedicated property and
environmental experts to support
compliance and licence to operate
• Innovation investment to further
strengthen competitive advantage
e.g. next generation Sheetrock®
being market tested
17
• Differentiation strategy has
strengthened USG Boral’s
response to new capacity /
market entrants
• Repositioning Korean business
with increased premium products
to market
• Shifting portfolio from high
fixed cost, energy-intensive to
lighter-weight products with a
more variable cost model; also
addresses excess brick capacity
• Headwaters acquisition
diversifies Boral’s exposure
to US construction markets
• Monitoring Trump administration
impacts – tax reform and
infrastructure investment
positive for Boral
• Dedicated Integration and
Synergy Delivery program for
Headwaters acquisition
• Cost and margin initiatives
including LEAN and divisional
procurement leveraging volume
growth opportunities
• Regionally focused product price
analytics and sales strategies
22
20
• Securing gypsum supply
through acquisition of reserves
and synthetic gypsum supply
agreements (e.g. Panja in
Thailand)
• Review of governance
structures to manage culture
and performance of third party
agreements and joint ventures
• Strategic review of IT platforms
• Multi-year roll-out of Sheetrock®
technologies has resulted in a
modern, upgraded plant network 14
• Long-term availability of fly
ash closely monitored and
future sources identified
• Prioritisation of capital
investment aligned with product
and market growth
• Streamlining and upgrading IT
systems
42
Boral Limited Annual Report 2017 19
Boral Limited Annual Report 2016 19
•-
SUSTAINABILITY
OVERVIEW
Introduction
Our business strategy recognises our responsibility to
shareholders – to deliver value creation and long-term
sustainability. Boral’s future depends on us having a robust
and socially responsible supply chain, enduring stakeholder
relationships, an engaged and reliable workforce, sustainable
community and environmental impacts, and businesses that
address the needs of today and the future.
This Sustainability Overview covers key material sustainability
issues and reporting for Boral Limited. For more information on
Boral’s sustainability performance and intiatives, refer to:
The following sustainability issues were identified as the
most material for Boral, which align well with management
focus, prioritisation and outcomes of existing risk assessment
processes. Refer to pages in the 2017 Annual Report (AR) and
2017 Boral Review (BR):
• Health & safety (AR pp. 22–23, BR pp.32–37)
• Environmental management & compliance (AR pp. 24–26,
BR pp. 32–33 and 38–39)
• Energy (AR p. 25, BR p. 40)
• Climate-related impacts (AR p. 26, BR pp. 42–43)
• Community impact (AR p. 27, BR p. 41)
•
•
•
the Boral Review 2017, which incorporates Boral’s 2017
Sustainability Report
• Supply chain & product innovation (AR p. 27, BR pp. 44–45)
• Workplace relations & human rights (AR p. 21, BR p. 31)
the Corporate Governance Statement and Directors’ Report
(including the Remuneration Report) in this Annual Report
case studies and features in our internal Boral News
magazine – see boral.com/boral_news
• Boral’s website, which includes supporting policies and
information on sustainable products and Boral’s community
engagement programs
• pollutant emissions data reported to the National Pollutant
Inventory for 94 sites in our Australian operations
• our voluntary responses to CDP, formerly known as the
Carbon Disclosure Project, covering climate change, forests
and water
• Boral’s 2017 public report on gender equality, lodged with
the Workplace Gender Equality Agency on 7 June 2017
•
the Summary of our Risks and Responses on pages 18–19.
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 2017, unless stated otherwise.
• Diversity (AR pp. 22 and 39–41, BR p. 31)
• Business conduct (AR pp. 20–21 and 41, BR p. 29)
Sustainability governance
Our commitment to sustainable development is driven by Boral’s
Board and Executive Committee.
The Board has a Health, Safety & Environment (HSE)
Committee, which provides focused leadership and supports
the activities of management. The Committee reviews and
monitors the performance and effectiveness of Boral’s policies,
plans, systems and governance structures in relation to HSE,
including Boral’s response to climate-related impacts.
Boral’s governance approach is detailed on pages 30–43.
Day-to-day responsibility for sustainability rests with every
employee and is embedded into Group and business-level
strategies. The commitment of line managers and their teams to
deliver Zero Harm Today and our other sustainability ambitions
is critical.
With the Headwaters acquisition completed in May 2017, eight
weeks of financial performance has been incorporated into
the FY2017 results. Reference to Headwaters’ sustainability
performance has been included in this report; however,
sustainability data will be consolidated from FY2018.
We firmly believe that safety performance is an integral
component of leadership and it is therefore linked to base
remuneration and employment. As a result, we do not link
remuneration incentives with safety performance or other
sustainability metrics.
Materiality
Alongside our risk management processes, in 2017 we
engaged EY to undertake a materiality review to validate that the
sustainability risks and opportunities that are important to our
stakeholders are being addressed and communicated.
The review included internal stakeholder interviews, desktop
peer and media reviews, external industry and sector reviews,
and consideration of wider sustainability trends.
Adopting a widely recognised approach to assessing materiality,
EY highlighted some enhancement opportunities, which we
have started to address in this year’s reporting.
Board discretion can be used to adjust executive remuneration
outcomes if there is evidence of a breakdown in management
oversight and processes leading to poor safety outcomes.
Policies and ethical standards
Boral’s Code of Business Conduct and supporting policies set
out the legal and ethical standards of behaviour expected of
Boral’s people. They apply to all of Boral’s operations globally.
We take adherence to legal and ethical standards seriously.
During FY2017, 35 employees in Boral Australia and Boral North
America were dismissed for serious breaches of policy, primarily
for breaching safety rules.
20
Boral Limited Annual Report 2017
Sustainability Overview Boral’s people have access to an external, independent
whistleblowing service, known as FairCall, to report possible
fraud, illegal acts or misconduct. KPMG, which operates the
FairCall service, provides information to appropriate Boral senior
management in order to investigate the potential misconduct.
Outcomes are reported to Boral’s Audit & Risk Committee.
As part of our Code of Business Conduct, we have formal
policies that deal with anti-bribery, corruption and fair
competition.
At end FY2017
Boral total
Boral
Australia3
USG
Boral
Women in Boral
Average service
Average age
20+ year veterans
Employee turnover5
18%
8.4yrs
43yrs
12%
15%
13%
9.3yrs
45yrs
13%
15%
18%
9.4yrs
41yrs
15%
12%
Boral
North
America4
22%
8.1yrs
43yrs
9%
16%
Boral’s Code of Business Conduct was reviewed in 2016, and
HSE policies were reviewed in 2017 to ensure that they continue
to support our business objectives.
3. Excluding joint ventures.
4. Including Meridian Brick joint venture.
5. For FY2017. Excluding employee turnover in Headwaters.
In summary, Boral’s policies and compliance systems:
•
commit to obeying all relevant laws,
• prohibit Boral’s businesses, and agents acting on our
behalf, from giving and receiving bribes and facilitation
payments, and
• prohibit political donations.
Our people
To build a transformative culture to capture growth,
innovate, anticipate and respond to a changing world, we
need an engaged, diverse and capable workforce led by
talented leaders.
Workforce profile
As at 30 June 2017, we have 16,475 full-time equivalent (FTE)
employees including in joint ventures (JVs), and approximately
8,200 contractors working in 17 countries and across a wide
range of functions.
Full-time equivalent
FY2017
FY2016
FY2015
Boral employees
Boral contractors
JV employees2
JV contractors2
11,4991
8,334
8,356
~4,800
~4,800
~4,400
4,976
3,724
3,676
~3,400
~3,400
~3,000
1. Including 4,016 FTE from Headwaters and excluding employees from
Boral Bricks in the USA who are now included in JV employees.
2. Including USG Boral, Meridian Brick and 10 other small Australian-based
joint ventures.
Human rights and workplace relations
We are committed to a workplace free from intimidation,
harassment, bullying, discrimination or unlawfulness, as outlined
in our Code of Business Conduct.
All our operations have grievance mechanisms that are
accessible, accountable and fair, enabling concerns to be raised
without fear of recrimination.
This includes Boral’s external, independent whistleblowing
service, known as FairCall. Boral also offers employees and their
immediate families a free, confidential, professional counselling
service, the Boral Employee Assistance Program or BEAP, to
help address issues that may affect their work and personal life.
We support the rights of our employees to freedom
of association, to choose to unionise and to collective
representation, regardless of their location or function. We are
committed to working honestly and transparently with labour
unions and we undertake negotiations in good faith.
In Australia, Boral has some 70 enterprise agreements covering
approximately 3,500 employees. We supported the return of
the Australian Building and Construction Commission, and all
of Boral’s relevant enterprise agreements have been varied or
replaced with agreements that we are comfortable comply with
the Building Code.
In line with the United Nations Guiding Principles on Business
and Human Rights, and acknowledging the shift in focus
externally, we are undertaking a review to assess the risk of
modern slavery in our value chain and the need to address it in
our policy framework.
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%
0%
10%
20%
30%
40%
50%
0% 10% 20% 30% 40% 50% 60% 70%
Male
Female
Male
Female
Male
Female
Boral Limited Annual Report 2017 21
SUSTAINABILITY
OVERVIEW
Diversity
We believe that a diverse workforce is important for business
success and that we should reflect the diversity of our
communities.
Boral has an established Diversity & Inclusion Plan with Boral’s
Diversity Council supporting the delivery of targeted outcomes.
The plan includes six elements: leadership, communication &
education, system & process design, gender equality & pay
equity, generational diversity, and Indigenous relations.
In FY2017, Boral partnered with Deloitte to carry out a high-level
study into the ability of our Australian workforce to adapt and
transform. The findings will be reflected in the FY2018 Diversity &
Inclusion Plan.
Other FY2017 focus areas included:
•
•
raising awareness of the impact of unconscious bias, with
18 senior leader diversity awareness and unconscious bias
sessions conducted,
increasing representation of women, particularly in
leadership roles, and
• pay equity outcomes, with the female to male average base
salary ratio1 in Boral Australia being favourable at 1.02:1.00.
Boral is committed to supporting Indigenous employment,
programs and communities. We continue to retain approximately
80% of employees through our Indigenous employment
program in Australia. In FY2017, the Indigenous Employment and
Training Plan for 2016 to 2020 was implemented to continue the
work from previous plans from 2006 to 2015.
Developed in FY2017, Boral’s Reconciliation Action Plan focuses
on building on relationships, respect and opportunities for
Indigenous communities and will be submitted to Reconciliation
Australia, the lead independent body for reconciliation in
Australia, in FY2018.
For more details on diversity at Boral, see pages 39–41.
1. Calculated as the average base cash salary for females as a proportion of
the average base cash salary for males, as used in the Workplace Gender
Equality Agency Confidential Report.
22
Boral Limited Annual Report 2017
Health, Safety and Environment
Across Boral, our overarching goal is to achieve Zero Harm
Today. We are working on this by eliminating behaviour and
conditions that have potential to injure our people and harm
the environment.
We are committed to our goal of Zero Harm and work to
eliminate adverse environmental impacts. Where elimination is
not possible, we seek to minimise any harmful effects from our
operations, which means that we target performance that is
often better than environmental laws require.
Our approach
Managing health, safety and environment (HSE) is an integral
part of the day-to-day activities of Boral’s line managers. They
are supported by a network of HSE professionals in Boral’s
divisions and a small corporate team headed by Boral’s Group
HSE Director.
The corporate team has responsibility for policy, governance and
functional leadership, in consultation with divisional specialists
and leadership. Each of Boral’s divisions has responsibility
for leading the implementation of their respective programs
and providing expert coaching to line managers. Divisions
have their own HSE strategies and plans, consistent with and
complementary to Boral’s Group HSE strategy.
Divisional management teams and the corporate HSE function
provide formal reports on 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.
During FY2017, Boral Australia established a divisional Executive
HSE Committee, chaired by Boral Australia’s CEO, with
membership drawn from operational leadership and supported
by the divisional HSE team. This committee assists Boral
Australia’s leadership team to fulfil its oversight of divisional
strategies, systems, policies and practices in respect of
HSE matters.
At a site level, safety performance and actions are discussed in
various forums including daily pre-start meetings and at many
sites, monthly HSE meetings. More serious HSE incidents,
including near miss events, are directly communicated to Boral’s
CEO & Managing Director and incident review meetings are held
for serious near miss events, involving local line management,
relevant divisional executives and the Group HSE Director.
Reviews of serious incidents are also held at a divisional
executive level.
Our HSE reporting framework and systems, in conjunction
with a culture of transparent reporting, ensure that reliable
HSE information is provided to both our internal and external
stakeholders.
Headwaters integrationThe acquisition of Headwaters added 4,016 FTE employees across more than 170 operational sites. Our North American operations now have 7,053 FTE employees (including the Meridian Brick joint venture), with an average age of 43 years and average service of 8.1 years.Bringing together the best of Boral and Headwaters is a key part of the integration, as is establishing aligned purpose, values and objectives, and building on the strong safety culture of both organisations.In the first few weeks of integration, senior leaders held more than 80 “meet and greet” sessions across 60 sites with more than 2,000 people. HSE strategy and performance
Following a review in FY2017, Boral’s Group strategy for HSE has
been simplified to four strategic objectives and 14 contributing
programs. Across Boral’s three divisions – Boral Australia, USG
Boral and Boral North America – HSE strategies are consistent
with Boral’s Group strategy for HSE.
A summary of progress against our HSE objectives is provided
on page 33 in the 2017 Boral Review.
Health and safety outcomes
Boral’s safety performance continued to improve in FY2017 on
a recordable injury basis. The recordable injury frequency rate
(RIFR1) of 8.1 was an 8% improvement on FY2016, contributing
to a long-term improvement of 62% since FY2011.
Boral Group recordable injury frequency rate (RIFR1)
)
d
e
k
r
o
w
s
r
u
o
h
n
o
i
l
l
i
m
r
e
p
s
e
i
r
u
n
j
i
(
e
t
a
R
MTIFR
LTIFR
21.4
19.4
19.0
17.4
17.2
15.5
13.6
11.7
12.1
10.3
8.8
7.5
8.1
6.6
2.0
1.8
1.9
1.9
1.8
FY2011
FY2012
FY2013
FY2014
FY2015
1.3
FY2016
1.5
FY2017
With zero fatalities in FY2017 and no fatalities reported since
December 2013, this is the longest fatality-free period recorded,
which we are working hard to maintain.
Boral’s lost time injury frequency rate (LTIFR1) of 1.5 was slightly
higher than the prior year at 1.3; however, it remained lower than
our longer-term performance. In three of the last seven quarter-
year periods, we achieved a LTIFR of one or less – a milestone
recognised as leading global practice in many industries. For
the fourth quarter of FY2017, we recorded our lowest RIFR on
record at 7.3.
Boral North America and USG Boral both reported FY2017
LTIFR below one, at 0.3 and 0.8, respectively, considered by
many to be a threshold into world best practice. US LTIFR
performance excluding the Meridian Brick joint venture was 0.2.
For the first time, we celebrated a full calendar year in the USA
without a lost time injury in 2016.
Our reported LTIFR, RIFR and fatalities are for employees and
contractors combined, which we believe is a true measure
of performance. This can, however, make benchmarking
challenging as not all organisations report contractor data.
Percentage hours lost2 and hours away on restricted or
transferred (HART) duties2 were 0.04% and 0.22%, respectively,
in FY2017. Percentage hours lost was broadly steady on the
prior year. Given that there were more employee lost time injuries
in FY2017, this suggests that injuries were generally less severe
or responded better to treatment and return to work programs
– a positive outcome for our injured people and, in turn, the
organisation.
The increase in HART (from 0.16% in FY2016) primarily reflects
maturing reporting systems in our joint ventures.
For divisional RIFR, in FY2017:
• Boral Australia achieved a much improved 11.2 RIFR.
• Boral North America reported a 6.7 RIFR, with the increase
due to previously non-Boral operations now part of the
Meridian Brick joint venture, formed in November 2016.
Safety results of the newly acquired Headwaters business
will be consolidated from FY2018.
• USG Boral reported a RIFR of 3.6, with slightly more injuries
reported in the first half of FY2017 compared with the
same period last year. Analysis showed that the injuries
occurred when responding to operational disruptions,
such as clearing blockages or cleaning. In response, a
comprehensive training and awareness program called
“Upset Conditions” has been developed and implemented,
which is already delivering positive results (see page 17 of
the 2017 Boral Review).
Additional commentary on safety performance and initiatives,
including case studies, is provided in the 2017 Boral Review.
RIFR1
Boral Australia
USG Boral
Boral North America
Corporate
Total
FY2017
FY2016
Change
11.2
13.1
down 15%
3.6
6.7
0
8.1
3.0
5.2
0
8.8
up 18%
up 28%
-
down 8%
1. Includes injuries per million hours worked for employees and contractors
in fully owned businesses and joint venture interests of 50% or more,
irrespective of management control. RIFR is made up of lost time injury
frequency rate (LTIFR) and medical treatment injury frequency rate
(MTIFR).
2. Defined as a percentage of total hours worked for employees only.
3. Injuries per million hours worked, for Headwaters employees only.
Boral Limited Annual Report 2017 23
Safety at HeadwatersWith over 4,000 employees working across 170 operating sites, Headwaters’ workplaces and operations have similar risk profiles to Boral’s.Prior to integration, a pulse survey showed that employees from both organisations were proud of what they were achieving in safety, and that they did not want the acquisition to adversely affect their safety performance.The two organisations are well aligned culturally, delivering improved safety outcomes in recent years, albeit Headwaters started its safety journey a little after Boral. Headwaters reported RIFR of 14.6 and LTIFR of 3.9 for FY20173. This compares with RIFR of 6.7 and LTIFR of 0.3 for Boral USA in FY20171.Safety is at the forefront of integration activities, with leading practices being shared between Headwaters’ and Boral’s US operations, helping Boral’s expanded North American business to meet our high safety standards and deliver Zero Harm Today.
SUSTAINABILITY
OVERVIEW
Environment
It is Boral’s policy to comply 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.
We recognise that compliance with our site-based planning
approvals and effective management of sensitive sites is critical
to our reputation and our ability to operate.
We are committed: to reducing greenhouse gas emissions from
our operations, the efficient use of energy, conservation of water,
minimising and recycling waste materials and energy, prevention
of pollution, and effective use of virgin and recovered resources
and supplemental materials.
We are also committed to open, constructive engagement
with communities surrounding our operations, and protecting
biodiversity values at and around our facilities.
Environmental compliance
We are focused on improving our environmental performance,
including targeting zero environmental infringements, across our
~700 operating sites globally.
We have strengthened our internal controls to improve
compliance with increasingly stringent regulatory requirements in
Australia, including through an online information management
system for environmental licence conditions. In FY2017, we
conducted 85 environmental compliance audits in Australia and
developed 105 site action plans, mapping licence and planning
compliance requirements.
Formal regulatory notifications are reviewed by our internal
legal and HSE functions and reported to Boral’s Executive
Committee. Any material issues are reported and discussed at
Board Committee level, even if no penalty results.
Infringements and penalties
FY2017
FY2016
FY2015
FY2014
Number
Fines1
10
9
3
15
$111,083
$33,888
$11,658
$26,849
Penalties1
$30,000 $250,000
Undertakings
$133,556
$0
$0
$0
$12,000
$100,0002
1. Fines are directly issued by the regulator and penalties by a court hearing.
2. Financial support for a local conservation project at the Yalanbee Nature
Reserve, WA.
In FY2017, Boral was charged with seven regulatory
infringements related to environmental contraventions in
Australia and one penalty in relation to Boral’s Cosgrove Quarry
in Victoria. A further two fines relating to Headwaters facilities in
the USA, which arose before completion of the acquisition, were
levied under Boral’s ownership.
The infringements, which resulted in total fines of $111,083,
relate to:
•
•
•
•
•
a turbid water discharge at Petrie Quarry, Queensland,
two planning condition breaches at Widemere, NSW,
recycling operations,
a late payment for a mining permission at Berrima, NSW,
cement works,
several breaches of air emission licence conditions in NSW
and Queensland, and
in Headwaters, a fugitive dust release at the North
Las Vegas, Nevada, fly ash terminal and fines relating to
permits at the roofing plant in Oceanside, California.
In 2016, Environment Protection Authority (EPA) Victoria
commenced proceedings against Boral on three counts related
to accepting concrete material at our Cosgrove Quarry.
The material had been received for processing and recycling
into construction materials; however, the EPA deemed this to be
the storage of industrial waste without a licence. Boral agreed to
plead guilty to one of the three counts, and was fined $30,000.
In November 2016, Boral accepted an enforceable undertaking
committing to training, auditing, industry education, and royalties
and levies, totalling $133,556. This followed a NSW Department
of Industry determination that Boral Bricks Pty Ltd had breached
the Mining Act 1992 at two clay pits in southern NSW.
In addition to the penalty and infringements at Boral’s fully-
owned operations, in May 2016 there were two regulatory
infringements at USG Boral plants in Pudong and Baoshan
in China. The penalties accepted by USG Boral in late 2016
were US$3,800 and US$51,000, respectively. These types of
infringements in China also restrict the business from claiming
Value-added Tax (VAT) rebates for three years.
Greenhouse gas emissions
For many years, Boral has been focused on reducing
greenhouse gas (GHG) emissions from our processes and
facilities, and committed to the efficient use of energy, including
re-use of waste energy and the use of waste materials as
alternate fuels.
For the past five years, our business strategy has been to move
away from energy-intensive manufacturing, such as kiln-fired
clay bricks, to lightweight, more sustainable products, such as
cultured stone, fly ash-based composite products and gypsum
wallboard technologies. We have exited higher cost, sub-scale,
less efficient cement kilns in Australia and increased imported
clinker produced in more modern, larger scale, less carbon
emissions-intensive kilns in Asia.
Boral’s absolute emissions (Scope 1 and 2) have reduced by
~29% over the past five years to 2.50 million tonnes of carbon
dioxide equivalent (CO2-e) in FY2017, even while market activity
– and Boral’s profitability – in Australia, North America and Asia
has been increasing.
24
Boral Limited Annual Report 2017
GHG emissions from operations1 (million tonnes CO2-e)
GHG emissions by source1
Australia
GHG intensity (tonnes CO2-e per A$m revenue2)
USA
Asia
665
0.42
0.20
2.92
644
0.47
0.20
582
0.48
0.21
2.74
2.45
523
0.25
0.23
2.17
491
0.23
0.22
470
0.24
0.24
2.00
2.01
FY2012
FY2013
FY2014
FY2015
FY2016
FY2017
FY2017 GHG emissions1 (million tonnes CO2-e)
0.52
Scope 1 (direct)
Scope 2 (indirect)
Natural gas
Electricity
Diesel & liquid fuels
Coal
Calcination
19%
33%
21%
17%
10%
Energy consumption
Boral’s operations consumed 20 petajoules of energy in FY2017,
up 2% on the prior year, reflecting increased production volumes
plus the formation of the Meridian Brick joint venture. Across all
divisions, a total of around A$295 million was spent on energy –
gas, electricity, coal, diesel and other fuels – in FY2017.
FY20171
Energy used
Change
Cost
Boral Australia
USG Boral
Boral North America
12 PJ
4 PJ
4 PJ
1%
5%
2%
~A$197m
~US$47m
~US$28m
1.98
Energy by fuel source1
The reduction in Boral’s absolute GHG emissions reflects
a combination of plant closures, divestments, production
efficiencies, alternate fuel use, and the shift to imported clinker
(which accounts for ~13% of the 29% reduction in emissions
since FY2012).
In FY2017, Boral’s GHG emissions were up 2% compared to
the prior year, with emissions from Boral’s Australian operations
broadly unchanged, North America up 9% and Asia up 5%.
Changes in Boral’s portfolio during FY2017 materially altered
GHG emissions, with the formation of the Meridian Brick joint
venture underpinning increased emissions in North America.
In Australia, lower emissions associated with decreased
production at Midland Brick in Western Australia were offset
by higher east coast construction activity and the impact of
increased clinker production at Berrima. Increased plasterboard
production in USG Boral resulted in higher emissions in Asia.
The Cement business in Australia accounted for approximately
60% of Boral’s total emissions in FY2017, and about 75% of
emissions in Australia.
Boral’s emissions intensity of approximately 470 tonnes of CO2-e
per million dollars of revenue2 (in AUD) in FY2017 was 29%
lower than it was five years ago and improved 4% year-on-year,
reflecting actual efficiency gains.
Natural gas
Electricity
Diesel & liquid fuels
Coal
Biofuels
23%
19%
2%
12%
44%
Improvement initiatives
Boral’s businesses continue to focus on energy and emissions
reduction initiatives, including through LEAN management
principles, plant efficiency projects and fuels programs, as well
as a continuation of our strategy to move away from energy-
intensive operations into lighter-weight products.
Emissions and energy consumption associated with the
acquisition of Headwaters, completed in May 2017, will be
reported from FY2018 and is expected to result in a further
improvement in Boral’s emissions intensity.
In addition, the Berrima cement works alternative fuels program,
developed to lower local manufacturing costs and emissions, will
be operational in 2018.
1. Data provided for FY2017 GHG emissions, energy consumption and costs
is for Boral’s 100%-owned operations plus Boral’s share from 50%-owned
joint venture operations. Does not include Headwaters.
2. Revenue adjusted to include 50% share of underlying revenues from USG
Boral and Meridian Brick joint ventures, which are not included in Group
reported revenue.
Boral Limited Annual Report 2017 25
SUSTAINABILITY
OVERVIEW
Managing climate-related impacts
As part of our objective to monitor megatrends and position
the business to respond to them, in 2017 Boral undertook a
Climate-related Risks and Opportunities Strategic Review across
all businesses.
Waste, recycling and re-use
Throughout Boral’s operations, our own waste materials are
re-used to produce the same product, including concrete
washout slurry, recycled asphalt pavement (RAP), and
plasterboard waste from production and building sites.
We used the recommended framework set out by the
international Financial Stability Board’s Task Force on Climate-
related Financial Disclosures (TCFD). We considered the specific
areas we need to target for the coming 10–20 years to maintain
Boral’s sustainability in a carbon-constrained world, broadly
based on a default 2°C scenario supplemented with self-
developed scenarios. The outcomes of this review are being
used to update Boral’s strategies and plans.
In FY2018, we will consider the TCFD recommendations for
modelling and measuring the financial impacts of these risks and
opportunities and the use of more formalised scenario analysis.
Boral’s climate-related risks include:
•
increasing energy costs adding to the cost of production
• potential reduction in fly ash in North America as coal-fired
power utilities curtail over time
•
changes to regulatory and disclosure requirements
Boral’s businesses deal with only low 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 in Australia 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.
Biodiversity management
Protecting biodiversity – the diversity of plant and animal species
– at our operational sites is a core component of our land
management.
Initiatives to protect biodiversity at our own sites and more
broadly include:
• maintaining and inspecting bat boxes at Dunmore Quarry in
• operations’ resilience to extreme weather events.
NSW for a number of threatened species
•
•
•
the ongoing supply of koala fodder from plantations at
Narangba and Petrie quarries in Queensland
tracking and conservation work to protect the legless lizard
at Deer Park Quarry in Victoria, and
supporting the Western Swamp tortoise recovery program
through Midland Brick’s work with Perth Zoo.
Our long-standing community partnerships with Conservation
Volunteers Australia and Taronga Conservation Society are
aimed at biodiversity, conservation and education, in our local
communities and more broadly.
Protecting cultural heritage
We recognise and respect sites, places, structures and objects
that have cultural or traditional significance. We work alongside
Indigenous peoples to protect cultural heritage including:
• working with local Aboriginal representatives at Peppertree
Quarry in NSW in the identification of nearly 100,000
Aboriginal artefacts, and
•
relocating an Aboriginal scarred tree from Dunmore Quarry
to Killalea State Park, where it was presented to the public
in an official “Close the Gap” ceremony.
Boral’s climate-related opportunities include:
•
harnessing product innovation capabilities to help our
customers transition to a lower carbon economy
•
increased use of alternative fuels in cement manufacturing
• Boral Timber’s use of residue by-products as biofuel.
Further details of Boral’s climate-related risks and opportunities
are provided in the 2017 Boral Review on pages 42–43.
Water management
Boral’s operations worldwide consume about 4 gigalitres
of mainly municipal supplied water for manufacturing, dust
suppression, cleaning and sanitation. We also capture
unmeasured rainfall or stream flow at our larger sites,
predominantly used for dust control purposes.
We have well established internal compliance systems for
prevention of pollution of discharged waters, as well as
numerous regulatory controls through licensing and permitting.
In recent years, we have had several penalties regarding water
discharges. However, these are largely traceable to rainfall
deluge events, which we are moving to better respond to as part
of our approach to climate-related risks.
In 2017 we commenced reporting to CDP Water and as such,
a more detailed analysis of our water risks as at FY2016 can be
found in CDP’s publicly available report – see cdp.net.
While individual Boral locations may have water risk from time to
time (either from too much or too little water), as a Group we do
not assess Boral as having material water risk.
26
Boral Limited Annual Report 2017
Community impacts
We are committed to being a socially responsible member
of the communities in which we operate.
We recognise that we need to meet local stakeholders’
expectations by:
• proactively engaging with the community to deliver back to
the community more than just jobs, and
• managing site operations so they do not negatively impact
on community amenity.
Operational issues that can impact local communities include
traffic, noise, dust, odours, water, waste, quarry end use, and
impacts on heritage and culture.
Value chain and product innovation
Boral is a critical part of the construction supply chain in
the markets in which we operate. As we continue to find
more effective ways to do business and respond to external
changes and disruptions, we recognise the influential role
we can and need to play in delivering sustainable solutions
for our customers, suppliers and the broader community.
We are working to deliver improved outcomes throughout the
value chain today and for the future. Some of the ways we are
doing this include:
•
using external waste and by-products or secondary
resources in a range of products
• working with customers to deliver Green Star energy and
Our approach is to engage with stakeholders and plan
strategically to mitigate and manage impacts across the full
life cycle of our extraction and processing sites. Our quarries
and other land assets are managed responsibly, taking a
whole-of-life approach from development approvals through to
rehabilitation and end-use planning and development.
•
•
sustainability goals
responding to changing demographics, working
environments and needs of our customers
helping to develop safer, improved construction methods
in Asia by broadening our product and systems offering to
provide plasterboard partitioning in residential buildings
Community engagement
Addressing potential community concerns is an important part
of Boral’s community engagement efforts. Our stakeholder
engagement programs are underpinned by communications,
consultation and contribution.
Community Consultation Committees are established at key
sites, and we communicate through online information resources
as well as other channels, such as mail drops, advertising, and
community inspections and guided site tours.
•
Boral is an acknowledged industry leader in community
engagement and was awarded the Community Leadership
Award at the Victorian Cement Concrete & Aggregates
Australia 2016 Environment, Health and Safety Awards. Boral
was recognised for our innovative Stakeholder Perception
Benchmarking process, which uses feedback from local
residents to guide community relations planning activities at
operational sites.
Community support programs
Boral works with a number of community organisations and
projects where there is a connection with our people, places
and products.
In FY2017, Boral contributed approximately $840,000 of financial
support through 12 corporate community partnerships and
other community support initiatives.
We also provided approximately $60,000 of in-kind materials to
community partners Habitat for Humanity Australia, Touched by
Olivia and Conservation Volunteers Australia. A further $92,000
was contributed to fundraising and events, like Habitat for
Humanity’s Rock the House build in October 2016 where Boral
supported 24 employees to help build homes for a disaster-
prone community in rural Indonesia.
Further details of Boral’s community support programs are
provided on page 41 of the 2017 Boral Review or at
boral.com/community_support
• working with the supply chain to design, build and use safer,
more innovative equipment
• working with social enterprises, which are businesses
that aim to improve communities, tackle social problems,
provide people with access to employment or help the
environment
helping to deliver more affordable housing solutions by
developing products that are lower cost and faster to install,
such as light building products in the USA and lighter-weight
plasterboard in Australia and Asia
• developing an integrated global supply chain, with local
procurement, across USG Boral, and
•
as a Corporate Member of Supply Nation in Australia,
procuring goods and services from Aboriginal and Torres
Strait Islander businesses.
Further details of Boral’s value chain and product innovation are
provided on pages 44–45 of the 2017 Boral Review.
Boral Limited Annual Report 2017 27
Mike Kane
Chief Executive Officer &
Managing Director
Joseph Goss
Divisional Chief Executive,
Boral Australia
David Mariner
President & CEO,
Boral Industries Inc
Frederic de Rougemont
CEO,
USG Boral
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 Master 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.
Rosaline Ng
Chief Financial Officer
Ross Harper
Executive General Manager,
Boral Cement
Dominic Millgate
Company Secretary
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 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. Reports to
Divisional Chief Executive, Boral Australia.
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 after a period with the
GPT Group. Kylie's early roles were in
production management in Roofing, moving
into corporate affairs and investor relations
from 2000. She holds an honours degree in
Ceramic Engineering and an MBA.
Michael Wilson
Group Health, Safety &
Environment Director
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.
Tim Ryan
Group Strategy and M&A Director
Damien Sullivan
Group General Counsel
Joined Boral in March 2011 in Strategy and
M&A team and appointed to current role in
January 2017. Prior to Boral, Tim worked
at EY in Transaction Advisory Services
roles. He is a CFA Charterholder and a
member of Chartered Accountants Australia
and New Zealand, and holds a Bachelor
of Commerce. Reports to Boral’s Chief
Financial Officer.
Joel Charlton
Executive General Manager,
Innovation & Group President,
Windows
Joined Boral in 2012 and Board member of
USG Boral since 2016. Prior to Boral, Joel
held senior intellectual property counsel
roles with Georgia-Pacific LLC and Exide
Technologies. He has Chemical Engineering
and Juris Doctor degrees, and is registered
to the Bar in Connecticut, Georgia and the
United States Patent Office. Dual reporting
to CEO & Managing Director, and President
& CEO, Boral Industries Inc.
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.
Linda Coates
Group Human Resources Director
Joined Boral in 2000 and previously
held Group and divisional HR roles in
Boral, including in Construction Related
Businesses and Clay & Concrete Products.
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.
28
Boral Limited Annual Report 2017
Executive Committee Mike Kane
CEO & Managing Director, Age 66
Karen Moses
Non-executive Director, Age 59
Brian Clark
Non-executive Chairman, Age 68
Eileen Doyle
Non-executive Director, Age 62
Dr Brian Clark joined the Boral Board
in May 2007 and became Chairman
in November 2015. 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.
Dr Eileen Doyle joined the Boral
Board in March 2010. Dr Doyle is
a Director of GPT Group 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 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 joined the Boral Board
in March 2016. Ms Moses is a
Director of Orica Limited, Charter
Hall Group, Sydney Symphony
Limited, SAS Trustee Corporation
and Sydney Dance Company. 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 46
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, Panel Member of Adara
Partners and a Member of the Art
Gallery of NSW Board of Trustees.
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
Remuneration & Nomination
Committee.
Kathryn Fagg
Non-executive Director, Age 56
John Marlay
Non-executive Director, Age 68
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
President of Chief Executive Women,
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 an Honorary Doctor
in Chemical Engineering 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 joined the Boral Board
in December 2009. Mr Marlay is
Independent Chairman of Flinders
Ports Holdings Pty Limited. He was
previously Chairman of Cardno
Limited, a Director of Incitec Pivot
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 63
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 2017 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 FY2017, 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:
boral.com/corporate_governance.
This Corporate Governance Statement is current as at 30 June
2017 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:
•
• determine matters (where the Committee acts with delegated authority), which the
refer matters to the Board for decision, with a recommendation from the Committees; or
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
t
h
g
s
r
e
v
o
d
n
a
n
o
i
t
a
g
e
e
D
l
g
n
i
t
r
o
p
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n
a
y
t
i
l
i
b
a
t
n
u
o
c
c
A
SENIOR
MANAGEMENT
Board and Committee Charters and the Company’s Constitution are available on Boral’s website.
30
Boral Limited Annual Report 2017
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 Deer Park Quarry, Melbourne, USG Boral’s plasterboard
operations at Khushkhera, India, and the award-winning Saraburi plant in Thailand, which includes a state-of-the-art Research
& Development Centre. Health, Safety & Environment Committee members also visited Boral’s operations at Petrie Quarry in
Queensland and the cement operations at Maldon 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 the Chairman and the 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
functioning 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
e
r
a
K
g
g
a
F
n
y
r
h
t
a
K
C l a r k
a i r m a n
B ri a
n
h
C
Mike Kane
CEO & Managing Dire
Executiv
e
cto
r
s
r
o
t
c
e
r
i
D
e
v
i
t
u
c
e
x
e
-
n
o
Board
Composition
N
t
n
Independe
C
a
t
h
e
r
i
n
e
B
r
e
n
n
e
r
P
a
ul R
yner
a
y
John Marla
Eile
e
n
Doyle
Boral Limited Annual Report 2017 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
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 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
Health, Safety & Environment
within any of the categories described above; or
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
•
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 2017
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.
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.
Boral Limited Annual Report 2017 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 a
candidate to shareholders.
• 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 2017
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 FY2017, 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
Karen Moses
The Committee met four times during FY2017.
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 2017 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)
Catherine Brenner
John Marlay
Eileen Doyle (Chairman)
Kathryn Fagg
John Marlay
Karen Moses
The Committee met four times during FY2017.
The Remuneration & Nomination Committee has a formal
Charter which sets out its role and responsibilities, composition,
structure and membership requirements.
The Committee met three times during FY2017.
The Committee’s responsibilities include the review and
monitoring of:
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.
Further information relating to the key areas of focus for the
Remuneration & Nomination Committee in FY2017 is set out in
the Remuneration Report from page 51.
•
•
•
•
•
•
•
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 2017
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.
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.
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
FY2017 in accordance with the process
described above.
An evaluation of the performance of the
CEO & Managing Director took place in
FY2017 in accordance with the process
described above.
An evaluation of the performance of senior
executives of Boral took place in FY2017
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 2017 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 FY2017. 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 2017
Business and sustainability risks
Details regarding our approach to managing business and
sustainability risks are contained in the OFR (pages 2–17 of
the Annual Report), Sustainability Overview (pages 20–27 of
the Annual Report) and the risks section of the Annual Report
(including at pages 18–19 and 44–45). 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 2017 and the half year ended 31 December 2016.
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.
In 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 FY2017
Boral’s diversity plan has six strategic elements against which the Board has set measurable objectives for FY2017, 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 and education
2 Communication and Education
2.1 Communication: develop communications
engagement framework and packages
to raise knowledge and understanding of
diversity
2.2 Education: develop diversity educational
framework to provide management with
capability to lead and manage diversity
and diverse teams
Completed
• Deployment of Senior Leader Diversity Awareness and
unconscious bias training across Boral, 18 further sessions
were held during the year.
In progress
• Development of diversity targets is underway and intended to
be considered for adoption in the coming year.
Completed
• Diversity narrative deployed across Boral to communicate the
purpose of Boral’s diversity program.
• Recognising the good practices observed in diversity and
inclusion with awards and advocacy.
In progress
• Survey of employees being developed to obtain feedback on
diversity progress in Boral.
Ongoing
• 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 FY2017 to 20% of all participants, from 19%
in FY2016.
Boral Limited Annual Report 2017 39
CORPORATE
GOVERNANCE
Diversity – Measurable objectives for FY2017 (continued)
Strategic Element and Objective
Status
Key Outcomes
2.3 Networking: establish Women in
Completed
• Diversity in Leadership Forum series attended by 30
Leadership Forum series to provide
networking opportunities for key leaders,
with an emphasis on women leaders,
across Boral
Ongoing
2.4 Track and report: develop key
Ongoing
performance indicators to measure, track
and report on change and progress
participants in FY2017 and 60% 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
Boral Diversity Council.
• Since FY2014, 103 employees have participated in a Forum,
and 81% of participants were women in leadership roles.
• Forum Alumni established to provide networking, advocacy
and other opportunities to contribute to diversity matters
for Boral.
• The forum series is an ongoing initiative, with two forums
scheduled for each year. Target of 90% of participants being
female adjusted to 80% to broaden the participation in the
diversity and gender equality discussion. In FY2017, 40% of
participants were male.
• Reporting and analysis of workforce by gender, pay levels,
selection, retention and promotion trends completed, with
results provided to the Boral Diversity Council for planning and
program development.
In progress
• Developing processes to measure, track and report against
diversity targets, once adopted in the coming year.
2.5 Benchmark: adopt external metric to
Completed
• Workplace Gender Equality Agency engaged to assist further
measure and benchmark effectiveness of
diversity strategy
with best practice and benchmarking.
Ongoing
• As founding member, continuing participation in the
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
• Exceeded target for intake of women graduates, 64% of
principles in standardised recruitment
the total graduate intake were women in professional and
engineering disciplines, against the target of 50%. FY2018
focus is to continue to exceed the target.
• 33% of hires in senior management roles were women, and
40% of recruitment into professional roles were women.
3.2 Flexibility and flexible work practices:
Completed
• Deployment of policy, communication and education on flexible
develop and implement policy, guidelines
and education program to improve
flexibility and flexible work outcomes
work practices.
• Research on best practice approaches to improve return and
retention of women on maternity leave.
In progress
• Development of additional educational material and guidelines
to support leaders and employees with flexible work
arrangements and practices.
40
Boral Limited Annual Report 2017
Strategic Element and Objective
Status
Key Outcomes
4 Gender Equality and Equity
4.1 Analysis: complete an analysis of Boral
Ongoing
pay equity at least annually to monitor pay
rates and identify issues
• Ratio of female to male average base salary is 1.02:1.00,
continuing to focus on pay equity outcomes on a total
compensation basis.
• Annual external industry benchmarking of pay equity and
comprehensive gender remuneration gap analysis completed.
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
• Analysis of work/life needs of generations identified programs
to assist leaders in managing cross-generational teams.
In progress
• Investigating whether generational and other diversity factors
influence readiness for workplace of the future.
Completed
• Reconciliation Action Plan developed to build on relationships,
respect and opportunities for Indigenous communities.
• Implemented Indigenous Employment and Training Plan from
2016 to 2020 as follow up to work in previous plans from
2006 to 2017.
• 80% of Indigenous employees employed through Indigenous
employment initiatives, such as the FY2011 Indigenous
Relations and Employment Plan, continue to work at Boral.
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 2017:
Boral’s Diversity Policy is available on Boral’s website.
For more information regarding people and diversity, see pages
21–22 in the Sustainability Overview.
Role
Board
Executive
management2
Middle
management3
Other roles4
Total
Female
Male
Number Percentage Number Percentage
4
46
84
50%
23%
4
155
50%
77%
15%
495
85%
1,012
1,142
14%
15%
5,993
6,644
86%
85%
Conduct and ethics
The Board’s policy is that Boral companies and employees must
observe both the letter and the spirit of the law, and adhere
to high standards of business conduct and comply with best
practice.
Boral’s management guidelines include the 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.
1. Includes all full time, part time and casual employees of Boral (excluding
employees of newly-acquired Headwaters Inc.), its wholly owned
subsidiaries, but 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 wgea.gov.au.
The Code and related guidelines and policies guide the
Directors, the CEO & Managing Director, the Chief Financial
Officer, the Company Secretary and other key executives
as to the practices necessary to maintain confidence in
the Company’s integrity, and as to the responsibility and
accountability of individuals for reporting, and investigating
reports of, unethical practices. The Code also guides
compliance with legal and other obligations to stakeholders.
Boral’s Code of Business Conduct is available on Boral’s website.
Boral Limited Annual Report 2017 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.
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.
Progress is monitored on an ongoing basis and Boral’s non-executive Directors have now met or exceeded these guidelines.
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. Announcements relating to significant matters, such as results, guidance to
the market, major acquisitions or divestments, or other corporate matters which involve significant financial or reputational risk, are
referred to the Board for approval, unless to do so is impractical in the circumstances (having regard to Boral’s continuous disclosure
obligations). In such cases, approval can be given by any two of the following officers: the CEO & Managing Director, the Chairman
of the Board and the Chairman of the Audit & Risk Committee. The Company Secretary will endeavour to notify all other Directors of
the possible disclosure considerations and invite them to participate in any discussions and disclosure decisions where possible.
Boral’s Continuous Disclosure Policy is available on Boral’s website.
42
Boral Limited Annual Report 2017
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.
Investor relations
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.
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 boral.com/corporate
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 2017 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 2017:
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.
(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 2–17
of the Annual Report accompanying the Directors’ Report.
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).
(2) State of affairs
The OFR sets out a number of matters that have had a
significant effect on the Group's state of affairs during the year,
including:
•
•
the acquisition of Headwaters Inc.
the Group reported a net profit after tax of $297 million
after recognising a net significant item loss of $46 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.
Risks
The achievement of Boral’s future prospects may be adversely
impacted by several risks, some of which are beyond our
control. An overview of the material business risks facing
the Group and our approach to managing those risks is set
out below.
Additional information regarding Boral’s material business risks
is included in the OFR, the Risks and Responses 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
30–43 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:
• geopolitical effects and 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 and timing of government funding for public
infrastructure and other building programs;
the level of demand for building products and construction
materials and services generally; and
the availability and cost of labour, raw materials and
transport services, as well as the price and availability of fuel
and energy.
44
Boral Limited Annual Report 2017
Directors’ Report To manage those 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,
geographic diversification 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.
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 the commercial excellence and customer centricity
program, 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 2,800 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 20–27 of the Annual Report.
Business interruption risks
Due to the high fixed-cost nature of the construction and
building materials industry, interruptions in production
capabilities and lower capacity utilisation at key manufacturing
and processing facilities may have an 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.
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 has business continuity
and emergency response plans in place and regular simulated
crisis response training is undertaken at a Group level. 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.
Boral’s manufacturing assets, as well as its financial and
commercial systems, are dependent on information technology
systems, capabilities and assets, which as with any organisation
can be vulnerable to cyber security risks. In this regard, Boral
has in place security awareness training, market-leading firewall
defence and external monitoring capabilities to protect it against
targeted and randomised intrusion attempts.
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-denominated 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 on pages 24–26 of the Sustainability
Overview 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;
(b) the financial position of Boral; and
(c) Boral’s business strategies and its prospects for future
financial years.
Boral Limited Annual Report 2017 45
DIRECTORS’
REPORT
(8) Dividends paid or resolved to be paid
Dividends paid to shareholders during the year were:
Total dividend
$m
(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
the final dividend of 11.5 cents per ordinary
share (fully franked at the 30% corporate tax
rate) for the year ended 30 June 2016 was paid
on 26 September 2016
the interim dividend of 12.0 cents per ordinary
share (fully franked at the 30% corporate tax
rate) for FY2017 was paid on 10 March 2017
85.5
Mike Kane
Catherine Brenner
140.7
Eileen Doyle
Kathryn Fagg
John Marlay
Karen Moses
Paul Rayner
All Directors have been Directors of the Company at all times
during and since the end of the year.
(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.
The Directors have resolved to pay a final dividend of 12.0 cents
per ordinary share (50% franked) for FY2017. The dividend is
expected to be paid on 3 October 2017.
46
Boral Limited Annual Report 2017
(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 2017 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 2018. 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.
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 from March 2010 (current)
Bradken Limited from July 2011 to November 2015
Oil Search Limited from February 2016 (current)
Kathryn Fagg
Djerriwarrh Investments Limited from May 2014 (current)
Incitec Pivot Limited from April 2014 (current)
John Marlay
Incitec Pivot Limited from December 2006 to December 2016
Cardno Limited from November 2011 to January 2016
Karen Moses
Orica Limited from July 2016 (current)
Charter Hall Group from September 2016 (current)
Origin Energy Limited from March 2009 to October 2015
Contact Energy Limited from October 2004 to August 2015
Details for each Director of all directorships of other listed
companies held at any time in the three years before the end of
the financial year and the period for which such directorships
have been held are:
Paul Rayner
Qantas Airways Limited from July 2008 (current)
Treasury Wine Estates Limited from May 2011 (current)
Centrica plc from September 2004 to 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
Audit & Risk Committee
Remuneration &
Nomination Committee
Health, Safety &
Environment Committee
Meetings
held while
a Director
Meetings
attended
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
Kathryn Fagg
Mike Kane
John Marlay
Karen Moses
Paul Rayner
12
12
12
12
12
12
12
12
12
12
12
12
12
12
12
12
1
–
4
–
–
–
4
4
1
–
4
–
–
–
4
4
4
–
–
4
–
4
–
–
4
–
–
4
–
4
–
–
–
–
4
4
–
4
4
–
–
–
4
4
–
4
4
–
The Chairman and the CEO & Managing Director attend all Board and Committee Meetings.
Boral Limited Annual Report 2017 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:
The shares are held in the name of the Director except in the
case of:
• Catherine Brenner, 40,614 shares are held by Brenner
Super Pty Ltd for and on behalf of the Brenner Super Fund;
• Brian Clark, 68,459 shares are held by MCG Wealth
Management Australia Nominees Pty Limited – and 38,532 shares are held by MCG
Wealth Management Australia Nominees Pty Limited
– JBC Investment Holdings Pty Ltd ;
• Eileen Doyle, 38,024 shares are held by Mr SE Doyle and
Dr EJ Doyle for the S&E Doyle Super Fund A/C;
•
John Marlay, 33,461 shares are held by Bond Street
Custodians Limited on behalf of The Marlay Superannuation
Fund; and
• Paul Rayner, 39,135 shares are held by Yarradale
Catherine Brenner
Brian Clark
Eileen Doyle
Kathryn Fagg
Mike Kane b
John Marlay
Karen Moses
Paul Rayner
Shares
48,405
109,595
39,948
38,562
946,073
39,310
21,757
100,555
Non-executive
Directors’
Share Plana
Investments Pty Limited and 59,469 shares are held by Invia
Custodian Pty Limited for and on behalf of Bigpar Pty Ltd
(the trustee of the PaulJul Super Fund).
–
7,730
–
–
–
–
–
2,597
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 FY2017.
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 51–71.
48
Boral Limited Annual Report 2017
(16) No officers are former auditors
No officer of the Company has been a partner in an audit firm,
or a Director of an audit company, that is an auditor of the
Company during the year or was such a partner or Director
at a time when the audit firm or the audit company undertook
an audit of the Company.
(17) Non-Audit Services
Amounts paid or payable to Boral’s auditor, KPMG, for non-audit
services provided during the year by KPMG totalled $2,830,000.
These services consisted of:
Taxation compliance services in Australia
Taxation compliance services in jurisdictions
other than in Australia
Advisory and assurance related services in
Australia
Due Diligence services in Australia and
other jurisdictions including in relation to the
acquisition of Headwaters and the formation of
the Meridian Bricks joint venture
$303,000
$70,000
$635,000
$1,822,000
(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 51–71 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.
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.
Signed in accordance with a resolution of the Directors.
Dr Brian Clark
Director
Mike Kane
Director
Sydney, 30 August 2017
Boral Limited Annual Report 2017 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 2017 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, 30 August 2017
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 2017
2017 REMUNERATION
REPORT
Message from the Chairman of the Remuneration & Nomination Committee
On behalf of the Remuneration & Nomination Committee (Committee), I am pleased to introduce our FY2017 Remuneration Report.
We thank you for the feedback provided during FY2017 and your active involvement as the owners of Boral. Taking into account
the feedback received, we have refreshed our Remuneration Report to ensure it more clearly demonstrates how our remuneration
policies and practices are aligned to achieving our long-term vision in a changing environment.
At our 2016 Annual General Meeting (AGM), 26% of shareholders voted against our Remuneration Report. During the lead-up and
subsequent to the AGM, the Company, including me in my role as Committee Chairman, conducted constructive discussions with our
major shareholders and proxy advisors to better understand their concerns. Our engagement process is ongoing.
FY2017 also brought substantial business changes, including the acquisition of Headwaters Inc., which significantly increases
Boral’s US footprint and supports our strong growth aspirations in the region. The acquisition has required the Committee to make
some immediate remuneration decisions. We are also continuing to review how remuneration policies and practices may need to be
adjusted in future to suit a changing, increasingly international business.
The following key remuneration items have been addressed in FY2017:
• One-off targeted retention incentives: No executive has been granted retention incentives in FY2017 and no executive will be
granted retention incentives in FY2018.
• Transition to a face value long-term incentive (LTI) allocation methodology: We have completed our transition to a face value
allocation methodology with LTI awards from FY2018 to be allocated on a face value basis.
• Headwaters acquisition impact on existing short-term incentive (STI) and LTI awards: The Board has considered the impact of
the transaction on existing STI and LTI awards. Additional EBIT in FY2017 relating to the transaction was not rewarded in the
2017 STI and was excluded for testing of the 2013 LTI grant against the return on funds employed (ROFE) target set for FY2017.
Targets for existing LTI awards will not be adjusted retrospectively.
• CEO remuneration: As announced to the market on 21 June 2017, changes have been made to the CEO’s remuneration
consistent with the CEO’s increased time in the USA, including the cessation of expatriate benefits from 1 July 2017.
• Executive growth: Key executives have continued to grow in their roles, taking on increased responsibilities and role complexity
and allowing CEO direct reports to reduce by two. Fixed annual remuneration for FY2017 increased for Key Management
Personnel (KMP) reporting to the CEO, reflective of these changes and CEO succession development. Notwithstanding these
increases, the reduction in the number of CEO direct reports resulted in net annual savings in excess of $1 million.
We have sought to address shareholder concerns directly through the actions taken in FY2017. Further details of our response to
remuneration issues raised, and changes being made for FY2018 in relation to the Headwaters acquisition, are in Section 2.
For FY2017, Boral delivered total shareholder returns1 (TSR) of 23.4%, a ranking of 37th in the ASX 100 relative TSR comparator
group (up from 42nd in FY2016). Boral’s profit after tax2 (PAT) increased by 28% and earnings before interest and tax (EBIT) before
significant items increased by 16%. Group EBIT including significant items increased by 12%3.
This strong financial performance supported STI cash payments of $2.811 million to executive KMP (14.3% lower than last year
and reflective of performance against internal expectations). LTI performance targets were also achieved for the 2011 and 2013 LTI
grants. For the 2013 LTI grant, Boral delivered near top quartile performance (at the 73rd percentile) relative to TSR comparators over
the three years to September 2016, and exceeded the stretch target for the return on funds employed (ROFE) hurdle. For the 2011
LTI grant, performance over the five years to September 2016 was at the 59th percentile. These performance outcomes resulted in
vesting of 68% and 98% for the 2011 and 2013 LTI grants respectively.
We value your feedback as our business and remuneration strategies continue to evolve over the coming year.
Yours sincerely
Kathryn Fagg, Chairman, Remuneration & Nomination Committee
1. TSR is calculated based on the change in Boral’s share price, reinvestment of dividends and franking credits applied to dividends for FY2017.
2. Excludes financial impact of significant items. See note titled ‘Non-IFRS information’ on page 1 of the Annual Report.
3. Includes continuing and discontinued operations.
Boral Limited Annual Report 2017 51
2017 Remuneration Report
2017 REMUNERATION
REPORT
Contents
Section 1:
Section 2:
Section 3:
Section 4:
Section 5:
Section 6:
Section 7:
Section 8:
Who is covered by this Report
Evolving our remuneration approach to suit the business
FY2017 performance and actual pay received
Remuneration framework for FY2017
Remuneration governance
Non-executive Directors’ remuneration
Statutory remuneration disclosures
Glossary of key terms
53
53
57
61
64
66
67
71
52
Boral Limited Annual Report 2017
Section 1: Who is covered by this Report
The Directors of Boral Limited present the Remuneration Report (the Report) for the Company and its controlled entities for the
year ended 30 June 2017 (FY2017). 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).
The table below details the KMP for FY2017.
Name
Position
Senior Executives
Mike Kane
Joseph Goss
Ross Harper
David Mariner
Rosaline Ng
Chief Executive Officer & Managing Director
Divisional Chief Executive, Boral Australia
Executive General Manager, Cement
President & CEO, Boral North America
Chief Financial Officer
Non-executive Directors
Brian Clark
Chairman and non-executive Director
Catherine Brenner
Non-executive Director
Eileen Doyle
Kathryn Fagg
John Marlay
Karen Moses
Paul Rayner
Non-executive Director
Non-executive Director
Non-executive Director
Non-executive Director
Non-executive Director
Section 2: Evolving our remuneration approach to suit the business
Alignment to Boral’s strategy
Boral’s executive remuneration policy is designed to incentivise and reward senior executives for delivery against key aspects of
our business plan. Our strategy, to achieve world-class safety performance, develop an innovative product platform for sustainable
growth and generate superior returns for shareholders, is supported by the Company’s ‘Fix Execute Transform’ program. As part of
this program, KMP were focused on the following objectives in FY2017:
• Delivering performance excellence and Zero Harm
• Transformational growth in the USA
• Maintaining and strengthening Boral’s leading position in Australia
• Strong cash flows and balance sheet to support growth and deliver value.
Reflected in our FY2017 executive remuneration framework are those business objectives which the Board consider most important
to incentivise our executives to achieve. Rationale for the selection of incentive plan metrics is outlined in Section 4.
Changes to our executive team
FY2017 saw several changes made to our executive team, including a reduction in the number of CEO direct reports by two
positions and a restructure of existing executive roles:
• David Mariner was appointed to the role of President & CEO, Boral North America (effective 1 July 2016), a significant increase in
job size, responsibilities and role complexity, which increased further with the acquisition of Headwaters Inc.
•
Joseph Goss moved to the role of Divisional Chief Executive, Boral Australia (effective 1 July 2016) following the merging of the
Boral Building Products and Construction Materials & Cement divisions.
• Rosaline Ng, Boral’s Chief Financial Officer (CFO), had Corporate Development and M&A (including project management of the
Headwaters Inc. transaction) added to her existing role responsibilities.
• Ross Harper, Executive General Manager, Cement saw an expansion of his role to include broader Boral Australia responsibility
for technology and innovation.
Boral Limited Annual Report 2017 53
2017 REMUNERATION
REPORT
To address the change in executive roles and responsibilities, and as CEO succession development continued, fixed annual
remuneration increases were made for these individuals in FY2017.
Overall, the executive restructure and subsequent role expansion resulted in substantial net savings of over A$1 million per annum
for the CEO’s direct reports.
Review of executive remuneration policy
During FY2017, the Committee determined that a review of Boral’s executive remuneration policy should be undertaken to consider
shareholder feedback, the impact of the Headwaters Inc. acquisition and how to meet future needs of the business. Each of these
factors is expected to influence our executive remuneration approach over time. A review during FY2017 identified several important
issues and challenges grouped under three key areas:
Responding to shareholder
feedback and strike against the
Remuneration Report
• Concern about the use of one-off
Targeted Retention Incentives to
selected executives in FY2016
• Support for Boral to use a simpler
transparent method to calculate the
number of share rights under the LTI
• Concern about the impact of non-
monetary benefits on the overall
quantum of pay for the CEO
Impact of our transformational
acquisition of Headwaters Inc.
Meeting the future needs of
our business
• Driving the successful integration
• Attracting and retaining the right
of Headwaters without unintended
consequences in other parts of the
Group or on executive behaviours
• Ensuring STI and LTI incentives
recognise and achieve a fair balance
of returns between executives and
shareholders
talent in different geographies and
businesses, while recognising that
Boral is and will remain an Australian
headquartered company
• Ensuring our approach to remuneration
is suited to a business that is heavily
impacted by different construction
markets in different geographies
• Able to transfer key talent quickly and
easily between businesses and regions
Decisions made during FY2017 to address our key issues and challenges are summarised below.
Issues and decisions
Comments
Targeted Retention Incentives
No executive was granted
retention incentives in FY2017
and no grants of retention
incentives will be made to
executives in FY2018.
LTI allocation methodology
Change from fair to face value
calculation for LTI awards from
FY2018.
In September 2015, the Board granted one-off retention incentives to eight key executives to
ensure stable leadership and continuity in delivering business transformation initiatives. It was
intended to minimise the risk of further targeted approaches from our competitors and to retain
our key talent for future potential succession opportunities across a number of senior roles.
We understand some shareholders’ concerns about the use of such incentives and
acknowledge the feedback provided. We have not provided any further executive retention
incentives in FY2017, nor will any be awarded in FY2018.
We appreciate there is great value in increasing the simplicity and transparency of remuneration
where possible, and have changed our LTI allocation methodology from FY2018 so the number
of rights granted under an LTI award is calculated as follows:
LTI opportunity
5 day VWAP at grant
= Number of rights granted
This means that for future grants, we will disclose our LTI value based on a “face” or maximum
value of LTI awards, rather than an expected or accounting-based fair value. We consider a face
value methodology to provide the most transparency for our shareholders.
As mentioned in the prior year Remuneration Report, the change to a face value LTI allocation
methodology is not intended to alter the actual value of awards delivered to executives and they
will be no worse off as a result of this transition. Accordingly, the number of rights granted to
each executive will remain approximately the same, although the value of the awards will appear
higher when expressed in terms of face value instead of fair value.
54
Boral Limited Annual Report 2017
Issues and decisions
Comments
Impact of Headwaters
transaction
Additional EBIT from the
Headwaters transaction in
FY2017 has not been rewarded
in the 2017 STI or 2013 LTI
grant vesting.
The Headwaters transaction, which completed on 8 May 2017, is a transformative step for Boral
and adds significant scale to our US footprint. As previously announced, expected synergies in
FY2018 are estimated to be approximately US$30–$35 million.
In light of the transaction, the Board reviewed its impact on existing STI and LTI targets.
Incentives tested in FY2017
The additional EBIT received in the final eight weeks of FY2017 as a result of the transaction was
not rewarded in the 2017 STI, nor did it impact vesting of the 2013 LTI grant where performance
against a ROFE target for FY2017 was tested.
Future incentives
The impact of the acquisition on pre-existing performance targets attached to the LTI awards,
due to be tested in FY2018 and FY2019, has been considered by the Board.
The additional EBIT and increased funds employed associated with the acquisition will dampen
the rate of ROFE growth in the earlier years, prior to delivery of the full year 4 synergy benefits.
Despite this, the Board has considered it appropriate to maintain the pre-existing targets and will
not make retrospective adjustments.
While the achievement of pre-existing ROFE targets (set for 2018 and 2019) may be more
challenging for executives, it is expected that executives may benefit from improved Total
Shareholder Return (TSR) outcomes as a result of the acquisition, which is directly aligned with
benefits delivered to shareholders.
Longer-term the Headwaters acquisition is expected to better position the Group to deliver
more sustainable growth and above cost of capital returns through market cycles as Boral has
diversified its US market exposures, reducing Boral’s reliance on the single family US housing
cycle.
Targets for the FY2018 LTI grant (set for FY2020) therefore take into account delivery of synergy
targets for the Headwaters acquisition and Boral’s long-term goal of ROFE exceeding the cost of
capital through the cycle.
In setting underlying EBIT and ROFE targets going forward (for the STI and LTI plans
respectively), the Board acknowledges and will monitor any potential post-acquisition
accounting impacts during integration that could create unintended consequences on incentive
outcomes.
Transaction costs (including adviser and M&A fees, due diligence costs and change in control
contracts) as well as one-off implementation costs (including redundancies and rationalisation
costs) have been identified and communicated to shareholders. These costs are being
expensed as they are incurred and reported as significant items.
Boral Limited Annual Report 2017 55
2017 REMUNERATION
REPORT
Issues and decisions
Comments
CEO remuneration
Changes made to the CEO’s
remuneration from FY2018
include a 2% increase on a
FAR equivalent basis and the
recommencement of US-based
pension contributions, but a 19%
reduction in fixed remuneration
costs to Boral due to the
cessation of expatriate benefits.
As announced to the market on 21 June 2017, the CEO’s remuneration arrangements have been
restructured to reflect the fact that he will now spend approximately half of his time in the USA,
following the completion of the Headwaters acquisition. Consequently, Boral will no longer need
to provide the CEO with expatriate allowances from 1 July 2017.
The CEO’s STI and LTI opportunity are now calculated based on Base Cash Salary (BCS) rather
than Fixed Annual Remuneration (FAR), BCS being lower than FAR, consistent with the basis
of calculation of the incentive plan opportunities for other US executives. The CEO’s US-based
pension and benefits arrangements are consistent with Boral’s policy for its US executives.
Outlined below are the key changes from FY2018:
BCS
STI (% of BCS)
Target
Maximum
LTI (% of BCS
under face value
approach)
US$1,299,674*
110%
154%
220%
* A$1,722,563 converted based on the Reserve Bank of Australia daily exchange rate A$/US$,
averaged over the 12 month period to 30 June 2017, being 0.7545.
In regard to the above:
• The CEO has received a 2% increase on a FAR equivalent basis.
• The CEO’s STI and LTI participation will continue under the terms outlined in Section 4.
The change in LTI opportunity reflects both the transition to a face value allocation
methodology and calculation based on BCS.
• The CEO’s termination entitlements and notice periods remain as previously disclosed.
• The Company will resume contributions to the CEO’s US-based pension plans, including
a 401K plan and Supplemental Executive Retirement Plan (SERP). SERP contributions are
made at a rate of 8% of BCS and STI awards.
• Other benefits include motor vehicle lease, medical and dental coverage, and life/disability
insurances.
We continue to use a common approach to remuneration for our executive team across all
regions. However, having regard to variations in remuneration structures across the globe, some
regional variations may enable Boral to continually attract and retain the right calibre of talent
across the key geographies in which we operate.
We are not proposing changes to our remuneration framework beyond what is outlined above.
We will, however, remain informed as to global trends and make changes as appropriate.
While we need to attract and retain key talent, Boral remains an Australian headquartered
and listed company. As such, Australian executive remuneration practices (including market
benchmarking) will continue to form the primary basis for how we reward our Senior Executives.
To the extent the Committee considers policy changes which deviate from typical Australian
practice, we will highlight this and engage with shareholders prior to changes being
implemented.
Reflecting the above and in order to meet the future needs of the business, we endeavour to
keep our remuneration approach as simple as possible to make it accessible to executives in
different locations, and facilitate transfers between businesses and geographies.
In keeping a simple, financially-based STI, underlying EBIT will continue to be used. The Board
considers EBIT to be the most valid benchmark for executive performance as it is easy to
understand and measure, and is independently verified.
For LTI, the Board will monitor the appropriateness of TSR and ROFE performance measures,
taking into account current and future needs of the business. Since the introduction of ROFE in
FY2014, Boral’s ROFE performance has steadily improved against a reducing cost of capital.
Targets will continue to be set to reflect targeted performance and capital requirements. Further
detail on ROFE performance and target setting can be found in Section 3.
Remuneration framework to
meet future needs
The Committee will continue to
assess whether any remuneration
framework changes are required
to take into account the changing
nature of the business.
56
Boral Limited Annual Report 2017
Section 3: FY2017 performance and actual pay received
During FY2017, Boral’s focus has been on the delivery of strong earnings growth and our transformation strategy, to ensure the
Company remains competitive throughout market cycles. The successful completion of the Headwaters acquisition was critical
to this transformation. The acquisition is expected to place Boral in a better position to manage returns in the US, during both
cycle highs and challenging conditions, through diversification of our product offerings, our market exposures and our US growth
prospects. This, along with continued growth in our Boral Australia and USG Boral businesses, is expected to result in improved
financial results and long-term returns for our shareholders.
Financial performance
FY2012
FY2013
FY2014
FY2015
FY2016
FY20172
Earnings per share1,3 (cents)
Dividends per share (cents)
Return on equity1 (%)
12.7
11.0
3.0
12.7
11.0
3.2
20.5
15.0
5.1
29.7
18.0
7.1
33.3
22.5
7.6
33.7
24.0
6.3
Boral Share price
$7.50
$6.50
$5.50
$4.50
$3.50
$2.50
FY2012
FY2013
FY2014
FY2015
FY2016
FY2017
How did Boral’s performance result in STI awards?
EBIT performance
The use of EBIT effectively aligns rewards for Senior Executives with Boral’s strategic focus on delivering strong earnings through the
business cycle. Year-on-year, EBIT targets for the STI have been set at challenging levels against our budget.
For FY2017, Boral reported earnings before interest and tax (EBIT1) of $460 million, which was $62 million or 16% higher than the
prior year. This EBIT improvement in earnings was underpinned by volume and price growth, as well as cost improvement initiatives.
The result also included a $28m EBIT contribution from Headwaters in the first eight weeks of ownership, which was excluded when
we calculated STI payments.
On average, 103.7% of target STI was paid out to current Senior Executives for FY2017 performance. This compares to 136.5%
of target STI paid out for FY2016 performance. The Board considered it appropriate to exclude the impact of the Headwaters
acquisition in determining EBIT performance for STI purposes to ensure executives would not receive a windfall gain from the
acquisition.
STI payments over the past 10 years demonstrate the cyclical nature of our industry. Over the last 10 years (FY2008 to FY2017),
Boral’s STI has paid out at an average 71.9% of target. This includes FY2009, when no STI was paid to Senior Executives and
FY2012 and FY2013 when no STI was paid to the CEO.
Senior Executive historical STI outcomes
Year
FY2008
FY2009
FY2010
FY2011
FY2012
FY2013
FY2014
FY2015
FY2016
FY2017 Average
(% of target)
100.5%
0.0% 93.8% 36.4% 14.0%
6.9% 100.4% 126.7% 136.5% 103.7% 71.9%
The average STI payout as a percentage of target is equivalent to an average of 39.0% of maximum STI opportunity.
1. Excludes significant items.
2. In FY2017, earnings per share and return on equity reflect additional shares on issue following the capital raising in December 2016 but only eight weeks of
Headwaters post-acquisition earnings contribution.
3. Earnings per share is adjusted to reflect the bonus element in the renounceable entitlement offer which occurred during November and December 2016.
Boral Limited Annual Report 2017 57
2017 REMUNERATION
REPORT
How did Boral’s performance result in LTI awards?
TSR performance
Boral’s relative total shareholder return (TSR) performance was strong. Taking into account share price appreciation and dividends
paid, Boral delivered a TSR of 23.4% for shareholders between 1 July 2016 and 30 June 2017. This TSR ranked Boral in the second
quartile (37th) of ASX 100 companies for FY2017.
Over the three year period from September 2013 to September 2016, Boral’s TSR of 76.5% was at the 73rd percentile of the
Company’s TSR comparator group, contributing to vesting of 98% of the 2013 LTI grant. Over the period from September 2011 to
September 2016 (being the second testing date for the 2011 LTI grant), Boral’s TSR of 100.4% was at the 59th percentile, resulting in
vesting of 68%.
TSR for Boral vs ASX 100 companies: 1 Sept 2013 to 1 Sept 2016
TSR for Boral vs ASX 100 companies: 1 Sept 2011 to 1 Sept 2016
1st Quartile
2nd Quartile
3rd Quartile
4th Quartile
76.5%
BLD
300%
200%
100%
0%
-100%
400%
300%
200%
100%
0%
-100%
1st Quartile
2nd Quartile
3rd Quartile
4th Quartile
100.4%
BLD
ROFE performance
The use of ROFE is designed to test the efficiency and profitability of the Company’s capital investments, linking executive reward
with the achievement of improved ROFE performance and a long-term goal of ROFE exceeding the cost of capital through the cycle.
At the time Boral introduced ROFE as an LTI performance measure, Boral’s returns were substantially lower and the weighted
average cost of capital (WACC) higher than they are today.
Boral’s ROFE performance, as measured by EBIT1 return on average funds employed in FY2017, at 7.6% declined from previous
years. The decline in ROFE in FY2017 has resulted from the significantly increased funds employed associated with the Headwaters
acquisition with only eight weeks of EBIT contribution following completion of the transaction in May 2017. However, both Boral
Australia and USG Boral delivered underlying divisional ROFE which exceeded the cost of capital for these businesses. In FY2016,
Boral’s ROFE was 9.1%. Calculating ROFE on an average monthly funds employed basis, to recognise the impact of only eight
weeks contribution from Headwaters, Boral’s ROFE in FY2017 was 9.2%.
Longer-term, the Headwaters acquisition is expected to better position the Group to deliver more sustainable growth and above cost
of capital returns through market cycles as Boral has diversified its US market exposures. However, before full acquisition synergies
are delivered, we expect ROFE to increase at a slower rate due to the significant increase in funds employed, even though earnings
from Boral North America are continuing to grow.
Our ROFE targets will continue to be set considering the current and anticipated cost of capital, to ensure that executives are only
rewarded for delivery of returns above Boral’s WACC, although recognising that the WACC itself does change to reflect external
circumstances, such as the long-term risk free rate.
EBIT1 return on average funds employed (ROFE), %
6.6
4.7
4.7
8.5
9.1
}
9.2
7.6
FY2017 ROFE of 7.6% reflects the impact of Headwaters
only contributing 8 weeks of EBIT in FY2017 but funds
employed increasing fully at 30 June 2017.
Calculating ROFE on an average monthly funds employed
basis has FY2017 ROFE as 9.2%
FY2012
FY2013
FY2014
FY2015
FY2016
FY2017
1. Excludes significant items.
58
Boral Limited Annual Report 2017
The key remuneration outcomes for Boral’s Senior Executives in FY2017 are outlined below along with relevant company
performance:
Component
Outcomes
Fixed Annual
Remuneration
Further details in
Section 4
Increases in Fixed Annual Remuneration (FAR) were considered by the Committee with reference to
responsibilities inherent in the role, experience of individuals occupying the role, Boral’s need to retain key
senior executives to manage risk and support succession planning, and positioning of the FAR for the roles
against the market. They were also made in conjunction with a restructure of the executive team and a
reduction in the number of CEO direct report roles. Notwithstanding the increases set out below, the reduction
in the number of CEO direct reports resulted in net annual savings in excess of $1 million.
During FY2017, increases in FAR were made for our key executives, in line with our annual review of
remuneration. These included:
• CFO increase of 17% to reflect expanded responsibilities in relation to Corporate Development and M&A
and project management of the Headwaters acquisition.
• President and CEO, Boral North America increase of 6% to reflect the significant increase in job size,
responsibilities and role complexity in managing Boral’s North American business, including post the
Headwaters acquisition. This also reflects a change from FAR to BCS, following the individual’s return to the
US (having previously performed the role of EGM, Building Products, Australia).
• Divisional Chief Executive, Boral Australia increase of 22% to reflect the expanded responsibilities as a
result of the formation of Boral Australia, the largest division of Boral (76% of EBIT before significant items in
FY2017).
• Executive General Manager, Boral Cement increase of 7% following demonstration of his ability to
undertake an expanded role which includes broader Boral Australia responsibility for technology and
innovation.
An increase in FAR of 3% was received by the CEO in September 2017, reflective of market benchmarking
undertaken against Boral’s comparators.
Short-Term
Incentive (STI)
Further details in
Section 4
STI Awards in FY2017 reflect Boral’s achievement of a 16% increase in Group EBIT before significant items,
which equated to 102.8% of the EBIT target set by the Board at a Group level. Both Boral Australia and USG
Boral saw increases in divisional EBIT of 11% and 18%, respectively. While Boral North America delivered an
overall increase in EBIT of 50%, earnings from the Headwaters acquisition were excluded for the purposes of
determining remuneration outcomes.
Long-Term
Incentive (LTI)
Further details in
Section 4
STI payments for FY2017:
• The CEO received an STI of $1.98 million, representing 107.6% of his target STI, with 80% of this amount
paid in cash and 20% deferred into equity for two years.
• Other Senior Executives received a total value of STI of $1.5 million, representing approximately 102.8% on
average for target STI, also with 20% deferred into equity for two years.
2013 LTI
98% of the 2013 LTI vested based on achievement of the stretch ROFE target for this grant and relative TSR
being at the 73rd percentile of the ASX 100 comparator group. This was the first LTI grant subject to a ROFE
performance hurdle (one-third), in addition to relative TSR (two-thirds).
Older plans
Until 2013, LTI awards were tested at different times over a seven-year period based on relative TSR
performance.
2009 LTI – failed to vest and lapsed on its final test date in November 2016.
2011 LTI – partially vested on its second test date in September 2016 with 68% vesting.
Boral Limited Annual Report 2017 59
2017 REMUNERATION
REPORT
Actual remuneration for FY2017
The remuneration outcomes table below has been prepared to provide shareholders with a view of the remuneration that was
actually paid to current Senior Executives for FY2017. The Board believes that presenting information this way provides shareholders
with increased clarity and transparency. Remuneration details prepared in accordance with statutory obligations and accounting
standards are contained in Section 7 of this Report.
FY2017 remuneration cash outcomes table
Cash payments and other benefits received
A$’000s
Fixed
remunerationa STI (cash)b
Mike Kane
1,836.7
1,586.5
Joseph Goss
Ross Harper
David Mariner
Rosaline Ng
975.0
574.2
679.4
855.4
444.2
199.4
164.2
416.5
Superannuation
or pension
payments
Expat
allowancese
Other
non-cashf
-
-
19.6
108.3
19.6
263.2
124.9
0.0
0.0
0.0
73.2
12.0
7.0
82.3
26.0
Vesting of prior year
“at risk” equity awards
Total
payments
Vesting of STI
deferral earned
in 2014c
Vesting of 2011
& 2013 LTI
Grantsd
4,061.7
1,674.3
806.1
1,034.2
1,327.6
415.9
96.4
51.5
24.2
89.9
5,310.2
1,108.6
550.0
517.9
1,198.0
FBT
302.1
118.2
5.9
0.0
10.1
A significant portion of actual remuneration received in FY2017 relates to vesting of deferred STI and two tranches of the LTI. Vesting
of these incentives and the increase in value of the equity awards held by the CEO and other Senior Executives aligns to the benefits
received by shareholders over the same period. Boral’s share price increased by approximately 76% from September 2011 to
September 2016. The following graph shows the difference between grant and vesting value of the relevant incentive awards, the
additional value for the LTI in particular, reflecting Boral’s TSR performance outcomes from September 2011 to September 2016.
Deferred STI
$556
(82%)
$121
(18%)
LTI vested in
period
$3,771.1
(43%)
A $’000s
$4,913.6
(57%)
Value at grant date
Additional value at vesting due to share price change
Ref
Item
Notes relating to the Actual Remuneration for FY2017 table
Fixed remuneration
Fixed remuneration is cash salary paid to the Senior Executive for their period as a KMP.
a.
b.
c.
STI (cash)
STI deferral
d.
LTI
e.
Expat allowances
The value of STI represents 80% of the total STI with the remaining 20% deferred into equity for two
years.
The value for earned deferred STI granted in September 2014 which vested on 1 September 2016,
calculated using the volume weighted average price (VWAP) of Boral ordinary shares traded on the
ASX in the five trading days up to 1 September 2016, being $6.67 multiplied by the number of rights
which vested.
LTI performance targets were achieved for the 2011 and 2013 LTI grants, triggering vesting of 68%
and 98% respectively, with Boral delivering nearly top quartile performance relative to our TSR
comparators over the three year period from September 2013 to September 2016 (73rd percentile)
and exceeding the stretch target for the ROFE hurdle for the 2013 LTI grant. The value of the 2011 LTI
and 2013 LTI grants which vested during the year is based on the value at the time of delivery of the
equity to participants, which occurred shortly following completion of the Headwaters transaction on
8 May 2017, calculated using the VWAP of Boral ordinary shares traded in the five days from 10 May
2017 to 16 May 2017 (inclusive), being $6.72 multiplied by the number of rights that vested.
Expat allowances, other non-cash benefits and associated fringe benefits tax (FBT) are not taken
into account for the purposes of calculating an executive’s STI or LTI opportunity. Expatriate benefits
ceased to be provided to David Mariner during FY2017 following his relocation back to the USA.
As announced on 21 June 2017, expatriate benefits for Mike Kane will cease in FY2018 and will be
reflected in a materially lower value for non-monetary benefits in the FY2018 Remuneration Report.
f.
Other non-cash
Other non-cash comprises non-monetary benefits. These amounts are not taken into account for the
purposes of calculating an executive’s STI or LTI opportunity.
60
Boral Limited Annual Report 2017
Section 4: Remuneration framework for FY2017
Remuneration strategy
Boral’s remuneration strategy and framework provides the foundation for how remuneration is determined and paid. The chart below
provides a summary of Boral’s remuneration strategy for 2017.
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 remuneration and
variable reward opportunities that reflect
seniority and complexity of roles
LINKED TO BUSINESS CONDITIONS
At risk reward outcomes are
reflective of financial performance
objectives
The strategy has guided the way remuneration has been set for FY2017, as outlined in the following pages.
Remuneration framework components
Component
Delivery
Year 1
Year 2
Year 3
FAR
STI
LTI
Base salary, non-cash benefits
(including any fringe benefits tax)
and superannuation paid during
the financial year
Annual ‘at risk’ incentive in which
80% of the STI is delivered
in cash, 20% is deferred in
Performance Rights
Deferred STI vests after 2 years
Equity awards that are subject
to the satisfaction of long-term
performance conditions
Two-thirds of the LTI vests after 3 years
based on TSR performance compared to a
selected group of comparators
100% is delivered as Performance
Rights
One-third of the LTI vests after 3 years based
on achieving ROFE targets set by the Board
Boral Limited Annual Report 2017 61
2017 REMUNERATION
REPORT
Remuneration framework details
Remuneration Strategy
Description
FAR
Attract and retain high calibre employees with market
competitive and flexible reward.
Boral benchmarks the remuneration of our executives against
comparator companies of a similar size (referencing market
capitalisation and revenue, as applicable) and within similar
industries (focusing on industrial and materials sector entities).
2017 Outcomes
Considerations in setting FAR:
• Individual’s role at Boral
• Knowledge, skills and experience
• Market practice for companies of similar size and
complexity of Boral
Senior Executives have continued to grow in their roles, taking on increased responsibilities and role complexity. FAR
increases between 6% and 22% for FY2017 for KMP, reflected growth, CEO succession development and benchmarking
outcomes. Notwithstanding these increases, a reduction in CEO direct reports by two positions resulted in net annual
savings over $1 million. Based on benchmarking outcomes, the CEO received a 3% FAR increase from 1 September 2017.
STI
STI rewards for achievement of financial performance over
one year.
STI gateway
Performance at the end of the financial year is measured against
pre-determined EBIT targets established as part of the Group’s
annual budget process. No STI awards are made if relevant
EBIT performance targets are not met.
EBIT targets are considered to be commercial-in-confidence and
therefore not disclosed in the interests of shareholders.
Single financial measure
Boral utilises a single performance hurdle 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.
STI deferral
Deferring 20% of the awarded STI over two years is considered
necessary by the Board to promote sustainability of annual
performance over the medium-term, provide executives with
additional share price exposure and facilitate the Board’s ability to
exercise clawback provisions, should this be required.
2017 Outcomes
Target and maximum STI opportunities as a percentage
of FAR are outlined below:
Position
CEO
Target
100%
Maximum
140%
Senior Executives
35% to 50%
70% to 100%
Boral used a single financial hurdle for STI awards in
FY2017, being EBIT (excluding significant items):
• CEO and CFO: 100% Group EBIT
• Other Senior Executives: 50% Group EBIT and 50%
Divisional or Business EBIT; or 50% Group EBIT, 30%
Divisional EBIT and 20% Business EBIT
The use of EBIT effectively aligns rewards for Senior
Executives with Boral’s strategic focus on delivering
strong earnings through the business cycle.
The exclusion of significant items, such as impairments
and write-ups / write-downs, ensures STI outcomes
reflect performance during the relevant period only and
are not skewed upwards (or downwards) due to one-off
investments or decisions in prior performance periods.
The inclusion of items such as acquisition costs may also
disincentivise management from pursuing acquisition
opportunities that will deliver long-term shareholder value
at the expense of their short-term incentive opportunity.
STI cash payments of $2.811 million were made to the CEO and Senior Executives in respect of performance over FY2017,
with the remainder of the FY2017 STI outcome for these individuals deferred into equity over two years.
The CEO received 107.6% of his target STI, while Senior Executives other than the President & CEO, North America,
received between 113% and 119% of target. This reflected strong, above-target EBIT results from Boral Australia and
USG Boral. Boral Australia delivered price, volume and margin improvements in FY2017 and has secured supply to a
growing number of infrastructure projects. USG Boral delivered solid growth reflecting market activity as well as increased
penetration of premium-priced Sheetrock®, growth in adjacent products and cost improvement initiatives.
The President & CEO, Boral North America, received 59.5% of his target STI, reflective of Boral USA delivering an EBIT
outcome below target, primarily due to market growth being lower than expected. Earnings from Headwaters in the first
eight weeks of ownership of US$21 million was excluded in assessing performance against the divisional EBIT target.
62
Boral Limited Annual Report 2017
Remuneration Strategy
Description
LTI
To link long-term executive rewards with the sustained creation of
shareholder value through allocation of equity awards subject to
long-term performance conditions.
TSR
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.
The Board believes that a relative TSR hurdle measured against
constituents of an ASX index ensures alignment between
comparative shareholder return and reward for the executive, and
provides reasonable alignment with diversified portfolio investors.
In considering selection of the TSR comparator group, the
Board has determined there to be an insufficient number of
ASX company comparators to produce a meaningful bespoke
peer group.
ROFE
ROFE tests the efficiency and profitability of the Company’s
capital investments and is determined by the Board based on
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).
The ROFE performance hurdle is intended to reward achievement
linked to improving the Company’s ROFE performance through
the cycle.
Since the introduction of ROFE in FY2013, our long-term goal has
been to exceed the WACC over the whole of the construction
cycle, even though at some points in the cycle returns may be
lower than WACC. ROFE targets for annual LTI awards have been
set progressively with a view to achieving this objective.
From FY2013 to today, Boral’s ROFE has steadily increased
alongside a decreasing WACC. While the FY2017 ROFE result is
lower than FY2016 due to the Headwaters acquisition, both Boral
Australia and USG Boral delivered underlying divisional ROFE
which exceeded the cost of capital for these businesses.
The CEO, Senior Executives and other executives
are eligible to participate in the LTI at the following
opportunity levels (as a percentage of FAR):
Position
CEO
Maximum opportunity (fair value)
100%
Senior Executives
35% to 50%
The FY2017 LTI awards were measured against two
performance hurdles:
Hurdle
Portion
Period
Relative TSR
ROFE
Relative TSR
measured against the
S&P/ASX 100 Index
EBIT in year of testing
as a percentage
of average funds
employed
Two-thirds
One-third
1 September 2016 to
1 September 2019
Year ending 30 June
2019
The TSR vesting schedule to be applied for the FY2017
LTI grant is:
If at the end of the period, the
TSR of the Company is:
Proportion vesting:
Below the 50th percentile
At 50th percentile
0%
50%
Between the 50th and 75th percentile
Pro-rata vesting from 50%
to 100%
Reaches or exceeds 75th percentile
100%
The ROFE vesting schedule to be applied for the FY2017
LTI grant is:
If the Company’s ROFE
performance for FY2019 is:
Proportion vesting:
Less than 12.0%
12.0%
0%
50%
Greater than 12.0% and
less than 12.5%
Pro-rata vesting from 50%
to 100%
12.5% or above
100%
2017 Outcomes
In September 2016, 98% of the 2013 LTI vested based on the FY2016 ROFE outcome of 9.1%, which was above the 8.0%
stretch target, combined with the relative TSR being at the 73rd percentile of the ASX 100 comparator group.
Older plans
Until 2013, LTI awards were tested at different times over a seven-year period based on relative TSR performance. Vesting
of grants tested during FY2017 was as follows:
2009 LTI – failed to vest and lapsed on its final test date in November 2016.
2011 LTI – partially vested on its second test date in September 2016 with 68% vesting.
Boral Limited Annual Report 2017 63
2017 REMUNERATION
REPORT
Remuneration framework details (continued)
Remuneration Strategy
Total Remuneration
Description
Boral’s targeted remuneration mix is set to balance the need to attract the right, high quality talent, with the risk-reward
outcomes sought by the Company. Total target remuneration mix for FY2017 is shown below.
CEO
34%
33%
33%
Other Current
Senior Executives
50-60%
20-25%
20-25%
FAR/BCS
STI
LTI
Section 5: Remuneration governance
Roles and responsibilities
The table below outlines the roles and responsibilities of the Board, the Committee and management in relation to Board and KMP
remuneration.
The Board
The Committee
Management
• Approving remuneration
arrangements for the CEO &
Managing Director, other Senior
executives and non-executive
Directors
• Monitoring performance of KMP
• Recommending remuneration and
incentive policies and practices for
Boral generally
• Prepares recommendations and
provides supporting information for the
Committee’s consideration
• Recommending remuneration
• Implements approved incentive policies
arrangements for the CEO & Managing
Director
and practices
• Recommending remuneration
arrangements for KMP (excl. CEO)
Further detail on 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 boral.com/corporate_governance.
How decisions are made
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. When decisions are made, consideration is applied to
the Boral strategy, remuneration strategy, alignment with shareholder interests and market practice.
64
Boral Limited Annual Report 2017
Board discretion
The Board maintains discretion to adjust remuneration outcomes for Senior Executives to ensure outcomes appropriately reflect
company performance and the shareholder experience over the relevant performance period.
Component
Board discretion
STI
LTI
The Board retains discretion to adjust the STI outcomes up or down to ensure
consistency with the Company’s remuneration philosophy, to prevent any
inappropriate reward outcomes including in the event of a seriously negative
safety issue, and maintain alignment with the shareholder experience before the
final award is determined.
The Board also has the discretion to exercise clawback provisions in
circumstances where an employee has acted fraudulently or dishonestly, has
breached their obligations to the Company, 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 retains discretion to make LTI adjustments as considered necessary
to ensure rewards reflect performance in a manner which is consistent with
shareholder expectations and the intent and purpose of the relevant targets.
The Board also 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 Company. The Company has a
further discretion to apply clawback provisions in an 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.
Determinations made in FY2017
The Board exercised its discretion
to exclude eight weeks of
post-acquisition earnings from
Headwaters from the EBIT
performance assessment. It was
also determined that targets for
prior year LTI awards would not
be adjusted to take into account
the impact of the Headwaters
acquisition, notwithstanding
the impact the transaction has
had on Boral’s ROFE. These
determinations were made to
ensure executives do not receive
any windfall gain as a result of the
transaction.
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:
Position
CEO
Minimum shareholding
Status
100% of FAR
As at 30 June 2017, the CEO & Managing Director well exceeds the applicable
requirement
Senior Executives 50% of FAR
As at 30 June 2017, all Senior Executives have achieved the applicable requirement
The Company’s guidelines for non-executive Directors’ minimum shareholdings are set out in the Corporate Governance Statement
on page 42 of the Annual Report. As at 30 June 2017, all Directors have achieved or exceeded the guidelines.
External advice on remuneration
The Committee seeks information and advice regarding remuneration directly from external remuneration consultants EY and
Guerdon Associates, who are independent of the Company’s management.
During FY2017, these consultants provided general information and support only. No advice was provided that contained
“remuneration recommendations” relating to the remuneration of KMP.
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 FY2017 by the Committee and no changes were considered necessary.
Boral Limited Annual Report 2017 65
2017 REMUNERATION
REPORT
Senior Executive contracts
An overview of key terms of employment for Senior Executives is provided below:
Contract term
Contract type
Notice period by Boral
Notice period by employee
Termination without cause
CEO
Permanent
12 months
6 months
Other executives
Permanent
6 months
6 months
Termination payment
12 months FAR
Up to 12 months FAR
STI
LTI
Unless otherwise determined by the Board, no entitlement to STI for the year of
termination.
Treatment of LTI awards are dealt with under the LTI plan rules and the specific terms
of grant. In general, unless otherwise determined by the Board, LTI awards will remain
on foot to be tested against the relevant performance conditions at the vesting date.
Resignation or termination with cause
Unless otherwise determined by the Board:
• No termination payment
• No entitlement to STI
• Forfeiture of all deferred STI
• All unvested LTI awards will lapse
Dealing restrictions
Boral’s Share Trading Policy prohibits executives from entering into hedge and other
derivative transactions in relation to rights granted under the LTI plan.
Shares allocated to participants upon vesting of their LTIs may only be dealt with in
accordance with the Share Trading Policy.
Any contravention of the Policy would result in disciplinary action.
Section 6: 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.
Non-executive Director fee levels for FY2017 were as follows:
Fees (A$)
Board
Audit & Risk
Remuneration & Nomination
Health, Safety & Environment
Due Diligence
2017
2016
Chair
441,000
40,100
30,100
30,100
25,000*
Member
146,800
20,500
15,000
15,000
–
Chair
428,200
38,900
29,200
29,200
–
Member
142,500
19,900
14,600
14,600
–
* The Due Diligence Committee was established to support the acquisition of Headwaters Inc. Only the Chairman of the Due Diligence Committee,
Paul Rayner, received a fee for additional work undertaken during FY2017.
The total annual non-executive Director remuneration for the current Board of seven non-executive Directors for FY2017 was
$1,583,600 including superannuation. This was within the current aggregate fee limit of $2,000,000 per annum, which was approved
at the Company’s Annual General Meeting in November 2016.
A comprehensive review of the level of fees paid to Boral’s non-executive Directors was undertaken during the year, and included
a review of market benchmarking information prepared by EY, Boral’s external remuneration consultant. The review considered the
elements of size and complexity of the business, time commitments and fees paid for non-executive Directors of companies of a
comparable size. As a result of the market review, with effect from 1 July 2017, fees for non-executive Directors were increased by
3.0%, including fees for the Board Chairman, each Committee Chairman and the base fees.
66
Boral Limited Annual Report 2017
Section 7: Statutory remuneration disclosures
The following Senior Executive remuneration table has been prepared in accordance with the accounting standards and has been
audited. The values in the table below align with the amounts expensed in Boral’s financial statements.
Senior Executive remuneration table
Short-term
Post-
employment
Share-based paymentsa
Other
Total
At Risk Remuneration
Cash
salaryb
Short-term
incentivec
Non-
monetary
benefitsd
Super-
annuation
/ Pensione
Termin-
ation
benefit
Rightsf
Deferred
equity
Retention
Awards
(Sept 15)
Long
service
leave
accrual
% of
remuneration
related to
performance
% of target
STI paid
Total
A$’000s
Year
Senior Executives
Mike Kane
2017
1,843.8
1,586.5
638.5
2016
1,837.9
1,668.1
622.0
Joseph Goss
2017
990.0
444.2
255.2
2016
Ross Harper
2017
2016
801.9
567.6
552.3
565.3
199.4
305.3
281.6
12.8
9.5
–
–
–
–
19.6
19.3
David Marinerg 2017
679.4
164.2
82.3
108.3
Rosaline Ng
2016
2017
2016
750.4
865.3
702.1
247.1
693.5
416.5
494.8
36.1
94.9
Total
2017
4,946.1
2,810.8 1,024.9
2016
4,644.6
3,280.6
1,701.5
82.5
19.6
19.3
147.5
121.1
– 1,588.2
411.8
– 2,410.8
393.4
–
–
32.1
6,100.9
58.8% 107.6%
31.3
6,963.5
64.2% 116.6%
–
307.7
116.3
133.3
25.7
2,272.4
38.2% 113.9%
–
–
–
–
–
–
–
457.2
105.6
133.3
13.6
2,358.5
47.8% 145.0%
165.5
219.3
223.8
218.7
58.9
56.4
57.1
53.1
93.8
93.8
98.0
98.0
14.8
1,132.4
37.4% 118.7%
12.6
1,268.5
45.8% 193.7%
–
1,413.1
31.5% 59.5%
9.6
2,152.9
24.1% 123.4%
304.3
113.2
125.0
42.3
1,922.3
43.4% 119.0%
469.2
103.1
125.0
16.6
2,025.0
52.7%
141.4%
– 2,589.5
757.3
450.1
114.9 12,841.1
48.0% 103.7%
– 3,775.2
711.6
450.1
83.7
14,768.4
52.6% 136.5%
Ref
Item
Notes relating to the Senior Executive remuneration table
a.
b.
c.
d.
e.
f.
Fair market
value
The fair market value of the 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 rights for each relevant reporting period, including the value of deferred equity.
Cash salary
Cash salary includes all fixed salary and accrued annual leave.
Short-term
incentive
STI values for 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.
Non-monetary
benefits
Non-monetary benefits include 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. Expatriate benefits ceased to be provided to David Mariner during FY2017 following his relocation
back to the USA. As announced on 21 June 2017, expatriate benefits for Mike Kane will cease in FY2018
and will be reflected in a materially lower value for non-monetary benefits in the FY2018 Remuneration
Report.
Superannuation
/ Pension
Under the terms of their expatriate agreements, superannuation contributions have not been made in
FY2017 for Mike Kane or Joseph Goss.
Restated Value
of Rights in
FY2016
The value of Rights in FY2016 for Joseph Goss, Ross Harper, David Mariner and Rosaline Ng were
inadvertently overstated in the FY2016 remuneration report, now corrected in the table above. In FY2016,
the accounting value for September 2015 retention awards was included in two columns in the statutory
remuneration table (under both “Rights” and “Retention”). The accounting value of these Rights now only
appears under the “Retention Awards (Sept 15)” column in the table above.
g.
David Mariner
The cash salary for David Mariner is lower in FY2017 compared to FY2016 due to the change in his
remuneration arrangements from FAR to BCS, following his return to the USA (having previously performed
the role of EGM, Building Products, Australia). David Mariner’s pension contribution includes SERP paid on
STI received during FY2017 in accordance with arrangements for other US executives.
Boral Limited Annual Report 2017 67
2017 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 2016
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 2017
No.
No.
$
No.
$
No.
No.
Mike Kane
LTI Rights
2,135,855
522,096
2,267,637
(790,072)
5,310,153
(12,306)
1,855,573
Deferred STI Rights
137,965
61,902
417,028
(62,382)
415,882
–
Joseph Goss
LTI Rights
441,674
138,101
599,819
(164,944)
1,108,605
(2,819)
Deferred STI Rights
TRI Rights
31,738
71,649
20,979
141,334
(14,456)
96,374
–
–
–
–
–
–
137,485
412,012
38,261
71,649
Ross Harper
LTI Rights
254,195
59,490
258,385
(81,839)
550,048
(19,647)
212,199
Deferred STI Rights
TRI Rights
16,812
50,435
–
–
11,330
76,334
(7,730)
51,534
–
(77,057)
(3,631)
–
–
517,908
24,207
–
–
–
20,412
50,435
(964)
245,525
–
–
26,406
52,684
David Mariner
LTI Rights
222,234
101,312
440,032
Deferred STI Rights
TRI Rights
20,867
52,684
9,170
61,781
–
–
Rosaline Ng
LTI Rights
495,978
123,937
538,300
(178,248)
1,198,023
(19,371)
422,296
Deferred STI Rights
TRI Rights
33,528
67,187
18,363
123,711
(13,496)
89,974
–
–
–
–
–
–
38,395
67,187
Notes relating to the Equity grants table are outlined below:
Ref
Item
Explanation
a.
Rights granted
during the year
as remuneration
b.
Value of grant
All rights were granted to Senior Executives effective 1 September 2016.
The fair market value of LTI Rights granted on 1 September 2016, calculated using a Monte Carlo simulation
analysis, is $3.53 per right for two-thirds of the grant relating to the TSR measure and $5.97 per right
for one-third of the grant relating to the ROFE hurdle. The fair market value of the Deferred STI Rights is
$6.7368 per right, reflecting a face value at time of grant calculated by taking the volume weighted average
price (VWAP) traded on the ASX over the five trading days following the release of Boral’s FY2016 full year
results.
c.
d.
Value of vested
rights
Calculated per right as the market price of Boral shares on the date of vesting. No exercise price is payable
in respect of rights that vest.
Lapsed rights
Rights that lapsed during the year were granted to Senior Executives under the 2009 LTI Grant (100%
lapsed) and the 2013 LTI Grant (98% vested, the remaining unvested rights lapsed).
68
Boral Limited Annual Report 2017
Senior executive equity balances
The number of rights included in the balance at 30 June 2017 for the Senior Executives is set out below:
2009
2010
2011
2012
2013
2014
2015
2016
Balance as
at 30 June
2017
Year of grant
–
–
–
–
–
–
–
–
–
–
–
–
–
–
78,717
32,363
–
–
–
–
–
–
–
–
26,319
11,434
–
–
–
–
11,512
9,567
–
–
–
–
29,519
12,644
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
615,957
606,440
522,096 1,855,573
–
75,583
61,902
137,485
138,351
135,560
138,101
412,012
–
–
17,282
20,979
38,261
71,649
–
71,649
48,160
66,796
59,490
212,199
–
–
9,082
11,330
20,412
50,435
–
50,435
53,089
70,045
101,312
245,525
–
–
17,236
9,170
26,406
52,684
–
52,684
129,078
127,118
123,937
422,296
–
–
20,032
18,363
38,395
67,187
–
67,187
Senior Executives
Mike Kane
LTI Rights
Deferred STI Rights
Joseph Goss
LTI Rights
Ross Harper
David Mariner
Rosaline Ng
Deferred STI Rights
TRI Rights
LTI Rights
Deferred STI Rights
TRI Rights
LTI Rights
Deferred STI Rights
TRI Rights
LTI Rights
Deferred STI Rights
TRI Rights
Non-executive Directors’ total remuneration
The remuneration of the non-executive Directors is set out in the following table.
A$’000s
Brian Clark, Chairmana
Catherine Brenner
Eileen Doyle
Kathryn Fagg
John Marlay
Karen Mosesb
Paul Rayner
Total
2017
2016
Short Term Board
and Committee
Fees
Post-employment
superannuation
Short Term Board
and Committee
Fees
Post-employment
superannuation
Total Fees
Total Fees
421.4
166.5
180.3
175.3
161.5
166.5
193.5
19.6
15.8
17.1
16.6
15.3
15.8
18.4
441.0
182.3
197.4
191.9
176.8
182.3
211.9
324.9
161.7
175.2
165.7
156.9
53.9
165.8
17.8
15.4
16.6
15.7
14.9
5.1
15.8
342.7
177.1
191.8
181.4
171.8
59.0
181.6
1,465.0
118.6
1,583.6
1,204.1
101.3
1,305.4
Notes relating to the Non-executive Directors’ total remuneration table are outlined below:
Ref
Item
Explanation
a.
b.
Brian Clark
Brian Clark became Chairman in November 2015.
Karen Moses
Karen Moses was appointed on 1 March 2016.
Boral Limited Annual Report 2017 69
2017 REMUNERATION
REPORT
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:
Balance at the
beginning of the year
Received during the
year on the exercise
of rights
Pro-rata entitlement
purchased in equity
raising
Other changes
during the year
Balance at the
end of the year
Number
Number
Number
Number
Number
363,566
10,233
–
–
7,978
7,978
18,500
–
33,586
28,586
2017
2016
2017
2016
2017
2016
2017
2016
2017
2016
2017
2016
2017
2016
790,072
666,666
164,944
–
81,839
36,866
77,057
30,520
178,248
40,718
163,769
–
–
–
3,594
–
–
–
15,131
–
(371,334)
(313,333)
(90,720)
–
(48,901)
(36,866)
–
(12,020)
(158,248)
(35,718)
946,073
363,566
74,224
–
44,510
7,978
95,557
18,500
68,717
33,586
Balance at the
beginning of the
year
Number
Received during the
year on the exercise
of rights
Other changes
during the year
Balance at the
end of the year
Number
Number
Number
80,887
76,887
33,371
15,371
27,541
15,076
26,586
26,586
27,101
25,101
15,000
–
71,116
50,116
–
–
–
–
–
–
–
–
–
–
–
–
–
–
36,438
4,000
15,034
18,000
12,407
12,465
11,976
–
12,209
2,000
6,757
15,000
32,036
21,000
117,325
80,887
48,405
33,371
39,948
27,541
38,562
26,586
39,310
27,101
21,757
15,000
103,152
71,116
Current Senior Executives
Mike Kane
Joseph Goss
Ross Harper
David Mariner
Rosaline Ng
2017
2016
2017
2016
2017
2016
2017
2016
2017
2016
Non-executive Directors
Brian Clark, Chairman
Catherine Brenner
Eileen Doyle
Kathryn Fagg
John Marlay
Karen Moses
Paul Rayner
70
Boral Limited Annual Report 2017
Loans
There were no loans made or outstanding to Senior Executives or non-executive Directors during FY2017.
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.
Section 8: Glossary of key terms
Term
Description
Committee
The Remuneration & Nomination Committee.
Face value of LTI
performance rights
The face value of LTI performance rights is determined from the volume weighted average price of
Boral shares on the ASX during the 5 day trading period up to but not including 1 September.
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.
Boral Limited Annual Report 2017 71
FINANCIAL
STATEMENTS
72
Boral Limited Annual Report 2017
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 Acquisitions
6.4 Controlled entities
74
75
76
77
78
79
80
84
85
86
87
88
91
92
93
93
95
97
98
100
102
110
111
112
114
116
118
120
123
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 Contingent liabilities
8.2 Commitments
8.3 Auditors’ remuneration
8.4 Related party disclosures
8.5 Parent entity disclosures
8.6 Deed of cross guarantee
STATUTORY STATEMENTS
126
126
126
128
129
130
131
131
132
133
135
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 2017 73
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
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
2017
$m
2016
$m
4,257.8
(2,858.4)
(763.2)
(301.4)
3,945.2
(2,672.5)
(713.3)
(288.8)
(3,923.0)
(3,674.6)
25.8
(95.3)
86.4
351.7
24.4
(75.1)
(50.7)
301.0
(51.4)
249.6
47.3
296.9
29.2c
29.0c
24.5c
24.3c
44.9
(50.6)
79.4
344.3
7.6
(70.8)
(63.2)
281.1
(35.6)
245.5
10.5
256.0
31.8c
31.5c
30.5c
30.2c
The Income Statement should be read in conjunction with the accompanying notes which form an integral part of the
financial statements.
74
Boral Limited Annual Report 2017
Statement of Comprehensive Income
Boral Limited and Controlled Entities
For the year ended 30 June
Net profit
Other comprehensive income
Note
2017
$m
2016
$m
296.9
256.0
Items that may be reclassified subsequently to Income Statement:
Net exchange differences from translation of foreign operations taken
to equity
Foreign currency translation reserve transferred to net profit on disposal
of controlled entities
4.4
Fair value adjustment on cash flow hedges
Income tax on items that may be reclassified subsequently to
Income Statement
Total comprehensive income
(99.4)
(24.5)
2.6
(1.3)
174.3
(7.0)
-
(7.7)
10.4
251.7
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 2017 75
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
Loans and borrowings
Financial liabilities
Employee benefit liabilities
Provisions
Other liabilities
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
2017
$m
237.8
873.6
606.6
3.8
41.9
2016
$m
452.1
623.9
556.9
18.9
32.4
1,763.7
1,684.2
30.4
13.1
1,353.7
31.8
2,755.7
3,208.6
128.4
28.2
7,549.9
9,313.6
812.4
407.4
15.4
64.1
115.5
53.5
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
1,468.3
1,181.7
2,163.7
992.8
10.9
44.4
157.5
28.3
2,404.8
3,873.1
5,440.5
4,265.1
19.3
1,156.1
5,440.5
18.6
11.3
59.0
30.8
1,112.5
2,294.2
3,506.3
2,246.2
162.0
1,098.1
3,506.3
The Balance Sheet should be read in conjunction with the accompanying notes which form an integral part of the financial statements.
76
Boral Limited Annual Report 2017
Statement of Changes in Equity
Boral Limited and Controlled Entities
For the year ended 30 June 2017
Balance at 1 July 2016
Net profit
Other comprehensive income
Translation of net assets of overseas entities
Translation of long-term borrowings and foreign currency
forward contracts
Foreign currency translation reserve transferred to net profit on
disposal of controlled entities
Fair value adjustment on cash flow hedges
Income tax relating to other comprehensive income
Total comprehensive income
Transactions with owners in their capacity as owners
Share acquisition rights vested
Dividends paid
Shares issued under capital raising net of costs
2,018.9
Share-based payments
Acquisition of non-controlling interest by associate
Transfer other reserves to retained earnings
Total transactions with owners in their capacity as owners
Balance at 30 June 2017
-
-
-
2,018.9
4,265.1
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
Retained
earnings
$m
Total equity
$m
2,246.2
162.0
1,098.1
3,506.3
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(115.4)
-
-
-
-
296.9
296.9
(101.3)
1.9
(24.5)
2.6
(1.3)
-
-
-
-
-
(101.3)
1.9
(24.5)
2.6
(1.3)
(122.6)
296.9
174.3
(38.3)
-
-
11.3
(5.8)
12.7
(20.1)
19.3
-
(226.2)
-
-
-
(12.7)
(38.3)
(226.2)
2,018.9
11.3
(5.8)
-
(238.9)
1,759.9
1,156.1
5,440.5
Retained
earnings
$m
Total equity
$m
996.3
256.0
3,524.1
256.0
-
-
-
-
20.4
(27.4)
(7.7)
10.4
256.0
251.7
-
-
(154.2)
-
(154.2)
(115.4)
(14.6)
(154.2)
14.7
(269.5)
-
20.4
(27.4)
(7.7)
10.4
(4.3)
-
(14.6)
-
14.7
0.1
Issued capital
Reserves
$m
$m
2,361.6
166.2
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
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 2017 77
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, acquisition and integration costs paid
Net cash provided by operating activities
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property, plant and equipment
Purchase of intangibles
Purchase of controlled entities and businesses
Cash acquired relating to acquisition of controlled entities
Repayment of loans by associates
Proceeds on disposal of non-current assets
Proceeds on disposal of controlled entities and associates
(net of transaction costs)
Net cash used in investing activities
CASH FLOWS FROM FINANCING ACTIVITIES
Capital raising net of transaction costs
On-market share buy-back
Dividends paid
Proceeds from borrowings
Repayment of borrowings
Net cash provided by/(used in) financing activities
NET CHANGE IN CASH AND CASH EQUIVALENTS
Cash and cash equivalents at the beginning of the year
Note
2017
$m
2016
$m
2.7
2.7
4,583.3
(4,049.2)
534.1
87.9
24.4
(74.4)
(41.8)
(116.9)
413.3
(336.4)
(3.7)
(3,636.5)
74.8
8.8
39.2
122.5
(3,731.3)
2,018.9
-
(226.2)
1,803.6
(489.3)
3,107.0
(211.0)
452.1
(3.3)
237.8
4,635.7
(4,069.5)
566.2
75.9
8.5
(69.2)
(69.4)
(34.5)
477.5
(320.3)
(3.5)
-
-
8.8
55.5
-
(259.5)
-
(115.4)
(154.2)
2.2
(6.0)
(273.4)
(55.4)
505.8
1.7
452.1
Effects of exchange rate fluctuations on the balances of cash and cash
equivalents held in foreign currencies
Cash and cash equivalents at the end of the year
2.7
The Statement of Cash Flows should be read in conjunction with the accompanying notes which form an integral part of the
financial statements.
78
Boral Limited Annual Report 2017
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 30 August 2017.
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 2016, 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
Acquisitions
Share-based payments
2.2
3.1
3.3
3.4
3.5
3.6
5.1
5.2
6.3
7.3
84
92
93
95
97
98
112
114
120
126
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.
Materiality
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.
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.
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
Date of transaction
Monetary assets and
liabilities
Non-monetary assets and
liabilities carried at fair value
Reporting date
Date fair value is determined
Boral Limited Annual Report 2017 79
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 gains and losses resulting from translation are
recognised in the Income Statement, except for qualifying cash
flow hedges which are deferred to equity.
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 &
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 & Managing Director on a recurring basis.
The following changes to the segment structure have occurred
during the period:
• Effective 1 July 2016, the Construction Materials & Cement
and Building Products divisions combined to form a new
Boral Australia division. Comparative segment information
has been restated to align with the current structure.
•
Following the completion of the acquisition of Headwaters
Incorporated on 8 May 2017, Boral USA and Headwaters
combined to form a new division named Boral North
America which combined the existing US operations with the
acquired Headwaters business.
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
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 2016:
• AASB 9 Financial Instruments: Assessment impact has
determined that there would be no significant impact on
Boral’s financial performance or position, on transition date at
1 July 2018.
• AASB 15 Revenue from Contracts with Customers: An
analysis of the impact of the standard has commenced. We
expect the majority of current revenue recognition practice
to not be significantly impacted by the new standard. There
may be specific contracts within Construction Materials
businesses where revenue recognition may be impacted
because of the nature and timing of performance obligations.
This will impact those contracts in place on transition date at
1 July 2018.
• AASB 16 Leases: A project to implement this standard
has commenced. While work is ongoing, particularly with
respect to the recently acquired Headwaters businesses,
this standard will require a significant portion of Boral’s
operating leases to be accounted for on balance sheet as a
“right of use asset” and “lease liability” upon adoption of the
standard on 1 July 2019. The standard will also result in the
reclassification of operating lease expense into depreciation
and financing expenses, and a reclassification of certain cash
flows from operating into financing activities.
80
Boral Limited Annual Report 2017
2.1 Segments (continued)
The following summary describes the operations of the Group’s reportable segments:
Boral Australia
USG Boral
Boral North America1
Construction Materials & Cement (comprising quarries, concrete, asphalt, transport, landfill,
property, cement and concrete placing) and Building Products (comprising West Coast bricks,
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.
Construction Materials (comprising fly ash, block and Denver construction materials), Building
Products (comprising stone, roofing, light building products and windows), and Bricks
(comprising US bricks up to 31 October 2016, and 50% share of Meridian Brick joint venture
from 1 November 2016).
Discontinued Operations
Boral CSR bricks joint venture.
Unallocated
Non-trading operations and unallocated corporate costs.
1. The results of the US bricks operations for the current year up to the date of formation of the Meridian Brick joint venture and prior year comparative periods
are shown as part of “Boral North America” in the Segment note and “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.
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
2.2
2017
$m
4,388.3
(130.5)
4,257.8
2016
$m
4,311.2
(366.0)
3,945.2
394.7
351.4
(43.0)
351.7
(50.7)
301.0
(7.1)
344.3
(63.2)
281.1
Boral Limited Annual Report 2017 81
FINANCIAL
STATEMENTS
Notes to the Financial Statements
Boral Limited and Controlled Entities
Section 2: Business performance (continued)
2.1 Segments (continued)
(a) Reportable segments
Boral Australia
Boral North America1
Unallocated
Boral Australia
USG Boral
Boral North America1
Discontinued Operations
Unallocated
Significant items (refer to note 2.6)
Boral Australia
USG Boral
Boral North America1
Discontinued Operations
Unallocated
Cash and cash equivalents
Tax assets
EXTERNAL REVENUE
2017
$m
2016
$m
DEPRECIATION AND
AMORTISATION
2017
$m
2016
$m
3,295.6
3,278.7
202.5
197.2
1,092.7
1,032.5
-
-
56.8
0.7
48.8
0.6
4,388.3
4,311.2
260.0
246.6
OPERATING PROFIT
(EXC EQUITY
ACCOUNTED INCOME)
EQUITY ACCOUNTED
INCOME
PROFIT BEFORE NET
FINANCING COSTS AND
INCOME TAX EXPENSE
2017
$m
2016
$m
322.5
293.3
-
67.2
-
(29.6)
360.1
(56.8)
303.3
-
44.4
-
(30.9)
306.8
(46.5)
260.3
2017
$m
26.2
69.5
(0.9)
5.0
-
99.8
(8.4)
91.4
2016
$m
20.6
59.0
(0.2)
11.7
-
91.1
-
91.1
2017
$m
2016
$m
348.7
313.9
69.5
66.3
5.0
(29.6)
459.9
(65.2)
394.7
59.0
44.2
11.7
(30.9)
397.9
(46.5)
351.4
SEGMENT ASSETS
(EXC EQUITY ACCOUNTED
INVESTMENTS)
2017
$m
2016
$m
3,050.2
2,919.8
-
-
4,526.9
1,078.9
-
16.6
-
57.7
EQUITY ACCOUNTED
INVESTMENTS
TOTAL ASSETS
2017
$m
19.8
931.1
402.8
-
-
2016
$m
2017
$m
2016
$m
14.6
3,070.0
2,934.4
951.1
931.1
951.1
-
4,929.7
1,078.9
88.9
-
-
16.6
88.9
57.7
7,593.7
4,056.4
1,353.7
1,054.6
8,947.4
5,111.0
237.8
128.4
452.1
237.4
-
-
-
-
237.8
128.4
452.1
237.4
7,959.9
4,745.9
1,353.7
1,054.6
9,313.6
5,800.5
1. The results of the US bricks operations for the current year up to the date of formation of the Meridian Brick joint venture and prior year comparative periods
are shown as part of “Boral North America” in the Segment note and “Discontinued Operations” in the Income Statement.
82
Boral Limited Annual Report 2017
2.1 Segments (continued)
(a) Reportable segments (continued)
Boral Australia
Boral North America1
Unallocated
Loans and borrowings
Tax liabilities
LIABILITIES
ACQUISITION OF
SEGMENT ASSETS2
2017
$m
681.3
428.6
128.0
1,237.9
2016
$m
612.0
192.8
107.6
912.4
2017
$m
2016
$m
288.5
244.3
51.4
0.2
78.7
0.8
340.1
323.8
2,571.1
1,345.2
64.1
36.6
-
-
-
-
3,873.1
2,294.2
340.1
323.8
1. The results of the US bricks operations for the current year up to the date of formation of the Meridian Brick joint venture and prior year comparative periods
are shown as part of “Boral North America” in the Segment note and “Discontinued Operations” in the Income Statement.
2. Excludes amounts attributable to the acquisition of controlled entities and businesses.
(b) Geographic location
In presenting information on a geographical basis, assets are based on the geographical location of the assets.
Australia
Asia
North America
Tax assets
Financial assets
(c) Product
Concrete
Asphalt
Quarry products
Roofing
Cement
Cladding
Bricks
Fly ash
Other
NON-CURRENT ASSETS
2017
$m
2016
$m
2,449.7
2,473.8
625.0
4,315.0
642.0
740.0
7,389.7
3,855.8
128.4
31.8
237.4
23.1
7,549.9
4,116.3
EXTERNAL REVENUE BY
PRODUCT
2017
$m
2016
$m
1,494.9
1,454.3
691.2
433.6
363.2
302.5
242.3
212.7
209.4
438.5
648.5
404.9
333.5
302.6
191.7
477.2
120.8
377.7
4,388.3
4,311.2
Boral Limited Annual Report 2017 83
FINANCIAL
STATEMENTS
Notes to the Financial Statements
Boral Limited and Controlled Entities
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 rendering 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
2017
$m
2016
$m
4,173.0
84.8
4,257.8
3,880.2
65.0
3,945.2
(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
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
84
Boral Limited Annual Report 2017
Note
2.6
2017
$m
13.7
1.3
10.8
25.8
(95.3)
-
(95.3)
2016
$m
27.0
-
17.9
44.9
(50.5)
(0.1)
(50.6)
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)
Interest expense paid or payable to:
Other parties (bank overdrafts, bank loans and other loans)1
Finance charges on capitalised leases
Unwinding of discount
Net financing costs from continuing operations
2017
$m
0.1
24.3
24.4
(72.4)
(0.2)
(2.5)
(75.1)
(50.7)
2016
$m
0.6
7.0
7.6
(67.6)
(0.5)
(2.7)
(70.8)
(63.2)
1. In 2017, interest of $4.4 million (2016: $1.0 million) was paid to other parties and capitalised in respect of qualifying assets. The capitalisation rate used was
5.4% (2016: 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:
For the year ended 30 June
Summarised Income Statement at 100%
Revenue
Profit before income tax
Income tax expense
Non-controlling interest
Net profit before significant items
Integration 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
Integration costs disclosed as significant item net of tax
2.6
Net profit – equity accounted relating to continuing operations
Further information regarding equity accounted investments is located in note 6.2.
Note
2017
$m
2016
$m
2,133.6
289.7
(91.8)
(5.8)
192.1
(16.8)
175.3
94.8
(8.4)
86.4
1,678.8
235.0
(67.8)
(7.1)
160.1
-
160.1
79.4
-
79.4
Boral Limited Annual Report 2017 85
FINANCIAL
STATEMENTS
Notes to the Financial Statements
Boral Limited and Controlled Entities
Section 2: Business performance (continued)
2.4 Dividends
Dividends Paid or Declared
(cents per share)
2016
2017
24.0
22.5
11.0
12.0
11.5
12.0
$81.8m
paid on
11/03/161
$140.7m
paid on
10/03/171
$85.5m
paid on
26/09/161
$140.7m
payable on
03/10/172
$167.3m
paid
$281.4m
paid/payable
Interim
Final
Annual Declared
1. Declared, paid and fully franked.
2. Estimated final dividend payable, 50% franked, subject to variations in number of shares up to record date. The financial effect of the final dividend for the year
ended 30 June 2017 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 2017 is $49.8 million (2016: $57.5 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 $30.2 million (2016: $36.6 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.
86
Boral Limited Annual Report 2017
2.5 Earnings per share
Basic earnings per share
Basic earnings per share (EPS) is calculated by dividing the net profit 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 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.
Calculation of weighted average number of ordinary shares
The calculations for the current and comparative periods have been adjusted to reflect the bonus element in the renounceable
entitlement offer which occurred during November and December 2016.
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
2017
2016
1,018,195,892
804,040,931
7,315,555
9,649,802
1,025,511,447
813,690,733
Continuing
operations
Discontinued
operations
2017
$m
2017
$m
Total
2017
$m
Continuing
operations
Discontinued
operations
2016
$m
2016
$m
Total
2016
$m
Earnings reconciliation
Net profit excluding significant items
338.0
4.7
342.7
261.5
6.5
268.0
Net significant items
(refer note 2.6)
Net profit
Basic earnings per share1
Diluted earnings per share1
Basic earnings per share
(excluding significant items)
Diluted earnings per share
(excluding significant items)1
1. Numbers may not add due to rounding.
(88.4)
249.6
24.5c
24.3c
33.2c
33.0c
42.6
47.3
4.6c
4.6c
0.5c
0.5c
(45.8)
296.9
29.2c
29.0c
(16.0)
245.5
30.5c
30.2c
33.7c
32.5c
33.4c
32.1c
4.0
10.5
1.3c
1.3c
0.8c
0.8c
(12.0)
256.0
31.8c
31.5c
33.3c
32.9c
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.
Boral Limited Annual Report 2017 87
FINANCIAL
STATEMENTS
Notes to the Financial Statements
Boral Limited and Controlled Entities
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. Management considers significant items when assessing performance of the Group, and in order to
provide a meaningful and consistent representation of the underlying performance of each operating segment and the Boral Group.
Significant items is not a defined performance measure in IFRS. The Company’s definition of significant items may not be comparable
with similarly titled performance measures and disclosures by other entities.
2017 Significant items
Gain on disposal of Boral CSR bricks joint
venture
Gain on disposal of US bricks
Discontinued
Discontinued
Meridian Brick joint venture integration costs Continuing
Headwaters acquisition and integration costs Continuing
Impairment of West Coast bricks
Continuing
Note
(i)
(ii)
(iii)
(iv)
(v)
Adjustment to disposal of Thailand
Construction Materials
Discontinued
(vi)
Sale of
business
$m
Acquisition
costs
$m
Integration
costs
$m
Asset
impairment
$m
35.8
13.2
-
-
-
(10.5)
38.5
-
-
-
(63.2)
-
-
-
-
(8.4)
(11.7)
-
-
-
-
-
-
(20.4)
-
(63.2)
(20.1)
(20.4)
Continuing operations
Other expenses
Share of equity accounted income
Discontinued operations
Note
2.2
2.3
6.1
Sale of
business
$m
Acquisition
costs
$m
Integration
costs
$m
Asset
impairment
$m
-
-
38.5
38.5
(63.2)
-
-
(11.7)
(8.4)
-
(20.4)
-
-
(63.2)
(20.1)
(20.4)
Sale of
business
$m
Acquisition
costs
$m
Integration
costs
$m
Asset
impairment
$m
Total
$m
35.8
13.2
(8.4)
(74.9)
(20.4)
(10.5)
(65.2)
Total
$m
(95.3)
(8.4)
38.5
(65.2)
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
Summary of significant items
Profit/(loss) before interest and tax
Income tax benefit
Net significant items
88
Boral Limited Annual Report 2017
-
-
-
(63.2)
10.4
(52.8)
(20.1)
4.9
(15.2)
(20.4)
(103.7)
-
(20.4)
15.3
(88.4)
38.5
4.1
42.6
38.5
4.1
42.6
-
-
-
-
-
-
-
-
-
(63.2)
10.4
(52.8)
(20.1)
4.9
(15.2)
(20.4)
-
(20.4)
38.5
4.1
42.6
(65.2)
19.4
(45.8)
2.6 Significant items (continued)
2017 Significant items (continued)
(i) Gain on disposal of Boral CSR bricks joint venture
On 31 October 2016, the Group disposed of its 40% interest in the Boral CSR bricks joint venture. This resulted in a net gain of
$35.8 million. Refer to note 6.1 for further information.
(ii) Gain on disposal of US bricks
During the period, the Group entered into an agreement with an affiliate of Forterra Inc. (“Forterra”) to combine its US bricks business
and Forterra’s US and Canadian businesses into two 50/50 owned joint ventures. On disposal of its interest, Boral deconsolidated
its existing US bricks business, and recognised an equity accounted investment in respect of its 50% shareholding in each of the US
and Canadian entities, that operate as the Meridian Brick joint venture. This resulted in a net gain of $13.2 million. Refer to note 6.1 for
further information.
(iii) Meridian Brick joint venture integration costs
Following formation of the Meridian Brick joint venture, restructuring and integration costs of $8.4 million were incurred, reflecting
plant rationalisation, integration of back office functions and an organisational restructure, in order to achieve targeted synergies and
streamline the organisation for optimal performance.
(iv) Headwaters acquisition and integration costs
Costs of $63.2 million were incurred in relation to the acquisition of Headwaters Incorporated, related to various due diligence costs,
success fees paid to advisers, and certain change in control payments to Headwaters executives.
Following the acquisition of Headwaters, $11.7 million of costs have been incurred on the initial integration of the business. The costs
to date predominantly relate to redundancies, employee incentives implemented by Headwaters, and consultant fees supporting the
integration. Additional costs are anticipated in 2018 and 2019.
(v) Impairment of West Coast bricks
Deteriorating market conditions in Western Australia and our ongoing review of the West Coast bricks business has resulted in an
impairment of assets during the period. A fair value less costs to sell methodology was used to determine the recoverable amount of
the West Coast bricks business, leading to an impairment of $20.4 million.
(vi) Adjustment to disposal of Thailand Construction Materials
This relates to additional costs attributable to the finalisation of working capital adjustments from the sale of the Thailand Construction
Materials’ business in December 2012.
Boral Limited Annual Report 2017 89
FINANCIAL
STATEMENTS
Notes to the Financial Statements
Boral Limited and Controlled Entities
Section 2: Business performance (continued)
2.6 Significant items (continued)
2016 Significant items
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
Summary of significant items
Profit/(loss) before interest and tax
Income tax benefit
Net significant items
Note
2.2
6.1
Non-current
receivable
impairment (i)
$m
Finalisation of
tax matters (ii)
$m
Other (iii)
$m
Total
$m
(50.5)
5.6
(44.9)
-
-
-
(50.5)
5.6
(44.9)
-
28.9
28.9
-
-
-
-
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
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 2016. 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.
Asset impairment by account
Property, plant and equipment
Receivables
Summary of significant items before interest and tax by segment
Boral Australia
Boral North America
Discontinued Operations
Unallocated
90
Boral Limited Annual Report 2017
2017
$m
(20.4)
-
(20.4)
2017
$m
(20.4)
(83.3)
38.5
-
(65.2)
2016
$m
-
(50.5)
(50.5)
2016
$m
-
-
4.0
(50.5)
(46.5)
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 2.13% (2016: 2.27%).
(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 restructuring costs
Share-based payment expense
Non-cash equity income
2017
$m
2016
$m
155.2
82.6
237.8
124.1
328.0
452.1
296.9
256.0
260.0
246.6
2.5
(49.5)
49.6
11.3
(3.5)
2.7
(27.3)
50.5
14.7
(15.2)
Net cash provided by operating activities before change in assets and liabilities
567.3
528.0
Changes in assets and liabilities net of effects from acquisitions/disposals
Receivables
Inventories
Payables
Provisions
Current and deferred taxes
Other
Net cash provided by operating activities
(iii) Restructure, acquisition and integration costs
During the year, the Group incurred costs associated with:
Acquisition costs
Integration costs
Restructure costs
(125.9)
2.2
(47.4)
29.7
5.3
(17.9)
50.1
(6.4)
(23.1)
(18.0)
(37.2)
(15.9)
413.3
477.5
(82.0)
(11.7)
(23.2)
(116.9)
-
-
(34.5)
(34.5)
Boral Limited Annual Report 2017 91
FINANCIAL
STATEMENTS
Notes to the Financial Statements
Boral Limited and Controlled Entities
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
2017
$m
2016
$m
866.3
2.5
868.8
(17.9)
850.9
22.8
(0.1)
22.7
873.6
589.1
0.1
589.2
(12.4)
576.8
47.2
(0.1)
47.1
623.9
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 $97.9 million (2016: $46.7 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
80.3
17.6
44.8
1.9
Total bad and doubtful debts expense for the period amounts to $2.5 million (2016: $1.1 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
16.5
13.9
30.4
14.6
1.4
16.0
No amounts owing by associates or included in other receivables were past due as at 30 June 2017.
92
Boral Limited Annual Report 2017
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
2017
$m
182.0
47.3
376.5
0.8
606.6
2016
$m
158.4
50.1
335.7
12.7
556.9
13.1
12.6
2.3
11.6
13.9
3.6
21.7
25.3
3.3 Property, plant and equipment
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 paid 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
2017
2016
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.
Boral Limited Annual Report 2017 93
FINANCIAL
STATEMENTS
Notes to the Financial Statements
Boral Limited and Controlled Entities
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
2017
$m
2016
$m
2017
$m
2016
$m
2017
$m
2016
$m
2017
$m
2016
$m
Balance at the beginning of the year
895.4
893.3
172.6
163.2
1,449.7
1,391.9
2,517.7
2,448.4
Additions
Disposals
Acquisitions of entities or operations
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
0.9
0.4
6.2
7.4
329.3
312.5
336.4
320.3
(10.1)
(14.1)
138.0
(117.1)
-
-
-
-
(5.8)
-
-
-
(6.4)
(14.5)
(16.5)
(28.6)
299.8
(105.9)
-
-
437.8
(228.8)
44.3
24.8
10.1
14.9
(54.4)
(39.7)
-
(12.7)
-
-
-
-
-
-
(7.7)
-
(20.4)
6.8
7.9
(2.7)
7.9
4.1
-
-
-
-
Depreciation or amortisation expense
(17.9)
(17.0)
(21.2)
(20.4)
(205.9)
(206.0)
(245.0)
(243.4)
Net foreign currency exchange
differences
(14.3)
8.0
(1.0)
0.7
(18.1)
8.2
(33.4)
16.9
Balance at the end of the year
906.5
895.4
160.9
172.6
1,688.3
1,449.7
2,755.7
2,517.7
At cost
1,095.6
1,086.6
320.1
310.8
4,217.2
4,179.1
5,632.9
5,576.5
Less: Accumulated depreciation,
amortisation and impairment
(189.1)
(191.2)
(159.2)
(138.2)
(2,528.9)
(2,729.4)
(2,877.2)
(3,058.8)
Balance at the end of the year
906.5
895.4
160.9
172.6
1,688.3
1,449.7
2,755.7
2,517.7
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 $72.2 million (2016: $73.9 million).
94
Boral Limited Annual Report 2017
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 trade names, fly ash contracts, customer relationships, intellectual property and patents, 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%.
The estimated useful lives for each class of intangible asset are as follows:
Estimated useful lives – years
20 to Indefinite
15
10 – 20
5 – 20
Trade names
Intellectual
property
Fly ash
contracts
Customer
relationships
Patents
6 – 19
Other
5 – 17
The estimated useful lives in relation to recently acquired intangibles from the Headwaters acquisition are preliminary, subject to
finalisation of the purchase price accounting exercise presently underway.
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, valuing, and estimating useful lives of intangible assets on acquisition of
new businesses.
Goodwill
Other intangible assets
Less: Accumulated amortisation
Total
Reconciliation of movements in goodwill
Balance at the beginning of the year
Acquisitions of entities or operations
Disposal of entities or operations
Net foreign currency exchange differences
Balance at the end of the year
2017
$m
2,274.9
970.5
(36.8)
933.7
3,208.6
213.1
2,257.4
(106.7)
(88.9)
2,274.9
2016
$m
213.1
44.0
(22.4)
21.6
234.7
208.6
-
-
4.5
213.1
Boral Limited Annual Report 2017 95
FINANCIAL
STATEMENTS
Notes to the Financial Statements
Boral Limited and Controlled Entities
Section 3: Operating assets and liabilities (continued)
3.4 Intangible assets (continued)
Reconciliation of movements in other intangible assets
As at 30 June 2017
Balance at the beginning of the year
Additions
Trade
names
$m
9.9
-
Intellectual
property
$m
Fly ash
contracts
$m
Customer
relationships
$m
Patents
$m
Other
$m
-
-
-
-
-
-
Acquisitions of entities or operations
145.6
12.6
372.4
418.9
Amortisation expense
Net foreign currency exchange differences
(1.1)
(5.7)
(0.1)
(0.5)
(5.4)
(14.0)
(4.1)
(15.8)
Balance at the end of the year
148.7
12.0
353.0
399.0
Total
$m
21.6
3.7
959.3
(15.0)
(35.9)
6.4
3.7
5.6
(3.6)
0.4
12.5
933.7
5.3
-
4.2
(0.7)
(0.3)
8.5
At cost
Less: Accumulated amortisation
Balance at the end of the year
153.4
(4.7)
148.7
12.1
358.3
403.1
12.5
31.1
970.5
(0.1)
(5.3)
(4.1)
12.0
353.0
399.0
(4.0)
8.5
(18.6)
(36.8)
12.5
933.7
As at 30 June 2016
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
At cost
Less: Accumulated amortisation
Balance at the end of the year
Trade
names
$m
10.5
-
-
(0.7)
-
0.1
9.9
13.7
(3.8)
9.9
Intellectual
property
$m
Fly ash
contracts
$m
Customer
relationships
$m
Patents
$m
Other
$m
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
5.7
-
-
(0.9)
-
0.5
5.3
8.7
(3.4)
5.3
2.3
3.5
(0.4)
(1.6)
2.7
(0.1)
6.4
21.6
(15.2)
6.4
Total
$m
18.5
3.5
(0.4)
(3.2)
2.7
0.5
21.6
44.0
(22.4)
21.6
96
Boral Limited Annual Report 2017
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:
Headwaters
US bricks
Other1
2017
$m
2,171.5
-
103.4
2,274.9
2016
$m
-
109.0
104.1
213.1
1. Relates to multiple business units, none of which are considered individually significant.
Headwaters
Goodwill of $2,171.5 million is recorded at 30 June 2017 with respect to the acquisition of Headwaters Incorporated which completed
on 8 May 2017. The recoverable amount of the CGU is supported on a fair value less costs to sell basis with reference to the market
price paid to acquire the business. No indicators of impairment have arisen since the acquisition date.
Key goodwill considerations, including the allocation and final value of goodwill are subject to a purchase price accounting exercise
which will be finalised during financial year 2018.
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 2017. 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.
Boral Limited Annual Report 2017 97
FINANCIAL
STATEMENTS
Notes to the Financial Statements
Boral Limited and Controlled Entities
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
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.
Significant accounting
judgements, estimates
and assumptions
Future costs associated with
the restructuring and the
expected time period.
Claims
Provisions are raised for liabilities arising from the ordinary course of business,
in relation to claims against the Group, including insurance, legal and other
claims. Where recoveries are expected in respect of such claims, these are
included in other receivables.
Likelihood of settling
customer and insurance
claims.
Restoration and
environmental
rehabilitation
The restoration and environmental rehabilitation provisions 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.
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.
98
Boral Limited Annual Report 2017
3.6 Provisions (continued)
As at 30 June 2017
Reconciliations
Balance at the beginning of the year
Provisions made during the year
Unwind of discount
Increase through acquisition
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 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
Rationalisation
and restructuring
$m
11.6
-
-
-
(9.5)
-
2.1
2.1
-
2.1
Restoration
and
environmental
rehabilitation
$m
Claims
$m
9.8
(2.1)
-
56.6
(0.4)
(1.9)
62.0
15.6
46.4
62.0
60.9
3.9
1.8
38.7
(3.0)
(1.3)
101.0
16.6
84.4
101.0
Other
$m
34.9
4.6
0.7
11.0
(4.8)
(0.5)
45.9
19.2
26.7
45.9
Total
$m
117.2
6.4
2.5
106.3
(17.7)
(3.7)
211.0
53.5
157.5
211.0
Rationalisation
and restructuring
$m
11.2
12.7
-
(12.4)
0.1
11.6
11.6
-
11.6
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
-
1.8
(9.2)
-
60.9
16.5
44.4
60.9
3.0
0.9
(9.8)
-
34.9
21.8
13.1
34.9
15.7
2.7
(33.6)
0.2
117.2
58.2
59.0
117.2
Boral Limited Annual Report 2017 99
FINANCIAL
STATEMENTS
Notes to the Financial Statements
Boral Limited and Controlled Entities
Section 4: Capital and financial structure
This section provides information relating to the Group’s capital structure and its exposure to financial risks, 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
2017
$m
398.3
9.1
407.4
2,157.2
6.5
2,163.7
2,571.1
2016
$m
351.1
1.3
352.4
990.0
2.8
992.8
1,345.2
Term and debt repayment schedule
Terms and conditions of outstanding loans were as follows:
Effective
interest rate
2017
Calendar year
of maturity
Currency
30 June 2017
30 June 2016
Carrying
amount
$m
Fair value
$m
Carrying
amount
$m
Fair value
$m
Current
US senior notes – unsecured
Other loans – unsecured
Finance lease liabilities
Non-current
US senior notes – unsecured
CHF notes – unsecured
Acquisition loan facility – unsecured
Syndicated loan facility – unsecured
Finance lease liabilities
Total
100
Boral Limited Annual Report 2017
USD
USD
AUD
USD
CHF
USD
Multi
AUD
7.12%
-
2018
-
5.90% 2017 - 2018
398.3
411.7
351.0
355.2
-
9.1
-
9.1
0.1
1.3
0.1
1.3
407.4
420.8
352.4
356.6
4.95% 2018 - 2030
2.25%
2.07%
2.90%
2020
2018
2021
5.91% 2018 - 2022
355.4
203.2
365.3
212.6
1,237.0
1,237.0
361.6
6.5
361.6
6.5
784.6
205.4
-
-
2.8
810.9
220.8
-
-
2.8
2,163.7
2,183.0
992.8
1,034.5
2,571.1
2,603.8
1,345.2
1,391.1
4.1 Loans and borrowings (continued)
US SENIOR NOTES – UNSECURED
Borrower
Boral USA
Boral USA
Boral Limited
Boral Limited
Boral Limited
Boral Limited
Total
Notional amount
US$m
Issue date
Interest rate
Maturity date
AUD equivalent
$m
30.0
76.2
276.0
135.0
41.0
24.0
582.2
04/2008
04/2008
04/2008
05/2015
05/2015
03/2015
7.12%
7.22%
7.12%
4.01%
4.16%
4.31%
04/2018
04/2020
04/2018
05/2025
05/2027
03/2030
39.0
99.3
359.3
173.1
52.5
30.5
753.7
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
203.2
BANK FACILITIES
Syndicated loan facility
On 25 August 2016, the Group increased its existing multi-currency syndicated loan facility from US$400 million to US$750 million,
and extended the maturity date to 1 July 2021. The facility was drawn down A$290.0 million and US$55.0 million as at 30 June 2017.
Acquisition loan facility
The Group entered into a new committed US$1.2 billion syndicated loan facility upon the announcement of the Headwaters
Incorporated acquisition. The maturity date of the facility is 8 November 2018, being 18 months following the date of completion of the
acquisition. The facility was drawn down US$950.0 million as at 30 June 2017.
Bank overdraft, lease liabilities and other
The Group operates unsecured bank overdraft facility arrangements in Australia and USA that have combined limits of A$19.0 million
(2016: A$20.0 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 2017.
Boral Limited Annual Report 2017 101
FINANCIAL
STATEMENTS
Notes to the Financial Statements
Boral Limited and Controlled Entities
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 equal to or greater than BBB+/Baa3 although allowance is given for credit exposures up to A$100.0 million with financial
counterparties with a rating below BBB+/Baa3.
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.
102
Boral Limited Annual Report 2017
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
2017
$m
Carrying
amount
2016
$m
19.0
14.7
885.0
625.2
237.8
452.1
29.5
15.3
1,171.3
1,107.3
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 2017
Derivative financial assets
Forward exchange contracts1
Interest rate swaps2
Commodity swaps1
30 June 2016
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
1.0
2.3
2.8
6.1
1.0
2.3
2.8
6.1
1.0
2.2
2.9
6.1
0.9
-
2.3
3.2
-
-
0.5
0.5
0.1
0.2
0.1
0.4
-
2.0
-
2.0
-
-
-
-
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
-
-
-
-
-
Boral Limited Annual Report 2017 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)
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 facility maturity profile with a target of exceeding 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 exceeds A$500 million.
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
30 June 2017
Non-derivative financial liabilities
US senior notes – unsecured
CHF notes – unsecured
Acquisition loan facility – unsecured
1,237.0
(1,237.0)
Syndicated loan facility – unsecured
Finance lease liabilities
Trade creditors
361.6
15.6
812.4
753.7
203.2
(894.8)
(13.9)
(421.6)
(17.7)
(138.2)
(303.4)
(215.7)
(361.6)
(15.8)
-
-
-
(2.9)
(4.6)
(208.2)
-
-
(1,237.0)
-
-
(361.6)
(4.6)
(4.7)
(5.4)
(1.1)
(812.4)
(812.4)
-
-
-
-
-
-
-
-
Derivative financial liabilities
Forward exchange contracts1
Commodity swaps1
Cross currency swaps1,2
Interest rate swaps3
30 June 2016
Non-derivative financial liabilities
3,383.5
(3,537.3)
(830.9)
(429.2)
(1,264.7)
(709.1)
(303.4)
8.7
3.0
13.3
1.3
26.3
(8.7)
(3.1)
(13.6)
(1.3)
(8.2)
(2.3)
(2.9)
(1.7)
(26.7)
(15.1)
(0.5)
(0.4)
0.2
0.4
(0.3)
-
(0.3)
(4.0)
-
-
(0.1)
(6.9)
-
(4.3)
(7.0)
-
-
-
-
-
3,409.8
(3,564.0)
(846.0)
(429.5)
(1,269.0)
(716.1)
(303.4)
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
1. Designated as cash flow hedges.
2. Designated as natural investment hedges.
3. Designated as fair value hedges.
104
Boral Limited Annual Report 2017
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)
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 greater than A$0.5 million must be 100% hedged at the time of capital
expenditure approval.
(c) Net investments, including net intercompany loans, in overseas domiciled investments are hedged, where regulatory conditions
and available hedge instruments permit.
The Group uses forward exchange contracts to hedge foreign exchange risk. Most of the forward exchange contracts have maturities
of less than one year. Where necessary and in accordance with policy compliance, forward exchange contracts can be rolled over
at maturity.
(i) Translation risk
Foreign currency translation risk is the risk that upon consolidation for financial reporting the value of the Group’s investment in foreign
domiciled entities will fluctuate due to changes in foreign currency rates.
The Group uses foreign currency denominated borrowings and cross currency swaps to hedge the Group’s net investment in
overseas domiciled assets. The related exchange gains/losses on foreign currency movements are taken to the Foreign Currency
Translation Reserve.
The table below shows the Group’s net exposure to translation risk. The Group’s investment in foreign operations is partially offset
against foreign currency borrowings, reducing the Group’s overall exposure to translation risk. Amounts below are calculated based
on notional amounts:
Currency
30 June 2017
Balance sheet
USD
CAD
Notional A$ equivalent ($m)2
Euro
GBP
Multi1
Net investment in overseas domiciled entities
4,214.8
121.9
Cash
Foreign currency borrowings
63.7
(2,077.9)
2,200.6
-
-
121.9
1.8
-
-
1.8
(1.9)
625.0
-
-
-
-
(1.9)
625.0
Currency
30 June 2016
Balance sheet
USD
CAD
Notional A$ equivalent ($m)2
Euro
GBP
Multi1
Net investment in overseas domiciled entities
Cash
Foreign currency borrowings
Cross currency swaps
940.3
10.0
(1,147.8)
278.9
81.4
-
-
-
-
-
1.7
(2.0)
642.0
-
-
-
-
-
-
-
-
-
1.7
(2.0)
642.0
1. Exposure relates to investment in USG Boral Building Products Pte Ltd, which is denominated in multiple Asian currencies.
2. The notional amount shows the principal face value for each instrument.
Boral Limited Annual Report 2017 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 (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:
US dollars
Buy USD/sell AUD – One year or less
Euros
Buy EUR/sell AUD – One year or less
Notional amount AUD1
Average exchange rate
2017
$m
282.0
15.5
2016
$m
38.7
11.9
2017
2016
0.7447
0.7280
0.7017
0.6620
1. The notional amount shows the principal face value for each instrument.
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 2017 (2016: nil). The related exchange gains/losses on
foreign currency movements are taken to the Income Statement.
Sensitivity
At 30 June 2017, 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$0.2 million (2016: equivalent A$0.3 million) and equity would have increased/decreased respectively by around equivalent
A$228.8 million (2016: equivalent A$10.6 million).
The following significant exchange rates applied during the year:
USD
Euro
GBP
CAD
Average rate
Reporting date spot rate
2017
2016
2017
2016
0.7536
0.6897
0.5932
1.0032
0.7270
0.6572
0.4948
-
0.7680
0.6725
0.5900
0.9959
0.7432
0.6692
0.5532
-
106
Boral Limited Annual Report 2017
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 long-term 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.
The acquisition loan facility is short-term in nature and is excluded from this policy requirement until it is refinanced with
long-term debt.
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
CHF notes – unsecured2,3
Other loans – unsecured
Finance lease liabilities
Variable rate instruments
Acquisition loan facility – unsecured
Syndicated loan facility – unsecured
Pay variable interest rate derivatives
Interest rate swap pay floating US$ LIBOR3
Cross currency swap pay floating A$ BBSW1
Other interest rate derivatives
Cross currency swap pay fixed US$/ receive fixed CHF2
2017
Carrying amount
$m
753.7
203.2
-
15.6
972.5
1,237.0
361.6
1,598.6
2,571.1
13.3
-
13.3
(0.8)
(0.8)
2017
2016
Notional amount4 Carrying amount
$m
$m
2016
Notional amount4
$m
758.1
203.6
-
15.6
977.3
1,237.0
361.6
1,598.6
2,575.9
221.1
-
221.1
203.2
203.2
1,135.6
205.4
0.1
4.1
1,124.5
206.0
0.1
4.1
1,345.2
1,334.7
-
-
-
-
-
-
1,345.2
1,334.7
(7.7)
(17.4)
(25.1)
20.9
20.9
228.5
278.9
507.4
205.4
205.4
1. In the prior year, US$200 million (equivalent A$278.9 million) fixed rate senior notes were swapped to AUD floating rates via cross currency swaps.
The borrowing was repaid in May 2017, at which time the cross currency swaps also matured.
2. CHF150 million (equivalent A$203.2 million) fixed rate notes due February 2020 have been swapped to USD fixed rate via cross currency swaps.
3. US$169.8 million (equivalent A$221.1 million) fixed rate notes due February 2020 have been swapped to USD floating rate via interest rate swaps.
4. The notional amount shows the principal face value for each instrument.
Sensitivity
At 30 June 2017, 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$0.1 million higher/lower (2016: A$0.3 million) and the change in equity would have been
A$0.3 million (2016: A$0.5 million) mainly as a result of a higher/lower interest cost applying to interest rate derivatives.
Boral Limited Annual Report 2017 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)
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
2017
Notional $A
equivalent1
$m
2017
Fair value/
Carrying amount
$m
2016
Notional $A
equivalent1
$m
2016
Fair value/
Carrying amount
$m
22.8
7.5
0.6
17.4
(1.3)
-
0.1
1.1
30.8
7.1
-
11.8
(4.3)
(0.2)
-
1.2
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 $0.1 million gain in 2017 (2016: $0.3 million loss).
Sensitivity
At 30 June 2017, 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 (2016: unchanged) and the change in equity would have been
A$4.6 million (2016: A$4.4 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
Commodity swaps and options
The fair value is based on a valuation calculation using closing commodity
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.
Carried at
fair value?
Yes
Yes
Yes
No
No
Equity securities
The fair value represents the market value of the underlying securities.
Yes
108
Boral Limited Annual Report 2017
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 2017 plus an adequate credit spread
to discount financial instruments. The interest rates used are as follows:
Derivatives
Interest bearing loans and borrowings
Finance leases
2017
% pa
2016
% pa
2.00 – 3.20
2.30 – 3.00
2.25 – 7.12
2.25 – 7.12
5.64 – 6.09
5.64 – 6.09
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
Level 2
2017
$m
29.5
-
29.5
-
-
2016
$m
15.3
-
15.3
-
-
2017
$m
-
6.1
6.1
26.3
26.3
2016
$m
-
26.7
26.7
26.4
26.4
The Group does not have financial instruments that have been valued at Level 3.
Boral Limited Annual Report 2017 109
FINANCIAL
STATEMENTS
Notes to the Financial Statements
Boral Limited and Controlled Entities
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 Group undertook an equity raising of $2,018.9 million net of transaction costs of $38.9 million. The equity
raising consisted of a 1 for 2.22 pro rata accelerated renounceable entitlement offer at an offer price of $4.80 per share. The capital
raising resulted in the issue of 93,750,000 ordinary shares under the Institutional Placement, 233,648,069 ordinary shares under the
Institutional Entitlement Offer and 101,334,418 ordinary shares under the Retail Entitlement Offer.
In the prior 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.
2017
$m
2016
$m
Issued and paid up capital
1,172,331,924 (2016: 743,599,437) ordinary shares, fully paid
4,265.1
2,246.2
Movements in ordinary issued capital
Balance at the beginning of the year
428,732,487 (30 Jun 2016: Nil) shares issued under capital raising net of costs
Nil (30 Jun 2016: 20,641,950) on-market share buy-back
Balance at the end of the year
2,246.2
2,018.9
-
4,265.1
2,361.6
-
(115.4)
2,246.2
110
Boral Limited Annual Report 2017
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 (loss)/gain on translation of assets and liabilities of overseas entities
Foreign currency translation reserve transferred to net profit on disposal of controlled entities
Net gain/(loss) on translation of long-term borrowings and foreign currency forward contracts net
of tax expense $0.5 million (2016: $8.1 million tax benefit)
Balance at the end of the year
Hedging reserve
2017
$m
98.5
(101.3)
(24.5)
1.4
(25.9)
2016
$m
97.4
20.4
-
(19.3)
98.5
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
Loss taken directly to equity
Tax (expense)/benefit
Balance at the end of the year
Other reserve
(3.9)
4.8
0.1
(2.3)
(0.8)
(2.1)
1.5
0.2
0.2
(8.1)
2.3
(3.9)
The other reserve relates to gains or losses arising from step-acquisitions of controlled entities, including our share of gains or losses
from equity accounted investments. At 30 June 2017, Boral transferred this reserve into retained earnings.
Balance at the beginning of the year
Acquisition of non-controlling interest by associate
Transfer to retained earnings
Balance at the end of the year
Share-based payments reserve
(6.9)
(5.8)
12.7
-
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
74.3
11.3
(38.3)
47.3
(6.9)
-
-
(6.9)
74.2
14.7
(14.6)
74.3
Total reserves
19.3
162.0
Boral Limited Annual Report 2017 111
FINANCIAL
STATEMENTS
Notes to the Financial Statements
Boral Limited and Controlled Entities
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.
112
Boral Limited Annual Report 2017
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)
Changes in estimate from prior 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% (2016: 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:
Non-deductible depreciation and amortisation
Capital and income tax losses realised
Non-deductible asset impairments and write-downs
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
Changes in estimate from prior years
Income tax expense attributable to profit
Income tax expense/(benefit) from continuing operations
Income tax expense excluding significant items
Income tax benefit relating to significant items
Income tax benefit from discontinued operations
Income tax benefit 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
Note
2.6
2.6
2.6
6.1
2017
$m
76.2
(26.6)
(2.5)
47.1
103.2
(3.4)
99.8
0.4
(20.4)
6.1
(28.5)
(11.5)
-
3.7
49.6
(2.5)
47.1
66.7
(15.3)
51.4
(0.2)
(4.1)
(4.3)
47.1
0.5
0.8
1.3
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
70.1
(34.5)
35.6
(3.4)
-
(3.4)
32.2
(8.1)
(2.3)
(10.4)
Boral Limited Annual Report 2017 113
FINANCIAL
STATEMENTS
Notes to the Financial Statements
Boral Limited and Controlled Entities
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
2017
$m
2016
$m
128.4
237.4
The potential deferred tax asset has not been taken into account in respect of
tax losses where recovery is not probable
136.8
134.7
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
Australia1
Germany
United Kingdom1
Expiry date
No restriction
No restriction
No restriction
2017
$m
39.2
46.0
39.4
2016
$m
-
46.2
42.0
United States of America
30 June 2029 - 30 June 2037
268.6
295.6
1. Unbooked capital losses.
114
Boral Limited Annual Report 2017
5.2 Deferred tax assets and liabilities (continued)
Movement in temporary differences during the year
As at 30 June 2017
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 2016
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 movements1
$m
$m
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
(0.9)
8.4
37.5
(0.7)
5.2
(3.4)
(29.4)
(12.4)
15.4
6.9
26.6
-
-
-
-
-
(1.3)
-
-
-
-
(1.3)
1.3
(4.9)
(59.4)
(201.2)
0.2
-
69.2
(24.0)
-
84.5
(134.3)
3.7
-
(101.8)
(239.5)
8.0
(10.2)
128.1
(40.9)
27.0
354.0
128.4
Balance at
the beginning
of the year
$m
Recognised
in income
$m
Recognised
in equity Other movements
$m
$m
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
(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
3.3
(3.5)
(79.9)
(37.6)
2.6
(5.5)
88.3
(4.5)
11.6
262.6
237.4
1. Other movements include adjustments in relation to the Headwaters acquisition, specifically fair value adjustments in relation to property, plant and equipment,
intangible assets and provisions.
Boral Limited Annual Report 2017 115
FINANCIAL
STATEMENTS
Notes to the Financial Statements
Boral Limited and Controlled Entities
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.
During the year, the Group completed the following divestments on 31 October 2016.
•
•
the divestment of its 40% interest in the Boral CSR bricks joint venture; and
the divestment of a 50% interest in its US bricks operations.
As a result, the earnings in the current and prior year comparative periods for these respective businesses have been reclassified to
“Discontinued Operations” in the Income Statement.
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
Share of equity accounted income
Trading profit before significant items, net financing costs and
income tax
Net profit 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
Cash flows from discontinued operations
Net cash provided by/(used in) operating activities
Net cash provided by/(used in) investing activities
Net cash provided by discontinued operations
Note
2017
$m
2016
$m
2.6
5.1
130.5
(131.0)
5.0
4.5
38.5
43.0
-
43.0
4.3
47.3
(8.5)
120.3
111.8
366.0
(374.6)
11.7
3.1
4.0
7.1
-
7.1
3.4
10.5
20.8
(15.4)
5.4
116
Boral Limited Annual Report 2017
6.1 Discontinued operations (continued)
Effect of disposal on the financial position of the Group
(i) Meridian Brick joint venture
During August 2016, the Group entered into an agreement with an affiliate of Forterra Inc. (“Forterra”), to combine its US bricks
business with Forterra’s US and Canadian businesses into two 50/50 owned joint ventures, which together operate as the Meridian
Brick joint venture. The transaction was completed on 31 October 2016.
For the period 1 July 2016 to 31 October 2016, the Group held a 100% interest in its US bricks operations, and the results were
consolidated into the Group’s financial report. On formation of the Meridian Brick joint venture, Boral:
• deconsolidated its existing US bricks business; and
•
recognised an equity accounted investment in respect of its 50% shareholding in each of the US and Canadian entities.
No cash consideration was included, with the exception of working capital adjustments.
The following disposal entries were recorded in the current period.
Note
Estimated fair value of 50% interest in new joint venture
Receivables
Inventories
Property, plant and equipment
Intangible assets
Other assets
Payables
Provisions
Net assets disposed
Costs incurred net of working capital adjustments
Foreign currency translation reserve transferred to net profit on disposal
of controlled entities
Profit on disposal of discontinued operations before income tax
2.6
2017
$m
409.0
(40.7)
(76.1)
(228.8)
(106.7)
(1.0)
33.4
3.3
(416.6)
(3.7)
24.5
13.2
2016
$m
-
-
-
-
-
-
-
-
-
-
-
-
(ii) Disposal of Boral CSR bricks joint venture
On 31 October 2016, the Group disposed of its 40% interest in the Boral CSR bricks joint venture. The following disposal entries were
recorded in the period.
Cash consideration net of costs
Equity accounted investment disposed
Profit on disposal of discontinued operations before income tax
Note
2.6
2017
$m
126.2
(90.4)
35.8
2016
$m
-
-
-
Boral Limited Annual Report 2017 117
FINANCIAL
STATEMENTS
Notes to the Financial Statements
Boral Limited and Controlled Entities
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.
Name
Principal
activity
Country of
incorporation date
Balance
2017
%
2016
%
2017
$m
2016
$m
OWNERSHIP INTEREST
INVESTMENT
CARRYING AMOUNT
Details of equity accounted investments
Bitumen Importers Australia Pty Ltd
Bitumen importer Australia
30-Jun
Boral CSR Bricks Pty Limited1
Bricks
Australia
31-Mar
Caribbean Roof Tile Company Limited
Roof tiles
Trinidad
31-Dec
Flyash Australia Pty Ltd
Fly ash collection Australia
31-Dec
Highland Pine Products Pty Ltd
Timber
Australia
30-Jun
Meridian Brick2
Penrith Lakes Development Corporation Ltd
Bricks
Property
development
USA/
Canada
30-Jun
Australia
30-Jun
South East Asphalt Pty Ltd
Asphalt
Australia
30-Jun
Sunstate Cement Ltd
Cement
manufacturer
Australia
30-Jun
USG Boral Building Products3
Plasterboard
Australia/
Singapore
US Tile LLC
TOTAL
Roof tiles
USA
30-Jun
31-Dec
50
-
50
50
50
50
40
50
50
50
50
1.6
88.9
-
2.6
-
-
-
0.7
50
40
50
50
50
6.0
-
-
3.0
-
-
402.8
-
1.1
40
50
50
50
50
9.7
9.7
931.1
951.1
-
-
1,353.7
1,054.6
1. On 31 October 2016, the Group divested its interest in Boral CSR Bricks Pty Limited.
2. The Group has a 50% interest in the new joint ventures in the USA (Meridian Brick LLC) and Canada (Meridian Brick Canada Ltd). The results were equity
accounted from 1 November 2016 when the joint venture was formed.
3. The Group has a has a 50% interest in the Gypsum joint ventures in Australia (USG Boral Building Products Pty Ltd) and Asia (USG Boral Building Products
Pte Ltd).
118
Boral Limited Annual Report 2017
6.2 Equity accounted investments (continued)
Movements in carrying value of equity accounted investments
Balance at the beginning of the year
Acquired during the year
Disposed during the year
Acquisition of non-controlling interest by associate
Share of equity accounted income
Integration costs disclosed as significant item
Dividends received
Results recognised against losses previously taken to non-current receivables
Share of movement in currency reserve
Net foreign currency exchange differences
Other
Balance at the end of the year
Note
2017
$m
2016
$m
2.6
1,054.6
411.2
(90.4)
(5.8)
99.8
(8.4)
(87.9)
(5.1)
5.0
(19.3)
-
1,048.1
-
-
-
91.1
-
(75.9)
(2.5)
(26.4)
21.9
(1.7)
1,353.7
1,054.6
USG Boral Building
Products
Meridian Brick
Total
Note
2017
$m
2016
$m
2017
$m
2016
$m
2017
$m
2016
$m
Summarised Income Statement at 100%
Revenue
Profit/(loss) before income tax
Income tax expense
Non-controlling interest
Net profit/(loss) before significant items
1,477.7 1,397.1
373.9
216.9
174.8
(72.2)
(49.6)
(5.8)
(7.1)
(1.4)
(0.3)
-
138.9
118.1
(1.7)
Integration costs disclosed as significant item net of tax
-
-
(16.8)
Net profit/(loss) – equity accounted relating to continuing
operations
138.9
118.1
(18.5)
The Group's share based on % ownership:
Net profit/(loss) before significant items
69.5
59.0
Integration costs disclosed as significant item net of tax
2.6
-
-
(0.9)
(8.4)
Net profit/(loss) – equity accounted relating to continuing
operations
69.5
59.0
(9.3)
Depreciation and amortisation
Net financing costs
(67.3)
(72.2)
(16.8)
0.3
(3.7)
(0.7)
2,133.6 1,678.8
289.7
235.0
(91.8)
(67.8)
(5.8)
(7.1)
192.1
160.1
(16.8)
-
175.3
160.1
94.8
79.4
(8.4)
-
86.4
79.4
-
-
-
-
-
-
-
-
-
-
-
-
Boral Limited Annual Report 2017 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
Products
Meridian Brick
Total
2017
$m
2016
$m
2017
$m
2016
$m
2017
$m
2016
$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
518.5
534.1
207.4
1,717.3 1,882.4
705.9
2,235.8 2,416.5
913.3
(183.7)
(246.5)
(99.1)
(59.6)
(113.7)
(8.5)
(243.3)
(360.2)
(107.6)
(130.4)
(154.0)
-
1,862.1 1,902.3
805.7
The Group’s share of net assets based on % ownership
931.1
951.1
402.8
Cash and cash equivalents
Current financial liabilities
Non-current financial liabilities
146.5
173.7
11.6
(22.3)
(11.2)
(37.7)
(17.8)
(56.1)
-
809.1
723.0
2,549.8 2,186.0
3,358.9 2,909.0
(326.1)
(333.7)
(194.8)
(267.6)
(520.9)
(601.3)
(130.4)
(154.0)
2,707.6 2,153.7
1,353.7 1,054.6
-
-
-
-
-
-
-
-
-
-
-
-
6.3 Acquisitions
Business combinations are accounted for using the acquisition method. Identifiable assets, liabilities and contingent liabilities acquired
are measured at fair value at the acquisition date.
The fair value of the consideration transferred comprises the initial cash paid to the sellers and an estimate for any future payments
the Group may be liable to pay, based on future performance of the business. The excess of the aggregate of the consideration
transferred and the amount recognised for non-controlling interests and any previous interest held over the fair value of the net
identifiable assets acquired is goodwill.
On the acquisition of a subsidiary, or of an interest in an associate or joint venture, fair values are attributed to the net assets including
identifiable intangible assets and contingent liabilities acquired.
The non-controlling interests on the date of acquisition can be measured at either fair value or at the non-controlling shareholders’
proportion of the net fair value of the identifiable assets assumed. This choice is made separately for each acquisition. Transactions
with non-controlling interests are recorded directly in retained earnings.
Significant accounting judgements, estimates and assumptions
Accounting for acquisition of businesses requires judgement and estimates in determining the fair value of acquired assets and
liabilities. Techniques used to determine the fair value of acquired assets and liabilities include the excess earnings approach
and relief from royalty for the valuation of intangibles, and depreciated replacement cost for the valuation of property, plant and
equipment. The relevant accounting standard allows the fair value of assets acquired to be refined for a window of one year after
the acquisition date, and judgement is required to ensure that the adjustments made reflect new information obtained about
facts and circumstances that existed as of the acquisition date. The adjustments made on fair value of assets are retrospective in
nature and have an impact on goodwill recognised on acquisition.
120
Boral Limited Annual Report 2017
6.3 Acquisitions (continued)
The following controlled entity was acquired during the financial year ended 30 June 2017:
Headwaters Incorporated acquisition
During November 2016, the Group announced that it had entered into a binding agreement to acquire 100% of the shares of
Headwaters Incorporated. The acquisition completed on 8 May 2017. The acquisition positions Boral with a more balanced portfolio
of traditional and light weight products with strengthened ability to grow in large, contestable US markets and through innovation.
The acquisition had the following effect on the Group’s assets and liabilities:
Consideration transferred
Cash paid – purchase price
Non-controlling interest
Less: Fair value of net identifiable assets acquired
Preliminary goodwill on acquisition
2017
$m
2016
$m
3,611.6
25.0
(1,379.2)
2,257.4
-
-
-
-
Acquisition-related costs of $63.2 million are included in other expenses in the Income Statement, and $82.0 million of cash payments
associated with acquisition-related costs are included in operating cash flows in the Statement of Cash Flows.
The below represents a proforma consolidated Income Statement for Boral Limited for the 12 months to 30 June 2017, assuming
an acquisition date for Headwaters of 1 July 2016. The proforma financial statements have been prepared on the basis of reported
results for the year, adjusted for:
•
•
•
acquisition costs incurred with respect to the Headwaters acquisition;
the estimated impact of purchase price accounting on financial performance for the year; and
alignment of accounting policies between Boral and Headwaters.
Revenue
Cost of sales and operating expenses
Other income
Other expenses
Results of equity accounted investments
Profit before net financing costs and income tax
Net financing costs
Profit before income tax
Income tax expense
Profit from continuing operations
Profit from discontinued operations (net of income tax)
Net profit
Depreciation and amortisation
Consolidated
1 July to
30 June 2017
$m
5,481.9
(5,059.3)
422.6
35.2
(46.3)
86.4
497.9
(100.4)
397.5
(76.0)
321.5
47.2
368.7
(388.4)
Boral Limited Annual Report 2017 121
FINANCIAL
STATEMENTS
Notes to the Financial Statements
Boral Limited and Controlled Entities
Section 6: Group structure (continued)
6.3 Acquisitions (continued)
Headwaters Incorporated acquisition (continued)
The table below represents the preliminary fair value of net identifiable assets acquired, based on the purchase price accounting
exercise performed to date. This exercise is in progress, and further adjustments are expected as this exercise is finalised, with any
revisions to be reflected as an adjustment to goodwill up to 12 months following the acquisition date of 8 May 2017.
The purchase price accounting exercise is ongoing due to the inherent complexity in determining the fair value of certain balances,
particularly intangible assets, tax balances and provisions.
Preliminary fair value of net identifiable assets acquired
CURRENT ASSETS
Cash and cash equivalents
Receivables
Inventories
Other assets
NON-CURRENT ASSETS
Receivables
Financial assets
Property, plant and equipment
Intangible assets
Other assets
CURRENT LIABILITIES
Trade creditors
Loans and borrowings
Provisions
NON-CURRENT LIABILITIES
Payables
Loans and borrowings
Deferred tax liabilities
Employee benefit liabilities
Provisions
Net identifiable assets acquired
$m
74.8
190.2
139.4
23.8
13.9
11.2
437.8
959.3
18.1
(209.3)
(8.3)
(16.4)
(6.8)
(5.5)
(137.8)
(11.2)
(94.0)
1,379.2
The amounts recognised on acquisition above represent provisional assessment of the fair values of assets and liabilities acquired.
During the period from 8 May 2017 to 30 June 2017, Headwaters has contributed revenue of $258.6 million and earnings before
interest and tax of $27.9 million to the Group’s Income Statement. If this business acquisition had taken place at 1 July 2016,
additional revenue of $1,224.1 million and earnings before interest and tax of $97.3 million would have been recorded in Boral’s
Income Statement.
Preliminary goodwill on acquisition of $2,257.4 million represents the difference in consideration paid and identifiable fair value of
the net assets acquired, and reflects the synergies and economies of scale expected from combining the operations of Boral and
Headwaters, benefits from the diversification of market exposures in North America, and transforming the North American business to
a more flexible, variable cost structure with lower capital intensity. The goodwill is not tax deductible.
Acquisition of 20% non-controlling interest in Entegra
On 31 May 2017, Boral acquired the 20% non-controlling interest in Entegra Holdings LLC, that was included in the acquisition of
Headwaters Incorporated, for consideration of $24.9 million.
122
Boral Limited Annual Report 2017
6.4 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
2017
%
Group
2016
%
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, L.L.C.
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. Tejas De Concreto Servicios, S. DE 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
Headwaters Incorporated **
Headwaters Synfuel Investments, LLC **
Global Climate Reserve Corporation **
Headwaters Technology Innovation Group Inc. **
Headwaters Heavy Oil, LLC **
Headwaters Windows, LLC **
Magnolia Windows & Doors, LLC **
Evonik Headwaters LLP **
Tapco International Corporation **
Tapco Europe Limited **
Headwaters Building Products Inc. **
Headwaters Concrete Products Louisiana, LLC **
Headwaters Concrete Products, LLC **
Headwaters Stone LLC **
Eldorado Stone LLC **
Stonecraft Manufacturing, LLC **
Eldorado Stone Operations, LLC **
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
USA
USA
USA
USA
USA
USA
USA
UK
USA
UK
USA
USA
USA
USA
USA
USA
USA
100
100
100
100
100
-
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
-
-
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
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
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Boral Limited Annual Report 2017 123
FINANCIAL
STATEMENTS
Notes to the Financial Statements
Boral Limited and Controlled Entities
Section 6: Group structure (continued)
6.4 Controlled entities (continued)
Eldorado Stone Philippines, Inc. **
Chihuahua Stone, LLC **
Piedras Headwaters, S. DE R.L. DE C.V. **
Quarry Stone, LLC **
Dutch Quality Stone, Inc. **
Headwaters CM Holdings, LLC **
Headwaters CM Services, LLC **
Headwaters Construction Materials, LLC **
Headwaters Plant Services, LLC **
Headwaters Services, LLC **
Headwaters Resources, LLC **
FlexCrete Building Systems, LLC **
Synthetic Materials, LLC **
Headwaters Resources Limited **
Headwaters Energy Services Corp. **
Environmental Technologies Group, LLC **
Headwaters Clean Carbon Services LLC **
Headwaters Ethanol Operators, LLC **
Headwaters CTL, LLC **
HES Ethanol Holdings, LLC **
American Lignite Energy, LLC **
Covol Fuels Alabama No. 3, LLC **
Covol Fuels Alabama No. 4, LLC **
Covol Fuels Alabama No. 5, LLC **
Covol Fuels Alabama No. 7, LLC **
Covol Fuels Chinook, LLC **
Covol Fuels Rock Crusher, LLC **
Covol Engineered Fuels, LLC **
Covol Fuels No.2, LLC **
Covol Fuels No.4, LLC **
Covol Fuels No.5, LLC **
Entegra Holdings, LLC **
Entegra Roof Tile, LLC **
Entegra Roof Tile Inc. –Deerfield **
Gerard Roof Products, LLC **
Allmet Roof Products, Ltd **
Metrotile Manufacturing, LLC **
Boral (UK) Ltd
Boral Investments BV
Boral Industrie GmbH
Boral Klinker GmbH
Boral Mecklenburger Ziegel GmbH
Boral Canada Ltd +
124
Boral Limited Annual Report 2017
Country of
incorporation
Philippines
USA
Mexico
USA
USA
USA
USA
USA
USA
USA
USA
USA
USA
Canada
USA
USA
USA
USA
USA
USA
USA
USA
USA
USA
USA
USA
USA
USA
USA
USA
USA
USA
USA
USA
USA
Canada
USA
UK
Netherlands
Germany
Germany
Germany
Canada
Beneficial ownership by
Group
2017
%
Group
2016
%
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
67
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
100
100
100
100
100
-
6.4 Controlled entities (continued)
Boral Investments Pty Ltd >*
Boral Construction Materials Ltd >*
Boral Resources (WA) Ltd >*
Boral Contracting Pty Ltd*
Boral Construction Related Businesses Pty Ltd >*
Boral Resources (Vic) Pty Ltd >*
Bayview Quarries Pty Ltd*
Boral Resources (Qld) Pty Ltd >*
Allen's Asphalt Pty Ltd >*
Q-Crete Premix Pty Ltd >*
Boral Resources (NSW) Pty Ltd >*
Dunmore Sand & Soil Pty Ltd*
Boral Recycling Pty Ltd >*
De Martin & Gasparini Pty Ltd >*
De Martin & Gasparini Concrete Placers Pty Ltd*
De Martin & Gasparini Pumping Pty Ltd*
De Martin & Gasparini Contractors Pty Ltd*
Boral Precast Holdings Pty Ltd >*
Boral Construction Materials Group Ltd >*
Concrite Pty Ltd >*
Boral Resources (SA) Ltd >*
Bitumax Pty Ltd >*
Road Surfaces Group Pty Ltd >*
Alsafe Premix Concrete Pty Ltd >*
Boral Transport Ltd >*
Boral Corporate Services Pty Ltd
Bitupave Ltd >*
Boral Resources (Country) Pty Ltd >*
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
Boral Finance Pty Ltd + >*
Country of
incorporation
Beneficial ownership by
Group
2017
%
Group
2016
%
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
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
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 ASIC Corporations
(Wholly-owned Companies) Instrument 2016/785 (refer to note 8.7).
* Entered into cross guarantee with Boral Limited (refer to note 8.7).
** Acquired in May 2017.
+ Incorporated during the year.
< A Delaware general partnership.
All the shares held by Boral Limited in controlled entities are ordinary shares.
Boral Limited Annual Report 2017 125
FINANCIAL
STATEMENTS
Notes to the Financial Statements
Boral Limited and Controlled Entities
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 within 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
2017
$m
115.5
44.4
159.9
2016
$m
118.8
11.3
130.1
7.2 Employee benefits expense
Employee benefits expense includes salaries and wages, defined contribution expenses, share-based payments and
other entitlements.
Employee benefits expense1
1. Total defined contribution expense for the period was $47.7 million (2016: $41.6 million).
2017
$m
2016
$m
945.4
891.3
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.
126
Boral Limited Annual Report 2017
7.3 Share-based payments (continued)
Share Acquisition Rights (SAR)
During the current year, SARs were issued under the Boral Equity Plan Rules. SARs issued with a Total Shareholder Return (TSR)
hurdle were valued at $3.53 per right, while SARs with a Return on Funds Employed (ROFE) target were valued at $5.97 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
2017
$6.64
1.41%
3.63%
25%
2016
$5.76
1.78%
3.56%
25%
In addition, SARs were issued during the year for Deferred Short-Term Incentive (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. The rights were valued at $6.74 per right, being the volume weighted average price traded on the ASX over the five trading
days following the release of the FY2016 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 – 2017
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
TSR
TSR
TSR
TSR
ROFE
TSR
ROFE
TSR
ROFE
TRI1
5/11/2009
5/11/2016
$0.00
1,224,423
12/11/2010
12/11/2017
$0.00
1,415,343
1/9/2011
1/9/2018
$0.00
2,544,057
1/9/2013
1/9/2016
$0.00
2,379,807
1/9/2013
1/9/2016
$0.00
1,189,903
1/9/2014
1/9/2017
$0.00
1,780,477
1/9/2015
1/9/2018
$0.00
1,912,538
Deferred STI
1/9/2014
1/9/2016
1/9/2014
1/9/2017
1/9/2015
1/9/2018
1/9/2015
1/9/2018
Deferred STI
1/9/2015
1/9/2017
TSR
ROFE
1/9/2016
1/9/2019
1/9/2016
1/9/2019
Deferred STI
1/9/2016
1/9/2019
1. Targeted retention incentive.
$0.00
$0.00
890,239
563,657
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
956,270
427,463
834,987
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,615,865
807,901
(1,224,423)
(9,241)
-
-
-
1,406,102
(126,007)
(1,706,555)
711,495
(99,809)
(2,279,998)
(49,952)
(1,139,951)
-
-
(70,667)
(35,320)
-
-
1,709,810
854,919
-
(563,657)
-
(95,523)
(47,770)
-
(36,164)
(17,241)
(8,621)
-
-
-
-
-
-
-
1,817,015
908,500
427,463
798,823
1,598,624
799,280
673,034
685,946
(12,912)
16,119,164
3,109,712
(1,833,650)
(5,690,161) 11,705,065
Boral Limited Annual Report 2017 127
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)
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
TSR
TSR
TSR
TSR
TSR
TSR
ROFE
TSR
ROFE
3/11/2008
3/11/2015
$0.00
802,339
5/11/2009
5/11/2016
$0.00
1,245,728
12/11/2010
12/11/2017
$0.00
1,734,491
1/9/2011
1/9/2018
$0.00
2,562,482
1/9/2012
1/9/2019
$0.00
2,680,816
1/9/2013
1/9/2016
$0.00
2,454,883
1/9/2013
1/9/2016
$0.00
1,227,441
1/9/2014
1/9/2017
$0.00
1,857,915
1/9/2014
1/9/2017
Deferred STI
1/9/2014
1/9/2016
TSR
ROFE
TRI
1/9/2015
1/9/2018
1/9/2015
1/9/2018
1/9/2015
1/9/2018
Deferred STI
1/9/2015
1/9/2017
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
928,958
579,687
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,932,703
966,352
427,463
(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)
(20,165)
(10,082)
-
-
-
-
-
-
-
-
-
2,379,807
1,189,903
1,780,477
890,239
563,657
1,912,538
956,270
427,463
834,987
849,927
(14,940)
16,074,740
4,176,445
(1,498,672)
(2,633,349) 16,119,164
During the year ended 30 June 2017, the Group recognised an expense of $11.3 million (2016: $14.7 million) in relation to
share-based payments.
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 2016 comparatives include key management personnel for that year.
2017
$'000
2016
$'000
10,246.8
12,064.7
266.1
3,796.9
114.9
352.9
5,828.1
83.7
14,424.7
18,329.4
128
Boral Limited Annual Report 2017
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 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
2017
$m
23.3
-
23.3
2016
$m
24.7
0.2
24.9
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.
Boral Limited Annual Report 2017 129
FINANCIAL
STATEMENTS
Notes to the Financial Statements
Boral Limited and Controlled Entities
Section 8: Other notes (continued)
8.2 Commitments
The Group leases property, equipment and vehicles under operating leases expiring from one to 15 years. Leases generally
provide the consolidated entity with a right of renewal at which time all terms are renegotiated. Some leases involve lease payments
comprising a base amount plus an incremental contingent rental. Contingent rentals are based on the Consumer Price Index or
operating criteria.
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
2017
$m
2016
$m
11.6
8.6
9.3
6.5
15.8
(0.2)
15.6
2017
$m
99.6
209.8
81.7
391.1
1.5
2.9
4.4
(0.3)
4.1
2016
$m
66.5
124.3
31.8
222.6
130
Boral Limited Annual Report 2017
8.3 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
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
2017
$’000
1,628
1,033
241
2,902
303
432
591
44
1,390
70
2,830
5,732
2016
$’000
1,322
401
144
1,867
185
312
154
56
287
32
1,026
2,893
8.4 Related party disclosures
Controlled entities
Interests held in controlled entities are set out in note 6.4.
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; and
• 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 2017 131
FINANCIAL
STATEMENTS
Notes to the Financial Statements
Boral Limited and Controlled Entities
Section 8: Other notes (continued)
8.5 Parent entity disclosures
For the year ended 30 June
RESULT OF THE PARENT ENTITY
Profit after tax
Other comprehensive loss after tax
Total comprehensive income for the period
SUMMARISED BALANCE SHEET
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
2017
$m
218.8
(5.9)
212.9
6,230.2
430.1
6,660.3
1,165.0
474.7
1,639.7
5,020.6
4,265.1
40.3
715.2
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
5,020.6
3,042.1
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
23.0
24.5
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.
132
Boral Limited Annual Report 2017
8.6 Deed of cross guarantee
Under the terms of ASIC Corporations (Wholly-owned Companies) Instrument 2016/785, 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 6.4.
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, 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
Reconciliation of movements in retained earnings
Balance at the beginning of the year
Net profit
Dividends paid
Balance at the end of the year
2017
$m
2016
$m
3,295.7
3,278.7
344.9
(51.6)
293.3
40.8
334.1
(13.5)
2.6
(0.8)
322.4
897.3
334.1
(226.2)
1,005.2
210.1
(17.1)
193.0
15.7
208.7
(12.5)
(7.7)
2.3
190.8
842.8
208.7
(154.2)
897.3
Boral Limited Annual Report 2017 133
FINANCIAL
STATEMENTS
Notes to the Financial Statements
Boral Limited and Controlled Entities
Section 8: Other notes (continued)
8.6 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
Loans and borrowings
Financial liabilities
Employee benefit liabilities
Provisions
Other liabilities
TOTAL NON-CURRENT LIABILITIES
TOTAL LIABILITIES
NET ASSETS
EQUITY
Issued capital
Reserves
Retained earnings
TOTAL EQUITY
134
Boral Limited Annual Report 2017
2017
$m
2016
$m
183.3
576.3
331.8
3.8
27.7
358.1
564.9
341.5
18.9
28.5
1,122.9
1,311.9
1,730.5
13.9
951.0
3,066.5
2,000.0
74.7
76.4
15.1
7,928.1
9,051.0
867.5
400.3
15.4
54.4
111.8
34.2
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
1,483.6
1,512.4
2,158.2
10.9
11.3
59.0
28.3
2,267.7
3,751.3
5,299.7
4,265.1
29.4
1,005.2
5,299.7
992.8
18.6
11.4
56.6
30.8
1,110.2
2,622.6
3,211.6
2,246.2
68.1
897.3
3,211.6
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 72 to 134 and the Remuneration Report in the Directors’
Report, set out on pages 51 to 71, 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 2017 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 6.4 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 Corporations (Wholly-owned Companies) Instrument 2016/785.
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 2017.
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, 30 August 2017
Boral Limited Annual Report 2017 135
STATUTORY
STATEMENTS
Independent Auditor’s Report to the shareholders of Boral Limited
Report on the audit of the Financial Report
Opinion
We have audited the Financial Report of Boral Limited (the Company).
In our opinion, the accompanying Financial Report of the Company is in accordance with the Corporations Act 2001, including:
• giving a true and fair view of the Group’s financial position as at 30 June 2017 and of its financial performance for the year ended
on that date; and
•
complying with Australian Accounting Standards and the Corporations Regulations 2001.
The Financial Report comprises:
• Balance Sheet as at 30 June 2017;
•
Income Statement, Statement of Comprehensive Income, Statement of Changes in Equity, and Statement of Cash Flows for the
year then ended;
• Notes including summaries of significant accounting policies; and
• Directors’ Declaration.
The Group consists of the Company and the entities it controlled at the year-end or from time to time during the financial year.
Basis for opinion
We conducted our audit in accordance with Australian Auditing Standards. We believe that the audit evidence we have obtained is
sufficient and appropriate to provide a basis for our opinion.
Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the Financial Report
section of our report.
We are independent of the Group in accordance with the Corporations Act 2001 and the ethical requirements of the Accounting
Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (the Code) that are relevant to our
audit of the Financial Report in Australia. We have fulfilled our other ethical responsibilities in accordance with the Code.
Key Audit Matters
The Key Audit Matters we identified are:
• Acquisition of Headwaters;
• Carrying value of investment in the USG Boral JV and Meridian Brick JV;
•
Formation of the Meridian Brick JV; and
• Availability and recoverability of US tax loss asset.
Key Audit Matters are those matters that, in our professional judgement, were of most significance in our audit of the Financial
Report of the current period.
These matters were addressed in the context of our audit of the Financial Report as a whole, and in forming our opinion thereon,
and we do not provide a separate opinion on these matters.
136
Boral Limited Annual Report 2017
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.
Acquisition of Headwaters (A$3.6 billion)
The Key Audit Matter
Boral’s acquisition of Headwaters for consideration of
$3.6 billion on 8 May 2017 represents a significant single
transaction for Boral. This was a Key Audit Matter due
to the size and scale of the acquisition. The transaction
had a pervasive impact on the financial statements and
consequently was a large part of the audit.
Significant effort was required to audit judgements made by
Boral relating to the acquisition, in particular:
•
•
•
the preliminary purchase price allocation (PPA) at 30 June
2017. Boral engaged an independent valuation expert to
advise on the identification and measurement of inventory,
property, plant and equipment and intangible assets which
form the PPA. We focused on the valuation methodologies
applied to value inventory, property, plant and equipment
and identifiable intangibles;
the impact of the accounting treatment of transaction
costs, such as debt and equity raising costs and change in
control payments. These could be pre or post-acquisition
in nature, are large, and therefore may significantly impact
the Balance Sheet and Income Statement; and
treatment of retrospective adjustment to earnings per
share (EPS) due to complexities applying the Theoretical
Ex-Rights Price (TERP) factor following Boral’s equity
raising.
Headwaters represents a new, large, diversified and
decentralised business for Boral, which required significant
effort to familiarise and understand as part of the audit.
How the matter was addressed in our audit
Our procedures included, amongst others:
•
•
reading the acquisition contract to understand key terms
including purchase price, rights and restrictions for
appropriate accounting treatment in line with accounting
standards;
working with our valuation specialists we challenged the
valuation methodologies applied in the preliminary PPA
to value inventory, property, plant and equipment and
identifiable intangible assets. This included:
–
–
comparing the valuation methodologies against generally
accepted valuation techniques; and
assessing the objectivity, competence, experience and
skills of the independent expert;
•
assessing the appropriateness of accounting treatment of
transaction costs, such as debt and equity raising costs and
change in control payments. This involved:
–
–
tracing transactions back to source documentation
and evaluating their classification against criteria in the
accounting standards; and
checking allocation to pre or post-acquisition based on
transaction cost obligations in the acquisition contract;
•
•
using our accounting specialists and checking the
retrospective application of the TERP factor following the
equity raising to Boral’s EPS calculations against the criteria
in the accounting standards;
revising our group audit approach, including component
scoping and audit procedure timing, to address the changes
in Boral’s structure, business and audit risks resulting from
the acquisition; and
•
meeting with Headwaters management and visiting key sites
to build our understanding of the business and its operations.
Boral Limited Annual Report 2017 137
STATUTORY
STATEMENTS
Carrying value of investment in the USG Boral JV (A$931m) and Meridian Brick JV (A$403m)
The Key Audit Matter
How the matter was addressed in our audit
The carrying value of Boral’s equity accounting investment
in the USG Boral JV and the Meridian Brick JV is a Key Audit
Matter due to:
•
•
the complexity of auditing forward looking estimates used
to support carrying values that are inherently subjective
and require a significant level of judgement to assess;
the variation in market demand for building products
and average selling prices across countries that create a
risk that business forecasts, which are the basis for the
assessment of recoverability, may not be achieved.
Boral’s recoverability assessment over the carrying value of
these investments involves our consideration of impairment
indicators at the investment level and the output of valuation
models for each CGU prepared by external valuers. This
recoverability assessment applies significant judgements
which include:
•
•
•
•
•
key assumptions relating to forecast market demand and
average selling prices in Australia, Asia, the Middle East
and North America;
discount rates applied to forecast cash flows as well as the
assumptions underlying the forecast growth and terminal
growth rates;
determination of cash generating units (CGUs) within each
of the joint ventures;
consideration of impairment indicators across multiple
countries with varied and opposing economic conditions;
and
specifically for the Meridian Brick JV, assumptions over
synergies on formation of the JV between Boral’s existing
US Bricks business and Forterra Brick.
In assessing this Key Audit Matter, we involved senior audit
team members, including valuation specialists and our
component auditors, who understand the USG Boral JV and
Meridian Brick JV business, industries and the economic
environment in which they operate.
Our procedures included:
•
challenging Boral’s key assumptions such as forecast market
demand for building products, average selling prices and
synergies by:
–
–
–
–
–
–
comparing key assumptions to historical actual data over
multiple housing cycles;
comparing forecasts of market demand for building
products against published analyst views;
comparing forecast synergies against similar industry
transactions and actual synergy achievement to date;
performing sensitivity analysis to identify changes in
assumptions that may give rise to a reasonably possible
change in each of the valuations;
comparing key underlying data in valuation models to
Board approved forecasts; and
assessing Boral’s historical forecasting accuracy as an
indication of risk in future forecasts;
•
•
•
•
using the auditors’ valuation specialists to assist the audit
team in assessing Boral’s valuation approach. We compared
the calculation methodology and inputs for discount rates,
forecast growth rates and terminal growth rates to industry
practice and externally sourced market data;
assessing Boral’s determination of CGUs based on our
understanding of the JVs’ businesses. CGUs were compared
to the JVs’ internal reporting to identify inconsistencies
between how results are monitored and CGU identification;
challenging Boral’s assessment of impairment indicators at
the investment level by considering the impact of decreases
in the estimated future cash flows in individual CGUs as an
indication of impairment of Boral’s investment balance; and
assessing the competence, capability and objectivity of the
external valuer engaged by the USG Boral JV and Meridian
Brick JV to prepare the valuation models.
138
Boral Limited Annual Report 2017
Formation of the Meridian Brick JV (A$403m)
The Key Audit Matter
How the matter was addressed in our audit
The disposal of Boral’s US Bricks business and subsequent
formation of the Meridian Brick JV with Forterra on
1 November 2016 was a significant transaction in the year
ended 30 June 2017.
This was a Key Audit Matter as the transaction involved:
•
•
•
complicated contractual arrangements across multiple
jurisdictions which required an increased level of effort
to audit;
accounting for taxation on formation of the JV required us
to involve our US taxation specialists;
the fair value of net assets acquired on formation of the
Meridian Brick JV, and consequently the proceeds on
disposal of Boral’s US Bricks business, was estimated
based on a discounted cash flow model. This was
prepared by Meridian Brick’s external valuers using the
methods and assumptions outlined in the Carrying value
of investment in the Meridian Brick JV Key Audit Matter
above. Significant judgement was required to audit these
forward looking estimates.
Availability and recoverability of US tax loss asset (A$352m)
Our procedures included:
•
•
•
examining contractual arrangements, identifying key terms as
applicable to the legal structure of the Meridian Brick JV and
involving our business combination accounting specialists.
We assessed accounting implications related to these key
terms by comparing them to the criteria and requirements of
the accounting standards;
using our US taxation specialists and assessing Boral’s
tax treatment of tax structure of the Meridian Brick JV for
compliance with US taxation requirements; and
assessing the valuation of Boral’s net assets acquired
on formation of the Meridian Brick JV by performing the
procedures outlined in the Carrying value of investment in
the Meridian Brick JV Key Audit Matter above over Boral’s
valuation on formation of the JV.
The Key Audit Matter
How the matter was addressed in our audit
The availability and recoverability of the US tax loss asset was
a Key Audit Matter due to:
•
•
the complexity of US continuity of ownership requirements,
necessitating involvement of our tax specialists; and
the significant level of judgement required to audit forward
looking estimates in Boral’s assessment of the future
utilisation of tax losses, which are inherently subjective.
Tax losses in the US generally have a maximum carry forward
period of 20 years before which they must be utilised. On
an annual basis they are subject to the US continuity of
ownership requirements. This added complexity to our audit,
due to:
•
•
•
•
the specialised nature of US taxation requirements;
changes in the equity ownership of Boral in the current
year;
the impact of the acquisition of Headwaters and the
formation of the Meridian Brick JV on Boral’s forecast;
the slower than expected recovery of the US housing
market; and
•
the extended period of the forecast.
Boral’s assessment of the recoverability of the US tax loss
asset is based on forecast future taxable income and applies
significant judgements. Key judgements made by Boral
include assumptions over forecast EBIT and taxable income.
In assessing this Key Audit Matter, we involved senior
audit team members and our US taxation specialists, who
understand Boral’s US business, industry and the economic
and regulatory environment it operates in.
Our procedures included:
•
•
•
•
obtaining the results of the most recent US continuity of
ownership assessment performed by Boral’s taxation
experts, which included changes in Boral’s equity ownership,
when assessing the tax losses that remain available to be
utilised;
assessing the competence, capability and objectivity of
Boral’s taxation experts who prepared the continuity of
ownership assessment;
analysing the timing of origination of US tax losses against the
timing of forecast future taxable income when assessing the
20 year carry forward period;
challenging Boral’s key assumptions such as forecast EBIT
and taxable income by:
–
–
–
comparing key assumptions to historical actual data over
multiple housing cycles;
comparing housing starts to published analyst views;
comparing key assumptions in the forecast future taxable
income to Board approved forecasts; and
–
assessing Boral’s prior forecasting accuracy;
•
performing sensitivity analysis on the key assumptions of
forecast EBIT and taxable income with a range of scenarios.
Boral Limited Annual Report 2017 139
STATUTORY
STATEMENTS
Other Information
Other Information is financial and non-financial information in Boral Limited’s annual reporting which is provided in addition to the
Financial Report and the Auditor’s Report. The Directors are responsible for the Other Information.
Our opinion on the Financial Report does not cover the Other Information and, accordingly, we do not express an audit opinion or
any form of assurance conclusion thereon, with the exception of the Remuneration Report and our related assurance opinion.
In connection with our audit of the Financial Report, our responsibility is to read the Other Information. In doing so, we consider
whether the Other Information is materially inconsistent with the Financial Report or our knowledge obtained in the audit, or
otherwise appears to be materially misstated.
We are required to report if we conclude that there is a material misstatement of this Other Information, and based on the work we
have performed on the Other Information that we obtained prior to the date of this Auditor’s Report we have nothing to report.
Responsibilities of the Directors for the Financial Report
The Directors are responsible for:
• preparing the Financial Report that gives a true and fair view in accordance with Australian Accounting Standards and the
Corporations Act 2001;
•
•
implementing necessary internal control to enable the preparation of a Financial Report that gives a true and fair view and is free
from material misstatement, whether due to fraud or error;
assessing the Group’s ability to continue as a going concern. This includes disclosing, as applicable, matters related to
going concern and using the going concern basis of accounting unless they either intend to liquidate the Group or to cease
operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the Financial Report
Our objective is:
•
to obtain reasonable assurance about whether the Financial Report as a whole is free from material misstatement, whether due
to fraud or error; and
•
to issue an Auditor’s Report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Australian
Auditing Standards will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error. They are considered material if, individually or in the aggregate, they could reasonably
be expected to influence the economic decisions of users taken on the basis of this Financial Report.
A further description of our responsibilities for the Audit of the Financial Report is located at the Auditing and Assurance Standards
Board website at: http://www.auasb.gov.au/auditors_files/ar2.pdf. This description forms part of our Auditor’s Report.
Report on the Remuneration Report
Opinion
In our opinion, the Remuneration Report of Boral Limited for the year ended 30 June 2017 complies with section 300A of the
Corporations Act 2001.
Directors’ responsibilities
The Directors of the Company are responsible for the preparation and presentation of the Remuneration Report in accordance with
section 300A of the Corporations Act 2001.
Our responsibilities
We have audited the Remuneration Report included in pages 51 to 71 of the Directors’ Report for the year ended 30 June 2017.
Our responsibility is to express an opinion on the Remuneration Report, based on our Audit conducted in accordance with Australian
Auditing Standards.
KPMG
140
Boral Limited Annual Report 2017
Kenneth Reid
Partner
Sydney, 30 August 2017
SHAREHOLDER
INFORMATION
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
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 FY2017 of 12.0 cents per share is expected
to be paid by Boral on 3 October 2017. The dividend will be
50% 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
Boral has implemented direct credit as the preferred method
for the payment of cash dividends, effective from the interim
dividend paid on 5 April 2012.
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.
Boral Limited Annual Report 2017 141
Shareholder Information Boral Limited and Controlled Entities SHAREHOLDER
INFORMATION
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 2017
Substantial shareholders
BlackRock Group (BlackRock Inc. and subsidiaries), by notice of
initial substantial holder dated 19 April 2017, advised that it and
its associates were entitled to 58,721,314 ordinary shares.
The Capital Group of Companies, Inc., by notice of change of
interest of substantial holder dated 1 December 2016, advised
that it and its associates were entitled to 61,918,012 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
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
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.
142
Boral Limited Annual Report 2017
Shareholder Information
Boral Limited and Controlled Entities
Distribution schedule of shareholders as at 16 August 2017
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 (73 shares)
Number of
shareholders
% of ordinary
shares
23,605
26,795
5,850
3,883
165
60,298
1,127
1.00
5.49
3.57
7.03
82.91
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
There is no current on-market buy-back of ordinary shares.
Twenty largest shareholders as at 16 August 2017
1
2
3
4
5
6
7
8
9
10
11
12
13
14
HSBC CUSTODY NOMINEES
J P MORGAN NOMINEES AUSTRALIA LIMITED
CITICORP NOMINEES PTY LIMITED
NATIONAL NOMINEES LIMITED
BNP PARIBAS NOMS PTY LTD
AMP LIFE LIMITED
BOND STREET CUSTODIANS LIMITED
ANZ EXECUTORS & TRUSTEE
ARGO INVESTMENTS LIMITED
AUSTRALIAN FOUNDATION INVESTMENT
UBS WEALTH MANAGEMENT AUSTRALIA
BOND STREET CUSTODIANS LIMITED
PACIFIC CUSTODIANS PTY LIMITED
RODNEY PEARSE
15 GWYNVILL INVESTMENTS PTY LTD
16
EQUITY TRUSTEES LIMITED
17 MILTON CORPORATION LIMITED
18
19
20
INVIA CUSTODIAN PTY LIMITED
RBC INVESTOR SERVICES AUSTRALIA NOMINEES PTY LTD
EQUITAS NOMINEES PTY LIMITED
Ordinary shares
% of ordinary shares
339,668,286
263,107,753
128,772,299
92,810,758
69,315,230
8,707,096
4,978,411
4,563,736
4,460,327
4,008,492
3,942,225
3,472,403
3,058,506
2,826,831
2,521,264
2,293,665
2,041,793
2,035,384
1,435,000
1,109,424
28.97
22.44
10.98
7.92
5.91
0.74
0.42
0.39
0.38
0.34
0.34
0.30
0.26
0.24
0.22
0.20
0.17
0.17
0.12
0.09
Boral Limited Annual Report 2017 143
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
Profit after tax1
Significant items - net of tax
Net profit/(loss) attributable to
members of Boral Limited
Total assets
Total liabilities
Net assets
Shareholders' funds
Net debt
Funds employed
2017
$m
2016
$m
2015
$m
2014
$m
2013
$m
2012
$m
2011
$m
2010
$m
2009
$m
2008
$m
4,388
4,311
4,415
5,204
5,286
5,010
4,711
4,599
4,875
5,199
720
260
460
(51)
409
(67)
-
343
(46)
645
247
398
(63)
335
(67)
-
268
(12)
605
249
357
(64)
293
(44)
-
249
8
556
261
294
(83)
211
(37)
519
291
228
(97)
130
(20)
(3)
(6)
171
2
104
(316)
473
273
200
(88)
111
(9)
(1)
101
75
522
245
277
(64)
213
(40)
2
175
(8)
505
253
252
(97)
155
(22)
(1)
132
(222)
539
263
276
(127)
149
(17)
-
131
11
688
240
448
(112)
336
(90)
1
247
(4)
297
256
257
173
(212)
177
168
(91)
142
243
9,314
3,873
5,441
5,441
2,333
7,774
5,801
5,865
5,559
6,316
6,499
5,668
5,209
5,491
5,895
2,294
2,341
2,211
2,923
3,096
2,512
2,583
2,738
2,985
3,506
3,524
3,348
3,394
3,403
3,156
2,626
2,754
2,910
3,506
3,524
3,348
3,394
3,403
3,156
2,626
2,754
2,910
893
817
718
1,446
1,518
505
1,183
1,514
1,515
4,399
4,341
4,066
4,840
4,921
3,662
3,809
4,268
4,425
Dividends paid or declared
281
167
139
117
85
82
105
88
77
202
Statistics
Dividend per ordinary share
24.0c
22.5c
18.0c
15.0c
11.0c
11.0c
14.5c
13.5c
13.0c
34.0c
Dividend payout ratio1
Dividend cover1
Earnings per ordinary share1
Earnings per ordinary share1,2
Return on equity1
EBIT to sales1
EBIT to funds employed1,3
ROFE4 (EBIT to average funds
employed)1
Net interest cover (times)1
Gearing (net debt to equity)
Gearing (net debt to net debt plus
equity)
82%
1.2
33.7c
33.7c
62%
1.6
35.8c
33.3c
6.3% 7.6%
10.5% 9.2%
9.2% 9.0%
56%
1.8
31.9c
29.7c
7.1%
8.1%
8.2%
68%
1.5
22.0c
20.5c
5.1%
5.7%
7.2%
81%
1.2
13.6c
12.7c
3.2%
4.3%
4.7%
81%
1.2
13.6c
12.7c
3.0%
4.0%
4.1%
60%
1.7
24.4c
22.7c
5.6%
5.9%
7.6%
67%
1.5
22.1c
20.5c
5.0%
5.5%
6.6%
59%
1.7
22.2c
20.7c
4.8%
5.7%
82%
1.2
41.4c
38.4c
8.5%
8.6%
6.5% 10.1%
7.6% 9.1%
8.5%
6.6%
4.7%
4.7%
7.4%
6.2%
6.3% 10.1%
9.1
43%
6.3
25%
5.6
23%
3.5
21%
2.3
43%
2.3
45%
4.4
16%
2.6
45%
2.2
55%
4.0
52%
30%
20%
19%
18%
30%
31%
14%
31%
35%
34%
Net tangible asset backing per share
$1.90
$4.40
$4.31
$4.03
$3.17
$3.31
$3.91
$3.92
$4.12
$4.41
1. Excludes the impact of significant items from 2008 to 2017.
2. Adjusted to reflect the bonus element in the renounceable entitlement offer which occurred during November and December 2016.
3. FY2008 – FY2016 return on funds employed (ROFE) calculated as EBIT (before significant items) on funds employed at 30 June. FY2017 ROFE is based on
average monthly funds employed due to the impact of Headwaters only contributing eight weeks of EBIT in FY2017 but funds employed increasing fully at 30
June 2017. Based on year end funds employed, ROFE for FY2017 would be reported as 5.9%.
4. 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.
144
Boral Limited Annual Report 2017
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
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
Boral® is a registered trademark of
Boral Limited or one of its subsidiaries.
© 2017 Boral Ltd. All rights reserved.
© 2017 USG Boral. All rights reserved.