Boral
ANNUAL
REPORT
2018
Boral limited
annual report
for the year
ended 30 June 2018
Boral limited
Annual Report
For the year ended 30 June 2018
The Annual General Meeting
of Boral Limited will be held at
the Civic Pavilion, The Concourse,
Chatswood, NSW, on Tuesday
30 October 2018 at 10.30am.
Financial calendar
please note, dates are subject to review.
Record date for final dividend
5 September 2018
Final dividend payable
Annual General Meeting
Half year end
2 october 2018
30 october 2018
31 December 2018
Half year results announcement
25 February 2019
ex dividend share trading commences
1 March 2019
Record date for interim dividend
Interim dividend payable
Year end
4 March 2019
15 March 2019
30 June 2019
Boral Limited
ABN 13 008 421 761
Chairman’s Review
Chief Executive’s Review
Chief Financial Officer’s Review
Divisional Performance
Summary of Boral's Risks and Responses
Sustainability Overview
Executive Committee
Board of Directors
Corporate Governance Statement
Directors’ Report
2018 Remuneration Report
Financial Statements
Statutory Statements
Shareholder Information
Financial History
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, Chief Financial Officer’s Review and
Divisional Performance comprise our operating and financial
review (OFR) and form part of the Directors’ Report.
2
4
6
10
18
20
32
33
34
48
55
78
145
152
155
Boral Limited Annual Report 2018
1
Chairman's
Review
“As Boral’s new Chairman, I am
committed to the long-term
creation of value for all of our
stakeholders and will work with
my fellow Directors and Boral’s
Executive team to deliver this.”
Kathryn Fagg, Chairman
Leading Boral
After four years on the Board, I am honoured to be in my new
role as Chairman from 1 July 2018.
Boral North America is very well placed in fly ash and building
products, providing highly attractive growth opportunities in
US markets.
Of course the pleasure of taking up this role is coupled with
sadness around Dr Brian Clark’s early retirement as Chairman
at the end of June, after 11 years on the Board including two
and a half years as Chairman.
I wish Brian a long and happy retirement with his wife Sandy,
and a return to full health. Brian’s contribution to Boral has
been invaluable. I thank him for his leadership, dedication
and support.
As Chairman, I am committed to supporting Boral’s people
and steering the business so that the great work undertaken
through Mike Kane’s leadership, to transform Boral into a higher
performing and more sustainable business, can continue.
In Boral I see people who are highly motivated, focused, committed
and expert in their industries – and a culture that has safety at the
forefront, and supports collaboration, innovation and respect.
Clear strategic direction
I am impressed with Boral’s three strong divisions – Boral
Australia, Boral North America and USG Boral. Boral Australia
is a leading business that is performing well. Our strategy to
strengthen our integrated construction materials position is
aligning well with the multi-year pipeline of major infrastructure
work in Australia.
The successful USG Boral joint venture in Australia, Asia and the
Middle East, formed in March 2014, remains a long-term organic
growth platform for Boral. With the announced acquisition of
our joint venture partner USG Corporation by Knauf, we are
considering several exciting options for Boral including moving
forward with 100% ownership or continuing in an expanded joint
venture.
With FY2018 marking the first full year of ownership of the
Headwaters business in North America, the Board remains
very positive about the acquisition. The compelling opportunity
that we saw in the acquisition and the undeniably strong fit with
Boral’s existing business, are reflected in the outperformance
of synergy delivery. Our year one target was to deliver
US$30–35 million of synergies; we delivered US$39 million.
Our initial year four synergy target was for US$100 million;
we have now increased this target to US$115 million.
The acquisition has doubled our position in the USA. It has
increased Boral’s product offerings, geographic breadth,
and diversification across broader and growing US construction
markets.
Substantial earnings growth
Within each division I see some impressive results – and there
is more expected from each of our divisions in FY2019.
Results for the year ended 30 June 2018 saw a substantial
47% increase in net profit after tax before amortisation and
significant items to $514 million. This substantial growth was
underpinned by the full year contribution from Headwaters,
together with higher earnings from Boral Australia and a solid
result from the USG Boral joint venture. Sales revenue of
$5.9 billion was up 34% on the prior year, and earnings before
interest, tax, depreciation and amortisation (EBITDA)1 of
$1,056 million was up 47%, reflecting a full 12 month
contribution from Headwaters and strong growth from
Boral Australia.
2
Boral Limited Annual Report 2018
1. Excluding significant items.
Net debt at 30 June 2018 was $2.45 billion compared to
$2.33 billion at 30 June 2017, in part due to Headwaters
acquisition costs. Proceeds from the divestment of Denver
Construction Materials, which closed in July 2018, will further
reduce net debt from $2.45 billion to $2.28 billion. Boral
remains well within its funding covenants, and our
balance sheet remains robust.
The Board declared a final dividend of 14.0 cents per share,
which was 50% franked, for a full year dividend of 26.5 cents
per share. This represents a payout ratio for the full year of
66%, in line with our dividend policy of between 50% and 70%
of earnings before significant items, subject to the Company’s
financial position.
A strong safety culture
Boral’s safety performance has improved significantly in recent
years and remains strong relative to peers. Restating our FY2017
safety numbers to include Headwaters retrospectively and all
joint ventures, Boral’s recordable injury frequency rate (RIFR)2
of 8.7 in FY2018 has reduced by 6%.
At last year’s Annual General Meeting, we reported that in
September 2017, a supplier’s driver delivering diesel to our
Concrite operation in Alexandria in Sydney was struck by one
of Boral’s concrete agitator vehicles on site, and later died from
his injuries. Across Boral, we were devastated by this tragic
incident.
Prompted by this incident, the Board undertook a thorough
review of the organisation’s response and our practice to keep
safety and remuneration outcomes separate. Details of the
considerations and conclusions of the Board are provided on
page 62 of the Annual Report 2018.
Boral’s Board benefits from diversity of gender, tenure and
experience across a range of sectors, functions and professions.
There is a depth of building products and construction materials
operational knowledge and experience, as well as financial,
M&A and strategy experience.
While several of us have direct experience operating businesses
in Asia and good working knowledge of the markets in
the region, we recognise that there would be value in having an
Asia-based Director with industry experience on the Board.
We are continuing to monitor the market and consider
potential candidates.
In FY2018, the Board continued its program of site visits to see
first-hand how we are managing safety, quality, operations and
employee engagement. In September 2017, the Board spent a
week in various parts of the North American business to better
assess the integration program and progress against synergy
delivery.
In May 2018, the Board spent a week in USG Boral operations in
Singapore and South Korea, visiting sites and hearing from local
management teams. We left with a clearer understanding of the
challenges and opportunities in their businesses and their plans
to capture growth.
Shareholder engagement
Over the past few years, as Chairman of the Remuneration
& Nomination Committee, I have joined Brian Clark in Boral’s
proactive investor engagement program. During these meetings,
we have gained a clearer understanding of stakeholder
perspectives and we have been better placed to consider
their feedback in our decision making, particularly in relation
to remuneration.
The Board
While my appointment as Chairman followed the earlier than
expected retirement of Brian Clark, we were well prepared
because of our ongoing orderly Board succession planning.
Since becoming Chairman, I have held a further series of
investor meetings during which we have discussed strategy,
governance, safety, climate-related risks and opportunities,
and remuneration amongst other issues.
At this year's Annual General Meeting, Catherine Brenner retires
by rotation and after eight years as a Director has decided not
to stand for re-election. Catherine has made an outstanding
contribution to the Board and will leave Boral with our thanks,
enormous respect and best wishes.
Over recent years, we have identified opportunities to strengthen
certain Board skills and experience over time. As part of that
skills expansion and ongoing Board renewal, in June we
announced the appointment of our first North American-based
Non-executive Director, Peter Alexander, effective
1 September 2018.
Peter is a seasoned former chief executive with more than
28 years of senior executive experience in US building materials
and distribution, technology products and services. His
experience and knowledge of the North American building and
construction markets, combined with his experience in business
integration, operations, capital allocation and technology, will
serve us well.
Our 2018 Remuneration Report on pages 55 to 77 of Boral's
Annual Report, reflects some of the feedback we have received
in recent years.
Boral’s people
The Board’s confidence in Mike Kane’s leadership remains
strong. Last year we said that the Board, following consultation
with Mike, expects he will continue in the role for another three
to five years. That view is unchanged, so we expect Mike Kane
will remain as CEO for another two to four years from now.
In the meantime, our CEO succession development program
continues and we are confident that at the appropriate time we
will have well-developed internal candidates to consider.
On behalf of the Board, I thank Mike and all of Boral’s people
for their relentless focus on safety and their efforts to be number
one in the eyes of our customers, to overcome obstacles and
to harness growth.
2. Per million hours worked, includes employees and contractors in
100%-owned businesses and all joint venture operations.
Kathryn Fagg
Chairman
Boral Limited Annual Report 2018
3
Chief
Executive's
Review
“Our strategy has been to reduce our
exposure to products that are manufactured
in energy-intensive, high cost operations;
to invest in higher growth, lighter-weight
products; and to ensure our more focused
businesses are well positioned for long-term
sustainable performance.”
Mike Kane, CEO & Managing Director
Our strategy for the long-term
Boral’s purpose is to help our customers Build something great
by supplying them with high-quality, sustainable building
products and construction materials across our international
markets.
Around the world we have different offerings in different
regions, but we are always operating in the same types of
construction materials and building products markets.
We have grown substantially in recent years, but Boral has also
become a more focused business.
We are an integrated construction materials player in Australia;
a gypsum-based product leader throughout Asia, the Middle
East and Australasia; and a leading supplier of fly ash and
building products in North America.
Our strategy has been to reduce our exposure to products
that are manufactured in energy-intensive, high cost
operations; to invest in higher growth, lighter-weight products;
and to ensure our more focused businesses are well positioned
for long-term sustainable performance.
As CEO, delivering on this strategy, including positioning
Boral for the long-term, is the most important part of the job –
after safety.
The decisions we make today are securing Boral’s future for
decades to come. This includes investing in new quarries,
and plant and equipment so that we have the resources and
capacity over time. It also includes considering the risks of
future policy, social and environmental changes to our business
and factoring these insights and potential financial impacts into
our decision making today.
In the case of USG Boral, it’s about carefully considering
whether to acquire USG’s share of the joint venture and
return to 100% Boral ownership, or work with another joint
venture partner if it’s better for Boral’s long-term prospects.
This opportunity has been triggered by Knauf’s agreement to
purchase USG. We are currently in discussions with industry
players and rigorously assessing our options.
Our decision to acquire Headwaters, which closed in May
2017, was very much a long-term decision. We recognised
that the substantial investment would dampen our returns on
funds employed in the near term, but it gives us the scale to
compete in attractive high growth markets over the longer term
and significantly strengthens our ability to deliver above cost of
capital returns through the cycle.
A year of significant progress
The FY2018 result reflects the early rewards of our long-term
strategy.
With a more focused, strengthened construction materials
business in Boral Australia, we are reaping the benefits of
strong construction markets particularly infrastructure activity
on the east coast. We have seen a substantial earnings lift
from Boral North America as a result of the additional earnings
from the Headwaters business and delivery of strong year one
synergies. And from USG Boral, we have seen a consolidation
of recent growth years to deliver solid results despite some
one-off cost impacts.
Our group EBITDA1 result of $1.06 billion was up 47% and
EBITDA margins on revenue of 18.0% were up from 16.4%
in the prior year.
4
Boral Limited Annual Report 2018
1. Earnings before interest, tax, depreciation and amortisation, and excluding
significant items.
• Earnings from USG Boral are expected to grow by around
10% or more in FY2019, coming from improvements
in China, Indonesia, Thailand and India. Our largest
businesses – Australia and South Korea – are expected
to continue to perform at strong levels, however, with
residential construction forecast to moderate in Australia
and South Korea, the gains in other countries are expected
to be slightly offset.
• Boral North America is expected to increase EBITDA by
around 20% or more in FY2019, reflecting further significant
synergies of around US$25 million in FY2019, together with
operational improvements and market growth, assuming
more normal weather patterns.
We are focused on delivering another great result in FY2019 at
the same time as delivering on our medium term promises.
In Boral Australia, we are continuing to tender for more
infrastructure project work that is in the pipeline, and we are
working to further strengthen margins through a combination of
price and cost initiatives, including optimising our supply chains.
In North America, we have four year synergy targets to deliver
and a fly ash growth strategy that includes plans to increase our
annual supply of fly ash by 1.5–2.0 million tons in three years.
This will be great for Boral, for our customers, our contracted
utilities, and the environment.
And as previously mentioned, USG Boral will either become
a new and expanded joint venture or return to a 100% Boral
owned business. As part of the joint venture shareholders’
agreement, we have commenced a process to establish the fair
market value of USG’s interest, which will take several months,
after which we will be in a better position to decide on the best
outcome for Boral.
This is an exciting time for Boral. Together with more than 17,000
motivated and hard-working Boral employees I am looking
forward to the challenges and opportunities ahead.
Mike Kane
CEO & Managing Director
Boral Australia delivered an EBITDA of $634 million, a 15%
increase on FY2017 driven by strong growth in infrastructure,
higher non-residential activity, higher contribution from Property
and solid margins. Excluding Property earnings of $63 million,
EBITDA was up 8% year-on-year.
USG Boral delivered an underlying EBITDA of $268 million,
which was down 6%. While Australia and South Korea, our two
largest businesses, delivered historically high revenues and
strong margins, and China delivered higher earnings, the result
was impacted by one-off costs and softer results in Thailand,
Indonesia, India and Vietnam. We expect to see earnings
rebound in FY2019. Boral’s 50% share of post-tax earnings
from the joint venture for FY2018 was $63 million, 9% lower
than last year.
Boral North America reported EBITDA of A$368 million for
continuing operations (which means we excluded the
A$23 million EBITDA from Denver Construction Materials,
which was divested in July 2018); this compares with
A$111 million in FY2017. On a prior year proforma basis,
EBITDA was up 7%.
The integration of the Headwaters acquisition during the year
progressed very well. First year delivered synergies of
US$39 million exceeded our initial US$30–US$35 million target,
and we have increased our year four synergy target by 15%
to US$115 million.
While our business is not immune to unfavourable weather
impacts and operational disruptions, the full year results confirm
that our transformation strategy is progressing well, and that
Boral can deliver significant earnings with highly attractive
margins.
Safety is my first priority and the first priority for everyone in
Boral.
In FY2018, Boral’s LTIFR2 of 1.6, which was broadly steady on
1.5 last year, consolidated several years of improvement. The
result includes an additional 4,500 employees and contractors
in our safety statistics with the inclusion of Headwaters and all
joint venture operations this year. Previously, we only included
50%-owned joint ventures. Headwaters and the Meridian Brick
joint venture performed below Boral’s US legacy businesses;
however, Headwaters delivered a massive reduction in medical
cases and lost work days relative to their prior year performance.
A strong FY2019 outlook and beyond
In FY2019, we expect further gains from Boral Australia,
improving results from USG Boral and strong growth from Boral
North America. More specifically:
•
From Boral Australia we expect to deliver high single-digit
EBITDA growth or more in FY2019, excluding Property
in both years. If we include our estimated $20 million of
earnings from Property in FY2019, we expect EBITDA to
remain at least in line with the prior year, which is a strong
operational outlook given property sales contributed
$63 million in FY2018. Volumes from infrastructure and
non-residential activity, and margin improvements are
expected to more than offset the impacts of a moderating
residential construction sector.
2. Lost time injury frequency rate per million hours worked for employees and
contractors in 100%-owned businesses, including Headwaters, and all
joint venture businesses regardless of equity interest in FY2018. Prior year
data only includes 50%-owned joint ventures and excludes Headwaters.
Boral Limited Annual Report 2018
5
Chief Financial
Officer's
Review
“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
Income statement
Year ended 30 June
$m
Sales revenue
EBITDA1
Depreciation and amortisation
EBIT1
Interest expense
Tax expense1
Underlying profit after tax1
Net significant items
Net profit after tax
2018
2017
Continuing
operations
Discontinued
operations
Group
Continuing
operations
Discontinued
operations
5,731.1
1,033.1
(360.2)
672.9
(103.8)
(106.4)
462.7
(32.2)
430.5
137.9
22.9
(7.4)
15.5
–
(5.0)
10.5
–
10.5
4,388.3
4,128.0
260.3
719.9
(260.0)
459.9
(50.7)
(66.5)
342.7
(45.8)
296.9
697.5
(248.4)
449.1
(50.7)
(64.3)
334.1
(88.4)
245.7
22.4
(11.6)
10.8
–
(2.2)
8.6
42.6
51.2
Group
5,869.0
1,056.0
(367.6)
688.4
(103.8)
(111.4)
473.2
(32.2)
441.0
Financial performance
Revenue
Reported revenue of $5.87 billion was up 34% on the prior year,
with growth in Boral Australia and Boral North America including
a full year of revenues from Headwaters, partially offset by
reduced revenues from US bricks following the formation of the
Meridian Brick joint venture (JV).
• Boral Australia revenue of $3.59 billion was up 9%, with
strong east coast residential construction, the continued
growth in infrastructure activity and growth in non-residential
construction, along with price gains in Concrete and
Asphalt. Aggregates and Concrete volumes were up 7%,
with all regions reporting higher volumes including strong
growth in east coast metro markets and major projects.
• USG Boral’s underlying revenue of $1.58 billion was up 7%
on the prior year, driven by continued growth in premium
Sheetrock® plasterboard sales and technical board. Strong
board volume growth in Australia and China, and strong
price gains in Korea and China supported revenue growth.
Non-board revenue, which includes ceiling tiles, metal stud,
compounds and plasters increased 9%.
• Boral North America revenue of A$2.14 billion was up 122%
on the prior year, reflecting the impact of 12 months of
revenue from Headwaters and the impact of the formation
of the Meridian Brick JV. On a proforma basis, excluding
Bricks, revenue increased 6%, benefiting from strong pricing
particularly in Fly Ash, which experienced price growth of
9%, as well as strong market demand in Roofing and Light
Building Products.
1. Before significant items. EBIT before significant items is a non-IFRS
measure used to provide a greater understanding of the underlying
business performance of the Group. The disclosures are extracted
or derived from the audited financial statements.
6
Boral Limited Annual Report 2018
Earnings before interest, tax, depreciation and
amortisation (EBITDA1)
Group EBITDA before significant items of $1.06 billion was up
47% on the prior year, reflecting a full 12 month contribution from
Headwaters, and strong earnings growth from Boral Australia,
underpinned by Property earnings and continued strong
infrastructure and residential activity.
Boral Australia EBITDA of $633.6 million was up 15%, with higher
Property earnings, price gains, and infrastructure volume growth,
partially offset by higher costs including energy, costs to serve
due to supply constraints and increased investment in customer
excellence and supply chain initiatives, which will deliver future
benefits. Excluding Property, EBITDA increased by 8%.
USG Boral contributed $63.1 million of equity accounted income
to the Group, a 9% decrease on the prior year. The underlying
EBITDA of the joint venture decreased by 6%, despite increased
revenue due to $11 million in one-off costs including the gypsum
supply issues in Australia following the unexpected temporary
port closure, and an unfavourable operational reserve adjustment
in India. In addition, higher input costs, competitive pressure in
certain markets and a $3 million unfavourable foreign exchange
rate movement relating to intercompany loans also impacted
the result.
Boral North America EBITDA of A$367.5 million was a
A$256.2 million improvement on the prior year, reflecting a full
12 months of Headwaters earnings following the acquisition
in early May 2017. On a proforma basis in US dollars, EBITDA
was 9% higher, which benefited from underlying volume growth
in Building Products, strong pricing particularly in Fly Ash
and US$39 million in synergies. This was partially offset by
weather impacts, one-off plant operational issues, higher costs
associated with plant closures in Texas for Fly Ash, and a
challenged result from the Meridian Brick JV.
Finance costs
Net underlying interest expense for FY2018 was $103.8 million,
an increase from the FY2017 expense of $50.7 million. The prior
year benefited from $24.4 million of interest income, mostly due
to increased cash levels for part of that year following the equity
raising, and lower gross debt levels prior to the completion of
the Headwaters acquisition on 8 May 2017. Underlying interest
cover in FY2018 was 6.6 times, which is lower than the 9.1 times
in FY2017 but higher than the FY2016 interest cover of 6.3 times.
Tax expense1
Tax expense for the year was $111.4 million, an increase from
$66.5 million in FY2017. The average underlying tax rate for
the year increased from 16% in FY2017 to 19% in FY2018.
The current year reflected the recognition of previously
unrecognised tax losses arising from higher property sales and
US earnings, as well as benefits from lower income tax rates on
US earnings following the reduction of the US federal tax rate in
December 2017.
Net profit after tax
Underlying profit after tax1 was $473.2 million, a 38% increase
on the prior year. This improvement was due to a 50% increase
in EBIT, offset by higher interest and tax expense. Reported net
profit after tax of $441.0 million included a net loss of
$32.2 million from significant items, and compares to a profit of
$296.9 million in the prior year, which included a significant item
loss of $45.8 million.
Significant items
The Group recorded an after-tax net loss of $32.2 million
in respect of significant items that were excluded from the
underlying trading result. This primarily relates to costs
associated with the integration of Headwaters and rehabilitation
and closure costs associated with Waurn Ponds, partially offset
by a benefit from the reassessment of US tax balances.
Headwaters integration costs
$73.2 million of costs have been incurred on the integration
of the Headwaters business. The costs to date predominantly
relate to redundancies, employee incentives implemented by
Headwaters, consultant fees supporting the integration, IT
systems, brand consolidation, rationalisation of products in metal
roofing, safety implementation costs and asset impairments
upon consolidation of the Roofing businesses.
Waurn Ponds rehabilitation and closure costs
The organisation has continued to develop plans to improve our
cement position in Victoria, which has led to a reassessment
of the expected end use of the Waurn Ponds cement facility.
This resulted in the recognition of a $23.8 million provision with
respect to the rehabilitation of the limestone quarry attached to
the facility.
Reconciliation of underlying results to reported results for FY2018
$m
Underlying results
Significant items
Headwaters integration costs
Waurn Ponds rehabilitation and closure costs
Joint venture matters
Reassessment of US tax balances
Total significant items
Reported results
1. Excluding significant items.
EBIT
Finance costs
Tax
Profit after tax
688.4
(103.8)
(111.4)
473.2
(73.2)
(23.8)
(4.6)
–
(101.6)
586.8
–
–
–
–
–
19.0
7.0
0.9
42.5
69.4
(103.8)
(42.0)
(54.2)
(16.8)
(3.7)
42.5
(32.2)
441.0
Boral Limited Annual Report 2018
7
Change in working capital
The current year was impacted by higher inventory levels
in Australian construction materials businesses and Boral
North America to support expected higher levels of demand
in FY2019, a stronger fourth quarter of activity in FY2018, a slight
increase in debtor days in Boral Australia reflecting increased
major projects work, and timing of capital payments in the
prior period.
Interest and tax
Interest paid increased in line with the higher interest expense
in FY2018, while tax paid increased, reflecting higher tax
catch-up and instalment payments for FY2018 in Australia,
reflecting increased earnings, as well as state and withholding
taxes paid in the USA.
Restructure, acquisition and integration costs paid
In FY2018, an additional $55 million of payments associated
with the acquisition of Headwaters were incurred, primarily the
payment of success fees to bankers paid in July 2017, as well as
change in control and other employee incentives which relate to
pre-acquisition. In addition, there were integration related cash
payments of $50 million, as well as continuation of spend from
restructuring of $14 million arising in prior periods.
Capital expenditure
Capital expenditure of $425 million in FY2018 was $85 million
higher than in FY2017, reflecting increased capital expenditure
in North America following the acquisition of Headwaters.
FY2018 expenditure included investments in new and upgraded
concrete and asphalt plants, quarry upgrades and the Berrima
alternative fuels plant in Australia, a land acquisition for the
Stone business, and investments in storage facilities and reclaim
activities in Fly Ash in the US. Growth expenditure was broadly
steady at $51 million in FY2018.
Chief Financial
Officer's
Review
Reassessment of US tax balances
A reduction in the US federal tax rate from 35% to 21%,
effective from 22 December 2017, has triggered a revaluation
of our deferred tax assets and liabilities associated with our US
operations, leading to a tax benefit of A$33.7 million. In addition,
the Group reassessed its US tax losses which have not been
recognised on the Balance Sheet given improved earnings in
North America. This has led to a benefit of A$8.8 million.
The total impact of the above adjustments on income tax
expense is a benefit of $42.5 million.
Joint venture matters
This includes $3.6 million of integration and restructuring costs
in Meridian Brick, and $1.0 million in asset impairments in
USG Boral.
Cash flow
For the year ended 30 June, $m
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 and
other items
Restructure, acquisition and
integration costs paid
Operating cash flow
Capital expenditure
Acquisition of controlled entities
Proceeds on disposal of assets
Proceeds on disposal of
controlled entities
Cash acquired
Free cash flow
Equity raisings
Dividends paid
Other items
Cash flow
2018
1,056
(79)
(7)
(22)
(96)
(86)
(22)
(48)
(118)
578
(425)
–
75
8
–
235
–
(287)
(2)
(54)
2017
720
(34)
(12)
(38)
(50)
(42)
(12)
(2)
(117)
413
(340)
(3,637)
39
123
75
(3,327)
2,019
(226)
9
(1,525)
Operating cash flow increased by $165 million to $578 million in
FY2018, with improved earnings offset by higher interest and tax
payments and an adverse working capital movement.
1. Excluding significant items.
(Figures may not add due to rounding).
8
Boral Limited Annual Report 2018
Debt and gearing
As at 30 June, $m
Total debt
Total cash and deposits
Net debt
Total shareholders equity
Gearing ratios
Net debt : equity (%)
Net debt : equity plus net debt (%)
Interest cover (times)
2018
2,527
74
2,453
5,731
43
30
6.6
2017
2,571
238
2,333
5,441
43
30
9.1
Net debt
Net debt increased from $2,333 million to $2,453 million
at 30 June 2018, primarily due to foreign currency impacts of
$66 million resulting from an unfavourable movement in US dollar
exchange rates, and a net cash outflow of $54 million.
Gearing ratios
Boral’s gearing covenant with its financiers, measured as gross
debt to gross debt plus equity, decreased slightly to 31%,
remaining comfortably within the 60% threshold. Gearing, as
measured by net debt to net debt plus equity, was 30% as at
30 June 2018.
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.
Capital management
In the prior 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 $4.80 per
share. The capital raising resulted in the issue of 93,750,000
ordinary shares under the Institutional Placement, 233,648,069
ordinary shares under the Institutional Entitlement Offer and
101,334,418 ordinary shares under the Retail Entitlement Offer.
In FY2018, a 50% franked interim dividend of 12.5 cents per
share and a 50% franked final dividend of 14.0 cents per share
were declared, for a full year dividend of 26.5 cents per share.
The Group’s Dividend Reinvestment Plan remains suspended
until further notice.
Boral Limited Annual Report 2018
9
Divisional
Performance
Boral Australia
(A$)
Revenue
EBITDA1
EBIT1
Net assets
ROFE1,2
Employees3
USG Boral
FY2018
$3,590m
$634m
$433m
$2,482m
17.5%
6,510
Revenue
EBITDA1
9%
15%
24%
m
0
9
5
3
$
,
m
6
9
2
3
$
,
m
4
3
6
$
m
1
5
5
$
7
1
0
2
Y
F
8
1
0
2
Y
F
7
1
0
2
Y
F
8
1
0
2
Y
F
EBITDA of $634 million and EBIT
of $433 million grew 15% and 24%
respectively, with revenue up 9%
to $3,590 million. The result was
underpinned by growing infrastructure
and non-residential activity, higher
Property earnings and solid
margins. The business benefited
from improvement and reinvestment
programs.
Boral’s full year reported result (A$)
FY2018
Revenue
EBITDA1
Reported EBIT1 or equity income4
$63m
9%
Underlying USG Boral result (A$)
FY2017
Revenue
EBITDA1
EBIT1
Net assets
ROFE1,2
Employees
7%
6%
10%
$1,575m
$268m
$194m
$1,955m
9.9%
3,526
m
4
8
2
$
m
8
6
2
$
m
5
7
5
,
1
$
m
8
7
4
,
1
$
7
1
0
2
Y
F
8
1
0
2
Y
F
7
1
0
2
Y
F
8
1
0
2
Y
F
Boral’s equity accounted income of
$63 million, down 9% on the prior year,
represents Boral’s 50% share of USG
Boral’s post-tax earnings. Revenue
increased 7% to $1,575 million in the
underlying business, with continued
adoption of premium Sheetrock®
products and technical board primarily
in Australia, South Korea, China and
Thailand. Earnings were impacted by
higher input costs, as well as one-off
costs that will not continue into FY2019.
Boral North America
(A$) (Continuing operations)
FY2018
FY2017
Revenue
EBITDA1
Revenue
EBITDA1
EBIT1
Net assets
ROFE1,2
Employees3
$2,141m
$963m
$368m
$208m
$111m
$60m
$4,678m
$4,524m5
4.4%
7,096
m
1
4
1
,
2
$
8
1
0
2
Y
F
m
3
6
9
$
7
1
0
2
Y
F
m
8
6
3
m $
1
1
1
$
7
1
0
2
Y
F
8
1
0
2
Y
F
Reflecting a full year contribution from
Headwaters, revenue of $2,141 million
compared to $963 million in the
same period last year and EBITDA
of $368 million compared to
$111 million last year for continuing
operations. Acquisition net synergies
of US$39 million were ahead of our
initial US$30–$35 million target.
1. Excluding significant items.
2. Divisional ROFE is EBIT before significant items on divisional funds employed.
3. Includes 50%-owned joint venture employees.
4. Post-tax equity income from Boral’s 50% share of the USG Boral joint venture.
5. Restated following the finalisation of acquisition accounting of Headwaters, refer to note 6.3 for further information.
10
Boral Limited Annual Report 2018
Divisional
Performance
Market
Conditions
and competition
In FY2018, there was strong growth in Australian infrastructure
projects across all key regions, growing non-residential activity
and robust housing construction which remained at prior year
levels. In the US, there were further improvements in housing
markets and infrastructure activity. In Asia, there continued
to be strong market demand in Korea, subdued markets in
Thailand and Indonesia, with China continuing to benefit from
plasterboard market supply constraints.
Highlights included:
• Boral continues to benefit from strong levels of activity in
major roads and infrastructure investments, and a robust
level of activity in the Australian residential market.
• US housing continues to be underpinned by growing
single-family house construction. Other US construction
markets also strengthened. Boral is well positioned to
benefit from broader construction market growth with
improved scale, enlarged product offering and a more
balanced portfolio.
• Market positions in Asia continue to benefit from high
adoption of Sheetrock® brand products, with opportunities
to increase product penetration.
Australia
Boral Australia’s largest exposure is to the roads, highways,
subdivisions & bridges (RHS&B) segment. RHS&B value of work
done2 is estimated to have grown by 15% in FY2018, with 26%
growth in Vic, 20% in Qld, 15% in NSW and 15% in SA.
Other engineering activity2 grew in FY2018, primarily through
growth in railways and electricity sectors as well as in mining
and heavy industry.
Australian housing starts3 remain robust, at a rate of 222,000
starts in FY2018, in line with FY2017. Detached housing
starts are estimated to be up 3%, with multi-residential starts
down 3%.
In NSW, Qld and WA, housing starts declined by an estimated
9%, 9%, and 7%, respectively. Offsetting this, housing starts
in Vic and SA increased by an estimated 17% and 15%
respectively, driven by multi-residential starts. Overall detached
housing starts as a proportion of total starts remain at low levels
of ~54%, compared to a 20-year average of 63%.
Market forecasters4 expect housing starts to be down ~9%
to ~202,000 starts in FY2019, which remains 17% above the
20-year average.
Australian alterations & additions (A&A) activity5 is estimated to
have declined by 4% in FY2018 compared with the prior year.
Boral external revenue1 by market
USA infrastructure 5%
Other 2%
USA non-residential 6%
USA repair
& remodel 8%
USA multi-
residential
3%
USA single-
residential
14%
Asia & Middle East 7%
Australian A&A 7%
Australian RHS&B
and other engineering
23%
Non-residential activity5 is estimated to have grown 13% in
FY2018 compared with the prior year with growth in all states
particularly Vic, NSW and SA.
The list of project work in Table 1 on page 12 includes the
largest infrastructure projects across each State awarded to
Boral, together with a selection from the potential pipeline of
work.
Australian
non-residential
9%
Australian detached
dwellings 10%
Australian multi-dwellings 6%
1. Includes Boral’s 50% share of underlying revenue from USG Boral and Meridian Brick joint ventures, which are not included in Group reported revenue.
2. RHS&B and Other Engineering: average of Macromonitor and BIS Oxford Economics forecasts.
3. ABS original housing starts; average of Macromonitor, BIS Oxford Economics and HIA for June 2018 quarter.
4. Average of HIA, BIS Oxford Economics and Macromonitor forecasts.
5. Original series (constant 2015/16 prices) from ABS. Average of BIS Shrapnel and Macromonitor forecast for June 2018 quarter.
Boral Limited Annual Report 2018 11
Divisional
Performance
Market
Conditions
and competition
Est. completion 2018
Est. completion 2019
Est. completion 2020
Table 1: Australia - project work
Bringelly Road stage 1, NSW
Northern Beaches Hospital, NSW
NorthLink stage 1, WA
Toowoomba Second Range, Qld
Warrego Highway (including stage 2), Qld
Amrun Project, Qld
Forrestfield – Airport Link (precast), WA
Gateway Upgrade North, Qld
Kingsford Smith Drive, Qld
Logan Motorway, Qld
NorthConnex, NSW
Northern Road stage 2, NSW
Northern Connector, SA
Northern Road stage 3, NSW
Pacific Motorway, (M1 & M3 merge) Qld
Sydney Metro (City/SW precast), NSW
Warrego Highway stage 3, Qld
Melbourne Metro Rail (precast), Vic
Albion Park Rail Bypass, NSW
Cross River Rail, Qld
Haughton River Bridge, Qld
Inland Rail, Qld, NSW, Vic
Newell Hwy Upgrade, NSW
Outer Suburban Arterial Roads, Vic
Pacific Hwy W2B, NSW
Perth Metro Road Maintenance, WA
Currently tendering
Smithfield Transport Corridor, Qld
Princes Hwy Upgrade, NSW
Snowy Hydro, NSW
Sunshine Coast Airport, Qld
Sydney Metro (Stations), NSW
WestConnex (stages 1A&B, 3A&B) NSW
West Gate Tunnel, Vic
Melbourne third runway, Vic
Badgerys Creek Airport, NSW
Pre-tendering
USA
The US market is strong with GDP growth estimated to be over
4% in the June 2018 quarter1, and unemployment and inflation
numbers amongst the best in the world.
US housing starts2 were up 4% to 1.25 million starts and
continue to be driven by higher single-family starts, partly
offset by a decline in multi-family starts. Single-family starts
grew by 8%2 and multi-family starts were down 5%2, resulting
in single-family starts as a proportion of total starts increasing
from 68% to 71%, in line with the long-term average of 71%2.
On average, market forecasters3 expect total US housing starts
to grow by ~5% in FY2019 to ~1.31 million starts.
Other US construction markets also strengthened in FY2018.
Activity in the repair and remodel4 market was up 7%.
Non-residential5 construction market activity was steady.
US infrastructure6 activity, based on estimated ready mix
concrete volumes, was up ~5%.
Asia7
In Korea, residential market activity continued to underpin
market growth in the first half, although government measures
to curb rising house prices have seen growth moderate in the
second half. In China, general market growth is continuing
and environmental regulations are reducing the plasterboard
industry’s manufacturing capacity. In Indonesia, activity remains
subdued, while in Thailand, the construction market continues to
decline relative to the prior year. Emerging markets of India and
Vietnam continue to grow.
In most of its building product markets Boral faces
competition from a range of large and small players. Many
of Boral’s large competitors in Australia, Asia and North
America have 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.
For the concrete and asphalt markets 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 pages 18 and 19.
1. “Advance” estimate released by the Bureau of Economic Analysis, US Department of Commerce.
2. US Census seasonally adjusted annualised housing starts.
3. Based on average of analysts’ forecasts (Dodge, Wells Fargo, NAR, NAHB, Fannie Mae, Freddie Mac, MBA), Jan - Jun 2018.
4. Moody’s retail sales of building products, July 2018.
5. Dodge & Analytics. Non-residential square feet area (millions), June 2018.
6. Infrastructure Ready Mix Demand from McGraw Hill Dodge, June 2018.
7. Based on various indicators of building and construction activity.
12
Boral Limited Annual Report 2018
Divisional
Performance
Boral
Australia
Revenue
Boral Australia revenue increased by 9% to $3,590 million driven
by a higher Concrete, Concrete Placing and Asphalt contribution
from continued acceleration of infrastructure project work and
growth in non-residential construction.
Overall, average selling price (ASP) was higher across most
businesses, with the exception of Quarries, which was impacted
by an adverse product mix shift, and WA Bricks, where
conditions remain challenging.
Boral benefited from exceptionally dry weather on the east coast
in Q1, compared to extremely wet weather in the prior year. Q2
and Q3 were impacted by rainfall in South East Queensland,
while Q4 saw drier weather patterns, particularly on the east
coast.
EBITDA1
EBITDA was up 15% to $634 million, exceeding Boral’s earnings
guidance provided in April. Excluding Property earnings of
$63 million compared to $24 million in the prior year, EBITDA
increased by 8%. Growth in EBITDA margins to 17.6% reflects
higher property earnings.
Cement, Quarries, Concrete and Asphalt margins all improved,
however EBITDA margins of 15.9% excluding Property, were
broadly steady, reflecting increased investment in divisional
improvement programs and a higher proportion of revenue
from lower margin businesses (Concrete, Asphalt & Concrete
Placing).
Price gains were offset by higher costs including higher energy
costs, increased cost to serve due to supply constraints, and
increased investment in excellence programs and innovation,
which will deliver future benefits.
With stronger earnings and marginally higher funds employed,
ROFE improved from 14.6% to 17.5%.
Concrete
Concrete earnings improved significantly, with higher volumes
and prices and a growing contribution from major projects
which included NorthConnex and Pacific Highway in NSW,
Amrun in Qld and Forrestfield Airport Link in WA. Concrete
volumes increased 7%, with all regions reporting higher volumes
including strong growth in east coast metro markets and major
projects.
Boral Australia FY2018 external revenue
Bricks and Roofing 5%
Timber 4% Other 2%
Concrete Placing
5%
Cement 8%
Asphalt 22%
Concrete 42%
Quarries 11%
maintenance funding by Vic Roads and infrastructure projects
including: Gateway Upgrade North, Warrego Highway
stage 2 and Dalby East West in Qld. Contracting productivity
and performance continues to improve.
Quarries
Earnings were modestly lower reflecting a 5% decline in external
revenue, in part due to an adverse mix shift to lower value
products in NSW metro and South East Queensland, together
with an increased cost to serve due to supply constraints.
Quarry volumes (internal and external) increased 1% with higher
demand in NSW, Qld and SA partially offset by lower volumes
in WA and Tas. Volumes in Vic were steady, impacted by supply
disruptions in Vic metro, particularly in the first half.
Nationally, ASP for Quarries declined by 3% reflecting the
increase in low value product in NSW and Qld, including an
abundance of tunnelling spoils and recycled materials in NSW.
Excluding low value product, ASP was up 1%.
On a LFL basis, Quarry prices were up an average of 1%
nationally, with price growth across Vic, SA and Tas.
Cement
While total Cement volumes (external and internal) increased
2%, external volumes were lower reflecting a shift to internal
supply to support growth in Boral’s concrete business.
LFL cement prices were up 2% and ASP increased by 1%, due
to a less favourable mix shift.
Concrete ASP was up 3% and on a like-for-like (LFL) basis
prices were up 2%. While LFL price growth in east coast
metro markets averaged 3%, this was partially offset by pricing
pressures in regional areas, WA and Tas.
Cement earnings and margins improved reflecting higher prices
and an ongoing contribution from Boral’s commercial and
operational excellence program. These benefits were partly
offset by cost inflation and higher energy costs.
Asphalt
Asphalt delivered strong earnings growth and improved
margins, driven by a 16% revenue increase. Substantial volume
growth continued to be underpinned by a strong increase in
1. Excluding significant items.
Concrete Placing
Concrete Placing delivered a 58% lift in revenue and higher
earnings, reflecting strong underlying market demand, especially
in the multi-residential Sydney market in the first half and the
ramp up of commercial projects in the second half of FY2018.
Boral Limited Annual Report 2018 13
Divisional
Performance
Boral
Australia
Property
Property contributed $63 million EBITDA, compared to
$24 million in FY2017. The FY2018 result included the sale of the
Prospect Masonry property in NSW and earnings from the new
development agreements for Donnybrook in Vic.
Building products
Building products businesses overall reported stable revenue and
a slight increase in earnings, as improved earnings in Timber were
partly offset by a decline in Bricks.
Roofing (including masonry operations in SA and Qld)
Roofing reported stable revenue and lower earnings driven
primarily by higher inflationary and energy costs, which offset a
2% increase in LFL prices.
Bricks WA (including WA masonry)
While Bricks WA reported declines in revenue and earnings in line
with challenging conditions, the business is performing above
breakeven.
Brick volumes were down 11% on lower housing starts and a
drop in commercial volumes. Brick ASP was down 4%.
Timber
Revenue increased 6% and earnings improved due to favourable
product mix and higher prices. Despite lower volumes, Softwood
revenues were up 7%, reflecting price increases of 10% as a result
of pricing initiatives in April and October 2017, and April 2018.
Hardwood revenue grew by 6%, reflecting a 3% lift in volumes
and 1% increase in ASP. Hardwood margins were slightly lower
as price increases were offset by higher product costs due to an
adverse mix shift.
Excellence programs
A customer experience program commenced in FY2018 focused
on further improving the customer journey with Boral. As part
of this program, a new Concrete Deliveries App and Multi Order
SMS were launched.
The commercial excellence program, which is focused on
improving commercial outcomes, continued to be rolled out
across the business with approximately 250 sales people
attending a newly developed national sales training program in
FY2018. The program has also developed and is rolling out new
pricing tools across Concrete and Quarry businesses, and has
implemented improved systems and reporting.
At the beginning of 2018, Boral commenced a multi-year supply
chain optimisation project as part of operational excellence. The
program is intended to support margin expansion across the
business, reduce cost to serve and provide better service to
customers.
Boral spends more than $650 million per annum transporting
materials and finished goods by road, rail and ship. To date, Boral
has identified initiatives to reduce supply chain costs by 5% to
10% over the next three years.
Strategic priorities
Boral Australia remains strong and the business is performing
well. Our strategy is to protect and strengthen our leading,
integrated construction materials position, which continues
to benefit from the multi-year pipeline of major roads and
infrastructure work.
During FY2018, a total of ~$284 million of capital was invested
in Boral Australia including further progressing our quarry
reinvestments at Deer Park (Vic), Orange Grove (WA) and Ormeau
(Qld), part of a ~$200 million capital program to modernise
and secure future resource positions in Melbourne, Perth and
Brisbane markets.
We also continued to invest in Boral’s concrete and asphalt plant
network in growth markets, with a new concrete batch plant
completed at Redbank Plains (Qld), and a new plant being built
at West Melbourne (Vic) to replace our closed North Melbourne
plant. In Asphalt, we completed the Deer Park (Vic) and Canberra
(ACT) upgrades, and we are upgrading Toowoomba (Qld).
In FY2018, we progressed plans to invest up to ~$130 million
to build a new 1.3 million tonne clinker and slag grinding plant
and cementitious storage facility at the Port of Geelong in
Victoria. The investment will improve delivered cement costs
by eliminating road transport of imported clinker and reducing
handling costs. The increased capacity will meet future demand
and expand Boral’s cement product offering. Regulatory approval
has now been received and contract negotiations completed.
Site establishment works have commenced and construction is
expected to be completed in FY2020.
Outlook
Boral Australia is expected to deliver high single-digit
EBITDA growth or more in FY2019, excluding Property in
both years. If we include Property in both years, we expect
EBITDA to remain at least in line with the prior year. FY2019
Property earnings are expected to be around $20 million
compared with $63 million in FY2018.
The anticipated year-on-year improvement is underpinned
by forecast growth in RHS&B (up 8%)1 and non-residential
demand (up around 10%)1 more than offsetting the impacts
of a moderating housing construction market. Detached
housing starts are forecast to be down 5% and multi-
residential starts down 13%2. Volumes and margins are
expected to strength in FY2019 relative to FY2018.
1. RHS&B & non-residential: average of Macromonitor and BIS Oxford Economics forecasts.
2. Housing starts (detached and multi): average of Macromonitor, BIS Oxford Economics and HIA forecasts.
14
Boral Limited Annual Report 2018
Divisional
Performance
USG
Boral
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 $63 million, down 9% on
the prior year, represents Boral’s 50% share of USG Boral’s
post-tax earnings, and is reflected in Boral’s EBITDA result.
USG Boral underlying business result
Revenue increased 7% to $1,575 million in the underlying business,
with continued adoption of premium Sheetrock® products and
technical board primarily in Australia, Korea, China and Thailand.
While prices increased in some key markets, inflationary cost
pressures in other markets including Thailand, Indonesia and
Vietnam, together with increased competition (especially in
Indonesia) and one-off costs saw margins contract.
Overall board volumes increased 3% and technical board, which
represents 20% of volumes, grew by 20%. Plasterboard volume
growth was evident in Australia and China, and strong price gains
were achieved in Korea and China.
Sheetrock® brand products continue to maintain a price premium
of ~3% with adoption rates at June ranging from ~40% in Korea to
more than 90% in Australia, China and Vietnam.
Non-board revenue, which includes ceiling tiles, metal stud,
compounds and plasters, and contracting increased 9% and
represented 40% of USG Boral’s total revenue.
Underlying EBITDA declined by 6% to $268 million. Benefits from
revenue growth were offset by unexpected one-off costs, higher
input costs, particularly paper, and ongoing competitive pressure in
Indonesia, Thailand and Vietnam.
EBITDA was impacted by one-off costs of $11 million associated
with the three-month closure of the port facility in SA impacting
gypsum supply in Australia in the first half and an unfavourable
operational reserve adjustment in India which impacted both
halves. Further, unfavourable foreign exchange movements relating
to intercompany loans had a $3 million adverse impact on earnings.
The fourth quarter was below our expectation due to operational
and product supply issues in Australia, the additional reserve
adjustment in India as well as higher than expected costs
associated with exiting a distribution agreement in Korea.
Excluding one-off costs of $11 million, EBITDA was slightly lower
year-on-year.
Average plant utilisation of ~80% was up from 76% in FY2017.
Australia/New Zealand revenue increased 9% to $577 million with
solid gains across board and non-board revenue driven by higher
volumes, while ASP was steady on the prior year.
Earnings in Australia were impacted by higher energy costs, higher
gypsum costs in the first half as gypsum was temporarily sourced
from Oman and WA, stock transfer costs to meet strong NSW
USG Boral FY2018 underlying revenue
Other 11%
China 11%
Indonesia 5%
Thailand 13%
Australia 37%
Korea 23%
demand and higher costs associated with now resolved product
supply issues in Melbourne in the second half of FY2018.
Asia
Revenue increased by 5% to $998 million driven by volume and
price increases in China and Korea and volume growth in Thailand.
Korea delivered revenue and earnings growth, underpinned by
higher prices. Margins held steady. In the second half of FY2018,
competitive pressures increased and growth rates moderated.
China delivered a substantial lift in revenue and earnings,
supported by strong price growth and volume gains. Higher input
costs were more than offset by price increases.
Thailand reported revenue growth despite lower prices, driven
by higher domestic and export volumes. Ongoing competitive
pressures, higher input and energy costs resulted in lower earnings
compared with the prior year.
Indonesia continued to experience competitive pricing pressures
and weaker demand, resulting in lower revenues and earnings.
India reported revenue growth, including higher plasterboard and
non-board sales. Earnings were lower due to an unfavourable
operational reserve adjustment.
While Vietnam continues to offer growth opportunities, during
FY2018 the business experienced competitive pricing pressures
and higher input costs, resulting in lower earnings. Second half
performance improved.
Outlook
USG Boral is expected to deliver profit growth of around
10% or more in FY2019. The FY2019 outlook for USG Boral
reflects a forecast moderation in residential construction
in our largest markets of Australia and South Korea, and
improvements in other countries including China, Indonesia,
Thailand and India. The year-on-year improvement in earnings
is expected to come through in the second half of FY2019.
1. Post-tax equity income from Boral’s 50% share of USG Boral JV.
Boral Limited Annual Report 2018 15
Divisional
Performance
Boral
North America
The FY2018 result includes the first full year contribution from the
Headwaters acquisition, completed on 8 May 2017. The prior year
includes revenue and earnings from Headwaters for eight weeks.
The result also includes post-tax equity income from Meridian
Brick JV formed 1 November 2016.
Boral North America external revenue2
Meridian Brick 11%
Block 6%
In May 2018, Boral agreed to sell its Denver Construction
Materials business, which settled on 2 July 2018 and is not in
Boral North America earnings for continuing operations.
Windows 8%
The following commentary relates to FY2018 results for continuing
businesses relative to the underlying proforma consolidated Boral
and Headwaters businesses for the 12 months to 30 June 2017.
Light building
products 15%
Fly Ash 28%
Roofing 17%
An average AUD/USD exchange rate of 77.35c is used for
FY2018 and 75.36c for FY2017.
Revenue
Revenue of US$1,656 million was flat on the prior year due
to the inclusion of four months of Bricks revenue in the first half
of FY2017 prior to the formation of Meridian Brick JV. Excluding
Bricks, revenue was up 6%.
EBITDA1
EBITDA of US$284 million was up 9% with benefits from
underlying revenue growth and substantial synergies of
US$39 million resulting in higher margins.
Stone 15%
Fly Ash
Revenue increased 7% to US$523 million, reflecting an increase
in site services revenue and an average 9% like for like price
increase, partly offset by lower volumes. In FY2018 site services
represented 28% of revenue benefiting from two major site
services construction projects. As these projects complete,
site services are expected to account for ~20% of Fly Ash
revenue in FY2019. Fly Ash earnings increased, benefiting from
US$11.5 million in synergies although margins were impacted by
the mix shift towards site services and higher costs.
During the period, earnings were impacted by adverse weather
(US$15 million), one-off plant operational issues, which
progressively improved during the year (US$10 million) and lower
profits associated with repositioning fly ash supply in Texas.
Fly ash volumes declined 6% to 7.1 million tons due to
weather impacts, the Texas utility closures in the second half
of the year and supply constraints due to intermittent unplanned
power plant outages.
Earnings were below our expectation in Q3 and down on the prior
year Q3 proforma result due to a later spring construction season
and persisting winter conditions coupled with the challenges of
reconfiguring fly ash supply in the Texas market following the
permanent closure of three utilities.
Pleasingly, there was a substantial earnings lift in Q4 as more
normal weather patterns returned and trading conditions
improved. Significant year-on-year Q4 earnings growth was
delivered by both Construction Materials and Building Products.
The FY2018 EBITDA result includes an US$11 million benefit from
aligning the accounting policy between Boral and Headwaters for
Stone molds. This was offset by one-off favourable adjustments
in the prior period under Headwaters ownership.
Construction Materials
Revenue for Construction Materials, which includes Fly Ash and
Block, increased 5% to US$640 million, and EBITDA increased
by 6% to US$142 million. EBITDA margins increased modestly
to 22.2%.
1. Excludes significant items.
2. Includes Boral’s 50% share of underlying revenue from the Meridian Brick
JV which is not included in reported revenue.
16
Boral Limited Annual Report 2018
Boral aims to grow fly ash volumes in line with cement
demand and over time exceed cement growth by increasing
substitution rates of fly ash in ready mix. Boral is targeting to
increase its annual supply of available fly ash to the market by
1.5–2.0 million tons over the next 3 years3. Refer to page 50 of
the Boral Review 2018 for more information on Boral’s strategy to
grow fly ash volumes.
Block
Block, which largely services the non-residential Texas market,
reported lower earnings with revenue down 4%. Volumes were
significantly impacted by Hurricane Harvey in the first half and the
continued focus of remediation work by builders on interior rather
than exterior repairs.
Benefits from post hurricane remediation work as well as future
planned school construction projects are expected to commence
in FY2019. Boral has won several large school construction
projects as part of this work.
Building Products
Revenue was up 7% to US$1,013 million, largely due to prior
year Windows acquisitions as well as strong volume growth in
Light Building Products (LBP). Earnings were up 9%, with the
3. Net estimated supply volume increase based on currently known utility
retirements estimated to impact Boral’s network by ~800,000 tons
per annum on FY2018 levels.
benefit of strong revenue growth partly offset by the impact of
hurricanes in the first half and adverse weather conditions in Q3.
Plant integration issues, costs associated with commissioning
new capacity and safety interventions impacted earnings.
While these issues impacted more significantly in the first
half, the Oceanside metal roofing consolidation (California)
and commissioning of the Greencastle stone plant upgrade
(Pennsylvania) continued to impact in the second half.
Stone
Revenue was down 2%, reflecting 4% lower stone volumes due to
share loss and weaker multi-family starts. ASP increased by 2%.
Earnings improved primarily due to an US$11 million benefit from
re-aligning accounting policies between Boral and Headwaters
for Stone molds. Excluding the accounting benefit, earnings
for Stone were softer due to lower volumes, higher costs and
production impacts in the first half due to safety interventions, and
costs associated with commissioning the Greencastle Eldorado
Stone plant upgrade.
In FY2019, share is expected to stabilise and costs improve as
the Greencastle plant continues to ramp up.
Roofing
Roofing delivered 8% revenue growth to US$320 million and
higher earnings. Volumes were up 6% with strong volume growth
in Concrete Tile products, which in many markets exceeded
housing starts. This was partly offset by supply constraint
issues at the Oceanside metal roofing business. Selling prices
were higher across all product categories with an average price
increase of 3%. While FY2018 synergies of US$8 million were
delivered in line with our expectations, earnings were impacted
by a number of one-off operational issues, more so in the first
half. These related to the manufacturing challenges at the
Okeechobee plant (Florida) (previously part of the Entegra Roofing
business, a Headwaters majority owned joint venture) and
optimising capacity at Lake Wales (Florida).
Improvement initiatives at Okeechobee and upgrades at
Lake Wales are now substantially complete with earnings
improvements expected in FY2019.
Light Building Products (LBP)
LBP delivered revenue growth of 6% and synergies of
US$11 million. Revenues were underpinned by growing market
demand and increased product penetration. Tapco revenue was
up 6%1. Versetta and TruExterior® Siding and Trim reported a
30% and 4% increase in revenues, respectively. Earnings grew
modestly but were impacted by adverse weather in Q3, higher
raw material and labour costs until final commissioning of the
upgrade of Kleer trim plant, and higher production costs in the
TruExterior® Siding and Trim business associated with production
of one of the newer siding product lines, particularly in Q4, as well
as higher raw materials costs more generally.
1. Excludes Clubhouse Decking which was sold in FY2018.
Windows
A revenue lift of 32% reflects the acquisitions by Headwaters
of Krestmark in August 2016 and Magnolia in February 2017,
coupled with underlying volume growth of 5%. Operational issues
at Magnolia in the first half negatively impacted margins.
Operational improvement initiatives at the Magnolia plant,
including the installation of a key new plant component and
implementation of LEAN manufacturing principles, were
completed in FY2018 and are expected to deliver improved
performance in FY2019.
Meridian Brick JV
The JV delivered a post-tax equity contribution loss of
US$1 million, as the business continues to restructure.
The underlying Meridian Brick JV generated US$395 million
of revenue and delivered US$25 million of EBITDA. Compared
to the prior period, EBITDA declined by US$3 million. Brick
volumes were down due to the decline in brick intensity, the
impact of Hurricane Harvey in the South in the first half, and a
smaller distribution network following the planned closure of
manufacturing and distributions assets. The business is focused
on delivering targeted cost synergies of US$25 million within four
years through a number of initiatives.
Outlook
Boral North America is expected to deliver EBITDA
growth of around 20% or more in FY2019 (for continuing
operations), reflecting further synergy delivery, operational
improvements and underlying market growth. The outlook
for Boral North America is based on:
•
•
expected additional Headwaters acquisition synergies
of ~US$25 million in FY2019
continued growth in underlying market demand,
including ~5% growth in housing starts
(to ~1.31 million), ~3% in repair and remodel, ~2% in
non-residential and ~6% in infrastructure2
• growth in fly ash volumes at least in line with cement
demand growth and reflecting efforts to increase
available supply volumes
• price growth for most products with margins improving
or at least holding across all businesses
•
•
the Meridian Brick JV delivering positive and improved
earnings
a return to normal weather patterns, with the spring
recovery expected from March 2019.
2. Housing starts based on average of Dodge, Wells Fargo, NAR, NAHB,
Fannie Mae, Freddie Mac and MBA analysts (March 2018); Repair & remodel
from Moody’s retail sales of building products, June 2018; Non-residential
from Dodge & Analytics, square feet area (millions) June 2018; and
Infrastructure Ready Mix Demand from McGraw Hill Dodge, June 2018.
Boral Limited Annual Report 2018 17
Summary
of Boral’s
Risks and
Responses
Responding to a changing world
To deliver on our goals, we recognise the
need to continually monitor external
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
our business. 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 Boral Review
2018, incorporating Boral's 2018
Sustainability Report.
18
Boral Limited Annual Report 2018
RisksHealth, safety, environment (HsE) and social risks industry and market risksCompetition risksBusiness interruption• Heightened community expectations • Injury and accidents• Environmental damage• Regulatory requirements • Community impacts• Climate-related impacts• Workplace relations and human rights• Conduct risk, anti-corruption• Structural and cyclical demand changes• Political and regulatory change • Macro-economic conditions • Inflationary impacts from rising input costs• Movements in foreign exchange rates• Future resource constraints• Changes to materials and construction methods• Changing demographics and urbanisation• New capacity and market entrants • Customer concentration • Pricing dynamics• Regulatory requirements• Technology/R&D and product innovation• Plant and systems failure• Cyber security• Weather impacts• Reserves and resources• Supply chain failure• Business conduct/reputational damage• Digital disruptionREsponsEsBoRal GRoup• Group-wide commitment to Zero Harm • Global HSEQ policies and minimum standards to inform divisional strategies and procedures 20 21• HSE performance monitoring, reporting and accountability frameworks 20• Monitoring regulatory changes• Progressive adoption of TCFD recommendations including early development of climate-related scenario analysis to better quantify risks, align mitigation strategies and identify opportunities 26 32• Group-led diversity program 19• Leadership development and suite of capability building activities 19 • US debt utilised to limit impacts of foreign exchange rate movements• Staged debt maturity profile • Adequate liquidity via committed undrawn facilities and cash• Energy inputs hedged and interest rates swapped to reduce cyclical impacts• Diversification to reduce impacts of individual geographies and markets• Group procurement to optimise cost base• Increased investment in R&D, innovation and customer-centric programs 38• Third-party managed whistleblowing hotline, monitoring and reporting in all jurisdictions 17• Centralised competition law training • Monitoring and reporting regulatory changes and industry trends • Transformation Action Group to foster new ways to make and sell new and existing products • Utilisation of technology for more targeted sales and marketing • Dedicated regionally based R&D teams focused on product innovation 38 • Business continuity planning with regular crisis simulations • Disaster recovery plans in place for critical IT systems and operational equipment• Formal bottom-up enterprise risk management processes in place 27 • Reserves planning and capital optimisation • Standardised Cyber Security strategy with cyber security training programs and Board reporting• Centralised Code of Conduct training and associated policies 17 • Centrally managed data breach monitoring and response processesBoRal austRalia• Zero Harm and wellbeing initiatives 24 • Heavy vehicle safety management to meet Chain of Responsibility compliance • Safe Systems of Work focused on safety leadership and decision making 22 • Community consultation programs and initiatives to minimise impacts of operations 33• Flood mitigation and environmental rectification programs 29 • Proactive engagement with regulators • Workplace relations supported by proactive engagement with unions and specialist advisers 19 • National Safety Information Management system• Leveraging demand shift to major infrastructure through investments in quarries, asphalt and concrete operations and strengthened project capability 42• Central oversight and tracking of major projects to target participation strategies• Strengthening import capability with construction of a clinker import terminal in Victoria• Operational Excellence program and cost reduction initiatives to offset inflation• Supply chain transformation focused on standardisation and optimisation 43• Investment in quarry assets, with Deer Park (Vic) nearing completion and Orange Grove (WA) and Ormeau (Qld) underway 41 43 • Innovation hub focused on identifying and implementing new technologies and processes 38• Commercial Excellence program and customer centricity programs to improve service and margin growth 38 • Maintaining Australian Building and Construction Commission (ABCC) compliance to enable bids on Federally funded work• Investment in downstream concrete and asphalt network to optimise exposure to growth markets 41• Boral Digital Services utilising agile processes and cloud-based application and storage• Targeted technology enhancements to improve operational systems• Monitoring and preparedness for weather affected disruption including water management plans, flexible workforces and additional equipment 29 • Dedicated property and environmental experts to support compliance and meet stakeholder expectations 20 usG BoRal• HSE standards applied consistently across Asia, Australia and the Middle East (where standards are often higher than in-country practices) 21 • Safety engagement program including communications, leadership workshops, tool box talks and dedicated safety culture month • Use of CCTV to aid incident investigations and improvements 47• Regionally led environmental improvements • Anti-corruption measures including clear accountability, policies, training, audits 17 • Capacity planning to respond to demand changes including upgrades in India and Vietnam 46 • Product leadership and differentiation strategy underpinning performance 47 • Securing gypsum supply through acquisition of reserves and exclusive supply agreements • Long-term resource supply contracts, eg paper • Innovation investment to further strengthen competitive advantage, eg Sheetrock® 2.0, EnsembleTM 37 • Differentiation strengthens response to new capacity and market entrants• Expanded product portfolio delivering enhanced revenue and earnings• Best in class architectural specification• Sales and Marketing Excellence includes new product integration and pricing strategies• Country focused cost saving initiatives• Revised governance structures to manage culture and performance of third-party agreements and joint ventures• New IT implementation in key regions• Multi-year roll-out of Sheetrock® technologies has resulted in a modern, upgraded plant network • Investment in cyber security controls and monitoring • National Institute of Standards and Technology (NIST) security frameworkBoRal noRtH amERiCa• Safety integration plans developed for acquired businesses to achieve Boral’s safety standards 25 • Ongoing review of safety exposure and compliance, including audits• Dedicated capital investment for safety enhancement projects 25 • Executive-led safety initiatives and near-miss reporting underway• Environmental risk reviews performed on acquired assets to meet internal and external standards• Safety and recovery plans for major weather events • Reposition of portfolio from high fixed cost, energy-intensive products to lighter building products, with more variable cost base 6 • Improvement of brick business through the Meridian Brick Joint Venture • Network optimisation initiatives to enhance returns• Diversified exposure to US construction markets • Continued monitoring of US Government policies including tax, labour and infrastructure policies • Synergy plans to reduce costs, produce efficiencies, and capture further market growth• Dedicated Integration and Synergy Delivery program • Cost reduction and margin improvement initiatives including LEAN • Divisional procurement initiatives• Regionally focused product price analytics and sales strategies• Business systems implementation, standardisation, and uplift• National R&D Center to bring new technologies and products to market 51• Long-term availability of fly ash monitored and future sources identified including reclaim 50 • Prioritisation of capital investment aligned with product and market growth, with a focus on increasing fly ash storage 50 • Streamlining and upgrading IT systems and investment in cyber security controls and tools• Ongoing code of conduct, competition law, and other legal training • Geographically balanced portfolio lessens the impact of regional weather events
Boral Limited Annual Report 2018 19
RisksHealth, safety, environment (HsE) and social risks industry and market risksCompetition risksBusiness interruption• Heightened community expectations • Injury and accidents• Environmental damage• Regulatory requirements • Community impacts• Climate-related impacts• Workplace relations and human rights• Conduct risk, anti-corruption• Structural and cyclical demand changes• Political and regulatory change • Macro-economic conditions • Inflationary impacts from rising input costs• Movements in foreign exchange rates• Future resource constraints• Changes to materials and construction methods• Changing demographics and urbanisation• New capacity and market entrants • Customer concentration • Pricing dynamics• Regulatory requirements• Technology/R&D and product innovation• Plant and systems failure• Cyber security• Weather impacts• Reserves and resources• Supply chain failure• Business conduct/reputational damage• Digital disruptionREsponsEsBoRal GRoup• Group-wide commitment to Zero Harm • Global HSEQ policies and minimum standards to inform divisional strategies and procedures 20 21• HSE performance monitoring, reporting and accountability frameworks 20• Monitoring regulatory changes• Progressive adoption of TCFD recommendations including early development of climate-related scenario analysis to better quantify risks, align mitigation strategies and identify opportunities 26 32• Group-led diversity program 19• Leadership development and suite of capability building activities 19 • US debt utilised to limit impacts of foreign exchange rate movements• Staged debt maturity profile • Adequate liquidity via committed undrawn facilities and cash• Energy inputs hedged and interest rates swapped to reduce cyclical impacts• Diversification to reduce impacts of individual geographies and markets• Group procurement to optimise cost base• Increased investment in R&D, innovation and customer-centric programs 38• Third-party managed whistleblowing hotline, monitoring and reporting in all jurisdictions 17• Centralised competition law training • Monitoring and reporting regulatory changes and industry trends • Transformation Action Group to foster new ways to make and sell new and existing products • Utilisation of technology for more targeted sales and marketing • Dedicated regionally based R&D teams focused on product innovation 38 • Business continuity planning with regular crisis simulations • Disaster recovery plans in place for critical IT systems and operational equipment• Formal bottom-up enterprise risk management processes in place 27 • Reserves planning and capital optimisation • Standardised Cyber Security strategy with cyber security training programs and Board reporting• Centralised Code of Conduct training and associated policies 17 • Centrally managed data breach monitoring and response processesBoRal austRalia• Zero Harm and wellbeing initiatives 24 • Heavy vehicle safety management to meet Chain of Responsibility compliance • Safe Systems of Work focused on safety leadership and decision making 22 • Community consultation programs and initiatives to minimise impacts of operations 33• Flood mitigation and environmental rectification programs 29 • Proactive engagement with regulators • Workplace relations supported by proactive engagement with unions and specialist advisers 19 • National Safety Information Management system• Leveraging demand shift to major infrastructure through investments in quarries, asphalt and concrete operations and strengthened project capability 42• Central oversight and tracking of major projects to target participation strategies• Strengthening import capability with construction of a clinker import terminal in Victoria• Operational Excellence program and cost reduction initiatives to offset inflation• Supply chain transformation focused on standardisation and optimisation 43• Investment in quarry assets, with Deer Park (Vic) nearing completion and Orange Grove (WA) and Ormeau (Qld) underway 41 43 • Innovation hub focused on identifying and implementing new technologies and processes 38• Commercial Excellence program and customer centricity programs to improve service and margin growth 38 • Maintaining Australian Building and Construction Commission (ABCC) compliance to enable bids on Federally funded work• Investment in downstream concrete and asphalt network to optimise exposure to growth markets 41• Boral Digital Services utilising agile processes and cloud-based application and storage• Targeted technology enhancements to improve operational systems• Monitoring and preparedness for weather affected disruption including water management plans, flexible workforces and additional equipment 29 • Dedicated property and environmental experts to support compliance and meet stakeholder expectations 20 usG BoRal• HSE standards applied consistently across Asia, Australia and the Middle East (where standards are often higher than in-country practices) 21 • Safety engagement program including communications, leadership workshops, tool box talks and dedicated safety culture month • Use of CCTV to aid incident investigations and improvements 47• Regionally led environmental improvements • Anti-corruption measures including clear accountability, policies, training, audits 17 • Capacity planning to respond to demand changes including upgrades in India and Vietnam 46 • Product leadership and differentiation strategy underpinning performance 47 • Securing gypsum supply through acquisition of reserves and exclusive supply agreements • Long-term resource supply contracts, eg paper • Innovation investment to further strengthen competitive advantage, eg Sheetrock® 2.0, EnsembleTM 37 • Differentiation strengthens response to new capacity and market entrants• Expanded product portfolio delivering enhanced revenue and earnings• Best in class architectural specification• Sales and Marketing Excellence includes new product integration and pricing strategies• Country focused cost saving initiatives• Revised governance structures to manage culture and performance of third-party agreements and joint ventures• New IT implementation in key regions• Multi-year roll-out of Sheetrock® technologies has resulted in a modern, upgraded plant network • Investment in cyber security controls and monitoring • National Institute of Standards and Technology (NIST) security frameworkBoRal noRtH amERiCa• Safety integration plans developed for acquired businesses to achieve Boral’s safety standards 25 • Ongoing review of safety exposure and compliance, including audits• Dedicated capital investment for safety enhancement projects 25 • Executive-led safety initiatives and near-miss reporting underway• Environmental risk reviews performed on acquired assets to meet internal and external standards• Safety and recovery plans for major weather events • Reposition of portfolio from high fixed cost, energy-intensive products to lighter building products, with more variable cost base 6 • Improvement of brick business through the Meridian Brick Joint Venture • Network optimisation initiatives to enhance returns• Diversified exposure to US construction markets • Continued monitoring of US Government policies including tax, labour and infrastructure policies • Synergy plans to reduce costs, produce efficiencies, and capture further market growth• Dedicated Integration and Synergy Delivery program • Cost reduction and margin improvement initiatives including LEAN • Divisional procurement initiatives• Regionally focused product price analytics and sales strategies• Business systems implementation, standardisation, and uplift• National R&D Center to bring new technologies and products to market 51• Long-term availability of fly ash monitored and future sources identified including reclaim 50 • Prioritisation of capital investment aligned with product and market growth, with a focus on increasing fly ash storage 50 • Streamlining and upgrading IT systems and investment in cyber security controls and tools• Ongoing code of conduct, competition law, and other legal training • Geographically balanced portfolio lessens the impact of regional weather events Sustainability
Overview
Managing sustainability
We recognise that our commitment and progress in managing
sustainability outcomes is vital to our business success and
meeting the expectations of our stakeholders. We strive to
deliver shareholder returns above our cost of capital through
the cycle, while creating value for our customers, employees,
suppliers and the communities in which we operate.
We strive to position Boral to sustainably create value for all our
stakeholders by:
• delivering innovative, superior performing and more
sustainable products and solutions that respond to a
changing world and better meet our customers' needs
• driving safety performance towards world’s best practice
and investing in our people to enable them to deliver on
our strategy
•
reducing our environmental footprint and building our
resilience to climate impacts, and
• being a socially responsible member of the communities in
which we operate.
We monitor and report on our sustainability performance to drive
progress and continuous improvement and are responding to
increasing expectations of our stakeholders on the disclosure of
our sustainability risks and opportunities. We are progressively
adopting the recommendations of the Financial Stability
Board’s Task Force on Climate-related Financial Disclosures
(TCFD) and are strengthening our approach to managing
and reporting on modern slavery risks in our operations
and supply chain.
In FY2019, we will review the United Nations Sustainable
Development Goals (SDGs) with a view to identifying those
SDGs that we can materially impact within our sphere
of influence, and incorporate these in our sustainability
management approach and reporting
Sustainability governance
Sustainability governance is embedded in how we govern.
Our approach is underpinned by an effective governance
structure, constructive and open engagement with our
stakeholders, and transparent reporting on our material issues.
The Board maintains oversight of sustainability matters, including
identification of material issues and external reporting. The Board
Health, Safety & Environment (HSE) Committee provides focused
leadership, support and oversight of the activities of management.
The CEO & Managing Director is accountable for the management
of sustainability issues and delegates this responsibility to
Boral’s Executive Committee. Day-to-day responsibility for
sustainability rests with line managers and is embedded into
Boral’s Group and business-level strategies.
20
Boral Limited Annual Report 2018
Managing sustainability, including safety, is considered an
integral component of leadership and is linked to employment
and considered in reviewing performance and setting fixed
remuneration increases. We therefore do not link remuneration
incentives with safety performance or other sustainability metrics.
During the year, the Board reviewed whether Boral’s separation
of safety and remuneration incentives remained appropriate, and
concluded that it remains a very important element of Boral’s
culture to avoid linking incentive payments with safety outcomes.
The Board retains discretion to adjust executive remuneration
outcomes if there is evidence of a breakdown in management
oversight and processes leading to poor safety outcomes.
Further explanation of the safety and remuneration review is
provided on page 62 of the Annual Report 2018.
Boral’s governance approach is further detailed in the Annual
Report 2018 (pages 34–47). Our governance of climate-related
impacts is outlined on page 25.
Materiality
A biennial materiality assessment is undertaken to review
sustainability risks and opportunities, which forms part of
our broader risk management processes. This materiality
assessment ensures that issues that are important to our
long-term success, as well as to our employees, customers,
suppliers and the communities in which we operate, are being
addressed and transparently reported on.
In 2017, we engaged Ernst & Young (EY) to undertake a
materiality assessment to validate our areas of focus. The scope
of this work encompassed internal stakeholder interviews,
desktop peer and media analysis, external industry and sector
analysis, and consideration of relevant sustainability trends.
The results from EY’s assessment were materially consistent
with existing areas of management focus, and the outcomes
of risk assessment processes. Refer to pages in this Annual
Report (AR) and Boral Review 2018 (BR) for the issues identified
as material:
• business conduct (AR p. 21, BR p. 17)
• diversity and inclusion (AR p. 22, BR p. 19)
• workplace relations and human rights (AR p. 22–23,
BR p. 19)
•
•
•
health and safety (AR pp. 23–24, BR pp. 20–25)
climate-related impacts (AR pp. 25–28, BR pp. 26–32)
environmental and community impacts (AR pp. 28–30,
BR pp. 33–35)
supply chain (AR p. 30, BR pp. 36–37)
• product innovation (AR p. 31, BR pp. 37–38)
•
Approach to reporting
Boral’s 2018 Sustainability Report, which forms part of the Boral
Review 2018, provides detailed information on the sustainability
issues assessed as material to Boral. In addition to our
Sustainability Report, we provide this sustainability overview in
this Annual Report, and also communicate with our stakeholders
on aspects of sustainability through:
•
•
•
the Corporate Governance Statement and Directors’ Report
(including the Remuneration Report) in this Annual Report
our website, which includes detailed energy, carbon and
other emissions data, policies, information on sustainable
products and community engagement programs
case studies and features in our Boral News magazine
– see boral.com/boral_news
• Boral’s 2018 public report, lodged with the Workplace
Gender Equality Agency.
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 2018, unless otherwise stated.
Sustainability data for Headwaters, acquired in May 2017, has
been consolidated from 1 July 2017.
We engaged EY to provide independent assurance of selected
metrics and related information including:
• Scope 1 and 2 greenhouse gas emissions and energy
consumption by fuel source for our Australian operations
•
•
•
significant environmental infringements and penalties
lost time injury frequency rate (LTIFR)
recordable injury frequency rate (RIFR)
• workforce statistics by occupation, age and length of
service
Our commitment to anti-corruption compliance is reflected in
our Code, which prohibits bribery and corruption in all forms,
whether direct or indirect. Our anti-corruption measures include
clear policies, accountability, training, reporting and audit review.
Conduct risk and corruption risk are also assessed through our
enterprise risk management review process.
We complement our policy and risk management framework with
clear communication and training on the Code and associated
policies in our induction training and ongoing refresher training
programs. The USG Boral joint venture conducts additional
risk-based anti-corruption training and has established an
externally managed anti-corruption audit program.
The Board and senior management take breaches of the Code
or other misconduct very seriously. We have consistent and
transparent policies and practices in place to address any
non-compliance with our Code and supporting policies.
Formal consequences include additional training, impact on
reward and promotion, formal warnings and termination.
In FY2018, 35 employees in Boral Australia and Boral North
America were dismissed for breach of policy or misconduct,
including breaching safety requirements. These matters were
considered isolated incidents and not systemic.
We provide easy and clear avenues for our people to report
ethical concerns and improper behaviour. In addition to internal
reporting channels – via senior management, human resources,
internal audit and legal – we provide an external independent
whistleblowing service, known as FairCall. Reports via FairCall
can be made on an anonymous basis, and we are committed
to maintaining the independence, impartiality and confidentiality
of the reporting and investigative processes. The Company
Secretary reports on these matters to the Board Audit & Risk
Committee.
•
female representation by position.
Boral's policies prohibit political donations or affiliations.
EY’s assurance statement is on page 52 of the Boral
Review 2018.
Business conduct
Working with integrity, respect and fairness is fundamental to
how we do business. We expect all employees and people
representing Boral to meet the highest ethical standards as well
as observing both the letter and spirit of the law.
Demonstrating strong ethical principles in all that we do is vital
to our reputation and our ability to deliver long-term value to
all of our stakeholders, including shareholders, customers,
employees and communities.
Our Code of Business Conduct (Code) and supporting policies
set out the high ethical standards we expect everyone across
our international operations to adhere to, including third parties
with whom we do business – suppliers, contractors and
distributors.
Industry associations
We work with a number of industry associations for various
reasons including as a conduit to industry best practice, for
workforce relations advice, or to advocate to government
and the community on behalf of industry.
In general, the policy positions of our industry associations
are to support regulation in the national and industry
interest and encourage business to sustainably prosper
and remain competitive.
We recognise that our associations represent the interests of
many members and there may be some areas of policy that
do not fully align with Boral’s positions. When appropriate, we
work with our industry associations to help them understand our
Company’s position.
In relation to energy and climate policy, we have not identified
any major positions held by our industry associations that are
materially inconsistent with Boral’s position.
Further information is available at boral.com/industry_
associations.
Boral Limited Annual Report 2018 21
Sustainability
Overview
Our people
Building an engaged, diverse and capable workforce,
led by talented and effective leaders, is vital to delivering
long-term sustainable value for our stakeholders.
Workforce profile
As at 30 June 2018, we had 17,131 full-time equivalent
employees including in joint ventures (JVs), and approximately
8,700 contractors working in 17 countries.
Full-time equivalent
FY2018
FY2017
FY2016
Diversity and inclusion
A diverse workforce helps us deliver higher performance
by fostering a more creative, flexible and innovative culture
by bringing together diversity of thought, background and
experiences. It also enables us to better understand and serve
our customers through reflecting the diversity of our communities.
We have an established Diversity and Inclusion Plan, with Boral’s
Diversity Council supporting the delivery of targeted outcomes.
The Plan incorporates six elements: leadership, communication
and education, system and process design, gender equality and
pay equity, generational diversity, and Indigenous relations.
Boral employees
Boral contractors
JV employees2
JV contractors2
11,898
~5,200
5,233
11,4991
8,334
~4,800
~4,800
4,976
3,724
~3,500
~3,400
~3,400
Focus areas in FY2018 included: raising awareness of the impact
of unconscious bias, increasing representation of women,
particularly in leadership roles, and pay equity outcomes, with
the female to male average base salary ratio6 in Boral Australia
favourable at 1.01:1.00.
1. Included 4,016 full-time equivalent employees from Headwaters and
excluded employees from Boral Bricks in North America which were
included in JV employees.
2. Includes USG Boral, Meridian Brick and other small Australian-based joint
ventures.
At end FY2018
Boral total
Boral
Australia3
USG
Boral3
Boral
North
America4
Women in Boral
18%
14%
18%
23%
Average length of
service
8.1 yrs
9.0 yrs
9.3 yrs
6.8 yrs
Average age
43.4 yrs
44.9 yrs
40.7 yrs
43.3 yrs
20+ year veterans
Employee turnover
for FY2018
12%
20%
13%
17%
15%
8%
9%
29%5
3. Excluding joint ventures.
4. Including Meridian Brick joint venture.
5. Reflects consolidation of Headwaters and Boral’s legacy businesses.
Compares to a FY2017 proforma employee turnover of 24%.
We support Aboriginal and Torres Strait Islander employment,
programs and communities. In FY2018, we continued to retain
approximately 85% of Indigenous employees in Australia through
our Indigenous employment program.
Our 2019 REFLECT Reconciliation Action Plan, which has
been submitted to Reconciliation Australia, extends and broadens
our existing approach. The Plan outlines practical actions
aimed at strengthening relationships, respect and opportunities
for Indigenous communities. These practical actions include
increasing the number of Aboriginal and Torres Strait Islander
employees across our workforce, further building on the work
undertaken through our Indigenous employment program
since 2006.
Workplace relations and human rights
We are committed to advancing respect for, and promotion
of, internationally recognised human rights across our global
operations, as outlined in our Human Rights and Labour Policy.
This includes contributing to the elimination of all forms of forced,
compulsory or child labour and having workplaces free from
harassment, bullying, discrimination and unlawfulness.
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 undertake
negotiations in good faith. In Australia, we have some 79
enterprise agreements covering about 3,700 employees.
Age profile of employees (age)
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 and admin
Technicians and trade
Operators and drivers
0% 5% 10% 15% 20% 25% 30%
0% 10% 20% 30% 40% 50% 60%
0% 10% 20% 30% 40% 50% 60%
Male
Female
Male
Female
Male
Female
6. 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 2018
Our grievance mechanisms are accessible, accountable and fair,
enabling concerns to be raised without fear of recrimination. This
includes Boral’s independent external whistleblowing service,
FairCall, where people can raise anonymous concerns.
In FY2018, we established a Human Rights and Modern Slavery
Working Group to support work being undertaken to further
develop our approach to modern slavery and human rights across
our operations and supply chain. The working group, comprising
members of Boral’s Executive Committee and key functional
roles, assessed Boral’s approach to modern slavery in light of
proposed Australian Government reporting criteria and the United
Nations Guiding Principles on Business and Human Rights.
Key focus areas relating to our workforce for FY2019 include
reviewing and enhancing Boral’s Human Rights and Labour
Policy and publishing it externally, refreshing our broader policy
framework, and increasing awareness of modern slavery through
targeted training.
Our approach to mitigating the risk of modern slavery in our
supply chain is outlined on page 30.
Health, safety and environmental
management
Our goal is to achieve Zero Harm Today. We strive to
achieve this by identifying, understanding and eliminating
conditions and behaviours that have potential to result in
injury to people or harm the environment.
Where eliminating adverse environmental impacts is not
possible, we aim to minimise any harmful effects from our
operations, which means we typically target performance
exceeding our environmental compliance requirements.
Our approach
Visible and proactive leadership, robust governance,
accountability and effective frameworks and systems are all
essential to driving a culture focused on our goal of Zero
Harm Today.
Boral’s CEO & Managing Director and senior executives regularly
spend time at our operations, which provides an opportunity
to discuss safety and environmental management challenges
directly with site teams.
Divisional management teams and the corporate Health, Safety
and Environment (HSE) function report on HSE performance,
risks and management actions to the Board’s HSE Committee
on a quarterly basis and to Boral’s Executive Committee on a
monthly basis.
More serious HSE incidents, including near-miss events,
are directly communicated to the CEO & Managing Director,
with CEO-led incident review meetings held for serious HSE
incidents (including near-miss events) involving relevant divisional
executives, the Group HSE Director and local line management.
Divisional leadership teams are responsible for implementing
divisional HSE strategies. Accountability and management of
day-to-day HSE matters rests with line managers, with support
from divisional HSE specialists who provide expert technical
advice and coaching, and a small corporate HSE team. This
team, headed by the Group HSE Director, is responsible for
policy, governance and functional leadership, in consultation
with divisional specialists.
HSE performance and actions are communicated at sites
through forums including daily pre-start meetings, and at
larger sites those meetings are supplemented with monthly
HSE meetings.
HSE issues and risks are reviewed and assessed as part of
due diligence processes on all potential acquisitions and,
commensurate with HSE risks, new or expansion projects.
HSE strategy
Our priorities and approach to managing HSE are guided by
four Group-wide strategic objectives and supported by 14
contributing programs.
Each division is responsible for implementing its own HSE
strategies and improvement plans, consistent with Boral’s
Group-wide HSE strategy.
A summary of progress against our HSE objectives is provided
on page 21 of the Boral Review 2018.
Safety outcomes
After nearly four years without a fatality, we deeply regret the
death of a delivery driver at our Concrite operation in Alexandria,
Sydney, in September 2017. A supplier’s driver, delivering diesel
to the site, died after he was struck by one of Boral’s agitator
vehicles on site.
Immediately following the incident, all sites were alerted, and
vehicle and pedestrian management risks across all of our sites
were considered. Boral Australia is also considering further risk
mitigation measures such as introducing additional technology
to monitor vehicle and pedestrian movements on-site.
We are also saddened by the death of an off-duty contract
employee at our Dutch Quality stone plant in Mt Eaton, Ohio in
the US, who was killed in a two-vehicle collision on a public road
outside our site in November 2017. While not work-related, it
does not lessen the shared loss and our response to investigate
and learn from this tragic incident.
To increase transparency, in FY2018 we commenced including
all Group entities in our safety measures, irrespective of equity
interest or management control. This compares to prior years
when we included joint ventures where our equity interest was
50% or more. Consequently, we now include joint ventures
within USG Boral.
FY2018 safety data also includes the Headwaters business,
which when acquired in May 2017 was not as advanced in its
safety journey as Boral.
Boral Limited Annual Report 2018 23
Sustainability
Overview
After more than a decade of significant improvement in our
safety data, FY2018 reported safety results broadly plateaued
at relatively low levels largely due to the inclusion of new
businesses, comprising over 4,500 employees and contractors.
Boral Group recordable injury frequency rate (RIFR1,2)
)
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
LTIFR
MTIFR
19.0
17.4
17.2
15.5
13.6
12.1
11.7
10.3
8.8
7.5
1.8
1.9
1.9
1.8
FY2012
FY2013
FY2014
FY2015
1.3
FY2016
comparable
data
9.2
7.3
8.7
7.1
1.9
1.6
8.1
6.6
1.5
FY2017
FY2017PF4 FY20185
Our recordable injury frequency rate (RIFR1,2) of 8.7 was
modestly higher than 8.1 in FY2017, but a greater than 50%
improvement from FY2012, and our lost time injury frequency
rate (LTIFR1) of 1.6 was broadly in line with 1.5 last year.
On a proforma basis, restating FY2017 data to include the
additional businesses, our RIFR improved by 6% and our LTIFR
by 16% in FY2018.
On a divisional level:
• Boral Australia reported a RIFR of 11.3, comparable to 11.2
in FY2017.
• Boral North America reported a RIFR of 8.9, an increase
from 6.7 last year, reflecting the inclusion of Headwaters
in FY2018. Boral North America’s legacy business RIFR
was steady on last year at 6.7. The Headwaters business
reported a RIFR of 10.7, a substantial improvement from
14.6 the prior year.
• USG Boral’s reported RIFR of 4.5 remains relatively strong,
and this is the best performing division in Boral. This year’s
result is softer than the 3.6 reported in FY2017 partially
due to the inclusion of minority-owned joint ventures and
partially due to a modest increase in injuries.
Boral’s overall Group RIFR on a comparable basis to prior years
(excluding Headwaters and minority held joint ventures), was 8.4.
Percentage hours lost3, which monitors the severity of our more
serious injuries by the total time lost, increased modestly from
0.04% in FY2017 to 0.05% in FY2018. Hours away on restricted
or transferred duties3, a more holistic measure of the effect
of all recordable injuries, improved to 0.18% from 0.22%. 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 the organisation.
24
Boral Limited Annual Report 2018
Boral measures its safety performance 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. In
addition, Boral includes all entities irrespective of equity interest
or management control, whereas other organisations typically
include only entities in which they have management control.
While leading indicators tend to vary across our businesses,
at a Group level we monitor hazard, near-miss and regulatory
intervention reporting. In FY2018, hazards reported increased
19% to more than 91,000 while near-misses reported increased
by 37% to more than 16,000 compared to the prior year.
1. Per million hours worked for employees and contractors in 100%-owned
businesses including Headwaters, and all joint ventures businesses
regardless of equity interest in FY2018. Prior years data only includes
50%-owned joint ventures and excludes Headwaters.
2. RIFR is the combined lost time injury frequency rate (LTIFR) and medical
treatment injury frequency rate (MTIFR).
3. Defined as a percentage of total hours affected against total hours worked
– for employees only.
4. Proforma. All entities, including Headwaters data prior to Boral acquisition,
and joint ventures within USG Boral.
5. All entities, including full year Headwaters data, and joint ventures within
USG Boral.
6. For employees and contractors, including the Meridian Brick joint venture.
Improving Headwaters’ safety performance The acquisition of Headwaters in May 2017 more than doubled the size of our US-based workforce and nearly tripled our US operating sites, adding more than 4,000 employees across 170 operating sites.While Boral North America’s legacy business and Headwaters were culturally well aligned and delivering improved safety outcomes in recent years, Headwaters’ injury performance was inferior to Boral’s.Improving Headwaters’ safety performance has been at the forefront of our integration activities. We developed a focused improvement plan leveraging shared leading practices and prioritising high risk areas, and have embedded Boral’s Zero Harm Today goal through proactive leadership and safety training. In the initial months of ownership, we invested close to US$10 million of capital to upgrade machinery guarding and other safety equipment at Headwaters’ sites.In FY2018, Headwaters reported a RIFR of 10.7 and a LTIFR of 1.6 for employees and contractors, an impressive 27% and 59% improvement respectively over FY2017 RIFR and LITFR of 14.6 and 3.9 for employees only. This compares to Boral North America’s legacy business, which reported a RIFR of 6.7 and a LTIFR of 0.8 in FY20186.
Climate-related impacts
Climate-related impacts and the transition to a low carbon
economy affect our operations, customers and supply chains.
We recognise that as a global manufacturer of construction
and building products, we are a significant emitter of carbon,
particularly through our clinker manufacturing operations in
Australia, which account for 49% of our total emissions of
2.6 million tonnes of CO2-e.
Since FY2012, we have reduced our absolute (Scope 1 and 2)
greenhouse gas (GHG) emissions by 27% through actively re-
aligning our portfolio towards lighter-weight products and less
carbon-intensive businesses, reducing clinker manufacturing
in Australia in favour of imports from larger scale, more modern
and efficient operations in Asia1, and investing in energy
efficiency and alternative fuels programs.
We are committed to continuing to develop appropriate
strategies to identify, manage and respond to climate-related
risks and opportunities across our business. This encompasses
building the resilience of our portfolio to climate impacts through
adapting and responding to market, policy and technological
changes by creating innovative solutions and products that
support a smooth transition to a low carbon future.
We strive to provide transparent disclosure of those risks and
opportunities, and how we manage and respond to climate
impacts, to help investors and others understand our business.
We are progressively adopting the recommendations of the
Financial Stability Board’s Task Force on Climate-related
Financial Disclosures (TCFD) to improve both our approach in
assessing and managing climate-related risks and opportunities
and our related external reporting.
Following engagement with numerous large investors and other
stakeholders, we have incorporated key information previously
included in our CDP Climate Change responses over the
following pages, with further details available on pages 26–32 of
the Boral Review 2018 and at boral.com/energy_and_emissions.
Governance
The full Board maintains oversight of Boral’s response
to climate-related risks and opportunities, including risk
identification and management, strategy and external reporting.
In addition, the Board HSE Committee is responsible for
reviewing and monitoring the effectiveness of Boral’s policies,
systems and governance structure in identifying and managing
HSE risks that are material to the Group, as well as compliance
with legal and regulatory requirements associated with HSE
matters. The Board HSE Committee considers energy and
climate-related issues at each of its meetings.
1. Following the closure of Boral’s clinker manufacturing plant at Waurn
Ponds, Victoria, in 2013, clinker has been imported from Asia. The
emissions intensity of our Waurn Ponds clinker manufacturing operations
in FY2013 was 0.98 tonnes CO2-e per tonne of production. The emissions
intensity of our imported clinker, included as Scope 3 emissions, is 0.95
tonnes CO2-e per tonne of production, including shipping to the Port of
Geelong (a 3% reduction in emissions).
The Board Audit & Risk Committee is responsible for satisfying
itself that a sound system of risk oversight and management
exists and that internal controls are effective. It meets at least
four times per year and receives an annual report on our
organisation-wide risks, which include climate-related risks and
opportunities. Further details of the roles and responsibilities
of the Board HSE and Audit & Risk Committees are in the
Corporate Governance Statement in this Annual Report.
While the full Board maintains oversight of Boral’s climate-related
risks, the CEO & Managing Director is accountable for the
management of Boral’s risks in relation to climate impacts and
delegates responsibility to the Executive Committee.
The Executive Committee, which includes the CEO & Managing
Director, is individually and collectively accountable for assessing
and managing these risks. Divisional Chief Executives and the
Group HSE Director have specific responsibilities in respect of
climate-related risks and opportunities.
Strategy
Boral acknowledges the physical and financial risks associated
with climate-related impacts and the potential impact on our
business from a global transition to lower carbon energy
sources.
Such a global transition may impact our business through the
pricing of energy, the availability of raw materials such as clinker,
gypsum and fly ash, and construction industry standards and
customer preferences for lower carbon solutions, which present
both risks and opportunities.
Boral’s key transition and physical climate-related risks include:
•
increased energy costs from changes in carbon or
energy policy
• potential reduction in fly ash supply in North America as
coal-fired power utilities curtail over time
•
supply chain impacts from closures of energy-intensive
manufacturing facilities due to changes in environmental
policy
• demand shifts towards low carbon construction materials
resulting from changes in construction industry standards
and regulations and shifts in consumer preferences
•
•
increased severity of extreme weather events
changes in precipitation patterns and unseasonal weather
variability.
Boral’s climate-related opportunities include:
•
•
capturing growth opportunities from a transition to a lower
carbon economy through product innovation and increasing
substitution of cement with fly ash in the manufacture of
concrete
reduced energy costs through energy efficiency initiatives
and alternative fuels use in cement manufacturing
•
using Boral Timber residue by-products as biofuel.
Further details of these climate-related risks and opportunities
are provided on pages 28–29 of the Boral Review 2018.
Boral Limited Annual Report 2018 25
Sustainability
Overview
As part of our business strategy, we have been reducing our
exposure to high fixed cost, energy- and emissions-intensive
operations.
We have been growing through shifting our portfolio to
lighter-weight building products that have more scalable
manufacturing and more variable costs, and are less
energy-intensive to produce.
We have been closing cement manufacturing kilns and exiting
the bricks business, which has underpinned reductions in our
absolute GHG emissions and emissions intensity of 27% and
44% respectively over the past six years.
This repositioning of the business has both reduced Boral’s risks
associated with the transition to a lower carbon economy and
our exposure to energy costs. In FY2018, total energy and fuel
costs accounted for around 7% of Boral’s cost base1.
With cement being highly emissions-intensive and an important
input into downstream concrete production and in some building
products, we are continuing to look at ways to reduce future
cement-related carbon emissions. In FY2018, our Cement
business accounted for 59% of Boral’s GHG emissions.
Details of how our alternative fuels project at Berrima Cement
Works is reducing carbon emissions is detailed on page 30
of the Boral Review 2018.
More broadly, we continue to focus on energy efficiency
improvements, and the use of waste materials and biofuel
development to reduce our own operational emissions.
Within our supply chain, the biggest role Boral is likely to play in
reducing GHG emissions is by increasing the use of fly ash as a
cement substitute in the ready mix concrete industry in the US,
where Boral is the largest broker of fly ash.
The World Business Council for Sustainable Development
Cement Sustainability Initiative2 identifies a reduction of
the clinker to cement ratio through the use of alternative
cementitious materials such as fly ash and slag as an important
key mitigation lever in reducing carbon emissions associated
with cement production. Substituting cement with fly ash during
ready mix concrete production achieves the same result.
A case study outlining how we plan to leverage our Fly Ash
business to reduce carbon emissions is provided on page 29
of the Boral Review 2018.
To gain a better understanding of the potential climate-related
transition risks and opportunities, Boral’s Cement business
has commenced scenario analysis work focused on clinker
production and imports. Three climate scenarios have been
developed, and these are informing the development of
appropriate response strategies to potential climate transition
risks. This includes two-degree scenarios as recommended
by the TCFD and consistent with Paris Agreement temperature
targets. This work is currently being completed and reviewed
internally. Further information on the scenario analysis work is
provided on page 32 of the Boral Review 2018.
1. Includes cost base of USG Boral and Meridian Brick joint ventures which
are equity accounted.
2. World Business Council for Sustainable Development, Cement
Sustainability Initiative, https://www.wbcsdcement.org
26
Boral Limited Annual Report 2018
Risk management
Climate-related risks are incorporated into Boral’s risk
identification and management process, which includes a
formal bottom-up, organisation-wide risk management process
undertaken on a yearly basis. This process is managed by
Group Risk & Internal Audit. A summary of Boral's risks and
responses, including climate-related risks, is included
on pages 18–19.
To supplement the annual risk review process, in 2017,
a targeted Climate-related Risks and Opportunities Strategic
Review was undertaken across Boral’s businesses using the
recommended framework set out by the TCFD. This process
identified more specific climate-related risks and opportunities
which are included in the Boral Review on pages 28–29.
The outcomes of this review were presented to the
Board HSE Committee.
Sustainability risks are embedded into Group and business-level
strategies.
Metrics and targets
Our Scope 1 and 2 emissions have reduced by 27% since
FY2012 to 2.6 million tonnes of CO2-e3,4.
Our emissions intensity has reduced by 44% since FY2012 to
375 tonnes of CO2-e per A$ million of revenue3,4,5.
Our climate-related goals and targets are to:
•
•
reduce emissions intensity by a further 10–20% by 2023
reduce CO2-e emissions in our supply chain by 1.1–1.5
million tonnes through increased fly ash supply by 20227
• deliver annual growth in the share of revenue from low
carbon, high-recycled products, which accounted for 9% of
Group revenue in FY2018.
Our low carbon and high-recycled content products and
businesses include Boral North America Fly Ash and
TrueExterior® Siding & Trim, and in Boral Australia, ENVISIA®
concrete, WarmPave and Boral Recycling.
Our approach to reducing emissions
We are confident that Boral’s emissions intensity will continue
to reduce over the coming years, as we know that our future
will be focused on less emissions-intensive operations than our
past, and we continue to reduce emissions through efficiency
programs and product development. At times, however,
our absolute emissions may increase as production increases
to meet demand and through acquisition, as was the case
in FY2018.
We have an emissions-intensive cement manufacturing plant at
Berrima accounting for ~60% of Boral’s total emissions, and
a bricks business in Western Australia and bricks joint venture
in the USA together accounting for ~10% of our emissions.
We have no intention to invest in new cement or brick kilns,
and these manufacturing operations are unlikely to be in Boral’s
portfolio in the long-term, which would result in our Scope 1
and 2 emissions reducing by around 70%. However, we cannot
put targeted dates around the life of these operations, which will
be determined by economic drivers.
Over the next five years, we are aiming to further reduce
the emissions intensity of our operations by 10%–20%,
delivering a total emissions intensity reduction of 50–55%
since FY2012. This targeted trajectory reflects higher expected
growth in our less energy-and emissions-intensive businesses
in North America and Asia relative to our more mature business
in Australia. It does not capture the potential exit of non-core
brick operations, other divestments or possible acquisitions.
The 27% reduction in Boral’s absolute GHG emissions over
the past six years reflects our portfolio re-alignment towards
less emissions-intensive operations through divestments and
plant closures, the shift to imported clinker and our investment
in more energy efficient technologies and alternative fuels
programs.
Boral Australia, as part of its divisional sustainability strategy,
is establishing aspirational goals and targets regarding energy
efficiency improvements and renewable energy.
Greenhouse gas emissions
In FY2018, Boral’s absolute (Scope 1 and 2) emissions of
2.6 million tonnes of CO2-e increased by 5% compared to
the prior year, reflecting the inclusion of the acquired
Headwaters business in North America and modestly
higher emissions from Boral Australia and USG Boral3,4.
In line with our strategy, Boral’s emissions intensity reduced
by 23% to 375 tonnes of CO2-e per A$ million of revenue, with
the acquired Headwaters businesses being substantially less
energy- and carbon-intensive than our traditional businesses3,4,5.
Absolute emissions were up 1% in Cement, 5% higher in the
remainder of the Australian operations, 1% higher in Asia and up
35% in the US. The substantial increase in US emissions reflects
the inclusion of Headwaters, as well as underlying growth in
production volumes driven by stronger demand. The modestly
higher emissions in Australia and Asia reflect overall higher
activity levels driven by stronger demand across both regions.
GHG emissions from operations3,4,6 (million tonnes CO2-e)
Australia-Cement
Australia-Other
USA
Asia
3.54
0.42
0.20
0.79
3.41
0.47
0.20
0.78
3.14
0.48
0.21
0.80
2.64
0.25
0.23
0.69
2.46
0.23
0.22
0.51
2.46
0.21
0.24
0.49
2.60
0.21
0.33
0.52
2.13
1.96
1.65
1.48
1.50
1.52
1.54
FY2018 GHG emissions
Scope 1 (direct)
Scope 2 (indirect)
2.60
0.55
2.04
GHG emissions intensity from operations3,4,5
(tonnes CO2-e per A$m revenue)
671
644
582
523
491
488
375
further 10–20%
reduction
FY2012
FY2013
FY2014
FY2015
FY2016
FY2017
FY2018
FY2023 Target
GHG emissions by source3
Natural gas
Electricity
Diesel and liquid fuels
Coal
Calcination
Biofuels
1%
17%
32%
21%
17%
12%
This year, we focused on improving data collection of our
Scope 3 emissions to more reliably report on our most material
indirect emissions. While we have further work to do in collecting
carbon information from suppliers, early indications suggest
our key Scope 3 emissions which relate to clinker imported into
Australia by Boral Cement and the purchase of cement in our
US building products businesses (Stone, Roofing, Block) are in
the order of 1.2 million tonnes per annum.
Looking more broadly at the role Boral plays in the supply chain,
our FY2018 fly ash sales in North America resulted in ~5.2
million tonnes of avoided CO2-e per annum8, resulting in
a net Scope 3 positive impact of 4.0 million tonnes of CO2-e
per annum for these cementitious materials.
With plans to increase available annual supply of fly ash by
1.5–2.0 million tons over the next three years, we are targeting a
further reduction of 1.1–1.5 million tonnes of CO2-e in the supply
chain by 2022.
Definitions of Scope 1, 2 and 3 emissions are included on
page 53 of the Boral Review 2018.
FY2012
FY2013
FY2014
FY2015
FY2016
FY2017
FY2018
FY2018
3. Data provided for GHG emissions and energy consumption is for
100%-owned operations and Boral’s share of 50%-owned joint venture
operations – it excludes some joint ventures which in aggregate are not
deemed to have material emissions.
4. USG Boral Asia emissions data for FY2017 has been restated using local
electricity emissions factors where available.
5. Group reported revenue adjusted to include 50% share of underlying
revenues from USG Boral and Meridian Brick joint ventures, which are
equity accounted.
6. Figures may not add due to rounding.
7. Based on increasing available supply of fly ash by 1.5–2.0 million tons
(1.4–1.8 million tonnes) per annum over the next three years. Refer to
case study “Leveraging our Fly Ash business to reduce carbon emissions”
on page 29 of the Boral Review 2018.
8. We have used a conservative conversion factor to estimate CO2-e
emissions displaced as a result of fly ash substitution of cement in ready
mix concrete, assuming that for every one tonne of fly ash approximately
0.8 tonne of CO2-e is displaced. This conversion rate accounts for varying
qualities of fly ash, and therefore substitution rates of 1.25 tonnes of
fly ash per tonne of cement in ready mix concrete and assumes one tonne
of cement produced results in one tonne of carbon emissions.
Boral Limited Annual Report 2018 27
Sustainability
Overview
Energy consumption
In FY2018, our operations consumed 22 petajoules of energy1,
up 7% on last year, reflecting the acquisition of Headwaters and
increased production volumes across our three divisions.
Boral’s Cement operations accounted for 31% of the Group’s
energy consumption.
Energy by fuel source1,2
2%
13%
Natural gas
Coal
Diesel and liquid fuels
Electricity
Biofuels
40%
21%
23%
Further data on Boral’s energy consumption, GHG and other
emissions can be found at boral.com/energy_and_emissions.
Environmental and community
impacts
Our policy is to eliminate adverse environmental impacts
and where elimination is not possible, seek to minimise any
harmful effects from our operations.
At an absolute minimum, this means complying with
environmental legislation, regulations, standards and codes of
practice applicable to each of our businesses.
We recognise that effective management of our sites, including
complying with our site-based planning approvals, is critical to
our reputation and meeting community expectations.
We manage our quarries and land assets responsibly, planning
strategically to mitigate and manage our impacts across
the full life cycle of our extraction and processing sites – from
development applications through to rehabilitation and end-use
planning and development.
We are also committed to meeting our responsibilities to the
local communities in which we operate. This means managing
our operations to avoid negative impacts on local stakeholders
and proactively addressing community concerns through
open and constructive engagement programs. Operational
issues that can impact local communities include traffic, noise,
dust, odours, water, waste, quarry end use, and impacts on
biodiversity, heritage and culture.
1. Data provided for energy consumption is for 100%-owned operations and
Boral’s share of 50%-owned joint venture operations – it excludes some
joint ventures which are in aggregate not deemed to be material.
2. Figures do not add to 100% due to rounding.
28
Boral Limited Annual Report 2018
Community engagement
Our stakeholder engagement programs are underpinned by
ongoing communications, consultation and contribution to the
local community.
At key sites we have Community Consultation Committees that
include elected community representatives which meet with
interested residents and stakeholders. We communicate through
online information resources, newsletters, mail, advertising,
community inspections, community meetings and site tours.
For example, during the year, we held guided tours for the
community at our Hall, Talbragar and Seaham quarries in NSW
and Orange Grove and Midland Brick quarries in Western
Australia. This provides an opportunity for the public to
understand our operations, and for Boral to receive feedback
on any issues, including our impact on local communities.
Government representatives also participated in site tours
around our concrete and quarry operations on the Gold Coast,
Queensland.
We have been acknowledged as an industry leader in
community engagement. This year, we received the Community
Leadership Award at the NSW Cement Concrete & Aggregates
Australia 2017 Innovation Awards. The award recognised Boral’s
comprehensive stakeholder engagement program at Marulan
that uses feedback from local residents to guide community
relations plans, incorporates public reporting on commitments,
and is focused on actively contributing to the local community
through initiating and organising local events.
Environmental compliance
We target zero environmental infringements across our
~680 operating sites and strive to continuously improve our
environmental management and performance.
We continue to strengthen our internal controls to improve
compliance with increasingly stringent regulatory requirements
in Australia, including through an online information management
system for environmental licence conditions.
During the year, we conducted 55 environmental compliance
audits, developed 89 new site-based action plans and reviewed
246 existing site-based action plans for effectiveness across
our Australian operations. Boral North America completed
29 environmental compliance audits, focusing on operations
acquired through Headwaters.
Formal regulatory notifications are reviewed by our internal
legal and HSE functions and reported to Boral’s Executive
Committee. Any material issues are reported to the Board HSE
Committee, even if no penalty results.
In FY2018, we were charged with six regulatory infringements
related to environmental contraventions in Australia and the
US that resulted in total fines of $82,273. The number of
infringements and fines is significantly lower than in the
prior year despite our substantially enlarged footprint following
the acquisition of Headwaters, reflecting an increased focus on
compliance.
The infringements relate to non-compliant:
• water quality discharge from the Chinderah concrete
plant, NSW
•
•
supply of concrete outside of approval conditions from the
Mount Kuring-gai concrete plant, NSW
use of kiln exhaust at Meridian Bricks JV Salisbury plant,
North Carolina
• disposal of solvent wastes at Atlantic Shutters Latta plant,
South Carolina
• disposal of solid or viscous materials to sewer at Oceanside
roofing plant, California
• permitting of a raw material feed and gas flare at Meridian
Bricks JV Terre Haute plant, Indiana.
In addition, we have one set of agreed undertakings relating to
vegetation clearing at the Loch Catherine Colliery in NSW.
In November 2016, the NSW Resources Regulator (Regulator)
commenced investigations relating to the clearing of
approximately one third of a hectare of vegetation regrowth
along a pre-existing drift at the Loch Catherine Colliery, which
the Regulator deemed to be undertaken without the relevant
consent. The Loch Catherine Colliery is located on the same
mining lease as Boral’s Medway Colliery, although never
operated by Boral. While Boral undertook this clearing as part
of closure works and on the basis that we held the appropriate
approvals, the Regulator deemed that Boral’s activities were
not permitted.
Boral entered into an enforceable undertaking in relation to
this matter that was accepted by the Regulator in March 2018.
The Regulator’s published decision noted that Boral’s actions
were neither malicious nor in deliberate contravention of its
regulatory obligations. Boral’s obligations under this undertaking
include training of relevant staff, conducting compliance audits
and making a $50,000 contribution to a conservation project
managed by a not for profit organisation. Boral expects to incur
approximately $133,000 in complying with its obligations.
Infringements and penalties
Number
Fines1
Penalties1
FY2018
FY2017
FY2016
FY2015
6
10
9
3
$82,273
$111,083
$33,888
$11,658
$0
$30,000 $250,000
$0
$0
Undertakings
$133,000 $133,556
$0
1. Fines are directly issued by the Regulator and penalties by a court
hearing.
Biodiversity management
Protecting the diversity of plant and animal species at and
around our operational sites is a core component of our land
management efforts.
Some examples of the many initiatives to protect biodiversity at
our own sites include:
•
collaborating with the Royal Botanic Garden Sydney
in research on the endangered Illawarra Socketwood
population at our Dunmore Quarry in NSW
• partnering with Sleepy Burrows Wombat Sanctuary to
capture and relocate wombats found at our Peppertree
Quarry in NSW
• maintaining koala fodder plantations at Narangba and Petrie
quarries in Queensland
•
•
conservation work to provide habitat for the threatened
legless lizard and spiny rice-flower at Deer Park Quarry in
Victoria
construction of a bird island habitat as part of our
rehabilitation of wetlands at our Dunmore Quarry in NSW.
Through our community partnership with Conservation
Volunteers Australia, we support conservation and education
initiatives in our local communities, including native vegetation
initiatives in local reserves and schools.
Cultural heritage
We are committed to protecting places and items of cultural
significance to local Indigenous groups across our Australian
operations. We work alongside Indigenous peoples to protect
cultural heritage, including across our sites subject to Cultural
Heritage Management Plans. Some of this work includes:
•
•
engaging local Aboriginal groups to undertake cultural
heritage surveys, including at 13 quarry sites in Queensland
salvage excavation works at Peppertree Quarry in NSW
which were completed in March 2018, with identification of
nearly 100,000 Aboriginal artefacts.
Water management
Water is a valuable resource and good quality fresh water
is essential to our concrete, construction material and
plasterboard operations. We use water in manufacturing,
and for dust suppression, cleaning and sanitation. Our quarry
and asphalt operations are able to use recycled, brackish
and/or process water.
Boral’s global operations consumed about 4 gigalitres of
municipal supplied water, steady on last year.
At our larger sites, including our quarry operations, we also
capture rainfall or stream flow which is largely used for dust control
purposes. In Boral Australia, we are developing systems that will
enable us to collect data on captured rainfall and are developing
plans that will underpin an overall improvement in water efficiency.
Boral Limited Annual Report 2018 29
Sustainability
Overview
At a Group level, management of water is not considered a
material risk. Individual Boral sites may, however, be exposed
to water risk from time to time, either from too little or too much
water, and we assess the potential impacts on our stakeholders
of water-related risks where this is relevant.
Supply chain
We recognise that through the purchase of goods and services
we indirectly impact the workers in our supply chain, their
communities and the environment.
Most of our Boral North America operations have federal or state
government stormwater management permits with very stringent
limits. To reduce the risk of non-compliance, we have been
implementing a program of upgrading stormwater management
infrastructure.
Across the Group, a relatively small amount of used process
water is discharged to sewer for treatment by water authorities
in line with our existing licensing conditions at relevant sites.
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. 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.
When developing or purchasing new facilities, our due diligence
assessment includes scenario analysis of the quantity and
quality of water, assessment of the risks of potential water
discharges, and, where relevant, river catchment assessments
to ensure sufficient water availability and supply.
Waste and recycling
Throughout Boral’s operations, some materials are commonly
re-used back into our production processes, including concrete
washout, recycled asphalt pavement (RAP), and plasterboard
waste from production and building sites. This beneficially uses
materials that would otherwise require disposal.
A large proportion of Boral’s recycled and low carbon products
revenue, totalling 9% of Group revenue, is derived from external
waste products. This includes our Fly Ash and Boral Recycling
businesses. Opportunities for the re-use of production by-
products or waste material continue to grow and are actively
being pursued.
In Boral Australia, we are developing plans and looking for
opportunities that will help us firm up targets to reduce waste
generated across all product lines over the coming five years.
Boral’s businesses deal with only low amounts of hazardous
waste, and this is managed in accordance with government
regulations.
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, are signatories to the Australian Packaging Covenant.
Boral Cement, through its membership of Cement Concrete &
Aggregates Australia, is also a signatory.
We expect our suppliers and contractors to uphold the same
high ethical standards as our people and abide by Boral’s Code
of Business Conduct.
We have been revising our supply chain governance and
policy framework in line with rapidly changing stakeholders’
expectations and best practices. During the year, we introduced
Boral’s Sustainable Procurement Policy that aims to align
our practices with the world’s first International Standard for
Sustainable Procurement ISO 20400 and sets out our minimum
sustainability procurement requirements for purchasing goods
and services across our supply chain.
Our Sustainable Procurement Policy outlines our commitment
to recognising, assessing and managing modern slavery risk,
promoting diversity and inclusion through partnerships with
social enterprise businesses, and requires suppliers to comply
with our Supplier Code of Conduct and Indigenous Procurement
Policy.
We monitor supply chain risks by assessing suppliers’
performance and their alignment to Boral standards through
a pre-qualification questionnaire and evaluation processes.
In Australia and USG Boral, a sanction screening process
is used to identify any areas of risk by association with elements
such as financial crime, fraud, and human rights abuse.
In Australia, we engage a third-party service to register
and monitor compliance of suppliers to our
pre-qualification requirements.
Our Supplier Code of Conduct requires suppliers to adhere to
minimum standards relating to health and safety, environment
and labour, including prohibiting the use of child labour and
complying with applicable modern slavery legislation.
We are committed to combating modern slavery in society
and strengthening our approach to most effectively identify
and address this risk across our supply chain. While we have
not identified any evidence of modern slavery in our supply
chain, we continue to refine our approach in light of proposed
Australian Government modern slavery legislation.
We established a Human Rights and Modern Slavery Executive
Working Group, composed of members of Boral’s Executive
Management team and key functional roles, to support this
work, including defining planned actions for FY2019.
Our Sustainable Procurement Policy and Supplier Code of
Conduct issued during the year strengthened our policy
framework, directly addressing the risk of modern slavery in
our supply chain. We are also collaborating with global peers to
ensure our approach reflects industry best practice.
Further details are provided on pages 36–37 of the Boral
Review 2018.
30
Boral Limited Annual Report 2018
Product innovation
As building material technologies and consumer preferences
continually change, we have a critical part to play in delivering
more effective and sustainable solutions to building the homes
and cities of tomorrow. We actively work to better meet the
needs of customers, support their objectives and deliver more
sustainable product solutions
We use external waste and by-products or secondary resources
in a range of our products. Our North American Fly Ash
business uses a coal combustion by-product to provide
building products manufacturers low carbon cost-effective
alternatives to conventional materials which offer significant
performance advantages.
Boral TrueExterior® Siding & Trim products comprise up to 70%
fly ash and deliver durability and workability advantages
to alternative products.
Boral Recycling is one of the largest construction and
demolition materials recyclers in NSW, processing more than
one million tonnes annually of concrete, asphalt and bricks
from demolitions, recycling centres and concrete batch plants.
Achieving more than 99% resource recovery rates, our products
include recycled roadbase, aggregate and manufactured
sand products.
We collaborate with our customers to strive to meet their
sustainability goals. For example, during FY2018, we supplied
low carbon concrete, ENVISIA®, to meet the Green Building
Council of Australia’s Green Star specification requirements of
Crown Sydney at Barangaroo, rated Green Star 3, and Darling
Harbour Live, rated Green Star 2.
We are currently piloting USG-developed Sheetrock® EcoSmart
Panels at our Pinkenba plasterboard plant in Queensland.
EcoSmart Panels are lighter weight with stronger sag
performance and deliver improved sustainability attributes
with 25% less water and 20% fewer carbon emissions used
in manufacturing. We are also developing safer, improved
construction methods in Asia, including through USG Boral’s
EasyFinishTM System.
During the year, we invested A$17 million in R&D across our
three innovation centres in the USA, Australia and Thailand.
Our R&D teams are helping Boral deliver superior building
product solutions and disruptive innovations in building materials
to better serve our customers and develop new markets.
Further details of Boral’s product innovation are provided on
pages 37–38 of the Boral Review 2018.
Community investment
Our community investment program is built on a long and proud
history of supporting the communities in which we operate and
aims to make a positive and sustainable contribution to the
wellbeing of those communities.
We support community groups and organisations that share our
values and where our resources can make the most impact in
addressing their needs and priorities.
With this in mind, we have built a community investment
framework around three pillars, Our People, Places and
Products. This framework helps us identify and evaluate
opportunities to build a robust and effective community
investment program that delivers measurable benefits to our
communities and Boral’s people and businesses.
In early FY2018, we reviewed our approach to community
partnerships, incorporating input from a range of internal and
external stakeholders. The review found that our overarching
strategic framework works effectively and resonates well with
our people, but we have now more clearly defined the three
pillars, improved guidance to better support decision making at
the corporate and business level, and improved our approach to
measuring outcomes beyond our financial contribution.
We have 12 corporate community partnerships, in addition
to providing financial support to local community causes and
projects. In FY2018, we contributed a total of $1,092,000 to
our community partnerships and local community causes and
projects, comprising $886,000 in cash, $121,000 in materials
and $85,000 in fundraising and events.
Our funding supports:
• Bangarra Dance Theatre
• Conservation Volunteers Australia
• Habitat for Humanity
• HomeAid America
• Outward Bound Australia
• Redkite
• Taronga Conservation Society
• Touched by Olivia
• Great Barrier Reef Foundation
• Anzac Centenary Public Fund
• University of NSW (Women in Engineering Scholarships)
• University of Sydney (US Studies Centre – research
program)
We are also preparing to launch a new partnership in FY2019
with Road Safety Education Limited to support road safety
education for youth throughout Australia.
More information on our partnerships can be found at boral.
com/community_investment.
Boral Limited Annual Report 2018 31
Executive
Committee
Mike Kane
Chief Executive Officer
& Managing Director
Joseph Goss
Divisional Chief Executive,
Boral Australia
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 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
David Mariner
President & CEO,
Boral Industries Inc
Ross Harper
Executive General Manager,
Boral Cement
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 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 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.
Linda Coates
Group Human Resources Director
Kylie FitzGerald
Group Communications &
Investor Relations Director
Dominic Millgate
Company Secretary
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 an honours
degree in Economics and Political Science
and an MBA.
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.
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.
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.
Joined Boral in 2009 and was previously
General Counsel, Australia. Damien has
worked as a lawyer for over 20 years in
private practice and in-house legal roles in
Sydney, New York and Los Angeles. He has
Law and Applied Science degrees.
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.
32
Boral Limited Annual Report 2018
Board
of Directors
Kathryn Fagg
Non-executive Chairman, Age 57
Kathryn Fagg joined the Boral Board
in September 2014 and was appointed
Chairman effective 1 July 2018.
Ms Fagg is a Director of Incitec Pivot
Limited and Djerriwarrh Investments
Limited, and was recently appointed
the CSIRO Board for a five-year term.
She is also President of Chief Executive
Women, Chair of the Melbourne
Recital Centre and the Breast Cancer
Network Australia. She was previously
a Board member of the Reserve
Bank of 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.
Catherine Brenner
Non-executive Director, Age 47
Catherine Brenner joined the Boral
Board in September 2010. Ms
Brenner is a Director of Coca-Cola
Amatil Limited, SCEGGS Darlinghurst
Limited and a Panel Member of Adara
Partners. She was previously Chairman
of AMP Limited, 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.
Brian Clark
Former Non-executive Chairman
Dr Brian Clark joined the Boral Board
in May 2007 and served as Board
Chairman from November 2015 until
his retirement on 30 June 2018.
Eileen Doyle
Non-executive Director, Age 63
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
CEO & Managing Director, Age 67
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.
John Marlay
Non-executive Director, Age 69
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.
Karen Moses
Non-executive Director, Age 60
Karen Moses joined the Boral Board in
March 2016. Ms Moses is a Director
of Orica Limited, Charter Hall Group,
Sydney Symphony Limited and
Sydney Dance Company, and a Fellow
of the Senate of Sydney University.
Ms Moses was previously a Director
of SAS Trustee Corporation, 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.
Paul Rayner
Non-executive Director, Age 64
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
Children’s 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.
Peter Alexander
Non-executive Director, Age 61
Peter Alexander joined the Boral Board
in September 2018. Mr Alexander is
a seasoned former chief executive
with more than 28 years of senior
executive experience in US building
materials and distribution, technology
products and services. In 2010, Mr
Alexander became CEO of Building
Materials Holding Corporation and led
the efforts to successfully combine
Building Materials Holding Corporation
with BMC Stock Holdings Inc (BMC).
He continued as President and CEO
of the newly merged NASDAQ listed
group BMC through to early 2018.
In addition to his eight years as CEO
of BMC, Mr Alexander was President
and Chief Executive Officer of ORCO
Construction Distribution from 2005
to 2009, serving large residential,
commercial and concrete construction
builders. He previously served as
President and Chief Executive Officer
or in executive positions for several
other companies in the technology,
retail, distribution and service
industries, including GE Capital,
ComputerLand/Vanstar, Premiere
Global Services and Coast to Coast
Hardware. Mr Alexander holds a BA
from The Ohio State University and
an MBA from The Pennsylvania State
University.
Mr Alexander is a member of
the Remuneration & Nomination
Committee.
Boral Limited Annual Report 2018 33
Corporate
Governance
Statement
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.
The Board recognises that good corporate governance is
essential to building trust and creating long-term shareholder
value, supported by the Boral Values:
•
Integrity open, honest, respectful and authentic in all our
dealings;
• Excellence ambitious and disciplined in pursuit of the
highest standards of performance;
• Collaboration working across businesses and developing
partnerships;
• Endurance operating for the long term rather than the quick
fix, ever improving.
These values are expected to inform all our decisions, from
the top down. The values are supported by our governance
framework and underpin our corporate culture.
Throughout FY2018, Boral’s governance arrangements
were consistent with the Corporate Governance Principles
and Recommendations (3rd edition) published by the ASX
Corporate Governance Council (the ASX Principles and
Recommendations).
The Board continually reviews governance at Boral to ensure
that our arrangements remain appropriate in light of changing
expectations and general developments in good corporate
governance. The Board is aware that the ASX Corporate
Governance Council has released a draft 4th edition of the ASX
Principles and Recommendations for consultation. Boral is
pleased to report that its governance arrangements as outlined
in this Corporate Governance Statement already address a
number of the new issues raised in the consultation draft.
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
2018 and has been approved by the Board of Boral Limited.
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
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
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Delegation
and oversight
Recommendations
and reporting
SENIOR
MANAGEMENT
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.
34
Boral Limited Annual Report 2018
Board and Committee Charters and the
Company’s Constitution are available on
Boral’s website.
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 on page 34 summarises Boral’s governance framework and the functions reserved for the Board in accordance with
the Board Charter.
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 a number of Boral’s sites in the US including the Tapco plant (Metamora, Michigan), the Kleer
plant (Westfield, Massachusetts), the Alleyton Block plant (Alleyton, Texas) and the Legacy Windows plant (Carrollton, Texas), as
well as USG Corporation’s Research & Development Facility (Libertyville, Illinois). The Board also visited USG Boral’s head office
in Singapore and the Ulsan plasterboard plant in South Korea. Health, Safety & Environment Committee members visited Boral’s
concrete plants at Bowen Bridge and Redbank Plains in Queensland and the cement operations and alternative fuels facility at
Berrima in New South Wales.
Composition of the Board
Membership
The accompanying diagram illustrates the composition of the
Board at 30 June 2018.
As announced on 20 June 2018, Dr Brian Clark retired
as Chairman and Non-executive Director of Boral effective
30 June 2018 and the Board appointed Kathryn Fagg
to succeed Dr Clark as Chairman, effective 1 July 2018.
Boral’s Constitution provides that there will be a minimum of
three Directors and a maximum of 12 Directors on the Board.
agg
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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.
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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, ensuring 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. They also represent
the Company in the wider community.
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CEO & Managing Dire
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Board
Composition
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Boral Limited Annual Report 2018 35
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, 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 industry experience,
tenure, 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. When the Board reviews the skills matrix,
the Board looks to ensure that it covers the skills needed to
address existing and emerging business and governance issues.
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.
By way of example, the Board identified building on the Board’s
existing global experience in the foreign jurisdictions in which
Boral operates as a key area to consider in its composition.
On 20 June 2018, it was announced that Peter Alexander would
join the Board and Mr Alexander will commence in the role of
non-executive Director on 1 September 2018. Mr Alexander
brings extensive North American and industry experience to
the Board, which will contribute to the Board's oversight of
Boral’s expanding North American Division. The Board is
also continuing to monitor opportunities for appointing an
Asia-based non-executive Director to build on the Board’s
existing experience in Asia.
36
Boral Limited Annual Report 2018
The areas addressed in the matrix are as follows:
Board skills matrix –
skills and experience across the Board as a whole support
Boral’s strategy to “Fix, Execute and Transform”
Element
Skills
Leadership
Executive Leadership
Health, Safety & Environment
Portfolio
Strategy / M&A
Financial acumen
Risk management
Global experience
Market and customer knowledge
Innovation
Change and transition
Information technology
People
Organisational sustainability
Remuneration and rewards
Governance
Governance and regulation
Board experience
Each of these areas is currently well represented on the Board.
The Board benefits from the combination of Directors’ individual
skills, experience and expertise in particular areas, as well as the
varying perspectives and insights that arise from the interaction
of Directors with diverse backgrounds.
The skills, experience and expertise of each Director are set out
on page 33 of this 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;
Induction and training
Management, with the Board, provides an orientation program
for new Directors. The program includes:
• briefings from executives and management, including
detailed introductions to Boral’s business and strategy
implementation, history, culture, industry and key risks
and opportunities;
•
•
•
an introduction to Boral’s regulatory environment (including
legal duties and responsibilities of Boral Directors, and
accounting matters where the Director requests additional
background);
the provision of induction materials such as the Strategic
Plan and governance charters and policies;
site visits to some of Boral’s key operations and discussions
with other Directors.
The Company also supports continuing education for Directors
to continue to develop their professional skills. This is considered
regularly in light of emerging business and governance issues
relevant to Boral. The Board also receives appropriate briefings
on material developments in laws, regulations and accounting
standards relevant to the Company.
•
has no material contractual relationship with a Boral
company other than as a Director;
• does not have close family ties with any person who falls
within any of the categories described above; or
•
has not been a Director of Boral for such a period that his
or her independence may have been compromised.
It is considered that none of the interests of Directors (or the
interests of persons with whom Directors have close family ties)
with other firms or companies having a business relationship
with Boral could materially interfere with the ability of those
Directors to act in Boral’s best interests. Material in the context
of Director independence is, generally speaking, regarded as
being 5% of the revenue of the supplier, customer or other entity
being attributable to the association with a Boral company
or companies.
Accordingly, all of the non-executive Directors (including the
Chairman) are considered independent.
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. 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 33 in this 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 2018 37
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. These checks include the candidate’s experience, education,
criminal record and bankruptcy history, and reference checks.
• 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.
38
Boral Limited Annual Report 2018
Board Committees
The qualifications and experience of each Committee member
are set out on page 33 of this Annual Report. Details of the
number of Committee meetings Directors attended during the
reporting period are set out on page 51 in the Directors’ Report.
Open lines of communication exist between all of Boral’s Board
Committees. This is intended to prevent any ‘gaps’ in risk
oversight and to maintain a broader picture of Boral’s risk profile.
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 FY2018.
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 as well as the effectiveness of
Boral’s risk management framework; and
• Boral’s auditing, accounting and financial reporting processes
and control framework.
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.
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, in each meeting 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 FY2018, 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 54. The Committee’s role in relation to the internal audit
function is discussed on page 42.
Boral Limited Annual Report 2018 39
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
The Committee met four times during FY2018.
The Remuneration & Nomination Committee has a formal Charter
which sets out its role and responsibilities, composition, structure
and membership requirements. The Committee’s responsibilities
include reviewing, advising and making recommendations to the
Board on:
• Boral’s remuneration framework (including incentive policies
and practices, remuneration arrangements for the CEO and
the CEO’s direct reports);
•
•
•
identification and recommendation of suitable candidates for
appointment to the Board;
the Board skills matrix;
succession planning policy and approach generally, and the
succession plan for the CEO in particular;
• developing and implementing procedures for the Board’s
periodic evaluation of its performance and the endorsement
of retiring Directors seeking re-election; and
• Board induction and the provision of appropriate training and
development opportunities for Directors as required.
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 FY2018 is set out in
the Remuneration Report from page 55.
Eileen Doyle (Chairman)
Kathryn Fagg
John Marlay
Karen Moses
The Committee met four times during FY2018.
The Health, Safety & Environment Committee has a formal
Charter which sets out its role and responsibilities, composition
and structure. The Committee’s responsibilities include the review
and monitoring of:
•
•
•
•
•
•
•
the Group’s strategy for health, safety and environment (HSE)
and management’s plans to improve HSE performance;
the effectiveness of the Group’s policies, systems and
governance structure for identifying and managing HSE risks
which are material to the Group;
the policies and systems within the Group for ensuring
compliance with applicable legal and regulatory requirements
associated with HSE matters;
the performance of the Group, assessed by reference to
agreed targets and measures, in relation to HSE matters,
including the impact on employees, third parties and the
reputation of the Group;
the output of the Group’s audit performance in relation
to HSE matters;
the adequacy of the Group’s systems for reporting actual
or potential accidents, breaches and significant incidents,
and review of investigations and remedial actions in respect
of any significant incident; and
the Group’s reports which are prepared and lodged
in compliance with its statutory obligations concerning
the environment.
In performing its role, the Committee seeks to support the
activities of Management and enhance the HSE culture of the
Group through its interactions with employees and others during
meetings and site visits.
Role and responsibility of the Executive Committee
Performance evaluation process
Under the supervision of the CEO, the Executive Committee is
responsible for implementing Boral’s strategic objectives.
The Executive Committee has also been delegated the
responsibility for managing business performance, monitoring
and reviewing material financial and non-financial risks and
overseeing and developing Boral’s people.
The Executive Committee as a whole is collectively responsible
for meeting these delegated responsibilities, and each member
is delegated specific accountability for overseeing their part of
40
Boral Limited Annual Report 2018
Boral's business (details of the Executive Committee are set out
on page 32 of this Annual Report).
The Executive Committee is also responsible for providing timely
and accurate reports to the Board on Boral’s business and
operations, in order to assist the Board in discharging its duties
and responsibilities effectively.
Members of the Executive Committee (as well as other senior
executives) are employed by Boral through individual Executive
Services Agreements. The pre-employment process for
executives includes obtaining background checks with the
assistance, where appropriate, of an external consultant, to verify
qualifications and determine suitability for the role.
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.
On an annual basis, the Remuneration &
Nomination Committee and subsequently
the Board formally review the performance
of the CEO & Managing Director.
Periodically, this review is undertaken with
the assistance of an external facilitator.
The evaluation encompasses a review of
the structure and operation of the Board,
the skills and characteristics required by
the Board to maximise its effectiveness
and whether the blending of skills,
experience and expertise and the Board’s
practices and procedures are appropriate
for the present and future needs of the
Company.
Steps involved in the evaluation include
the completion of a questionnaire by
each Director, review of responses to the
questionnaire at a Board meeting, and a
private discussion between the Chairman
and each other Director.
The criteria assessed are both qualitative
and quantitative, and include profit
performance, other financial measures,
safety performance, financial and
non-financial risk identification and
management, 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 presents
the outcomes of those reviews to the
Board through the Remuneration &
Nomination Committee. The Remuneration
& Nomination Committee retains discretion
as to the appropriateness of remuneration
outcomes for the Executive Committee,
both individually and as a whole.
An evaluation of the performance
of the Board, its Committees and
individual Directors took place in
FY2018 in accordance with the
process described above.
An evaluation of the performance of the
CEO & Managing Director took place in
FY2018 in accordance with the process
described above.
An evaluation of the performance of senior
executives of Boral took place in FY2018
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:
•
•
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.
•
•
•
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;
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 55.
Boral Limited Annual Report 2018 41
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 and that these systems are rigorously tested
to ensure that they are operating effectively at all stages of
the risk management cycle.
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;
the identification and monitoring of emerging business
risks; and
•
assessment, monitoring and mitigation of identified risks.
On at least an annual 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
following division-specific risk reviews. 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
FY2018. 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.
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Boral Limited Annual Report 2018
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.
Business and sustainability risks
Details regarding our approach to managing business and
sustainability risks are contained in the OFR (pages 2–17 of this
Annual Report), Sustainability Overview (page 20 of this Annual
Report) and the risks section of the Annual Report (including at
pages 18–19 and 48–49). 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 2018 and the half year ended 31 December 2017.
Compliance with laws and policies
The Company has adopted policies to monitor compliance
with occupational health, safety, environment, anti-corruption
and bribery, competition and consumer laws throughout the
jurisdictions in which it operates.
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 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.
Boral also has a dedicated Compliance Council, tasked with
achieving compliance within Boral through collaboration across
functional areas including Legal, Risk, Internal Audit, HSE,
Property Group, Product Councils, Insurance, Finance, Tax,
HR / IR, IT security and other areas of expertise. Given the
multi-disciplinary 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.
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 Integrity, Excellence, Collaboration and Endurance.
The Code and related guidelines and policies guide the Directors, the CEO & Managing Director, the Chief Financial Officer, the
Company Secretary and other key executives as to the practices necessary to maintain confidence in the Company’s integrity, and
as to the responsibility and accountability of individuals for reporting, and investigating reports of, unethical practices. The Code also
guides compliance with legal and other obligations to stakeholders.
Employees are provided with regular training sessions about expected standards of behaviour, the Boral Values and compliance
with the Code of Business Conduct. Compliance with the Code is monitored by senior management, and the Board is notified of
material breaches. The Board reviews the Code regularly, and at least every three years.
Boral’s Code of Business Conduct is available on Boral’s website.
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 FY2018
Boral’s diversity plan has six strategic elements against which the Board has set measurable objectives for FY2018, 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
Completed
• Deployment of additional unconscious bias training across Boral, 11
further sessions were held during the year.
Ongoing
• Diversity targets adopted by Boral Australia. Senior leaders to have
at least one diversity target in zero|one|ten personal objective plan
for FY2019.
2.1 Communication: develop
Completed
• Developed brochure, booklet and video library to communicate
communications engagement
framework and packages to raise
knowledge and understanding of
diversity
strategy, plan and initiatives.
• Deployed survey for further feedback. Diversity Council structure,
narrative and communication approach refined in response to that
feedback.
In progress
• Boral Australia targeting 50% of managers at supervisor level and
above to have participated in an unconscious knowledge awareness
session in FY2019.
Boral Limited Annual Report 2018 43
Corporate
Governance
Diversity – Measurable objectives for FY2018 (continued)
Strategic Element and Objective
Status
Key Outcomes
2.2 Education: develop diversity
Completed
• Unconscious bias training included in curriculum of all leadership
educational framework to provide
management with capability to lead
and manage diversity and diverse
teams
development programs.
Ongoing
• Participation of women in leadership development programs
increased in FY2018 to 26% of all participants, from 20% in FY2017.
• 308 frontline leaders completed the Zero|One|Ten leader program,
including modules on diversity, inclusion and unconscious bias.
Approximately 1,000 frontline leaders are expected to complete this
program in FY2019.
2.3 Networking: establish Women in
Completed
• Diversity in Leadership Forum series attended by 29 participants
Leadership Forum series to provide
networking opportunities for key
leaders, with an emphasis on women
leaders, across Boral
in FY2018, with 55% of the participants being 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, 131 employees have participated in a Forum, and
76% of participants were women in leadership roles.
Ongoing
• Forum Alumni provides networking, advocacy and other
opportunities to contribute to diversity matters in Boral.
• The Forum series is an ongoing initiative, with two Forums
scheduled for each year. Target of 80% of participants being female.
In FY2018, 45% of participants were male.
2.4 Track and report: develop key
Completed
• Objectives developed by Boral Australia’s leadership team for
performance indicators to measure,
track and report on change and
progress
FY2019 to progress diversity and inclusion, and representation of
women in leadership roles.
• Diversity Dashboard ready for reporting purposes. Dashboard
includes metrics and key performance indicators to track, measure
and report on progress with diversity plan.
2.5 Benchmark: adopt external metric
to measure and benchmark
effectiveness of diversity strategy
Completed
• Diversity dashboard now includes best practice information to
benchmark effectiveness of the strategy and plan.
Ongoing
• As a founding member, continuing participation in the Construction
3 System and Process Design
3.1 Search and selection: embed
Ongoing
diversity principles in standardised
recruitment
In progress
44
Boral Limited Annual Report 2018
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.
• Against a target of 50%, 14% of our graduate intake were women in
professional and engineering disciplines. Given this outcome, senior
leadership have committed with renewed focus to exceed the 50%
target in FY2019.
• 29% of new hires in senior manager roles were women, and 34% of
recruitment into professional roles were women.
• Targets for Boral Australia for FY2019 to improve recruitment and
retention of women include: 30% of candidates for manager; 40%
for professional; and 10% for machinery operator/driver/technician/
trade roles; and an increase in the conversion rate of female
candidates to placement by 5%.
• Boral is a founding member of the Prime Minister’s Veterans
Employment Coalition supporting defence force personnel’s
transition to civilian employment. Work is underway on development
of traineeships, alumni and recruitment processes to support
veterans joining Boral.
Strategic Element and Objective
Status
Key Outcomes
3.2 Flexibility and flexible work practices:
develop and implement policy,
guidelines and education program to
improve flexibility and flexible work
outcomes
4 Gender Equality and Equity
Completed
• Education materials and guidelines, including Manager and
Employee Flexibility Guide book.
4.1 Analysis: complete an analysis of
Ongoing
Boral pay equity at least annually to
monitor pay rates and identify issues
• Ratio of female to male average base salary is 1.01:1.00, 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
Completed
• Working group has identified ways to support mature aged
different generations to understand
need to develop programs to lift
capability of managers to effectively
lead multi-generational teams
employees who are either retiring, transitioning to retirement or
would like to continue to work more flexibly.
• Investigation into generational and other diversity aspects that
potentially influence readiness for workplace of the future. Findings
inform next stage of work on the potential impact of disruptive
technologies on work and the workforce.
In progress
• Transition to retirement program to be launched in FY2019.
6
Indigenous Relations
6.1 Indigenous Employment: through
Indigenous Employment strategy,
increase the representation of
Indigenous employees in Boral’s
workforce
Completed
• Boral became a corporate member of Supply Nation, a Government
supported business program that identifies and utilises Indigenous
businesses.
• 85% of Indigenous employees employed through Indigenous
employment initiatives such as the FY2011 Indigenous Relations and
Employment Plan continue to work at Boral.
In progress
• Target set to increase the total number of Indigenous employees
working in Manager, Professional, Sales, Clerical and Administration
roles.
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 2018:
Role
Board
Executive
management2
Middle
management3
Other roles4
Total
Female
Male
Number Percentage Number Percentage
4
50
50%
23%
4
165
50%
77%
113
14%
720
86%
2,172
2,335
20%
19%
8,955
9,840
80%
81%
1. Includes all full-time, part-time and casual employees of Boral and 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 frontline 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 and on
Boral’s website.
For more information regarding people and diversity, see page
22 in the Sustainability Overview.
Boral’s Diversity Policy is available on Boral’s website.
Boral Limited Annual Report 2018 45
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 52 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.
Directors are provided with copies of all announcements made pursuant to Boral’s continuous disclosure obligations promptly after
they have been made.
Boral’s Continuous Disclosure Policy is available on Boral’s website.
46
Boral Limited Annual Report 2018
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.
Investor relations
Annual reporting
Company announcements
General meetings
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
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 lodgement has been received from the ASX. These documents are
also available for download by mobile devices from Boral’s Investor Relations (IR) app, which is
available for no cost from the App Store or Google Play. Furthermore, Boral has an email list of
investors, analysts and other interested parties who are sent relevant announcements via email
alert after those announcements have been lodged with the ASX. Announcements are also sent
to major media outlets and newswire services for broader dissemination.
Boral encourages shareholders to attend and participate in all general meetings including annual
general meetings. Shareholders are entitled to ask questions about the management of the
Company and of the auditor as to its conduct of the audit and preparation of its reports.
Notices of Meeting are accompanied by explanatory notes to provide shareholders with
information to enable them to decide whether to attend and how to vote upon the business of the
meeting. Full copies of Notices of Meeting and explanatory notes are posted on Boral’s website.
If shareholders are unable to attend general meetings, they may vote by appointing a proxy using
the form attached to the Notice of Meeting or an online facility.
Annual General Meeting
Shareholders are invited, at the time of receiving the Notice of Meeting, to put forward questions
that they would like addressed at the Annual General Meeting.
At the Annual General Meeting, shareholders have a reasonable opportunity to ask the external
auditor questions in relation to the conduct of the audit, the preparation and content of the
Auditor’s Report, the accounting policies adopted by the Company in relation to the preparation
of the financial statements of the Company, and the independence of the external auditor in relation
to the conduct of the audit.
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 2018 47
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 2018.
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 integration of Headwaters Inc., acquired May 2017; and
the Group reported a net profit after tax of $441 million
after recognising a net significant item loss of $32 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 (pages
18–19) and Sustainability Overview section (pages 20–31) of
this Annual Report. The Group’s broader risk identification
and management framework is also set out in the Corporate
Governance Statement on pages 34–47 of this 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.
48
Boral Limited Annual Report 2018
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 2,700 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 20–31 of this 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
a 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.
Weather is an inherent risk for the construction materials and
building products industries. Periods of extreme weather can
impact Boral’s ability to supply products to the market and also
limit customers’ ability to construct, thereby reducing demand.
While these delays are generally short term in nature Boral has
the ability to flex its production schedules to reduce the cost
impacts of these events. Boral also has weather monitoring
processes in place to identify where and when these extreme
weather events may impact the business and initiate planning
processes early.
Major projects are a large part of Boral’s annual revenue stream,
primarily in Australia. Given that Boral is predominantly a sub-
contractor to these projects, it is directly impacted by delays in
the delivery schedules or changes to the project scope of works.
In order to mitigate against this risk, Boral has a diversified base
of major projects underway across its regional businesses at
any one time. Boral’s dedicated Project Management Office
also ensures that it is able to maintain best practice project
management processes and technical expertise to meet and
exceed customer schedules and programs of work.
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.
Boral Limited Annual Report 2018 49
Directors’
Report
(6) Environmental performance
Details of Boral’s performance in relation to environmental
regulation are set out on pages 23–30 of the Sustainability
Overview in this Annual Report.
(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 (retired effective 30 June 2018)
Mike Kane
Catherine Brenner
Eileen Doyle
Kathryn Fagg
John Marlay
Karen Moses
Paul Rayner
With the exception of Brian Clark who retired effective
30 June 2018, all Directors have been Directors of the
Company at all times during and since the end of the year.
On 20 June 2018, it was announced that Peter Alexander
would join the Board, effective 1 September 2018.
146.5
(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.
(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.
(8) Dividends paid or resolved to be paid
Dividends paid to shareholders during the year were:
Total dividend
$m
140.7
the final dividend of 12.0 cents per ordinary
share (50% franked at the 30% corporate tax
rate) for the year ended 30 June 2017 was paid
on 3 October 2017
the interim dividend of 12.5 cents per ordinary
share (50% franked at the 30% corporate tax
rate) for the year ended 30 June 2018 was paid
on 9 March 2018
The Directors have resolved to pay a final dividend of 14.0 cents
per ordinary share (50% franked) for FY2018. The dividend is
expected to be paid on 2 October 2018.
50
Boral Limited Annual Report 2018
(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 2018 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 2019. 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 33 of the Annual Report.
Details for each Director of all directorships of other listed
companies held at any time in the three years before the end of
the financial year and the period for which such directorships
have been held are:
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 to April 2018
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
Paul Rayner
Qantas Airways Limited from July 2008 (current)
Treasury Wine Estates Limited from May 2011 (current)
(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
9
9
9
9
9
9
9
9
9
9
9
9
9
9
9
9
–
–
4
–
–
–
4
4
–
–
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 2018 51
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:
Catherine Brenner
Brian Clark
Eileen Doyle
Kathryn Fagg
Mike Kane b
John Marlay
Karen Moses
Paul Rayner
Non-executive
Directors’
Share Plana
–
7,730
–
–
–
–
–
2,597
Shares
48,405
123,072
45,248
38,562
1,207,153
39,310
31,757
121,055
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 52,009 shares are held by MCG
Wealth Management Australia Nominees Pty Limited
– JBC Investment Holdings Pty Ltd ;
• Eileen Doyle, 43,324 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;
• Karen Moses, 30,757 shares are held by Aventeos
Investments Limited on behalf of KRN Pty Limited ATF KRN
Family Discretionary Trust; and
• Paul Rayner, 39,135 shares are held by Yarradale
Investments Pty Limited and 79,969 shares are held by Invia
Custodian Pty Limited for and on behalf of Bigpar Pty Ltd
(the trustee of the PaulJul Super Fund).
Shares or other securities with rights of conversion to equity
in the Company or in a related body corporate are not otherwise
held by any Director of the Company:
a Shares in the Company allocated to the Director’s account
in the Non-executive Directors’ Share Plan. Directors will only
be entitled to a transfer of the shares in accordance with the
terms and conditions of the Plan. No shares were allocated
to non-executive Directors during FY2018.
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 55-77.
52
Boral Limited Annual Report 2018
(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 $528,000.
These services consisted of:
Taxation compliance services in Australia
Advisory and assurance-related services in
Australia
Other services
Taxation compliance and other services in
jurisdictions other than in Australia
$256,000
$209,000
$16,000
$47,000
In accordance with advice from the Company’s Audit & Risk
Committee, Directors are satisfied that the provision of the
above non-audit services during the year by the auditor is
compatible with the general standard of independence for
auditors imposed by the Corporations Act.
Also in accordance with advice from the Audit & Risk
Committee, Directors are satisfied that the provision of those
non-audit services during the year by the auditor did not
compromise the auditor independence requirements of the
Corporations Act because:
• Directors are not aware of any reason to question the
auditor’s independence declaration under section 307C
of the Corporations Act;
•
the nature of the non-audit services provided is not
inconsistent with the requirements of the Corporations Act;
and
• provision of the non-audit services is consistent with the
processes in place for the Audit & Risk Committee to
monitor the independence of the auditor.
(18) Auditor’s Independence Declaration
The auditor’s independence declaration made under section
307C of the Corporations Act is set out on page 54 of the
Annual Report and forms part of this Report.
(19) Remuneration Report
The Remuneration Report is set out on pages 55–77 of this
Annual Report and forms part of this Report.
(20) Proceedings on behalf of the Company
No application under section 237 of the Corporations Act
has been made in respect of the Company and there are
no proceedings that a person has brought or intervened
in on behalf of the Company under that section.
(21) Rounding of amounts
Unless otherwise expressly stated, amounts have been rounded
off to the nearest whole number of millions of dollars and one
place of decimals representing hundreds of thousands of dollars
in accordance with ASIC Corporations Instrument 2016/191,
dated 24 March 2016.
Signed in accordance with a resolution of the Directors.
Kathryn Fagg
Director
Mike Kane
Director
Sydney, 29 August 2018
Boral Limited Annual Report 2018 53
Directors’
Report
Lead Auditor’s Independence Declaration
under Section 307C of the Corporations Act 2001
To: the Directors of Boral Limited
I declare that, to the best of my knowledge and belief, in relation to the audit for the financial year ended 30 June 2018 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
Kevin Leighton
Partner
Sydney, 29 August 2018
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.
54
Boral Limited Annual Report 2018
2018
Remuneration
Report
Message from the Chairman of the Remuneration & Nomination Committee
On behalf of the Remuneration & Nomination Committee (Committee), I am pleased to present our FY2018 Remuneration Report.
Our Report demonstrates the alignment between executive pay and shareholder value and clearly communicates how our remuneration
policies and practices support the delivery of our long-term vision for Boral.
We have continued to receive feedback from our shareholders and their proxy advisers as we actively engage with them to better
understand their views and priorities. This feedback has informed and supported our decision making, assisted in refinements to our
remuneration practices and improved our reporting.
In this year’s report you will see the impact of several previously communicated decisions and changes, namely:
• Chief Executive Officer & Managing Director (CEO) remuneration – as indicated in the FY2017 Report, changes were made to the
CEO’s remuneration consistent with his increased time in the USA, including the cessation of his expatriate benefits in FY2018.
• One-off targeted retention incentives – no executive has been granted retention incentives in FY2018 and no executive will be granted
retention incentives in FY2019.
•
Face value long-term incentive (LTI) allocation methodology – the LTI awards granted in September 2018 were allocated on a face
value basis.
In addition, the Board decided to reduce senior executives’ maximum short-term incentive (STI) opportunities but increase their target
STI opportunities, which is more in line with market practice.
These changes are explained on pages 58-59.
FY2018 was the first full year of ownership of the Headwaters business in the USA, and I am pleased to report that the integration of
Headwaters progressed very well and that year one synergies of US$39 million exceeded our expectations.
The transformation to deliver more sustainable growth and better returns required the Board, supported by the Committee, to assess
whether adjustments to Boral’s remuneration policies and practices were needed to take into account the changing nature of our business.
The key areas of review that the Committee considered in FY2018 were:
• whether earnings before interest and tax (EBIT) return on funds employed (ROFE) remains the most appropriate LTI returns measure to
align with the future needs of the business; and
• whether safety outcomes should drive a component of remuneration.
The outcomes of these reviews and the decisions made by the full Board are described on pages 60-62.
Boral’s FY2018 profit after tax1 (PAT) increased by 38% and EBIT before significant items increased by 50%. Group EBIT including
significant items increased by 49%2. This solid performance was 96.4% of the ambitious EBIT target set by the Board at a Group level. As a
consequence, Senior Executives’ STI cash payments of $2.5 million were 11.7% lower than last year.
Executives earned some long-term incentive reward for exceeding most of our comparators’ shareholder returns, but forfeited some
incentive reward for not meeting tough internal financial standards. These outcomes, on review by the Committee and the Board, fairly
reflect underlying performance, and are consistent with our philosophy of aligning pay with performance.
We trust this Remuneration Report provides insight into the high priority the Board places on listening and responding to our shareholders.
We are committed to serving your interests and to deliver sustainable value to our shareholders.
Yours sincerely
Kathryn Fagg, Chairman, Remuneration & Nomination Committee
1. Excludes financial impact of significant items. See note titled “Non-IFRS information” on page 1 of the Annual Report.
2. Includes continuing and discontinued operations.
Boral Limited Annual Report 2018 55
2018
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
FY2018 performance and actual pay received
Remuneration framework for FY2018
Remuneration governance
Non-executive Directors’ remuneration
Statutory remuneration disclosures
Glossary of key terms
57
57
63
67
70
72
73
77
56
Boral Limited Annual Report 2018
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 2018 (FY2018). 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 FY2018.
Name
Position
Senior Executives
Mike Kane
Joseph Goss
Ross Harper
David Mariner
Rosaline Ng
Non-executive Directors
Chief Executive Officer & Managing Director (CEO)
Divisional Chief Executive, Boral Australia
Executive General Manager, Cement
President & CEO, Boral North America
Chief Financial Officer (CFO)
Brian Clark
Chairman and non-executive Director (retired effective 30 June 2018)
Catherine Brenner
Non-executive Director
Eileen Doyle
Kathryn Fagg
John Marlay
Karen Moses
Paul Rayner
Non-executive Director
Non-executive Director (appointed Chairman, effective 1 July 2018)
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 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, Senior Executives were focused on the following objectives in FY2018:
• Delivering Zero Harm and performance excellence
•
Integrating the Headwaters business into Boral North America, including delivering year one synergies
• Maintaining and strengthening Boral’s leading position in Australia
• Capturing USG Boral’s organic and innovation-based growth opportunities in Asia, Australia and the Middle East
• Strong cash flows and balance sheet to support growth and deliver value.
Boral’s executive remuneration policy is intended to focus executives on business plan delivery and in doing so create shareholder
value. Our FY2018 executive remuneration arrangements reflect those business objectives the Board considers most important to
incentivise our executives to achieve. The rationale for the selection of incentive plan metrics is outlined in Section 4.
Refinements to the executive remuneration policy
The Committee supports the Board to assess whether adjustments to remuneration policy are required to take into account the
changing nature of our business and the environment in which we operate, including the expectations of Boral’s stakeholders and
market practice.
To help ensure current and future business needs can be met, the Committee has focused its efforts on:
• Ensuring our approach to remuneration is suited to a business that is heavily impacted by different construction markets and
cycles in different geographies
• Attracting and retaining the right talent in different geographies and businesses, while recognising that Boral is, and will remain,
an Australian headquartered company
• Enabling the transfer of key talent quickly and easily between businesses and regions.
Boral Limited Annual Report 2018 57
2018
Remuneration
Report
The Committee has also listened to shareholder feedback, which in recent years has been focused on:
• Concern regarding the impact of non-monetary benefits on the overall quantum of pay for the CEO, and the approach to fixed
annual remuneration adjustments
•
Improving the clarity and transparency of remuneration disclosures
• Ensuring STI and LTI continue to recognise and achieve a fair balance of returns for both executives and shareholders.
Prior year decisions impacting FY2018 remuneration
Issues and decision
Comments
CEO remuneration
Changes made to the CEO’s
remuneration delivered a
reduction in fixed remuneration
costs of 21% due to the cessation
of expatriate benefits. He received
a 2% increase on a Fixed Annual
Remuneration (FAR) equivalent
basis. The CEO’s incentives are
now calculated on his base cash
salary (BCS).
As announced on 21 June 2017, the CEO’s remuneration arrangements were restructured
to reflect him spending approximately half of his time in the USA, after the completion of
the Headwaters acquisition. The new arrangements included a 2% increase to the CEO’s
remuneration on a FAR equivalent basis, following a benchmarking review relative to Australian
peers. The new arrangements also saw the CEO’s expatriate benefits cease, resulting in
non-monetary benefits reducing by 75% in FY2018. The net effect of these changes is a 21%
reduction in fixed remuneration costs.
From 1 July 2017, the CEO’s STI and LTI opportunity were calculated based on Base Cash
Salary (BCS) rather than FAR, BCS being lower than FAR as it excludes some fixed benefits
such as pension amounts. This is consistent with the basis of calculation of incentive plan
opportunities for other US executives. The CEO’s US-based pension and benefits arrangements
are also consistent with Boral’s policy for other US executives.
Outlined below is the outcome of the changes made to the CEO’s remuneration in FY2018:
BCS
STI % of BCS
Target
Maximum
LTI (% of BCS
under face value
approach)
US$1,299,674*
110%
154%
220%
* A$1,722,563 converted based on the Reserve Bank of Australia daily A$/US$ exchange rate,
averaged over the 12 month period to 30 June 2017, being 0.7545.
The CEO’s STI and LTI participation continued under the terms outlined in Section 4, with the
change in LTI opportunity reflecting the transition to a face value allocation methodology and
calculation based on BCS.
The Company resumed 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, consistent with the Boral policy applied to other US
executives. Other benefits provided to the CEO include motor vehicle lease, medical and dental
coverage and life/disability insurances.
To improve simplicity and transparency of remuneration, we changed our LTI allocation
methodology in FY2018. We now disclose LTI value based on a “face” or maximum value of LTI
awards, rather than an expected or accounting-based fair value which was used in FY2017. We
consider a face value methodology provides the most transparency for our shareholders.
The number of rights granted under an LTI award is now calculated as follows:
LTI opportunity
5 day VWAP at grant
= Number of rights granted
As mentioned in the FY2017 Remuneration Report, the change to a face value LTI allocation
methodology was not intended to alter the actual value of awards delivered to executives, and
they should be no worse off as a result of this transition.
The number of rights granted to each executive remained approximately the same. However,
communicated values may appear higher because they reflect the face value or maximum value
of the LTI awards instead of fair value.
LTI allocation methodology
Change from fair to face value
calculation for LTI awards from
FY2018
58
Boral Limited Annual Report 2018
Prior year decisions impacting FY2018 remuneration (continued)
Issues and decision
Comments
Impact of Headwaters
transaction
Maintaining pre-existing
targets for incentives with no
retrospective adjustments
Targeted Retention Incentive
No retention incentives were
granted to executives in FY2018.
The retention grant awarded to
executives in September 2015 is
scheduled to vest in September
2018.
As noted in FY2017, the additional EBIT and increased funds employed associated with the
acquisition has initially dampened the rate of ROFE growth within the incentive period, prior to
delivery of the full year 4 synergy benefits. Despite this, the Board considered it appropriate to
maintain the pre-existing targets and did not make retrospective adjustments.
In the long 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.
Targets set for the September 2017 LTI Grant (ie which will be eligible to vest in September 2020)
took 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 targets for the STI plan, the Board will continue to monitor any potential
post-acquisition accounting impacts during integration that may have unintended consequences
on incentive outcomes.
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.
Those eight key executives have continued to develop within Boral and all have expanded roles
with increased responsibilities. The targeted retention incentives awarded in September 2015
are scheduled to vest in September 2018. No additional executive retention incentives were
provided in FY2017 or FY2018, nor will any be awarded in FY2019.
FY2018 review areas and decisions
Issues and decision
Comments
Aligning overall remuneration
opportunities with business
performance
We have preserved our simple financially-based STI, retaining underlying EBIT as the measure
of performance. The Board considers EBIT to be the most valid benchmark for executive
performance because it is easy to understand and measure, and it is independently verified.
Aligning STI opportunities for
CEO direct reports
In the FY2017 Remuneration Report, a reduction in the number of CEO direct reports by two
positions was disclosed. To address the change in executive roles and responsibilities, the STI
opportunities for the remaining direct reports were adjusted in FY2018. Remuneration changes
focused on STI because it recognises the delivery of EBIT targets which are challenging and
create value for shareholders.
Under the revised STI arrangements for the remaining direct reports, STI target opportunities
were increased while maximum opportunity was reduced. STI targets are now 60% of FAR
for the executive team, up from 50% for most roles. This increases the proportion of on-target
remuneration that is subject to performance and is more market competitive. In addition,
maximum STI was reduced to better align with market practice and Boral’s risk profile. Whereas
Senior Executives could previously earn up to 200% of target for stretch performance, this has
been reduced to approximately 165% of target.
Boral Limited Annual Report 2018 59
2018
Remuneration
Report
FY2018 review areas and decisions (continued)
Issues and decision
Comments
LTI Performance Hurdle
ROFE measure retained but
new target setting approach to
be adopted for FY2019 grants
onwards. The ROFE targets
will now be set relative to the
weighted average cost of capital
(WACC) and the target vesting
range will be broadened. This
directly incentivises executives
to deliver returns exceeding the
WACC through market cycles.
Existing ROFE targets for grants
prior to FY2019 are not being
adjusted.
Relative TSR measured against
the S&P/ASX100 Index will be
retained.
As indicated in the FY2017 Remuneration Report, Boral monitors the appropriateness of LTI
performance measures, taking into account current and future needs of the business. In
FY2018, Boral reviewed whether ROFE continued to be the most appropriate measure going
forward and its alignment to the future needs of the business. The Board concluded that ROFE
remained an appropriate measure, although ROFE targets could be more explicitly aligned with
Boral’s objective to deliver returns that exceed the weighted average cost of capital (WACC).
WACC is the level of return required to add investor value, taking into account the risk associated
with the investment.
The current approach to setting ROFE targets, and the new approach to apply for FY2019 LTI
grants onwards, are summarised below:
FY2018 approach
FY2019 approach
ROFE targets determined as a percentage of
funds employed
ROFE targets determined relative to WACC
Historically, the Board set absolute ROFE
targets with reference to Boral’s forecast long-
term financials. This approach has a number of
limitations:
• forecast and actual ROFE performance
To address these limitations, ROFE targets will
now be set relative to Boral’s WACC for the
relevant testing period and a broader vesting
range will be introduced, which is strongly
skewed to outperformance. These adjustments:
fluctuates materially given the cyclical nature
of business conditions
• provide a more stable and less volatile
approach for measuring ROFE performance
• targets do not explicitly factor in Boral’s
WACC
• any significant portfolio changes increase
the difficulty of accurate forecasting, and
• the narrow vesting range of 0.5% between
target and stretch, combined with the
cyclical nature of the business, increases
the chance of ‘all or nothing vesting’.
• continue to measure ROFE performance as
EBIT (before significant items) on average
funds employed
• transparently align with Boral’s stated
objective of exceeding WACC through the
cycle, and
• focus executives on delivering returns which
exceed WACC, with the broader vesting
range providing increased incentive to
outperform.
The chart below illustrates how the new approach would have applied over the past 17 years.
Over this period, reported ROFE would have exceeded WACC seven times (41% of the time) and
would have exceeded the stretch target five times (29% of the time).
20.0%
18.0%
16.0%
14.0%
12.0%
10.0%
8.0%
6.0%
4.0%
2.0%
0.0%
60
Boral Limited Annual Report 2018
ROFE
Target
Stretch
FY2018 review areas and decisions (continued)
Issues and decision
Comments
LTI Performance Hurdle
(continued)
Broader vesting range from FY2019
The vesting range will be expanded from 0.5%, where it has been in recent years, to 2.0%,
emphasising performance above WACC. The vesting range and payout percentages are below.
ROFE
Below WACC
At WACC (target)
Payout (% of potential award)
Nil
50%
Between WACC and WACC plus 2.0%
Vesting on a straight-line basis
At or above WACC plus 2.0% (stretch)
100%
These hurdles are intended to drive sustainable value creation for shareholders and attract
and retain high performing executives. The hurdles will continue to ensure executives are only
rewarded for delivery of returns above Boral’s WACC, recognising that WACC itself does change
to reflect external circumstances, such as the long-term risk free rate.
Any awards that do not vest in accordance with the vesting schedule will lapse and there will be
no re-testing.
WACC and ROFE calculation
As joint ventures (JVs) remain an attractive business model for Boral, the share of EBIT (before
significant items) from our JVs (rather than post-tax JV earnings) will be included in the pre-tax
ROFE calculation, consistent with the treatment for Boral’s wholly owned businesses. WACC will
be calculated by Boral on a pre-tax basis, providing a direct comparison with the pre-tax ROFE
measure, using the average annual WACC over the three year period from 1 July 2018 (for the
FY2019 grant). The calculation will be overseen by the Audit & Risk Committee supporting the
Remuneration & Nomination Committee and the Board, and will be reviewed and validated by an
independent external advisor. Previous ROFE targets and calculations for grants prior to FY2019
are not affected.
The calculated WACC for each year and the Company’s ROFE performance will be disclosed
retrospectively in Boral’s Remuneration Report.
Boral Limited Annual Report 2018 61
2018
Remuneration
Report
FY2018 review areas and decisions (continued)
Issues and decision
Comments
Safety and remuneration
The Committee and the Board
considered whether Board
discretion in relation to FY2018
STI outcomes should be
exercised as a result of a fatality
of a delivery driver on a Boral
site. This prompted a broader
review by the Board to reconsider
whether safety should be an
additional STI metric.
Based on a thorough review and full consideration of the tragic circumstances, management
response and the devastating impacts that the September 2017 supplier fatality had on the
entire organisation, the Board has determined not to reduce FY2018 executive STI payments.
Furthermore, the Board remains of the view that we are better served in Boral to continue to
exclude safety as a measure within short-term financial incentives.
The Board recognises that in some organisations, it is very important to have safety as a
component of remuneration. At Boral, safety is considered so fundamentally important that
there is a strong belief that safety should not be financially rewarded and therefore should not
be a component of remuneration incentives. This is an important and powerful aspect of Boral’s
culture, and after rigorously considering the cultural aspects and performance outcomes, the
Board remains of the view that it is the right approach for Boral.
In testing Boral’s approach, the Board reviewed 10 years of safety and STI data from FY2008
through to FY2017, which included a three year period to FY2010 when safety was an additional
STI determinant. The data showed that Boral’s safety performance has improved dramatically
over the past 10 years, and importantly safety outcomes continued to improve significantly after
safety was removed as an STI metric from FY2011. Safety continued to improve even in periods
where STI payouts varied and were low due to poor financial performance. The improvement
in safety is underpinned by a strong safety leadership culture and a commitment across the
company to Zero Harm Today.
Managing safety well is considered a fundamental part of everyone’s role at Boral, and is
taken into consideration in performance reviews and performance management. As such,
the Board examined Boral’s track record in taking appropriate responsive action, including
terminating employment for poor safety management and safety breaches. The results show
that over the past three years (FY2015-18), 78 employees (including 12 in FY2018) in Australia
and North America had their employment terminated because of a breach of safety standards
and protocols, which included poor management of safety. The combination of a strengthened
safety culture and performance management is considered the right approach for Boral.
62
Boral Limited Annual Report 2018
Section 3: FY2018 performance and actual pay received
During FY2018, 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.
Financial performance
FY2013
FY2014
FY2015
FY2016
FY20172
FY2018
Earnings per share1,3 (cents)
Dividends per share (cents)
Return on equity1 (%)
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
40.4
26.5
8.3
Boral Share price
$8.50
$7.50
$6.50
$5.50
$4.50
$3.50
$2.50
FY2013
FY2014
FY2015
FY2016
FY2017
FY2018
How did Boral’s performance result in STI awards?
EBIT performance
The use of EBIT effectively aligns rewards for Senior Executives with Boral’s 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 FY2018, Boral reported EBIT1 of $688.4 million, which was $228.5 million or 50% higher than the prior year. This EBIT
improvement in earnings was underpinned by Boral’s first full year of ownership of the Headwaters business in the USA, volume and
price growth, cost improvement initiatives and strong Property results.
On average, 52.3% of maximum STI opportunity was paid out to Senior Executives for FY2018 performance, which is equivalent
to 84.4% of target STI on average. This compares to 56.5% of maximum STI, and 103.7% of target STI, paid out for FY2017
performance.
STI payments over the past 10 years demonstrate the cyclical nature of our industry and the variability of STI payments. Over the last
10 years (FY2009 to FY2018), Boral’s STI has paid out at an average 70.3% 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 % of target outcomes
Year
FY2009
FY2010
FY2011
FY2012
FY2013
FY2014
FY2015
FY2016
FY2017
FY2018 Average
(% of target)
0.00% 93.80% 36.40% 14.00% 6.90% 100.40% 126.70% 136.50% 103.70% 84.38% 70.28%
STI
Further details in Section 4
STI awards in FY2018 reflect Boral’s achievement of a 50% increase in Group EBIT before
significant items, which equated to 96.4% of the EBIT target set by the Board at a Group level.
Divisional EBIT growth was 24% for Boral Australia, -9% for USG Boral, and 247% for Boral
North America.
STI payments for FY2018 varied by Senior Executive:
• The CEO received an STI of $1.4 million, representing 75% of his target STI and 54% of his
maximum STI, with 80% of this amount paid in cash and 20% deferred into equity for
two years.
• Other Senior Executives received a total STI of $1.7 million, representing approximately
52.0% on average of the maximum STI, with 20% deferred into equity for two years.
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 2018 63
2018
Remuneration
Report
How did Boral’s performance result in LTI awards?
TSR performance
Boral’s relative TSR performance was steady. Taking into account share price appreciation and dividends paid, Boral delivered a
TSR of 6.7% for shareholders between 1 July 2017 and 30 June 2018. This TSR ranked Boral around the median (47th percentile) of
ASX 100 companies for FY2018.
Over the three year period from September 2014 to September 2017, Boral’s TSR of 60.5% was at the 69th percentile of the
Company’s TSR comparator group, resulting in 59% of the 2014 LTI grant vesting. Over the period from November 2010 to
November 2017 (being the third testing date for the 2010 LTI grant), Boral’s TSR of 121.9% was at the 58th percentile, resulting in
67% of the 2010 LTI grant vesting.
TSR for Boral vs ASX 100 companies: Sept 2014 to Sept 2017
TSR for Boral vs ASX 100 companies: Nov 2010 to Nov 2017
400%
350%
300%
250%
200%
150%
100%
50%
0%
-50%
-100%
1st Quartile
2nd Quartile
3rd Quartile
4th Quartile
60.5%
BLD
700%
600%
500%
400%
300%
200%
100%
0%
-100%
1st Quartile
2nd Quartile
3rd Quartile
4th Quartile
121.9%
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 than they are today and
the cost of capital was higher.
Boral’s ROFE performance of 8.6% in FY2018, as measured by EBIT1 return on average funds employed, declined from previous
years, reflecting the significant increase in funds employed following the Headwaters acquisition, ahead of the full synergy benefits
coming through, which will see a lift in ROFE over the medium and longer term. Boral Australia delivered a divisional ROFE of 17.5%
in FY2018 well ahead of Boral’s cost of capital. USG Boral delivered an underlying divisional ROFE of 9.9% and Boral North America
is positioned to deliver a significant increase in ROFE from 4.4% as the full synergy benefits from the Headwaters acquisition are
realised in year 4.
Boral’s 8.6% ROFE in FY2018 was below the 11.0% to 11.5% vesting range for the 2014 LTI grant and none of the ROFE
tranche vested.
ROFE remains a key measure of performance that is aligned to shareholders. For future LTI awards, Boral will set targets relative
to Boral’s WACC, calculated on a pre-tax basis to provide a direct comparison with the pre-tax ROFE measure. This directly
incentivises executives to deliver returns exceeding the WACC through market cycles.
EBIT return on average funds employed (ROFE)1, %
8.5
9.1
9.2
8.6
6.6
4.7
4.7
FY2012
FY2013
FY2014
FY2015
FY2016
FY2017
FY2018
1. ROFE for remuneration purposes is EBIT (excluding significant items) return on average funds employed. Funds employed is calculated as the average of
funds employed at the start and end of the year, except for FY2017, which was calculated on a monthly average funds employed basis, recognising the
impact of the Headwaters acquisition part way through the year.
64
Boral Limited Annual Report 2018
LTI
2014 LTI
Further details in Section 4
Overall vesting for the 2014 LTI was 59%, based on performance against the relative TSR
hurdle (two-thirds of the grant) and the ROFE hurdle (one-third of the grant). Relative TSR was
at the 69th percentile of the ASX 100 comparator group. The ROFE target was not met, with this
portion of the grant lapsing in full.
Legacy plans
Until 2013, LTI awards were tested at different times over a seven year period based on relative
TSR performance.
The 2010 LTI partially vested on its third and final test date in November 2017 with 67% vesting.
The 2011 LTI, which is subject to its third and final test date in September 2018, is the last LTI
grant that is subject to multiple testing.
Fixed annual remuneration (FAR) outcomes
The key remuneration outcomes for Boral’s Senior Executives in FY2018 are outlined below.
Component
Outcomes
FAR (or BCS for
US employees)
Further details in
Section 4
Increases in FAR were considered by the Board with reference to role responsibilities, experience of individuals,
Boral’s need to retain Senior Executives to manage risk and support succession planning, and positioning of
remuneration against the market.
In FY2018, the Board approved the following adjustments to Senior Executive FAR/BCS. Increases reflect
changes in position scope, market benchmarking undertaken against Boral comparators and market
movements for Senior Executive roles:
• CEO received an increase equivalent to 2% of FAR
• CFO received a 4% increase to FAR
• President and CEO, Boral North America received a 4% increase to BCS
• Divisional Chief Executive, Boral Australia received a 2.56% increase to FAR
• Executive General Manager, Cement received a 4% increase to FAR.
Boral Limited Annual Report 2018 65
2018
Remuneration
Report
Actual remuneration for FY2018
The remuneration outcomes table below has been prepared to provide shareholders with a view of remuneration that was actually
paid to Senior Executives for FY2018. 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.
FY2018 remuneration cash outcomes table
Cash payments and other benefits received
Vesting of prior year
“at risk” equity awards
A$’000s
Fixed
remunerationa STI (cash)b
Superannuation
or pension
payments
Expat
allowancesc
Other
non-cashd
Mike Kane
1,654.4
1,108.0
301.8
–
162.6
FBT
–
Joseph Goss
Ross Harper
David Mariner
Rosaline Ng
995.8
583.7
679.5
876.9
579.8
340.8
125.7
327.3
–
148.2
19.4
148.3
36.3
131.7
27.3
–
–
–
5.2
52.8
44.6
3.1
–
18.8
Total
payments
Vesting of STI
deferral earned
in 2015e
Vesting of 2010
& 2014 LTI
Grantsf
3,226.8
1,891.5
969.1
989.7
1,294.9
510.4
116.7
61.3
116.4
135.3
2,856.0
552.9
324.3
269.8
663.8
A significant portion of actual remuneration received in FY2018 relates to the vesting of deferred STI and partial vesting of 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
75% from November 2010 to November 2017. 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.
Deferred STI
$777
(83%)
$163
(17%)
LTI vested in
period
A$’000s
$3,595
(77%)
$1,072
(23%)
Value at grant date
Additional value at vesting due to share price change
Ref
Item
Notes relating to the Actual Remuneration for FY2018 table
Fixed remuneration
Fixed remuneration is cash salary paid to the Senior Executive for their period as a KMP.
a.
b.
c.
STI (cash)
Expat allowances
d.
Other non-cash
e.
STI deferral
f.
LTI
The value of STI represents 80% of the total STI with the remaining 20% deferred into equity for
two years.
Expatriate 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
allowances ceased for the CEO during FY2018 following his relocation back to the USA.
Other non-cash is comprised of non-monetary benefits including parking, medical, life and disability
insurance, and vehicle costs. These amounts are not taken into account for the purposes of
calculating an executive’s STI or LTI opportunity.
The value for earned deferred STI granted in September 2015 which vested on 1 September 2017,
calculated using the volume weighted average price (VWAP) of Boral ordinary shares in the five trading
days up to 1 September 2017, being $6.7524 multiplied by the number of rights which vested.
LTI performance targets were achieved for the 2010 and 2014 LTI grants, triggering vesting of 67%
and 59% respectively, with Boral delivering nearly top quartile performance relative to our TSR
comparators over the three year period from September 2014 to September 2017 (69th percentile).
The value of the 2010 LTI grant which vested during the year is based on the value at the time of
delivery of the equity to participants, calculated using the VWAP of Boral ordinary shares traded in
the five days up to 17 November 2017 (being $7.5155) and for the five days up to 1 September 2017
for the 2014 LTI grant (being $6.7524), multiplied by the number of rights that vested for each grant.
66
Boral Limited Annual Report 2018
Section 4: Remuneration framework for FY2018
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 FY2018.
REMUNERATION STRATEGY
Align reward to business strategy and shareholder value creation
Attract and retain high performing 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 performing employees with ability
to deliver required financial and non-
financial outcomes are attracted and
retained with fixed remuneration that
reflects role seniority and complexity,
and variable reward opportunities that
reflect performance
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 FY2018, 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 comparator companies
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 2018 67
2018
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).
Comparator companies used in the benchmarking are described
in Section 8 of this Report.
2018 Outcomes
Considerations in setting FAR:
• Position responsibilities and financial impact
• Individual’s knowledge, skills and experience
• Market practice for companies of similar size and
complexity of Boral
Based on benchmarking outcomes, the CEO received a 2% adjustment to his FAR equivalent from 1 July 2017. Other
Senior Executives received FAR increases of between 2.56% and 4.0% for FY2018, reflecting changed position scope,
succession development, incumbents’ capability growth, market movements and benchmarking outcomes.
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. STI awards have threshold, target and
maximum opportunities that are differentiated based on Group
and/or divisional results. No STI awards are made if relevant EBIT
performance gateways are not met.
EBIT targets are considered to be commercial-in-confidence and
are 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 to determine STI outcomes, managing
safety well is 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.
2018 Outcomes
Target and maximum STI opportunities as a percentage
of BCS for the CEO and President & CEO, Boral North
America and FAR for other Senior Executives are
outlined below:
Position
CEO
Senior Executives
Target
110%
60%
Maximum
154%
100%
Boral used a single financial hurdle for STI awards in
FY2018, 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 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 $2.5 million were made to the CEO and Senior Executives in respect of performance over FY2018,
with the remainder of the FY2018 STI outcome for these individuals deferred into equity over two years.
The CEO received 54% of his maximum STI (75% of target), while Senior Executives other than the President & CEO, Boral
North America, received between 45% and 72% of maximum STI (75% and 121% of target). This reflected strong, above-
target EBIT results from Boral Australia. In FY2018, Boral Australia delivered price, volume and margin improvements,
strong Property results, and has secured supply to a growing number of infrastructure projects.
The President & CEO, Boral North America, received 22% of his maximum STI (37% of his target), reflective of Boral
North America delivering an EBIT outcome below target. Further information on the financial performance of Boral North
America is found on pages 16-17 of this Annual Report.
68
Boral Limited Annual Report 2018
Remuneration framework details (continued)
Remuneration strategy
Description
LTI
LTI links 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 to 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 direct ASX
company comparators to produce a meaningful bespoke
peer group.
ROFE
The CEO and Senior Executives are eligible to participate
in the LTI at the following opportunity levels:
Position
CEO
Maximum opportunity (face value)
220% of Base Cash Salary
Senior Executives
70% to 100% of FAR / BCS
The FY2018 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 2017 to
1 September 2020
Year ending 30 June
2020
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 TSR vesting schedule to be applied for the FY2018
LTI grant is:
If at the end of the period, the
TSR of the Company is:
Proportion vesting:
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.
Since FY2013, Boral’s ROFE has steadily increased alongside a
decreasing WACC. While the FY2018 ROFE result is lower than
FY2017, both Boral Australia and USG Boral delivered underlying
divisional ROFE which exceeded the cost of capital for these
businesses.
Below the 50th percentile
At 50th percentile
0%
50%
Between the 50th and 75th percentile Pro-rata vesting from 50%
Reaches or exceeds 75th percentile
100%
to 100%
The ROFE vesting schedule to be applied for the FY2018
LTI grant is:
If the Company’s ROFE
performance for FY2020 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%
2018 Outcomes
In September 2017, 59% of the 2014 LTI vested based on the relative TSR being at the 69th percentile of the ASX100
comparator group. The ROFE component for the 2014 LTI lapsed because that hurdle was not met.
Legacy plans
Until 2013, LTI awards were tested at different times over a seven year period based on relative TSR performance.
The 2010 LTI was tested during FY2018 and partially vested on its third and final test date on 17 November 2017,
with 67% vesting.
Boral Limited Annual Report 2018 69
2018
Remuneration
Report
Total Remuneration
Boral’s remuneration mix is set to balance the need to attract and retain high calibre talent, with the ability to vary reward with
performance. Total maximum remuneration mix for FY2018 is shown below, reflecting the remuneration mix should all performance
hurdles at maximum be met in full.
CEO
22%
32%
46%
Other
Senior Executives
33-37%
33-37%
26-33%
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, other
Senior Executives and non-executive
Directors
• Monitoring the performance of Senior
Executives
• Recommending remuneration and
incentive policies and practices
• Recommending remuneration
arrangements for the CEO
• Recommending remuneration
arrangements for KMP (excl. CEO)
• Prepares recommendations and
provides supporting information for the
Committee’s consideration
• Implements approved incentive policies
and practices
Open lines of communication exist between all of Boral’s Board Committees. For example, in FY2018 the Committee was supported
by the:
• Audit & Risk Committee in reviewing the methodology, assumptions and calculation of ROFE relative to WACC
• Health, Safety & Environment Committee in reviewing safety and remuneration, as discussed earlier in the Report.
These open lines of communication are intended to prevent any ‘gaps’ in risk oversight and to maintain a broader picture of Boral’s
risk profile as it relates to remuneration governance. In addition to the overlapping membership of the Board Committees, the
Board Chairman and the CEO attend all Board and Committee meetings and provide a link between each Committee’s oversight
responsibilities.
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 https://www.boral.com/about-boral/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, 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.
70
Boral Limited Annual Report 2018
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.
Determinations made in FY2018
Based on a thorough review and
full consideration of the tragic
circumstances of the September
2017 supplier fatality, the Board
determined not to reduce FY2018
executive remuneration. For
further information, see page 62 of
this Annual Report.
Component Board discretion
STI
LTI
The Board retains discretion to adjust 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 incentive 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 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 incentive or other amount from
an employee.
Minimum shareholding requirements
To further align the interests of the Company’s Senior Executives with the interests of shareholders, the Board established minimum
shareholding requirements effective from 1 July 2013 for the CEO 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 2018, the CEO well exceeds the requirement
Senior Executives 50% of FAR
As at 30 June 2018, all Senior Executives have achieved the requirement
The Company’s guidelines for non-executive Directors’ minimum shareholdings are set out in the Corporate Governance Statement
on page 46 of this Annual Report. As at 30 June 2018, all Directors had achieved or exceeded the guidelines.
External advice on remuneration
The Committee seeks information and advice regarding remuneration directly from external remuneration consultants Ernst & Young
(EY) and Guerdon Associates, who are independent of the Company’s management.
During FY2018, 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 FY2018 by the Committee and no changes were considered necessary.
Boral Limited Annual Report 2018 71
2018
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 Senior Executives
Permanent
6 months
6 months
Termination payment
Up to 12 months BCS
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 (with a pro rata scale-back based on the proportion of the performance
period elapsed at the cessation date) 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 non-executive Directors do not receive any at risk
remuneration or other performance-related incentives, such as options or rights to shares, and no retirement benefits are provided
to non-executive Directors other than superannuation contributions. The Board Chairman, while attending all Board and Committee
meetings, does not receive any Committee fees in addition to their Board Chairman fees.
Non-executive Director fee levels for FY2018 were as follows:
Fees (A$)
Board
Audit & Risk
Remuneration & Nomination
Health, Safety & Environment
2018
2017
Chair
454,200
41,300
31,000
31,000
Member
151,200
21,100
15,500
15,500
Chair
441,000
40,100
30,100
30,100
Member
146,800
20,500
15,000
15,000
The total annual non-executive Director remuneration for the current Board of seven non-executive Directors for FY2018 was
$1,588,300 including superannuation. This was within the current aggregate fee limit of $2,000,000 per annum, which was approved
at the Company’s Annual General Meeting in November 2016.
A comprehensive review of the level of fees paid to Boral’s non-executive Directors was undertaken during the year, and included
a review of market benchmarking information prepared by EY, Boral’s external remuneration consultant. The review considered the
elements of size and complexity of the business, time commitments and fees paid for non-executive Directors of companies of a
comparable size. As a result of the market review, with effect from 1 July 2018, fees for non-executive Directors were increased by
2.5%, including fees for the Board Chairman, each Committee Chairman and the base fees.
72
Boral Limited Annual Report 2018
Section 7: Statutory remuneration disclosures
The following Senior Executive remuneration table has been prepared in accordance with the accounting standards and has been
audited. The values in the table below align with the amounts expensed in Boral’s financial statements.
Senior Executive remuneration table
Short-term
Post-
employment
Share-based paymentsa
Other
Total
At Risk Remuneration
Cash
salaryb
Short-term
incentivec
Non-
monetary
benefitsd
Super-
annuation
Pensione
Deferred
equity
Rights
Retention
Awards
(Sept 15)f
Long
service
leave
accrual
% of
remuneration
related to
performance
% of target
STI paid
Total
A$’000s
Year
Senior Executives
Mike Kane
2018
1,654.4
1,108.0
162.6
301.8 1,302.3
363.5
2017
1,843.8
1,586.5
638.5
– 1,588.2
411.8
–
–
20.4
4,913.0
56.5%
74.9%
32.1
6,100.9
58.8%
107.6%
Joseph Goss
2018
1,026.8
579.8
315.9
Ross Harper
David Mariner
Rosaline Ng
2017
2018
2017
2018
2017
2018
2017
990.0
580.8
567.6
679.5
679.4
869.8
865.3
444.2
255.2
340.8
199.4
125.7
164.2
327.3
416.5
8.4
12.8
52.8
82.3
63.4
36.1
–
–
336.9
132.4
133.3
18.0
2,543.1
41.3% 120.8%
307.7
116.3
133.3
25.7
2,272.4
38.2%
113.9%
36.3
144.6
19.6
165.5
131.7
203.9
108.3
223.8
70.5
58.9
44.8
57.1
93.8
93.8
98.0
98.0
10.8
1,286.0
43.2% 113.8%
14.8
1,132.4
37.4%
118.7%
–
–
1,336.4
28.0%
37.5%
1,413.1
31.5%
59.5%
27.3
19.6
306.2
103.2
125.0
12.9
1,835.1
40.1%
74.9%
304.3
113.2
125.0
42.3
1,922.3
43.4%
119.0%
Total
2018
4,811.3
2,481.6
603.1
497.1 2,293.9
714.4
450.1
62.1 11,913.6
46.1%
84.4%
2017
4,946.1
2,810.8
1,024.9
147.5 2,589.5
757.3
450.1
114.9
12,841.1
48.0% 103.7%
Ref
Item
Notes relating to the Senior Executive remuneration table
a.
Fair market
value
The fair market value of 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.
b.
c.
d.
e.
f.
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 the CEO during FY2018 following his relocation back
to the USA.
Superannuation
Pension
Under the terms of his expatriate agreements, superannuation contributions have not been made in FY2018
for Joseph Goss.
Retention
awards
(Sept 15)
These values relate to awards made in September 2015, which are expensed over three years. No retention
awards were made in FY2018.
Boral Limited Annual Report 2018 73
2018
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 rights granted under the plan in previous financial years.
Equity Type
Balance as at
30 June 2017
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 2018
No.
No.
$
No.
$
No.
No.
Mike Kane
LTI Rights
1,855,573
561,229
2,418,897
(417,037)
2,856,043
(277,637)
1,722,128
Deferred STI Rights
137,485
58,736
396,609
(75,583)
510,367
–
120,638
Joseph Goss
LTI Rights
412,012
148,096
638,294
(81,885)
552,920
(56,466)
421,757
Deferred STI Rights
38,261
16,446
111,050
(17,282)
116,695
TRI Rightse
71,649
–
–
–
–
–
–
37,425
71,649
Ross Harper
LTI Rights
212,199
64,689
278,810
(46,049)
324,330
(28,430)
202,409
Deferred STI Rights
TRI Rightse
20,412
50,435
7,383
49,853
(9,082)
61,325
–
–
–
–
–
–
18,713
50,435
David Mariner
LTI Rights
245,525
106,150
457,507
(39,096)
269,848
(25,505)
287,074
Deferred STI Rights
TRI Rightse
26,406
52,684
6,080
41,055
(17,236)
116,384
–
–
–
–
–
–
15,250
52,684
Rosaline Ng
LTI Rights
422,296
134,767
580,846
(96,075)
663,753
(62,522)
398,466
Deferred STI Rights
38,395
15,420
104,122
(20,032)
135,264
TRI Rightse
67,187
–
–
–
–
–
–
33,783
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 2017.
The fair market value of LTI Rights granted on 1 September 2017, calculated using a Monte Carlo simulation
analysis, is $3.54 per right for two-thirds of the grant relating to the TSR measure and $5.85 per right
for one-third of the grant relating to the ROFE hurdle. The fair market value of the Deferred STI Rights is
$6.7524 per right, reflecting a face value at time of grant calculated by taking the VWAP of Boral shares on
the ASX during the five day trading period up to but not including 1 September 2017.
c.
Value of vested
rights
Calculated per right as the market price of Boral shares on the date of vesting. No exercise price is payable
in respect of rights that vest.
d.
Lapsed rights Rights that lapsed during the year were granted to Senior Executives under the 2010 LTI Grant
(33% lapsed) and the 2014 LTI Grant (41% lapsed).
e.
TRI Rights
Targeted Retention Incentive Rights provided as a one-off retention award in September 2015.
74
Boral Limited Annual Report 2018
Senior Executive equity balances
The number of rights included in the balance at 30 June 2018 for the Senior Executives is set out below:
Year of grant
2011
2012
2013
2014
2015
2016
2017
Balance as
at 30 June
2018
Senior Executives
Mike Kane
Joseph Goss
LTI Rights
32,363
Deferred STI Rights
LTI Rights
Deferred STI Rights
TRI Rights
–
–
–
–
Ross Harper
LTI Rights
11,434
Deferred STI Rights
TRI Rights
–
–
David Mariner
LTI Rights
9,567
Deferred STI Rights
TRI Rights
–
–
Rosaline Ng
LTI Rights
12,644
Deferred STI Rights
TRI Rights
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
606,440
522,096
561,229
1,722,128
–
–
–
–
–
–
–
–
–
–
–
–
–
–
61,902
58,736
120,638
135,560
138,101
148,096
421,757
–
20,979
16,446
37,425
71,649
–
–
71,649
66,796
59,490
64,689
202,409
–
11,330
7,383
18,713
50,435
–
–
50,435
70,045
101,312
106,150
287,074
–
9,170
6,080
15,250
52,684
–
–
52,684
127,118
123,937
134,767
398,466
–
18,363
15,420
33,783
67,187
–
–
67,187
Non-executive Directors’ total remuneration
The remuneration of the non-executive Directors is set out in the following table.
A$’000s
Brian Clark, Chairman
Catherine Brenner
Eileen Doyle
Kathryn Fagg
John Marlay
Karen Moses
Paul Rayner
Total
2018
2017
Short-Term Board
and Committee
Fees
Post-employment
superannuation
Short-Term Board
and Committee
Fees
Post-employment
superannuation
Total Fees
Total Fees
434.2
155.8
185.7
180.5
166.4
171.5
175.8
20.0
14.8
17.6
17.2
15.8
16.3
16.7
454.2
170.6
203.3
197.7
182.2
187.8
192.5
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
1,469.9
118.4
1,588.3
1,465.0
118.6
1,583.6
Boral Limited Annual Report 2018 75
2018
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
946,073
363,566
74,224
–
44,510
7,978
95,557
18,500
68,717
33,586
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
492,620
790,072
99,167
164,944
55,131
81,839
56,332
77,057
116,107
178,248
–
163,769
–
–
–
3,594
–
–
–
15,131
(231,540)
(371,334)
–
(90,720)
(45,131)
(48,901)
(56,332)
–
(91,993)
(158,248)
1,207,153
946,073
173,391
74,224
54,510
44,510
95,557
95,557
92,831
68,717
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
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
–
–
–
–
–
–
–
–
–
–
–
–
–
–
13,477
36,438
–
15,034
5,300
12,407
–
11,976
–
12,209
10,000
6,757
20,500
32,036
130,802
117,325
48,405
48,405
45,248
39,948
38,562
38,562
39,310
39,310
31,757
21,757
123,652
103,152
Senior Executives
Mike Kane
Joseph Goss
Ross Harper
David Mariner
Rosaline Ng
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
Non-executive Directors
Brian Clark, Chairman
Catherine Brenner
Eileen Doyle
Kathryn Fagg
John Marlay
Karen Moses
Paul Rayner
76
Boral Limited Annual Report 2018
Loans
There were no loans made or outstanding to Senior Executives or non-executive Directors during FY2018.
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 LTI 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
BCS
Base Cash Salary (BCS) is a remuneration term applicable to Boral employees in the USA. It describes
base salary only, excluding pension contributions and other non-monetary benefits.
Committee
The Remuneration & Nomination Committee.
Comparator companies
Two comparator groups are used for market benchmarking:
• Market capitalisation and revenue: S&P / ASX 200 (ASX 200) companies within 50% to 200% of Boral’s
market capitalisation and 50% to 200% of Boral’s revenue (ranges expanded to 33% to 300% where
sample sizes are small).
• Market capitalisation, revenue and industry: ASX 200 companies within the market capitalisation
and revenue comparator group within the ‘Industrials’ or ‘Materials’ Global Industry Classification
Standard (GICS).
Face value of LTI
performance rights
The face value of LTI performance rights is determined from the VWAP 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
ROFE
Senior Executives
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.
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 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 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 2018 77
Financial
Statements
78
Boral Limited Annual Report 2018
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, and assets and
liabilities held for sale
6.2 Equity accounted investments
6.3 Acquisitions
6.4 Controlled entities
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 Subsequent events
8.3 Commitments
8.4 Auditors’ remuneration
8.5 Related party disclosures
8.6 Parent entity disclosures
8.7 Deed of cross guarantee
STATUTORY STATEMENTS
122
124
126
128
130
132
136
136
136
138
139
139
140
141
141
142
143
145
80
81
82
83
84
85
88
92
93
94
95
96
99
100
101
102
104
106
107
109
111
120
121
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 2018 79
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 interest expense and income tax
Interest income
Interest expense
Net interest expense
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
2018
$m
2017
$m
5,731.1
(3,828.7)
(947.6)
(436.9)
4,128.0
(2,759.2)
(743.8)
(296.5)
(5,213.2)
(3,799.5)
65.5
(97.7)
85.6
571.3
1.8
(105.6)
(103.8)
467.5
(37.0)
430.5
10.5
441.0
37.6c
37.4c
36.7c
36.6c
25.8
(95.3)
86.4
345.4
24.4
(75.1)
(50.7)
294.7
(49.0)
245.7
51.2
296.9
29.2c
29.0c
24.1c
24.0c
The Income Statement should be read in conjunction with the accompanying notes which form an integral part of the
financial statements.
80
Boral Limited Annual Report 2018
Statement of Comprehensive Income
Boral Limited and Controlled Entities
For the year ended 30 June
Net profit
Other comprehensive income
Note
2018
$m
2017
$m
441.0
296.9
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
115.5
-
10.5
22.5
589.5
(99.4)
(24.5)
2.6
(1.3)
174.3
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 2018 81
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
Assets classified as held for sale
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
Liabilities classified as held for sale
TOTAL CURRENT LIABILITIES
NON-CURRENT LIABILITIES
Loans and borrowings
Financial liabilities
Deferred tax liabilities
Employee benefit liabilities
Provisions
Other liabilities
TOTAL NON-CURRENT LIABILITIES
TOTAL LIABILITIES
NET ASSETS
EQUITY
Issued capital
Reserves
Retained earnings
TOTAL EQUITY
1. Refer note 6.3 for further details.
Note
2.7
3.1
3.2
6.1
3.1
3.2
6.2
3.3
3.4
5.2
4.1
7.1
3.6
6.1
4.1
5.2
7.1
3.6
4.3
4.4
2018
$m
74.3
879.7
613.8
11.2
38.1
121.2
Restated1
2017
$m
237.8
880.9
594.1
3.8
34.1
19.2
1,738.3
1,769.9
35.1
11.4
1,411.3
32.8
2,782.1
3,395.1
69.6
34.6
7,772.0
9,510.3
752.0
19.2
8.6
20.0
129.6
55.1
10.7
995.2
2,507.6
26.9
39.5
40.6
147.9
21.8
2,784.3
3,779.5
5,730.8
4,265.1
155.8
1,309.9
5,730.8
38.6
13.1
1,353.7
31.8
2,723.8
3,345.0
76.5
28.2
7,610.7
9,380.6
825.9
407.4
15.4
62.0
115.5
46.9
-
1,473.1
2,163.7
10.9
73.9
44.4
145.8
28.3
2,467.0
3,940.1
5,440.5
4,265.1
19.3
1,156.1
5,440.5
The Balance Sheet should be read in conjunction with the accompanying notes which form an integral part of the financial statements.
82
Boral Limited Annual Report 2018
Statement of Changes in Equity
Boral Limited and Controlled Entities
For the year ended 30 June 2018
Balance at 1 July 2017
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
Share acquisition rights vested
Dividends paid
Share-based payments
Total transactions with owners in their capacity as owners
Issued capital
$m
Reserves
$m
Retained
earnings
$m
Total equity
$m
4,265.1
19.3
1,156.1
5,440.5
-
441.0
441.0
201.2
(85.7)
10.5
22.5
-
-
-
-
201.2
(85.7)
10.5
22.5
148.5
441.0
589.5
(22.4)
-
-
(287.2)
-
10.4
(12.0)
(22.4)
(287.2)
10.4
(287.2)
(299.2)
Balance at 30 June 2018
4,265.1
155.8
1,309.9
5,730.8
Issued capital
$m
Reserves
$m
Retained
earnings
$m
Total equity
$m
2,246.2
162.0
1,098.1
3,506.3
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
-
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
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 2018 83
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
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 (to)/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
Dividends paid
Proceeds from borrowings
Repayment of borrowings
Net cash (used in)/provided by financing activities
NET CHANGE IN CASH AND CASH EQUIVALENTS
Cash and cash equivalents at the beginning of the year
Note
2018
$m
2017
$m
2.7
2.7
6,209.0
(5,399.1)
809.9
68.4
1.8
(97.7)
(86.0)
(118.4)
578.0
(421.5)
(3.8)
-
-
(1.6)
74.7
7.6
(344.6)
-
(287.2)
1,664.2
(1,775.2)
(398.2)
(164.8)
237.8
1.3
74.3
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
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.
84
Boral Limited Annual Report 2018
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 29 August 2018.
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 2017, 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
92
100
102
104
106
107
122
124
130
136
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 2018 85
Financial
Statements
Notes to the Financial Statements
Boral Limited and Controlled Entities
Section 1: About this report (continued)
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.
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.
The Group has early adopted from 1 July 2017 AASB 9 Financial
Instruments as issued in December 2014. The new standard
provides greater flexibility going forward with respect to the
Group’s hedging arrangements, compared with the requirements
of the previous Accounting Standard AASB 139 Financial
Investments: Recognition and Measurement.
The adoption of this standard has no material impact on the
measurement of the Group’s financial assets. The Group has
elected to apply the standard retrospectively; however, there is no
restatement of prior period comparatives as there has been no
material impact. Under the adoption of AASB 9, cash and cash
equivalents, trade receivables and other receivables continue to
be measured at amortised cost.
With the adoption of AASB 9, the Group assesses on a forward
looking basis the expected credit losses associated with
assets carried at amortised cost and fair value through other
comprehensive income. For trade receivables only, the Group
applies the simplified approach permitted by AASB 9, which
requires expected lifetime losses to be recognised from initial
recognition of the receivables. The change in policy did not result
in any material impact to the carrying value of the Group’s assets.
On adoption of AASB 9, the Group adopted the AASB 9 hedge
accounting model. The adoption of AASB 9 has changed the
Group’s accounting policies by simplifying and improving hedge
accounting for the Group and means that the accounting results
will better align with its risk management practices. The adoption
of AASB 9 does not impact the original carrying amount of the
86
Boral Limited Annual Report 2018
Group’s financial assets and liabilities, previously measured under
AASB 139. Hedging relationships designated under AASB 139 at
time of adoption met the criteria for hedge accounting
under AASB 9 and are therefore regarded as continuing
hedge relationships.
There has been no material impact on the Group’s basic or
diluted earnings per share (EPS) for the current and
comparative year.
D. New accounting standards and interpretations
not yet adopted
A number of new standards are effective for annual periods
beginning after 1 July 2018 and earlier adoption is permitted;
however, the Group has not early adopted the new or amended
standards in preparing these financial statements.
• AASB 15 Revenue from Contracts with Customers:
The Group is required to adopt AASB 15 Revenue from
Contracts with Customers from 1 July 2018. The Group has
assessed the estimated impact that the initial application of
AASB 15 will have on the Group financial statements. The
primary change in current revenue recognition practice is
with respect to income from the sale of land, which from
1 July 2018 will be recognised at the time the customer
obtains control of the land. This contrasts to current practice
where income from the sale of land is recognised when
contracts are exchanged, an appropriate non-refundable
deposit is received and material conditions contained in the
contract are met. This change does not impact any income
from sale of land recognised up to 30 June 2018.
While other changes have been identified, these are minor
and will not materially affect revenue recognition practice
going forward. The estimated impact on the adoption of
AASB 15 on the Group’s equity at 1 July 2018 is less than
$2 million.
Overall, based on its assessment, the Group does not
expect the application of AASB 15 to have a significant
impact on its consolidated financial statements. Further
information is provided below with respect to the impact of
Boral’s accounting for revenue under AASB 15.
(i) Sale of goods: When the Group sells goods (such as
quarry product, concrete, cement, fly ash and building
products), revenue is currently recognised when the
goods are delivered to the customer, which is taken to
be the point in time at which the customer accepts the
goods and the related risks and rewards of ownership
transfer. Revenue is recognised at this point provided
that the revenue and costs can be measured reliably, the
recovery of the consideration is probable and there is no
continuing management involvement with the goods.
Under AASB 15, revenue will be recognised when a
customer obtains control of the goods. The Group
has assessed that in most instances the time at which
control passes to the customer will align with the
current accounting.
D. New accounting standards and interpretations
not yet adopted (continued)
(ii) Contracting businesses: Contract revenue currently
• AASB 16 Leases: A project to implement this standard is
includes the initial amount agreed in the contract plus
any variations in contract work, claims and incentive
payments, to the extent that it is probable that they will
result in revenue and can be measured reliably. When a
claim or variation is recognised, the measure of contract
progress or contract price is revised and the cumulative
contract position is reassessed at each reporting date.
Under AASB 15, claims and variations will be included in
the contract accounting when they are approved.
Based on its assessment, the Group does not expect
the application of AASB 15 to have a significant impact
on its consolidated financial statements.
(iii) Rendering of services: The Group is involved in a
range of service contracts, predominantly in the Fly
Ash business in North America. If the services under a
single arrangement are rendered in different reporting
periods, then the consideration is allocated on a relative
fair value basis between the different services. Revenue
is currently recognised using the stage-of-completion
method.
Under AASB 15, the total consideration in the service
contracts will be allocated to all services based on their
stand-alone selling prices.
Based on the Group’s assessment, the fair value and
the stand-alone selling prices of the services are broadly
similar. Therefore, the Group does not expect the
application of AASB 15 to result in significant differences
in the timing of revenue recognition for these services.
(iv) Transition: The Group plans to adopt AASB 15 using
the cumulative effect method, with the effect of initially
applying this standard recognised at the date of initial
application (ie 1 July 2018). As a result, the Group
will not apply the requirements of AASB 15 to the
comparative period presented.
underway. While work is ongoing, 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 interest
expense, and a reclassification of certain cash flows from
operating into financing activities.
Initial estimates of the additional right of use asset and
lease liability recognised from 1 July 2019 are between
$350 million and $550 million. In addition, we estimate the
following impacts on the Income Statement on an
annualised basis:
• profit before net interest expense, depreciation,
amortisation, and income tax (EBITDA) to increase by
$90 million to $100 million;
• depreciation expense to increase by $85 million to
$95 million;
• profit before net interest expense and income tax (EBIT) to
increase by $5 million to $10 million;
• net interest expense to increase by approximately
$10 million to $15 million; and
• profit before income tax to reduce by approximately
$5 million to $10 million.
The implementation project is ongoing and therefore all
impacts are initial estimates which are subject to finalisation
prior to final implementation. The actual impact of applying
AASB 16 on the financial statements in the period of initial
application will depend on future economic conditions,
including the Group’s borrowing rate at 1 July 2019, the
composition of the Group’s lease portfolio at that date,
the Group’s latest assessment of whether it will exercise
any lease renewal options and the extent to which the
Group chooses to use practical expedients and recognition
exemptions, and may be materially different from
initial estimates.
Boral Limited Annual Report 2018 87
Financial
Statements
Notes to the Financial Statements
Boral Limited and Controlled Entities
Section 2: Business performance
This section provides the information that is most relevant to understanding the financial performance of the Group during the financial
year and, where relevant, the accounting policies applied and the critical judgements and estimates made.
2.1 Segments
An operating segment is a component of an entity that engages in business activities from which it may earn revenue and incur
expenses, whose operating results are regularly reviewed by the Group’s chief operating decision-maker in order to effectively allocate
Group resources and assess performance.
The Group has identified its operating segments based on the internal reports that are reviewed and used by the CEO and Managing
Director in assessing performance and in determining the allocation of resources. The operating segments are identified by the Group
based on consideration of the nature of the services provided as well as the geographical region. Discrete financial information about
each of these operating businesses is reported to the CEO and Managing Director on a recurring basis.
The following summary describes the operations of the Group’s reportable segments:
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 and block), 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
Denver construction materials. Prior year comparatives include Boral CSR bricks joint venture.
Unallocated
Non-trading operations and unallocated corporate costs.
1. The results of the US bricks operations for the prior year comparative period is 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
Note
6.1
2018
$m
5,869.0
(137.9)
5,731.1
2017
$m
4,388.3
(260.3)
4,128.0
Profit before net interest expense and income tax from reportable segments
586.8
394.7
Less: Profit before net interest expense and income tax from
discontinued operations
Profit before net interest expense and income tax from continuing operations
Net interest expense from continuing operations
Profit before tax from continuing operations
6.1
2.2
(15.5)
571.3
(103.8)
467.5
(49.3)
345.4
(50.7)
294.7
88
Boral Limited Annual Report 2018
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Boral Limited Annual Report 2018 89
Financial
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90
Boral Limited Annual Report 2018
2.1 Segments (continued)
(b) Geographic location
In presenting information on a geographical basis, assets are based on the geographical location of the assets.
Australia
Asia
North America
Other
Tax assets
Financial assets
(c) Product
Concrete
Asphalt
Fly ash
Roofing
Quarry products
Light building products
Stone
Cement
Windows
Bricks
Other
1. Refer note 6.3 for further details.
NON-CURRENT ASSETS
2018
$m
Restated1
2017
$m
2,531.0
2,449.7
670.0
625.0
4,323.6
4,288.7
145.0
139.0
7,669.6
7,502.4
69.6
32.8
76.5
31.8
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7,610.7
EXTERNAL REVENUE BY
PRODUCT
2018
$m
2017
$m
1,596.0
1,494.9
801.5
675.6
505.7
452.0
356.5
346.4
301.9
193.3
70.8
569.3
691.2
209.4
363.2
433.6
100.8
190.9
302.5
31.9
212.7
357.2
5,869.0
4,388.3
Boral Limited Annual Report 2018 91
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
2018
$m
2017
$m
5,464.3
266.8
5,731.1
4,043.2
84.8
4,128.0
(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
92
Boral Limited Annual Report 2018
Note
2.6
2018
$m
58.1
-
7.4
65.5
(97.0)
(0.7)
(97.7)
2017
$m
13.7
1.3
10.8
25.8
(95.3)
-
(95.3)
2.2 Profit for the period (continued)
(c) Net interest expense
Net interest expense comprises 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 interest expenses are capitalised as
part of the cost of the asset up to the time it is ready for its intended use and are then amortised over the expected useful
economic life.
For the year ended 30 June
Interest income received or receivable from:
Associated entities
Other parties (cash at bank and bank short-term deposits)
Unwinding of discount
Interest expense paid or payable to:
Other parties (bank overdrafts, bank loans and other loans)1
Finance charges on capitalised leases
Unwinding of discount
Net interest expense from continuing operations
2018
$m
-
1.5
0.3
1.8
(101.7)
(0.5)
(3.4)
(105.6)
(103.8)
2017
$m
0.1
24.3
-
24.4
(72.4)
(0.2)
(2.5)
(75.1)
(50.7)
1. In 2018, interest of $6.5 million (2017: $4.4 million) was paid to other parties and capitalised in respect of qualifying assets. The capitalisation rate used was
5.4% (2017: 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:
Summarised Income Statement at 100%
Revenue
Profit before income tax
Income tax expense
Non-controlling interest
Net profit before significant items
Significant items net of tax
Net profit – equity accounted relating to continuing operations
The Group’s share based on % ownership:
Net profit before significant items
Significant items net of tax
Net profit – equity accounted relating to continuing operations
Further information regarding equity accounted investments is located in note 6.2.
Note
2018
$m
2017
$m
2,407.6
274.4
(86.4)
(5.7)
182.3
(9.2)
173.1
90.2
(4.6)
85.6
2,133.6
289.7
(91.8)
(5.8)
192.1
(16.8)
175.3
94.8
(8.4)
86.4
2.6
Boral Limited Annual Report 2018 93
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)
2017
2018
26.5
24.0
12.0
12.5
12.0
14.0
$140.7m
paid on
10/03/171
$146.5m
paid on
09/03/182
$140.7m
paid on
03/10/172
$164.1m
payable on
02/10/183
$281.4m
paid
$310.7m
paid/payable
Interim
Final
Annual Declared
1. Declared, paid and fully franked.
2. Declared, paid and 50% franked.
3. 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 2018 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 2018 is $32.2 million (2017: $49.8 million) after adjusting for
franking credits/(debits) that will arise from:
•
•
the payment/refund of the amount of the current tax liability;
the receipt of dividends recognised as receivables at year end;
and before taking into account the franking credits associated with payment of the final dividend declared subsequent to year end.
The impact on the franking account of the dividend recommended by the Directors since year end, but not recognised as a liability at
year end, will be a reduction in the franking account of $35.2 million (2017: $30.2 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.
94
Boral Limited Annual Report 2018
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 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
2018
2017
1,172,331,924
1,018,195,892
5,462,105
7,315,555
1,177,794,029
1,025,511,447
Continuing
operations
Discontinued
operations
2018
$m
2018
$m
Total
2018
$m
Continuing
operations
Discontinued
operations
2017
$m
2017
$m
Total
2017
$m
Earnings reconciliation
Net profit excluding significant items
462.7
10.5
473.2
334.1
8.6
342.7
Net significant items
(refer note 2.6)
Net profit
Basic earnings per share1
Diluted earnings per share1
Basic earnings per share
(excluding significant items)1
Diluted earnings per share
(excluding significant items)
1. Numbers may not add due to rounding.
(32.2)
430.5
36.7c
36.6c
39.5c
39.3c
-
(32.2)
10.5
441.0
37.6c
37.4c
(88.4)
245.7
24.1c
24.0c
40.4c
32.8c
40.2c
32.6c
0.9c
0.9c
0.9c
0.9c
42.6
51.2
5.0c
5.0c
0.8c
0.8c
(45.8)
296.9
29.2c
29.0c
33.7c
33.4c
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 2018 95
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 peformance measure in IFRS. The Company’s definition of significant items may not be comparable
with similarly titled performance measures and disclosures by other entities.
2018 Significant items
Waurn
Ponds
rehabilitation
and closure
costs (ii)
$m
Headwaters
integration
costs (i)
$m
Reassessment
of US tax
balances (iii)
$m
Joint venture
matters (iv)
$m
Total
$m
Summary of significant items from continuing operations
Loss before interest and tax
Income tax benefit
Net significant items from continuing operations
(73.2)
19.0
(54.2)
(23.8)
7.0
(16.8)
-
42.5
42.5
(4.6)
(101.6)
0.9
69.4
(3.7)
(32.2)
Continuing operations
Other expenses
Share of equity accounted income
Waurn
Ponds
rehabilitation
and closure
costs (ii)
$m
Headwaters
integration
costs (i)
$m
Reassessment
of US tax
balances (iii)
$m
Joint venture
matters (iv)
$m
Total
$m
(73.2)
(23.8)
-
-
(73.2)
(23.8)
-
-
-
-
(97.0)
(4.6)
(4.6)
(4.6)
(101.6)
Note
2.2
2.3
(i) Headwaters integration costs
During the period, $73.2 million of costs have been incurred on the integration of the Headwaters business into the Boral North
America business, which forms part of the implementation costs of US$90 million – $100 million expected over financial years 2018
and 2019. The costs during the period predominantly relate to redundancies, employee incentives implemented by Headwaters,
consultant fees supporting the integration, integration of IT systems, brand consolidation, rationalisation of products in metal roofing,
safety implementation costs and asset impairments upon consolidation of the Boral and Headwaters concrete roofing business.
(ii) Waurn Ponds rehabilitation and closure costs
During the period, the organisation has continued to develop plans to improve our cement position in Victoria. This has led to a
reassessment of the expected end use of the Waurn Ponds cement facility, resulting in the recognition of a provision of $23.8 million
with respect to rehabilitation of the limestone quarry attached to the facility.
(iii) Reassessment of US tax balances
On 22 December 2017, a tax bill, H.R. 1, was enacted into US law. This triggered a revaluation of the carrying value of deferred tax
balances associated with the Boral North America division, primarily as a result of a reduction in the federal tax rate from 35% to 21%.
The reduction in tax rate has resulted in a net tax benefit of A$33.7 million, reflecting a net reduction in deferred tax liabilities. This has
improved from the $6.4 million tax expense reported in December 2017, as a result of the finalisation of the acquisition accounting for
Headwaters Incorporated, which increased the value of deferred tax liabilities acquired on the acquisition date of 8 May 2017.
In addition, the Group has reassessed its US tax losses which have not been recognised on the Balance Sheet, given improved
earnings following the acquisition of Headwaters Incorporated in May 2017. This has led to a benefit of A$8.8 million being recorded
during the period.
The total impact of the above adjustments on income tax expense is a benefit of $42.5 million.
(iv) Joint venture matters
Includes $3.6 million of integration and restructuring costs incurred in Meridian Brick, and a $1.0 million loss associated with asset
impairments in USG Boral.
96
Boral Limited Annual Report 2018
2.6 Significant items (continued)
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)
Continuing operations
Other expenses
Share of equity accounted income
Discontinued operations
Note
2.2
2.3
6.1
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
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)
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
-
-
-
(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)
Boral Limited Annual Report 2018 97
Financial
Statements
Notes to the Financial Statements
Boral Limited and Controlled Entities
Section 2: Business performance (continued)
2.6 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.
(ii) Gain on disposal of US bricks
In the prior year, 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.
(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.
Asset Impairment
Property, plant and equipment
Summary of significant items before interest and tax by segment
Boral Australia
USG Boral
Boral North America
Discontinued Operations
2018
$m
(4.8)
2018
$m
(23.8)
(1.0)
(76.8)
-
(101.6)
2017
$m
(20.4)
2017
$m
(20.4)
-
(83.3)
38.5
(65.2)
98
Boral Limited Annual Report 2018
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 2.66% (2017: 2.13%).
(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
2018
$m
2017
$m
57.1
17.2
74.3
155.2
82.6
237.8
441.0
296.9
367.6
260.0
3.1
(58.1)
31.1
10.4
(17.2)
2.5
(49.5)
49.6
11.3
(3.5)
Net cash provided by operating activities before change in assets and liabilities
777.9
567.3
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 and business closure costs
(iv) Changes in loans and borrowings arising from financing activities:
Balance at the beginning of the year
Proceeds from borrowings
Repayment of borrowings
Acquisitions of entities or operations
Changes in fair values
Net foreign currency exchange differences
Balance at the end of the year
(11.5)
(27.8)
(81.8)
(12.9)
(44.0)
(21.9)
(125.9)
2.2
(47.4)
29.7
5.3
(17.9)
578.0
413.3
(54.9)
(49.8)
(13.7)
(118.4)
2,571.1
1,664.2
(1,775.2)
-
(14.7)
81.4
(82.0)
(11.7)
(23.2)
(116.9)
1,345.2
1,803.6
(489.3)
13.8
(24.2)
(78.0)
2,526.8
2,571.1
Boral Limited Annual Report 2018 99
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 fair value plus any directly attributable transaction costs. Subsequent to initial
measurement they are measured at amortised cost less any provisions for expected impairment losses or actual impairment losses.
Credit losses and recoveries of items previously written off are recognised in the profit or loss.
During the year, the Group early adopted AASB 9 Financial Instruments. As a result, the provision for impairment losses in relation
to trade receivable balances is calculated with reference to an expected impairment loss model. There was no opening balance
adjustment to retained earnings and the provision for impairment losses recovered.
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 along with an expected impairment loss calculation which considers the past events,
and exercises judgement over the impact of current and future economic conditions when considering the recoverability of
outstanding trade receivable balances at the reporting date. Subsequent changes in economic and market conditions may result
in the provision for impairment losses increasing or decreasing in future periods.
Current
Trade receivables
Associated entities
Less: Allowance for impairment
Other receivables
Less: Allowance for impairment
2018
$m
875.0
0.8
875.8
(14.5)
861.3
18.4
-
18.4
879.7
Restated1
2017
$m
864.7
2.5
867.2
(18.8)
848.4
32.6
(0.1)
32.5
880.9
Included in the following table is an age analysis of the Group’s trade receivables, along with impairment provisions against these
balances as at 30 June:
Gross
2018
$m
Impairment
2018
$m
Net
2018
$m
Gross
2017
$m
Impairment
2017
$m
754.3
100.5
20.2
875.0
(3.2)
(0.6)
(10.7)
(14.5)
751.1
759.6
99.9
9.5
80.8
24.3
860.5
864.7
(3.6)
(0.8)
(14.4)
(18.8)
Net
2017
$m
756.0
80.0
9.9
845.9
Current
Overdue 0 – 60 days
Overdue > 60 days
Total
1. Refer note 6.3 for further details.
100
Boral Limited Annual Report 2018
3.1 Receivables (continued)
The movement in the allowance for impairment in respect to trade receivables during the year was as follows:
Balance at the beginning of the year
Amounts written off during the year
Increase recognised in Income Statement
Acquisitions of entities or operations
Disposals of entities or operations
Transferred to assets held for sale
Net foreign currency exchange differences
Balance at the end of the year
Non-current
Loans to associated entities
Other receivables
2018
$m
(18.8)
4.0
(0.1)
-
-
0.8
(0.4)
(14.5)
2018
$m
19.8
15.3
35.1
Restated1
2017
$m
(12.4)
2.6
(2.5)
(10.5)
3.7
-
0.3
(18.8)
Restated1
2017
$m
16.5
22.1
38.6
No amounts owing by associates or included in other receivables were past due as at 30 June 2018.
1. Refer note 6.3 for further details.
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
1. Refer note 6.3 for further details.
2018
$m
174.8
52.1
386.4
0.5
613.8
Restated1
2017
$m
180.5
47.3
365.5
0.8
594.1
11.4
13.1
0.5
11.4
11.9
2.3
11.6
13.9
Boral Limited Annual Report 2018 101
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
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
2018
2017
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.
102
Boral Limited Annual Report 2018
3.3 Property, plant and equipment (continued)
Reconciliation of movements in property, plant and equipment
Land and buildings
Restated1
2017
$m
2018
$m
Mineral reserves,
licences and quarry
stripping
Plant and equipment
Total
2018
$m
2017
$m
Restated1
2017
$m
2018
$m
Restated1
2017
$m
2018
$m
Balance at the beginning of the year
867.5
895.4
160.9
172.6
1,695.4
1,449.7
2,723.8
2,517.7
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 from other assets or liabilities
Transferred to assets held for sale
Depreciation or amortisation expense
Net foreign currency exchange
differences
2.8
(6.5)
-
-
0.9
(10.1)
97.5
(117.1)
3.4
6.2
415.3
329.3
421.5
336.4
(7.6)
(6.4)
(14.1)
(16.5)
-
-
-
-
-
(5.8)
-
-
307.2
(105.9)
-
-
-
404.7
(228.8)
-
93.2
44.3
19.4
10.1
(112.6)
(54.4)
(0.5)
1.9
(33.5)
(20.5)
(12.7)
-
-
-
-
(4.6)
-
-
-
(4.3)
18.7
(40.0)
(7.7)
7.9
-
(4.8)
(20.4)
20.6
(78.1)
7.9
-
(17.9)
(20.6)
(21.2)
(264.1)
(205.9)
(305.2)
(245.0)
6.9
(12.8)
0.6
(1.0)
10.9
(18.4)
18.4
(32.2)
Balance at the end of the year
911.3
867.5
159.1
160.9
1,711.7
1,695.4
2,782.1
2,723.8
At cost
1,105.6
1,056.6
333.7
320.1
4,301.9
4,224.3
5,741.2
5,601.0
Less: Accumulated depreciation,
amortisation and impairment
(194.3)
(189.1)
(174.6)
(159.2)
(2,590.2)
(2,528.9)
(2,959.1)
(2,877.2)
Balance at the end of the year
911.3
867.5
159.1
160.9
1,711.7
1,695.4
2,782.1
2,723.8
1. Refer note 6.3 for further details.
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 $122.6 million (2017: $72.2 million).
Boral Limited Annual Report 2018 103
Financial
Statements
Notes to the Financial Statements
Boral Limited and Controlled Entities
Section 3: Operating assets and liabilities (continued)
3.4 Intangible assets
Goodwill
All business combinations are accounted for by applying the acquisition method. Goodwill represents the difference between the cost
of the acquisition and the fair value of the net identifiable assets acquired.
Goodwill is stated at cost less any accumulated impairment losses. Goodwill is tested annually for impairment.
Other intangible assets
Other intangible assets, which include trade names, fly ash contracts, customer relationships 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 its
estimated useful life.
The estimated useful lives for each class of intangible asset are as follows:
Trade names
Fly ash
contracts
Customer
relationships
Patents
Other
Estimated useful lives – years
2 to Indefinite
19 – 20
14 – 20
6 – 19
5 – 17
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.
The total value of indefinite life intangible assets (excluding Goodwill) is $124.4 million (2017: $119.8 million).
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.
2018
$m
2,159.9
1,334.2
(99.0)
1,235.2
3,395.1
2,097.8
-
-
(16.6)
78.7
Restated1
2017
$m
2,097.8
1,284.0
(36.8)
1,247.2
3,345.0
213.1
2,072.4
(106.7)
-
(81.0)
2,159.9
2,097.8
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
Transferred to assets held for sale
Net foreign currency exchange differences
Balance at the end of the year
1. Refer note 6.3 for further details.
104
Boral Limited Annual Report 2018
3.4 Intangible assets (continued)
Reconciliation of movements in other intangible assets
As at 30 June 2018
Trade names
$m
Fly ash
contracts
$m
Customer
relationships
$m
Patents
$m
Other
$m
Total
$m
Balance at the beginning of the year
137.8
475.6
618.9
Additions
Amortisation expense
Net foreign currency exchange differences
-
(1.6)
5.3
-
(24.8)
18.2
-
(33.6)
23.5
Balance at the end of the year
141.5
469.0
608.8
At cost
Less: Accumulated amortisation
Balance at the end of the year
147.7
(6.2)
141.5
497.7
(28.7)
469.0
648.3
(39.5)
608.8
4.5
-
(0.5)
0.1
4.1
8.8
(4.7)
4.1
Restated1
As at 30 June 2017
Trade names
$m
Fly ash
contracts
$m
Customer
relationships
$m
Patents
$m
Balance at the beginning of the year
Additions
9.9
-
-
-
-
-
Acquisitions of entities or operations
134.0
498.3
648.7
Amortisation expense
Net foreign currency exchange differences
(0.8)
(5.3)
(3.8)
(18.9)
(5.3)
(24.5)
Balance at the end of the year
137.8
475.6
618.9
At cost
142.2
479.3
624.2
Less: Accumulated amortisation
(4.4)
(3.7)
(5.3)
Balance at the end of the year
137.8
475.6
618.9
1. Refer note 6.3 for further details.
5.3
-
-
(0.7)
(0.1)
4.5
8.5
(4.0)
4.5
10.4
1,247.2
3.8
(1.9)
(0.5)
3.8
(62.4)
46.6
11.8
1,235.2
31.7
(19.9)
11.8
1,334.2
(99.0)
1,235.2
Other
$m
6.4
3.7
4.7
(4.4)
-
Total
$m
21.6
3.7
1,285.7
(15.0)
(48.8)
10.4
1,247.2
29.8
(19.4)
10.4
1,284.0
(36.8)
1,247.2
Boral Limited Annual Report 2018 105
Financial
Statements
Notes to the Financial Statements
Boral Limited and Controlled Entities
Section 3: Operating assets and liabilities (continued)
3.5 Carrying value assessment
Boral annually tests goodwill and other intangible assets with indefinite useful lives for impairment. Other non-financial assets, with the
exception of inventories (see note 3.2) and deferred tax assets (see note 5.2), are tested if there is any indication of impairment or if
there is any indication that an impairment loss recognised in a prior period may no longer exist or may have decreased.
An asset that does not generate independent cash flows and its individual value in use cannot be estimated is tested for impairment
as part of a cash generating unit (CGU).
An impairment loss is recognised in the Income Statement when the carrying amount of an asset or CGU exceeds its recoverable
amount. The asset’s recoverable amount is estimated based on the higher of its value in use and fair value less costs to sell.
An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment
loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been
determined, net of depreciation or amortisation, if no impairment loss had been recognised. An impairment loss in respect of goodwill
is not reversed.
Significant accounting judgements, estimates and assumptions
Management is required to make significant estimates and judgements in determining whether the carrying amount of
non-financial assets has any indication of impairment, in particular in relation to:
•
the forecasting of future cash flows – these are based on the Group’s latest approved forecasts and reflect expectations of
sales growth, operating costs, margin, capital expenditure and cash flows, based on past experience and management’s
expectation of future market changes, taking into account external forecasts.
• discount rates applied to those cash flows – pre-tax discount rates used are 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 CGUs containing goodwill according to business types,
geographical span of operations and with reference to the CGUs impacted by the acquisition upon which the goodwill was generated.
The allocation of goodwill, and subsequently the impairment testing, reflects the lowest level within the business for which information
about goodwill is available and monitored for internal management purposes. The aggregate carrying amounts of goodwill allocated to
each CGU or group of CGUs are as follows:
North America
Other1
2018
$m
2,071.8
88.1
2,159.9
Restated2
2017
$m
1,994.4
103.4
2,097.8
1. Relates to multiple business units, none of which are considered individually significant.
2. Refer note 6.3 for further details.
North America
Goodwill of $2,071.8 million is recorded at 30 June 2018 which arose from the acquisition of Headwaters Incorporated in May 2017.
Given the transformative nature of the acquisition on our North American operations, and the number of CGUs impacted by the
acquisition, the goodwill is tested annually at an aggregated level incorporating all CGUs within our Boral North America segment, with
the exception of our equity accounted investment in the Meridian Brick Joint Venture. This is the lowest level within the business for
which information about goodwill is available and monitored for internal management purposes.
The goodwill was tested using a value in use model. Cash flow projections cover a period of five years, with cash flows beyond the
projection period extrapolated using growth rates of 2.2%. These growth rates do not exceed the long-term average growth rate for
the industries in which the businesses operate. The discount rate applied to pre-tax cash flows was 11.5%.
106
Boral Limited Annual Report 2018
3.5 Carrying value assessment (continued)
Key assumptions relate to:
• market forecasts, including US housing starts, other US construction markets including non-residential and repair and remodel
activity, and US infrastructure activity;
• market share;
•
•
average selling price; and
achievement of synergy targets.
These assumptions have been determined with reference to current and historical performance and taking into account external
forecasts. Market forecasts utilised in the cash flow projections are based on historical experiences and exposures in the relevant
business units and independent economists’ forecasts.
The recoverable amount of the CGU based on value in use exceeds its carrying value at 30 June 2018. 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.
Impairment testing for other cash generating units
The recoverable amount of other CGUs containing goodwill has been reviewed and exceed their carrying values as at 30 June 2018.
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.
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 considered virtually certain 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.
Boral Limited Annual Report 2018 107
Financial
Statements
Notes to the Financial Statements
Boral Limited and Controlled Entities
Section 3: Operating assets and liabilities (continued)
3.6 Provisions (continued)
Rationalisation
and restructuring
$m
2.1
7.8
-
(0.2)
-
0.4
10.1
10.1
-
10.1
Rationalisation
and restructuring
$m
11.6
-
-
-
(9.5)
-
2.1
2.1
-
2.1
Restoration
and
environmental
rehabilitation
$m
Claims
$m
59.3
0.2
-
(1.5)
-
1.9
59.9
10.3
49.6
59.9
Claims
$m
9.8
(2.1)
-
53.9
(0.4)
(1.9)
59.3
9.0
50.3
59.3
85.4
23.5
3.0
(8.4)
(0.3)
0.5
103.7
15.4
88.3
103.7
Restoration
and
environmental
rehabilitation
$m
60.9
3.9
1.8
22.5
(3.0)
(0.7)
85.4
16.6
68.8
85.4
Other
$m
45.9
3.1
0.4
(20.3)
-
0.2
29.3
19.3
10.0
29.3
Other
$m
34.9
4.6
0.7
11.0
(4.8)
(0.5)
45.9
19.2
26.7
45.9
Total
$m
192.7
34.6
3.4
(30.4)
(0.3)
3.0
203.0
55.1
147.9
203.0
Total
$m
117.2
6.4
2.5
87.4
(17.7)
(3.1)
192.7
46.9
145.8
192.7
As at 30 June 2018
Reconciliations
Balance at the beginning of the year
Provisions made during the year
Unwind of discount
Payments made during the year
Transferred to liabilities held for sale
Net foreign currency exchange differences
Balance at the end of the year
Current
Non-current
Total
Restated1
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
1. Refer note 6.3 for further details.
108
Boral Limited Annual Report 2018
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
2018
$m
13.0
6.2
19.2
2,497.0
10.6
2,507.6
2,526.8
2017
$m
398.3
9.1
407.4
2,157.2
6.5
2,163.7
2,571.1
Term and debt repayment schedule
Terms and conditions of outstanding loans were as follows:
Effective
interest rate
2018
Calendar year
of maturity
Currency
30 June 2018
30 June 2017
Carrying
amount
$m
Fair value
$m
Carrying
amount
$m
Fair value
$m
Current
US senior notes – private placement – unsecured
Other loans – unsecured
Finance lease liabilities
USD
GBP
-
2018
3.45% 2018 - 2019
AUD/USD
3.29% 2018 - 2019
-
13.0
6.2
19.2
-
398.3
411.7
13.0
6.2
-
9.1
-
9.1
19.2
407.4
420.8
Non-current
US senior notes – private placement – unsecured
CHF notes – unsecured
US senior notes – 144A/Reg S – unsecured
Acquisition loan facility – unsecured
Term credit facility – unsecured
USD
CHF
USD
USD
Multi
4.43% 2020 - 2030
771.5
793.0
355.4
365.3
2.25%
2020
204.3
213.5
203.2
212.6
3.39% 2022 - 2028
1,261.2
1,253.7
-
-
-
3.38%
2018
2021
-
-
1,237.0
1,237.0
260.0
260.0
361.6
361.6
Finance lease liabilities
AUD/USD
3.28% 2018 - 2022
10.6
10.6
6.5
6.5
Total
2,507.6
2,530.8
2,163.7
2,183.0
2,526.8
2,550.0
2,571.1
2,603.8
Boral Limited Annual Report 2018 109
Financial
Statements
Notes to the Financial Statements
Boral Limited and Controlled Entities
Section 4: Capital and financial structure (continued)
4.1 Loans and borrowings (continued)
US SENIOR NOTES – PRIVATE PLACEMENT – UNSECURED
Borrower
Boral USA
Boral Limited
Boral Limited
Boral Limited
Boral Industries Inc.
Boral Industries Inc.
Total
CHF NOTES – UNSECURED
Borrower
Boral Limited
Notional amount
US$m
Issue date
Interest rate
Maturity date
AUD equivalent
$m
76.2
135.0
41.0
24.0
225.0
75.0
576.2
04/2008
05/2015
05/2015
03/2015
04/2018
04/2018
7.22%
4.01%
4.16%
4.31%
4.05%
3.66%
04/2020
05/2025
05/2027
03/2030
04/2026
04/2026
103.1
177.1
53.8
31.8
304.3
101.4
771.5
Notional amount
CHF $m
Issue date
Interest rate
Maturity date
AUD equivalent
$m
150.0
02/2013
2.25%
02/2020
204.3
US SENIOR NOTES – 144A/REG S – UNSECURED
Borrower
Boral Finance Pty Ltd
Boral Finance Pty Ltd
Total
Notional amount
US$m
450.0
500.0
950.0
Issue date
Interest rate
Maturity date
11/2017
11/2017
3.00%
3.75%
11/2022
05/2028
AUD equivalent
$m
598.0
663.2
1,261.2
BANk FACILITIES
US Senior notes – 144A/Reg S
The Group issued US$950 million of senior notes pursuant to Rule 144A and Regulation S under the US Securities Act of 1933, as
amended, which were drawn down on 1 November 2017. US$450 million notes are due in 2022 and US$500 million senior notes are
due in 2028.
Acquisition loan facility
The Group utilised the proceeds from the US$950 million draw down of the US senior notes – 144A/Reg S to repay the acquisition
loan facility on 1 November 2017. This facility is no longer available to the Group.
US Senior notes – private placement
The Group issued US$300 million (US$225 million fixed rate and US$75 million floating rate) private placement senior notes in April
2018, which are due in 2026. The proceeds were used, in addition to existing cash, to refinance US$306 million of senior, unsecured
notes which matured in April 2018.
Term credit facility
The Group has a multi currency syndicated loan facility from US$400 million to US$750 million maturing on 1 July 2021. The facility
was drawn down by A$260 million as at 30 June 2018.
Bank overdraft, lease liabilities and other
The Group operates unsecured bank overdraft facility arrangements in Australia and USA that have combined limits of A$20 million
(2017: A$19 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 2018.
110
Boral Limited Annual Report 2018
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 disclosed on a gross basis
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.
No more than 40% of Boral’s total credit exposure is to be with any individual eligible counterparty, subject to A$150.0 million total
credit exposure.
For information on the management of credit risk relating to trade and other receivables, see note 3.1.
Boral Limited Annual Report 2018 111
Financial
Statements
Notes to the Financial Statements
Boral Limited and Controlled Entities
Section 4: Capital and financial structure (continued)
4.2 Financial risk management (continued)
CREDIT RISk (continued)
The following table indicates the Group’s maximum credit exposure from non-derivative financial assets.
Non-derivative financial assets
Loans to and receivables from associates
Trade and other receivables
Cash at bank, on hand and bank short-term deposits
Equity securities
1. Refer note 6.3 for further details.
Carrying
amount
2018
$m
Restated1
Carrying
amount
2017
$m
20.6
19.0
894.2
900.5
74.3
32.3
237.8
29.5
1,021.4
1,186.8
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:
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
6.7
0.4
4.6
6.7
0.4
4.6
6.9
0.4
3.5
11.7
11.7
10.8
6.0
-
2.3
8.3
0.9
-
1.1
2.0
-
0.4
0.1
0.5
-
-
-
-
-
-
-
-
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
-
-
-
-
30 June 2018
Derivative financial assets
Forward exchange contracts2
Interest rate swaps3
Commodity swaps/options2
30 June 2017
Derivative financial assets
Forward exchange contracts2
Interest rate swaps3
Commodity swaps2
2. Designated as cash flow hedges.
3. Designated as fair value hedges.
112
Boral Limited Annual Report 2018
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.
30 June 2018
Non-derivative financial liabilities
US senior notes – private placement – unsecured
CHF notes – unsecured
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
771.5
204.3
(1,009.1)
(10.5)
(17.5)
(138.1)
(83.1)
(759.9)
(212.1)
-
(2.9)
(209.2)
-
-
US senior notes – 144A/Reg S – unsecured
1,261.2
(1,715.0)
Bank loans – unsecured
Finance lease liabilities
Trade creditors
Derivative financial liabilities
Forward exchange contracts1
Commodity swaps1
Cross currency swaps1,2
Interest rate swaps3
30 June 2017
Non-derivative financial liabilities
US senior notes – private placement – unsecured
CHF notes – unsecured
Acquisition loan facility – unsecured
Syndicated loan facility – unsecured
Finance lease liabilities
Trade creditors4
Derivative financial liabilities
Forward exchange contracts1
Commodity swaps1
Cross currency swaps1,2
Interest rate swaps3
1. Designated as cash flow hedges.
2. Designated as natural investment hedges.
3. Designated as fair value hedges.
4. Restated. Refer note 6.3 for further details.
273.0
16.8
752.0
(273.0)
(16.8)
(15.4)
(13.0)
(3.1)
(752.0)
(752.0)
(23.0)
(46.2)
(747.1)
(883.3)
-
(3.1)
-
-
(260.0)
(4.9)
-
(5.5)
-
-
(0.2)
-
3,278.8
(3,978.0)
(794.0)
(46.5)
(398.4)
(1,095.7)
(1,643.4)
0.7
0.7
19.3
14.8
35.5
(0.9)
(0.7)
(22.1)
(16.3)
(40.0)
(0.7)
(0.4)
(2.8)
(3.0)
(6.9)
(0.2)
(0.2)
(4.5)
(1.6)
(6.5)
-
(0.1)
(14.8)
(2.0)
(16.9)
-
-
-
(5.4)
(5.4)
-
-
-
(4.3)
(4.3)
3,314.3
(4,018.0)
(800.9)
(53.0)
(415.3)
(1,101.1)
(1,647.7)
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
753.7
203.2
(894.8)
(215.7)
1,237.0
(1,237.0)
361.6
15.6
825.9
(361.6)
(15.8)
(825.9)
(825.9)
(13.9)
(421.6)
(17.7)
(138.2)
(303.4)
-
-
-
(4.6)
(2.9)
(4.6)
(208.2)
-
-
(4.7)
-
(1,237.0)
-
-
(361.6)
(5.4)
-
(1.1)
-
-
-
-
-
-
3,397.0
(3,550.8)
(844.4)
(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)
(26.7)
(8.2)
(2.3)
(2.9)
(1.7)
(15.1)
(0.5)
(0.4)
0.2
0.4
(0.3)
-
(0.3)
(4.0)
-
(4.3)
-
(0.1)
(6.9)
-
(7.0)
-
-
-
-
-
3,423.3
(3,577.5)
(859.5)
(429.5)
(1,269.0)
(716.1)
(303.4)
Boral Limited Annual Report 2018 113
Financial
Statements
Notes to the Financial Statements
Boral Limited and Controlled Entities
Section 4: Capital and financial structure (continued)
4.2 Financial risk management (continued)
FOREIGN CURRENCY RISk
The Group is exposed to fluctuations in foreign currency as a result of purchase of raw materials, interest expenses related to
non-Australian dollar borrowings, imported plant and equipment, some export-related receivables and the translation of its
investments in overseas assets.
The Group manages this risk by adopting the following policies:
(a) All global operational foreign exchange exposures are regarded as being within discretionary parameters. If hedging is elected
then maximum hedging levels of 75% for Year 1 (months 1 to 12) and 50% for Year 2 (months 13 to 24) apply. The maximum
hedging term permitted is two years.
(b) Capital expenditure-related foreign currency exposures greater than A$0.5 million must be 100% hedged at the time of capital
expenditure approval.
(c) Net investments, including net intercompany loans, in overseas domiciled investments are hedged, where regulatory conditions
and available hedge instruments permit.
The Group uses forward exchange contracts to hedge foreign exchange risk. Most of the forward exchange contracts have maturities
of less than one year. Where necessary and in accordance with policy compliance, forward exchange contracts can be rolled over
at maturity.
(i) Translation risk
Foreign currency translation risk is the risk that upon consolidation for financial reporting the value of the Group’s investment in foreign
domiciled entities will fluctuate due to changes in foreign currency rates.
The Group uses foreign currency denominated borrowings and cross currency swaps to hedge the Group’s net investment in
overseas domiciled assets. The related exchange gains/losses on foreign currency movements are taken to the Foreign Currency
Translation Reserve.
The table below shows the Group’s net exposure to translation risk. The Group’s investment in foreign operations is partially offset
against foreign currency borrowings, reducing the Group’s overall exposure to translation risk. Amounts below are calculated based
on notional amounts:
Currency
30 June 2018
Balance sheet
USD
CAD
Notional A$ equivalent ($m)2
Euro
GBP
Multi1
Net investment in overseas domiciled entities
3,955.5
127.1
Cash
Foreign currency borrowings
18.6
(1,785.0)
2,189.1
-
-
127.1
1.7
-
-
1.7
11.0
-
(13.0)
(2.0)
670.0
-
-
670.0
Currency
30 June 2017
Balance sheet
USD
CAD
Notional A$ 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
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.
114
Boral Limited Annual Report 2018
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
Sell USD/buy AUD – One year or less
Euros
Notional amount AUD1
Average exchange rate
2018
$m
98.6
(85.0)
2017
$m
282.0
-
2018
2017
0.7860
0.7397
0.7447
-
Buy EUR/sell AUD – One year or less
28.2
15.5
0.6375
0.7017
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 2018 (2017: nil). The related exchange gains/losses on
foreign currency movements are taken to the Income Statement.
Sensitivity
At 30 June 2018, 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 unchanged in 2018 (2017: (loss)/gain respectively
of equivalent A$0.2 million) and equity would have increased/decreased respectively by around equivalent A$229.1 million (2017:
equivalent A$228.8 million).
The following significant exchange rates applied during the year:
USD
Euro
GBP
CAD
Average rate
Reporting date spot rate
2018
2017
2018
2017
0.7735
0.6470
0.5730
0.9840
0.7536
0.6897
0.5932
1.0032
0.7394
0.6339
0.5606
0.9725
0.7680
0.6725
0.5900
0.9959
Boral Limited Annual Report 2018 115
Financial
Statements
Notes to the Financial Statements
Boral Limited and Controlled Entities
Section 4: Capital and financial structure (continued)
4.2 Financial risk management (continued)
INTEREST RATE RISk
Interest rate risk is the risk that the Group is impacted by significant changes in interest rates. Borrowings issued at or swapped to
floating rates expose the Group to interest rate risk.
Interest rate swaps and cross currency swaps have been transacted to assist with achieving an appropriate mix of fixed and floating
interest rate borrowings. All interest rate derivative instruments mature progressively over the next six years, with the duration
applicable to the interest rate and cross currency swaps consistent with maturities applicable to the underlying borrowings.
The Group adopts a policy that ensures a minimum of 35% and a maximum of 75% of its 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 was short-term in nature and was excluded from this policy requirement until it was 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:
2018
Carrying amount
$m
2018
Notional amount4
$m
2017
Carrying amount
$m
2017
Notional amount4
$m
Fixed rate instruments
US senior notes – private placement – unsecured
CHF notes – unsecured1,2
US senior notes – 144A/Reg S – unsecured3
Finance lease liabilities
Variable rate instruments
Acquisition loan facility – unsecured
Bank loans – unsecured
US senior notes – private placement – unsecured
670.1
204.3
1,261.2
16.8
2,152.4
-
273.0
101.4
374.4
677.8
204.6
1,284.8
16.8
2,184.0
-
273.0
101.4
374.4
2,526.8
2,558.4
753.7
203.2
-
15.6
972.5
1,237.0
361.6
-
1,598.6
2,571.1
758.1
203.6
-
15.6
977.3
1,237.0
361.6
-
1,598.6
2,575.9
Pay variable interest rate derivatives
Interest rate swap pay floating US$ LIBOR2,3
14.5
500.1
13.3
221.1
Other interest rate derivatives
Cross currency swap pay fixed US$/receive fixed CHF1
19.3
204.6
(0.8)
203.2
1. CHF150 million (equivalent A$204.6 million) fixed rate notes due February 2020 have been swapped to USD fixed rate via cross currency swaps.
2. US$169.8 million (equivalent A$229.6 million) fixed rate notes due February 2020 have been swapped to USD floating rate via interest rate swaps.
3. US$200 million (equivalent A$270.5 million) fixed rate notes due November 2022 and May 2028 (US$100 million each) have been swapped to USD floating
rate via interest rate swaps.
4. The notional amount shows the principal face value for each instrument.
The ineffective portion of the hedges transferred to the Income Statement was $0.6 million loss in 2018 due to credit and execution
charge cost of hedge on the interest rate swaps (2017: $0.1 million loss).
Sensitivity
At 30 June 2018, 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$1.1 million higher/lower (2017: A$0.1 million) and the change in equity would have been
A$3.7 million (2017: A$0.3 million) mainly as a result of a higher/lower interest cost applying to interest rate derivatives.
116
Boral Limited Annual Report 2018
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 and options to hedge a
component of 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
Natural gas (NYMEX)
Newcastle Coal
Electricity
2018
Notional $A
equivalent1
$m
2018
Fair value/
Carrying amount
$m
2017
Notional $A
equivalent1
$m
2017
Fair value/
Carrying amount
$m
40.6
2.9
-
12.6
4.2
-
-
(0.2)
22.8
7.5
0.6
17.4
(1.3)
-
0.1
1.1
1. The notional amount shows the principal face value for each instrument.
The commodity swaps and options are considered to be highly effective hedges as they are matched against forward commodity
purchases. The ineffective portion of the hedges transferred to the Income Statement was $0.4 million loss in 2018 due to
amortisation of the premium paid on options (2017: $0.1 million gain).
Sensitivity
At 30 June 2018, 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 (2017: unchanged) and the change in equity would have been
A$4.8 million (2017: A$4.6 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 calculated using closing commodity market prices and implied
volatility data and includes bilateral credit value adjustments.
Forward exchange contracts
and cross currency swaps
The fair value is calculated based on market derived spot and forward prices, relevant
currency interest rate curves, foreign currency basis spreads applicable to the relevant
currency and includes bilateral credit value adjustments.
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 and includes the bilateral credit adjustment. 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
Boral Limited Annual Report 2018 117
Financial
Statements
Notes to the Financial Statements
Boral Limited and Controlled Entities
Section 4: Capital and financial structure (continued)
4.2 Financial risk management (continued)
INTEREST RATES USED FOR DETERMINING FAIR VALUE
Where appropriate, the Group uses BBSW, LIBOR and Treasury Bond yield curves as of 30 June 2018 plus an adequate credit spread
to discount financial instruments. The interest rates used are as follows:
Derivatives
Interest bearing loans and borrowings
Finance leases
2018
% pa
2017
% pa
2.28 – 4.45
2.00 – 3.20
2.25 – 7.22
2.25 – 7.22
3.10 – 6.01
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
2018
$m
32.3
-
32.3
-
-
2017
$m
29.5
-
29.5
-
-
2018
$m
-
11.7
11.7
35.5
35.5
2017
$m
-
6.1
6.1
26.3
26.3
The Group does not have financial instruments that have been valued at Level 3.
118
Boral Limited Annual Report 2018
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Boral Limited Annual Report 2018 119
Financial
Statements
Notes to the Financial Statements
Notes to the Financial Statements
Boral Limited and Controlled Entities
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.
In the prior 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 event of a winding up of Boral Limited, ordinary shareholders rank after creditors and are fully entitled to any proceeds
of liquidation.
2018
$m
2017
$m
Issued and paid up capital
1,172,331,924 (2017: 1,172,331,924) ordinary shares, fully paid
4,265.1
4,265.1
Movements in ordinary issued capital
Balance at the beginning of the year
Nil (30 Jun 2017: 428,732,487) shares issued under capital raising net of costs
Balance at the end of the year
4,265.1
-
4,265.1
2,246.2
2,018.9
4,265.1
120
Boral Limited Annual Report 2018
4.4 Reserves
Foreign currency translation reserve (FCTR)
Exchange differences arising on translation of foreign operations are recognised in FCTR, together with foreign exchange differences
from the translation of liabilities that hedge the Group’s net investment in a foreign operation. Gains or losses accumulated in equity
are recognised in the Income Statement when a foreign operation is disposed of.
Balance at the beginning of the year
Net gain/(loss) on translation of assets and liabilities of overseas entities
Foreign currency translation reserve transferred to net profit on disposal of controlled entities
Net (loss)/gain on translation of long-term borrowings and foreign currency forward contracts net
of tax benefit $25.6 million (2017: $0.5 million tax expense)
Balance at the end of the year
2018
$m
(25.9)
201.2
-
(60.1)
115.2
2017
$m
98.5
(101.3)
(24.5)
1.4
(25.9)
Hedging reserve
The hedging reserve records the portion of the gain or loss on a hedging instrument in a cash flow hedge that is determined to be an
effective hedge relationship.
Balance at the beginning of the year
Transferred to the Income Statement
Transferred to initial carrying amount of hedged item
Gain/(loss) taken directly to equity
Tax expense
Balance at the end of the year
(2.1)
1.7
(0.9)
9.7
(3.1)
5.3
(3.9)
4.8
0.1
(2.3)
(0.8)
(2.1)
Other reserve
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
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
47.3
10.4
(22.4)
35.3
(6.9)
(5.8)
12.7
-
74.3
11.3
(38.3)
47.3
Total reserves
155.8
19.3
Boral Limited Annual Report 2018 121
Financial
Statements
Notes to the Financial Statements
Notes to the Financial Statements
Boral Limited and Controlled Entities
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.
122
Boral Limited Annual Report 2018
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% (2017: 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:
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
Change in US federal tax rate
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
Note
2.6
2.6
2.6
6.1
(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
2018
$m
42.6
9.0
(9.6)
42.0
144.9
2.1
147.0
(27.6)
-
(25.6)
(6.3)
(33.7)
(2.2)
51.6
(9.6)
42.0
106.4
(69.4)
37.0
5.0
-
5.0
42.0
(25.6)
3.1
(22.5)
2017
$m
76.2
(26.6)
(2.5)
47.1
103.2
(3.4)
99.8
(20.4)
6.1
(28.5)
(11.5)
-
4.1
49.6
(2.5)
47.1
64.3
(15.3)
49.0
2.2
(4.1)
(1.9)
47.1
0.5
0.8
1.3
Boral Limited Annual Report 2018 123
Financial
Statements
Notes to the Financial Statements
Notes to the Financial Statements
Boral Limited and Controlled Entities
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
Deferred tax liability
Unrecognised deferred tax assets
The potential deferred tax asset has not been taken into account in respect of
tax losses where recovery is not probable
2018
$m
69.6
(39.5)
30.1
Restated1
2017
$m
76.5
(73.9)
2.6
81.9
136.8
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
Expiry date
Australia
Germany
United Kingdom2
No restriction
No restriction
No restriction
United States of America
30 June 2029 – 30 June 2037
1. Refer note 6.3 for further details.
2. Unbooked capital losses.
2018
$m
-
45.7
41.5
230.6
2017
$m
39.2
46.0
39.4
268.6
124
Boral Limited Annual Report 2018
5.2 Deferred tax assets and liabilities (continued)
Movement in temporary differences during the year
As at 30 June 2018
Receivables
Inventories
Other financial instruments
Property, plant and equipment
Intangible assets
Payables
Loans and borrowings
Provisions
Other
Unrealised foreign exchange
Tax losses carried forward
Restated3
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
Balance at
the beginning
of the year
$m
Recognised
in income
$m
Recognised
in equity
$m
3.7
-
-
(89.7)
(358.8)
8.0
(10.2)
121.1
(52.5)
27.0
354.0
2.6
(1.1)
3.2
(0.2)
9.6
1.3
2.3
(0.4)
(10.8)
0.2
(15.1)
2.0
(9.0)
-
-
(3.1)
-
-
-
25.6
-
-
-
-
22.5
Change in US
federal tax rate
$m
(0.5)
-
-
24.4
122.8
-
-
(18.7)
17.4
-
(111.7)
33.7
Other
movements
$m
Balance at
the end
of the year2
$m
0.1
(2.6)
14.4
(24.0)
(23.7)
2.7
(16.9)
17.5
22.0
(4.1)
(5.1)
(19.7)
2.2
0.6
11.1
(79.7)
(258.4)
13.0
(1.9)
109.1
(12.9)
7.8
239.2
30.1
Balance at
the beginning
of the year
$m
Recognised
in income
$m
Recognised
in equity
$m
Change in US
federal tax rate
$m
Other
movements1
$m
Balance at
the end
of the year2
$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)
(47.3)
(320.5)
0.2
-
62.2
(35.6)
-
84.5
(260.1)
3.7
-
(89.7)
(358.8)
8.0
(10.2)
121.1
(52.5)
27.0
354.0
2.6
1. Other movements in 2017 include adjustments in relation to the Headwaters acquisition, specifically fair value adjustments in relation to property, plant and
equipment, intangible assets and provisions.
2. Balance represents deferred tax asset $69.6 million (2017: $76.5 million) and deferred tax liability $39.5 million (2017: $73.9 million) giving rise to net deferred
tax balance of $30.1 million (2017: $2.6 million).
3. Refer note 6.3 for further details.
Boral Limited Annual Report 2018 125
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 an
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, and assets and liabilities held for sale
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.
On 10 May 2018, the Group agreed to sell its Concrete and Quarries business in Denver, Colorado to Brannan Sand and Gravel
Company, LLC for US$127.0 million. Proceeds from the sale will be used to reduce debt. The transaction completed on 2 July 2018.
As a result, the earnings in the current and comparative periods for Denver construction materials have been reclassified to
“Discontinued Operations” in the Income Statement and Assets and Liabilities Held for Sale in the Balance Sheet.
The prior year comparatives also include the discontinued operations relating to the Boral CSR bricks joint venture and US bricks
operations, as well as various significant items in relation to discontinued operations.
In addition, we have classified the Energy and Clubhouse decking businesses as held for sale in 2017 following finalisation of the
acquisition accounting of Headwaters. The earnings of these businesses have not been recorded as a discontinued operation as they
are not considered material businesses to the Group.
Note
2.6
5.1
2018
$m
137.9
(122.4)
-
15.5
-
15.5
-
15.5
(5.0)
10.5
15.2
(4.0)
11.2
Restated1
2017
$m
260.3
(254.5)
5.0
10.8
38.5
49.3
-
49.3
1.9
51.2
(3.9)
113.6
109.7
Results of discontinued operations
Revenue
Expenses
Share of equity accounted income
Trading profit before significant items, net interest expense and
income tax
Net profit on sale of discontinued operations
Profit before net interest expense and income tax
Net interest expense
Profit before income tax
Income tax (expense)/benefit
Net profit
Cash flows from discontinued operations
Net cash provided by/(used in) operating activities
Net cash (used in)/ provided by investing activities
Net cash provided by discontinued operations
1. Refer note 6.3 for further details.
126
Boral Limited Annual Report 2018
6.1 Discontinued operations, and assets and liabilities held for sale (continued)
Assets and liabilities classified as held for sale
Receivables
Inventories
Property, plant and equipment
Intangible assets
Other assets
Assets classified as held for sale
Payables
Employee benefit liabilities
Provisions
Liabilities classified as held for sale
Net assets
1. Refer note 6.3 for further details.
2018
$m
21.1
2.9
78.1
16.6
2.5
121.2
(10.2)
(0.2)
(0.3)
(10.7)
110.5
Restated1
2017
$m
1.6
6.1
5.2
4.6
1.7
19.2
-
-
-
-
19.2
Disposal of Headwaters Energy business
During October 2017, the Group disposed the Headwaters Energy business for net proceeds of $16.8 million, including $7.6 million
received on settlement and $9.2 million to be received in annual instalments from October 2018 to October 2021. No gain or loss
was generated on the sale of this business.
The earnings of the Headwaters Energy business has not been recorded as a discontinued operation as it is not considered a
material business of the Group.
Boral Limited Annual Report 2018 127
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 in the relevant equity
accounted investment, the losses are taken against any long-term receivables relating to the equity accounted investment and if the
Group’s obligation for losses exceeds this amount, they are recorded as a provision in the Group’s financial statements to the extent
that the Group has an obligation to fund the liability.
Name
Principal
activity
Country of
incorporation date
Balance
2018
%
2017
%
2018
$m
2017
$m
OWNERSHIP INTEREST
INVESTMENT
CARRYING AMOUNT
Details of equity accounted investments
Bitumen Importers Australia Pty Ltd
Bitumen importer Australia
30-Jun
Caribbean Roof Tile Company Limited
Roof tiles
Trinidad
31-Dec
Flyash Australia Pty Ltd
Fly ash collection Australia
31-Dec
Highland Pine Products Pty Ltd
Timber
Australia
30-Jun
Meridian Brick1
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 Products2
Plasterboard
Australia/
Singapore
US Tile LLC
TOTAL
Roof tiles
USA
30-Jun
31-Dec
50
50
50
50
50
40
50
50
50
50
50
50
50
50
50
40
50
50
50
50
7.7
-
2.9
-
6.0
-
3.0
-
410.6
402.8
-
1.3
-
1.1
11.1
9.7
977.7
931.1
-
-
1,411.3
1,353.7
1. The Group has a 50% interest in the 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.
2. The Group 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).
128
Boral Limited Annual Report 2018
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
Significant items
Dividends received
Results recognised against losses previously taken to non-current receivables
Share of movement in currency reserve
Net foreign currency exchange differences
Balance at the end of the year
Note
2018
$m
2017
$m
2.6
1,353.7
-
-
-
90.2
(4.6)
(68.4)
(3.3)
5.1
38.6
1,054.6
411.2
(90.4)
(5.8)
99.8
(8.4)
(87.9)
(5.1)
5.0
(19.3)
1,411.3
1,353.7
SIGNIFICANT EQUITY
ACCOUNTED INVESTMENTS
USG Boral Building
Products
Meridian Brick
Total
Note
2018
$m
2017
$m
2018
$m
2017
$m
2018
$m
2017
$m
Summarised Income Statement at 100%
Revenue
1,574.9 1,477.7
519.4
373.9
2,407.6 2,133.6
Profit/(loss) before income tax
193.1
216.9
(0.6)
(1.4)
274.4
289.7
Income tax expense
Non-controlling interest
(61.2)
(72.2)
(2.6)
(0.3)
(86.4)
(91.8)
(5.7)
(5.8)
-
-
(5.7)
(5.8)
Net profit/(loss) before significant items
126.2
138.9
(3.2)
(1.7)
182.3
192.1
Significant items net of tax
(2.0)
-
(7.2)
(16.8)
(9.2)
(16.8)
Net profit/(loss) – equity accounted relating to
continuing operations
The Group’s share based on % ownership:
124.2
138.9
(10.4)
(18.5)
173.1
175.3
Net profit/(loss) before significant items
63.1
69.5
(1.6)
(0.9)
90.2
94.8
Significant items net of tax
2.6
(1.0)
-
(3.6)
(8.4)
(4.6)
(8.4)
Net profit/(loss) – equity accounted relating to
continuing operations
62.1
69.5
(5.2)
(9.3)
85.6
86.4
Depreciation and amortisation
Net interest (expense)/income
(74.1)
(67.3)
(27.5)
(16.8)
(0.7)
0.3
(2.3)
(0.7)
Boral Limited Annual Report 2018 129
Financial
Statements
Notes to the Financial Statements
Boral Limited and Controlled Entities
Section 6: Group structure (continued)
6.2 Equity accounted investments (continued)
Summarised Balance Sheet at 100%
Current assets
Non-current assets
Total assets
Current liabilities
Non-current liabilities
Total liabilities
Non-controlling interest
Net assets
SIGNIFICANT EQUITY
ACCOUNTED INVESTMENTS
USG Boral Building
Products
Meridian Brick
Total
2018
$m
2017
$m
2018
$m
2017
$m
2018
$m
2017
$m
574.5
518.5
236.5
207.4
891.5
809.1
1,786.8
1,717.3
745.1
705.9
2,660.7
2,549.8
2,361.3
2,235.8
981.6
913.3
3,552.2
3,358.9
(237.4)
(183.7)
(108.1)
(99.1)
(372.1)
(326.1)
(65.2)
(59.6)
(52.4)
(8.5)
(254.2)
(194.8)
(302.6)
(243.3)
(160.5)
(107.6)
(626.3)
(520.9)
(103.2)
(130.4)
-
-
(103.2)
(130.4)
1,955.5
1,862.1
821.1
805.7
2,822.7
2,707.6
The Group’s share of net assets based on % ownership
977.7
931.1
410.6
402.8
1,411.3
1,353.7
Cash and cash equivalents
Current financial liabilities
Non-current financial liabilities
164.7
146.5
23.2
11.6
(29.5)
(22.3)
(12.8)
(37.7)
(21.5)
(17.8)
(44.2)
-
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.
130
Boral Limited Annual Report 2018
6.3 Acquisitions (continued)
Headwaters Incorporated acquisition
Boral acquired 100% of the shares of Headwaters Incorporated on 8 May 2017.
Since the initial purchase price accounting performed around the time of the acquisition, further adjustments have been performed
to the opening balance sheet, including the finalisation of an independent valuation of the identifiable assets acquired and liabilities
assumed in the Headwaters acquisition. These adjustments have determined the net identifiable assets/(liabilities) as being $185.0
million higher than previously reported. As a consequence, the goodwill acquired as part of the Headwaters acquisition has decreased
by this amount, resulting in the previously reported Headwaters goodwill of $2,257.4 million reducing to $2,072.4 million. The
comparative information shown in the financial statements has been restated to include the adjusted fair values. There has been no
material impact to the comparative profit or loss so as to require restatement.
Details of the identified adjustments are as follows:
Fair value of net identifiable assets acquired
Final –
8 May 2017
$m
Preliminary –
8 May 2017
$m
CURRENT ASSETS
Cash and cash equivalents
Receivables
Inventories
Other assets
Assets held for sale
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
Goodwill on acquisition
74.8
197.8
126.4
13.5
19.9
22.4
11.2
404.7
1,285.7
18.3
(220.2)
(8.2)
(9.4)
(6.6)
(5.3)
(267.7)
(15.1)
(78.0)
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)
1,564.2
1,379.2
2,072.4
2,257.4
The goodwill on acquisition of $2,072.4 million represents the difference in consideration paid and identifiable fair value of the net assets
acquired, and reflects the synergies and economics 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 America business to a more flexible, variable
cost structure with lower capital intensity. The goodwill is not tax deductible.
Boral Limited Annual Report 2018 131
Financial
Statements
Notes to the Financial Statements
Boral Limited and Controlled Entities
Section 6: Group structure (continued)
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
Australia
Australia
Australia
Australia
Australia
Thailand
USA
USA
USA
USA
USA
USA
USA
USA
USA
USA
USA
USA
USA
USA
USA
USA
USA
USA
USA
USA
USA
UK
USA
USA
USA
USA
USA
USA
USA
USA
USA
Philippines
USA
Mexico
USA
USA
Beneficial ownership by
Group
2018
%
Group
2017
%
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
-
100
100
100
-
100
-
-
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
-
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
Boral Limited
Boral Cement Limited >*
Barnu Pty Ltd*
Boral Building Materials Pty Ltd >*
Boral International Pty Ltd >*
MJI (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 Meridian Holdings 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 ***
Boral Windows, LLC
Magnolia Windows & Doors, LLC
Evonik Headwaters LLP
Tapco International Corporation
Boral Composites Inc.
Headwaters Building Products Inc.
Boral Concrete Products Louisiana, LLC
Boral Concrete Products, LLC
Headwaters Stone LLC
Eldorado Stone LLC
Stonecraft Manufacturing, LLC
Eldorado Stone Operations, LLC
Eldorado Stone Philippines, Inc.
Chihuahua Stone, LLC
Piedras Headwaters, S. DE R.L. DE C.V.
Quarry Stone, LLC
Dutch Quality Stone, Inc.
132
Boral Limited Annual Report 2018
6.4 Controlled entities (continued)
Country of
incorporation
Beneficial ownership by
Group
2018
%
Group
2017
%
Boral CM Holdings, LLC
Boral CM Services, LLC
Boral Resources LLC
Boral Plant Services, LLC
Boral Transportation Services LLC +
Headwaters Services, LLC
Synthetic Materials, LLC
Boral Materials LLC
FlexCrete Building Systems, 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 **
Boral Lifetile inc.
Boral Roofing de Mexico, S. de R.L. de C.V.
Boral Roofing LLC
Gerard Roof Products, LLC
Allmet Roof Products, Ltd
Metrotile Manufacturing, LLC
Boral Concrete Tile Inc.
Tile Service Company LLC
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
Mexico
USA
USA
Canada
USA
USA
USA
E.U.M. Tejas De Concreto Servicios, S. DE R.L. DE C.V. Mexico
Boral (UK) Ltd
Tapco Europe Limited
Boral Investments BV
Boral Industrie GmbH
Boral Klinker GmbH
Boral Mecklenburger Ziegel GmbH
Boral Canada Ltd
UK
UK
Netherlands
Germany
Germany
Germany
Canada
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
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
100
100
Boral Limited Annual Report 2018 133
Financial
Statements
Notes to the Financial Statements
Boral Limited and Controlled Entities
Section 6: Group structure (continued)
6.4 Controlled entities (continued)
Country of
incorporation
Beneficial ownership by
Group
2018
%
Group
2017
%
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 >*
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
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).
** Deregistered during the year.
*** Disposed of during the year.
+ Incorporated during the year.
< A Delaware general partnership.
All the shares held by Boral Limited in controlled entities are ordinary shares.
134
Boral Limited Annual Report 2018
6.4 Controlled entities (continued)
The following controlled entities were disposed of during the financial year ended 30 June 2018:
Entities disposed:
Headwaters Technology Innovation Group Inc.
Headwaters Heavy Oil, LLC
Headwaters CTL, LLC
Entities deregistered:
Headwaters Synfuel Investments, LLC
FlexCrete Building Systems, LLC
Environmental Technologies Group, LLC
Headwaters Clean Carbon Services LLC
Headwaters Ethanol Operators, LLC
HES Ethanol Holdings, 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 No.5, LLC
Entegra Holdings, LLC
Entegra Roof Tile, LLC
Entegra Roof Tile Inc. –Deerfield
Boral Material Technologies LLC
merged into
merged into
merged into
merged into
Boral Roofing LLC
Entegra Holdings, LLC
Entegra Roof Tile
Boral Resources LLC
Date of
disposal
Oct 2017
Oct 2017
Oct 2017
Date of deregistration
Jun 2018
Jun 2018
Jun 2018
Jun 2018
Jun 2018
Jun 2018
Jun 2018
Jun 2018
Jun 2018
Jun 2018
Jun 2018
Apr 2018
Apr 2018
Apr 2018
Jun 2018
The following controlled entities had name changes during the financial year ended 30 June 2018:
Name changes during the financial period:
Headwaters Windows, LLC
Headwaters Concrete Products Louisiana, LLC
Headwaters Concrete Products, LLC
Headwaters CM Holdings, LLC
Headwaters CM Services, LLC
Headwaters Construction Materials, LLC
Headwaters Plant Services, LLC
Headwaters Resources, LLC
to
to
to
to
to
to
to
to
Boral Windows LLC
Boral Concrete Products Louisiana LLC
Boral Concrete Products LLC
Boral CM Holdings LLC
Boral CM Services LLC
Boral Resources LLC
Boral Plant Services LLC
Boral Materials LLC
Subsequent to year end, on 2 July 2018, De Martin & Gasparini Concrete Placers Pty Ltd changed its name to Pro Concrete Group
Pty Limited.
Boral Limited Annual Report 2018 135
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
2018
$m
129.6
40.6
170.2
2017
$m
115.5
44.4
159.9
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 $50.1 million (2017: $47.7 million).
2018
$m
2017
$m
1,254.5
945.4
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.
136
Boral Limited Annual Report 2018
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 $3.54 per right, while SARs with a Return on Funds Employed (ROFE) target were valued at $5.85 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
2018
$6.62
2.51%
4.12%
25%
2017
$6.64
1.41%
3.63%
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 $6.75 per right, being the volume weighted average price traded on the ASX over the five trading
days following the release of the FY2017 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
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
Consolidated – 2018
TSR
TSR
TSR
ROFE
TSR
ROFE
TRI1
12/11/2010
12/11/2017
$0.00
1,406,102
1/9/2011
1/9/2018
$0.00
711,495
1/9/2014
1/9/2017
$0.00
1,709,810
1/9/2014
1/9/2017
$0.00
854,919
1/9/2015
1/9/2018
$0.00
1,817,015
1/9/2015
1/9/2018
1/9/2015
1/9/2018
$0.00
$0.00
$0.00
908,500
427,463
798,823
1/9/2016
1/9/2019
$0.00
1,598,624
Deferred STI
1/9/2015
1/9/2017
TSR
ROFE
1/9/2016
1/9/2019
Deferred STI
1/9/2016
1/9/2018
TSR
ROFE
1/9/2017
1/9/2020
1/9/2017
1/9/2020
Deferred STI
1/9/2017
1/9/2019
1. Targeted retention incentive.
$0.00
$0.00
$0.00
$0.00
$0.00
799,280
673,034
-
-
-
2,050,009
1,025,004
510,554
-
-
-
-
-
-
-
-
-
-
-
(474,377)
(931,725)
-
(3,624)
-
707,871
(197,336)
(1,512,474)
(854,919)
(54,076)
(27,058)
-
-
-
-
-
-
-
1,762,939
881,442
427,463
(1,365)
(797,458)
-
(34,600)
(17,298)
(18,303)
(90,021)
(45,465)
(8,365)
-
-
-
-
-
1,564,024
781,982
654,731
1,959,988
979,539
502,189
11,705,065
3,585,567
(1,826,807)
(3,241,657) 10,222,168
Boral Limited Annual Report 2018 137
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
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
Consolidated – 2017
TSR
TSR
TSR
TSR
ROFE
TSR
ROFE
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
Deferred STI
1/9/2014
1/9/2016
1/9/2014
1/9/2017
TSR
ROFE
TRI1
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
1/9/2018
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
-
-
-
1/9/2015
1/9/2018
$0.00
1,912,538
-
-
-
-
-
-
-
-
-
-
-
-
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
During the year ended 30 June 2018, the Group recognised an expense of $10.4 million (2017: $11.3 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
138
Boral Limited Annual Report 2018
2018
$’000
9,365.9
615.5
3,458.4
62.1
2017
$’000
10,246.8
266.1
3,796.9
114.9
13,501.9
14,424.7
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
2018
$m
2017
$m
38.5
23.3
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.
Where the liability is estimable and probable the Group hold appropriate provisions based on consideration of available information
and, where appropriate, independent advice.
8.2 Subsequent events
The sale of our Concrete and Quarries business in Denver, Colorado to Brannan Sand and Gravel Company, LLC completed on 2 July
2018. Refer note 6.1.
Boral Limited Annual Report 2018 139
Financial
Statements
Notes to the Financial Statements
Boral Limited and Controlled Entities
Section 8: Other notes (continued)
8.3 Commitments
The Group leases property, equipment and vehicles under operating leases expiring from one to 15 years. Leases generally provide
the 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
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
2018
$m
2017
$m
32.3
11.6
6.8
10.3
0.2
17.3
(0.5)
16.8
2018
$m
99.6
211.6
74.2
385.4
9.3
6.5
-
15.8
(0.2)
15.6
2017
$m
99.6
209.8
81.7
391.1
140
Boral Limited Annual Report 2018
8.4 Auditors’ remuneration
Audit services:
KPMG Australia – audit and review of financial reports
KPMG overseas firms – audit and review of financial reports
KPMG Australia – other assurance services
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
2018
$’000
1,466
1,249
616
3,331
256
-
209
16
-
47
528
3,859
2017
$’000
1,628
1,033
241
2,902
303
432
591
44
1,390
70
2,830
5,732
8.5 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 2018 141
Financial
Statements
Notes to the Financial Statements
Boral Limited and Controlled Entities
Section 8: Other notes (continued)
8.6 Parent entity disclosures
For the year ended 30 June
RESULT OF THE PARENT ENTITY
Profit after tax
Other comprehensive income/(loss) after tax
Total comprehensive income for the period
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
2018
$m
278.6
3.9
282.5
4,827.0
1,348.2
6,175.2
683.0
488.4
1,171.4
5,003.8
4,265.1
32.1
706.6
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
5,003.8
5,020.6
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
38.3
23.0
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.
142
Boral Limited Annual Report 2018
8.7 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
2018
$m
2017
$m
3,589.8
3,295.7
435.8
(40.7)
395.1
-
395.1
53.0
10.5
(3.2)
344.9
(51.6)
293.3
40.8
334.1
(13.5)
2.6
(0.8)
Total comprehensive income
455.4
322.4
Reconciliation of movements in retained earnings
Balance at the beginning of the year
Net profit
Dividends paid
Balance at the end of the year
1,005.2
395.1
(287.2)
897.3
334.1
(226.2)
1,113.1
1,005.2
Boral Limited Annual Report 2018 143
Financial
Statements
Notes to the Financial Statements
Boral Limited and Controlled Entities
Section 8: Other notes (continued)
8.7 Deed of cross guarantee (continued)
BALANCE SHEET
CURRENT ASSETS
Cash and cash equivalents
Receivables
Inventories
Financial assets
Other assets
TOTAL CURRENT ASSETS
NON-CURRENT ASSETS
Receivables
Inventories
Investments accounted for using the equity method
Financial assets
Property, plant and equipment
Intangible assets
Deferred tax assets
Other assets
TOTAL NON-CURRENT ASSETS
TOTAL ASSETS
CURRENT LIABILITIES
Payables
Loans and borrowings
Financial liabilities
Current tax liabilities
Employee benefit liabilities
Provisions
TOTAL CURRENT LIABILITIES
NON-CURRENT LIABILITIES
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
144
Boral Limited Annual Report 2018
2018
$m
2017
$m
25.0
822.7
363.9
11.2
28.3
183.3
576.3
331.8
3.8
27.7
1,251.1
1,122.9
158.6
11.9
1,000.7
4,004.6
2,079.7
72.9
69.6
11.6
7,409.6
8,660.7
788.2
20.6
8.6
10.1
124.8
29.4
981.7
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
1,483.6
2,092.0
2,158.2
26.9
10.0
73.5
20.8
2,223.2
3,204.9
5,455.8
4,265.1
77.6
1,113.1
5,455.8
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
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 78 to 144 and the Remuneration Report in the Directors’
Report, set out on pages 55 to 77, 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 2018 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 2018.
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:
Kathryn Fagg
Chairman
Mike Kane
CEO & Managing Director
Sydney, 29 August 2018
Boral Limited Annual Report 2018 145
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 2018 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 2018;
•
Income Statement, Statement of Comprehensive Income, Statement of Changes in Equity, and Statement of Cash Flows for the
year then ended;
• Notes that include 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:
• Carrying value of North America goodwill;
• Purchase Price Allocation (PPA) accounting relating to Headwaters acquisition;
• Carrying value of the investment in USG Boral JV and 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.
146
Boral Limited Annual Report 2018
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.
Carrying value of North America goodwill (A$2.1 billion)
Refer to note 3.5 of the Financial Report
The Key Audit Matter
Following the acquisition of Headwaters Inc in 2017 the
carrying value of Boral’s Goodwill in relation to North America
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 size of the Goodwill balance, representing a significant
portion of Boral’s net assets.
The Group acquired Headwaters Inc in May 2017,
necessitating our consideration of the Group’s allocation
of goodwill to Cash Generating Units (CGUs) based on the
management and monitoring of the North American business.
Boral’s recoverability assessment over the carrying value
of North America Goodwill involved determining the output
of valuation models for the business and comparing this to
the carrying value of assets. This recoverability assessment
applies significant judgements which include:
•
•
•
discount rate – these are complicated in nature and vary
according to the conditions and environment a CGU is
subject to from time to time, and the approach taken to
incorporate risks into the cash flows or discount rates.
The Group’s modelling is sensitive to changes in the
discount rate;
forecast growth rates and terminal growth rates – the
Group’s models are sensitive to changes in these
assumptions. This drives additional audit effort in
consideration of their appropriateness and consistency
with economic indicators and the Group’s strategy; and
terminal value calculation – the terminal value calculation
depends on the economic drivers of each business
unit and the stage of the business cycle. The Group’s
modelling is sensitive to changes in management’s
terminal value assumptions, which drives additional
audit effort to consider the appropriateness of
these assumptions.
We involved valuation specialists to supplement our senior
audit team members in assessing this key audit matter.
How the matter was addressed in our audit
Our procedures included, amongst others:
•
•
•
•
•
•
•
assessing the appropriateness of the Group’s determination
of CGUs and groups of CGUs used for impairment testing,
considering management’s internal reporting and monitoring
and the requirements of the accounting standards;
assessing the integrity of the value in use models used,
including the accuracy of the underlying calculation formulas;
comparing the forecast cash flows contained in the value in
use models to Board approved forecasts and considering
the impact of past performance of the Group versus previous
forecasts as an indicator of risk in future forecasts;
considering the sensitivity of the models by varying key
assumptions, such as forecast growth rates, terminal growth
rates and discount rates, within a reasonably possible
range, to identify those assumptions at higher risk of bias or
inconsistency in application;
comparing the economic assumptions such as industry
growth rates to external sources;
checking the consistency of growth rates with the Group’s
strategy and our experience of the economic environment in
which the Group operates;
challenging management’s terminal value assumptions
by considering the impact of alternative assumptions and
assessing the impact on the present value calculation; and
• using our valuation specialists to:
–
–
–
challenge the discount rate against an independently
developed discount rate range using publicly available
market data for comparable entities, adjusted by specific
risk factors;
compare the Group’s long term growth rate assumptions
against publicly available long term economic forecasts
specific to the United States; and
assess the appropriateness and mathematical accuracy
of the discounted cash flow models.
Boral Limited Annual Report 2018 147
Statutory
Statements
Purchase Price Allocation (PPA) accounting relating to Headwaters acquisition
Refer to note 6.3 of the Financial Report
The Key Audit Matter
The finalisation of the Purchase Price Allocation (PPA)
Accounting relating to Boral’s acquisition of Headwaters Inc
completed on 8 May 2018. The PPA has been deemed a Key
Audit Matter due to the pervasive impact of the acquisition
of Headwaters Inc on the financial statements, which has
consequently formed a large part of our audit.
Boral engaged an independent valuation expert for the
final PPA. The expert advised on the identification and
measurement of inventory, property, plant and equipment
and intangible assets which form the PPA. Significant effort
was required to audit the key assumptions and valuation
methodologies applied to value inventory, property, plant and
equipment and identifiable intangibles.
In assessing the Key Audit Matters, we involved senior audit
team members, including valuation specialists.
How the matter was addressed in our audit
Our procedures included, amongst others:
•
working with our valuation specialists to assess and challenge
the valuation methodologies and assumptions applied in the
final PPA to value inventory, property, plant and equipment
and identifiable intangible assets. This included:
–
–
–
–
comparing the valuation methodologies against generally
accepted valuation techniques;
assessing the objectivity, competence, experience and
skills of the independent expert;
assessing key assumptions such as discount rate,
long term growth rate, royalty rate and contributory
asset charge; and
assessing the appropriateness of economic lives applied
to intangible and tangible non-financial assets.
•
we considered the Group’s determination of the final fair value
adjustments and compared them to the provisionally reported
values reported at 30 June 2017. We performed testing on
updated valuations to challenge whether the adjustments
were appropriate under accounting standards; and
•
we assessed the adequacy of the Group’s disclosure in
respect of the business combination.
148
Boral Limited Annual Report 2018
Carrying value of the investment in USG Boral JV (A$978m) and Meridian Brick JV (A$411m)
Refer to note 6.2 of the Financial Report
The Key Audit Matter
The carrying value of Boral’s equity accounted investments
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 and synergies 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 involved our consideration of impairment
indicators at the investment level and the output of valuation
models for each asset prepared by JV management or by
independent 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; and
consideration of impairment indicators across multiple
countries with varied economic conditions.
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 businesses, and the industries and
economic environment in which they operate.
How the matter was addressed in our audit
Our procedures included, amongst others:
•
challenging key assumptions such as forecast market
demand for building products, average selling prices and
synergies by:
–
–
–
–
–
comparing key assumptions to actual historical data over
multiple business cycles;
comparing forecasts of market demand for building
products against published analyst views;
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 historical forecasting accuracy as an indication
of risk in future forecasts.
using information from the component auditors’ valuation
specialists to assist the audit team in assessing the valuation
approach;
comparing the discounted cash flow methodology and
assumptions over 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 the individual CGUs
as an indication of impairment of Boral’s investment
balances; and
assessing the competence, capability and objectivity of the
external valuer engaged by the USG Boral JV to prepare the
valuation models.
•
•
•
•
•
Boral Limited Annual Report 2018 149
Statutory
Statements
Availability and recoverability of US tax loss asset (A$239m)
Refer to note 5.2 of the Financial Report
The Key Audit Matter
The availability and recoverability of the US tax loss asset was
a Key Audit Matter due to:
•
•
the complexity of US laws and regulations governing
the continued availability of tax losses, necessitating
involvement of our tax specialists; and
the significant level of judgement required to audit forward
looking estimates on Boral’s assessment of the future
utilisation of tax losses, which are inherently subjective.
US tax losses held by Boral 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 test. This is an added complexity to our audit,
due to:
•
•
•
•
the specialised nature of US taxation requirements;
the slower than expected recovery of the US
housing market;
the extended period of the forecast utilisation; and
changes to the US tax legislation resulting from H.R. 1
which was enacted on 22 December 2017.
Boral’s assessment of the recoverability of the US tax loss
asset is based on the application of significant judgement to
estimate forecast 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.
How the matter was addressed in our audit
Our procedures included, amongst others:
•
•
•
•
•
obtaining the results of the most recent US continuity of
ownership assessment performed by Boral’s taxation experts
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 forecast timing of utilisation of US tax losses
against the timing of forecast future taxable income and
considering restrictions on utilisation of the 20 year carry
forward period;
using our US taxation specialists, assessing management’s
analysis of the impact of the US tax reform on the availability
and recovery of the US tax loss asset;
challenging Boral’s key assumptions such as forecast taxable
income by:
–
–
comparing key assumptions to historical actual data over
multiple business cycles;
comparing key assumptions to Board approved
forecasts; and
–
assessing Boral’s prior forecasting accuracy.
•
performing sensitivity analysis on the key assumptions of
forecast taxable income with a range of scenarios.
150
Boral Limited Annual Report 2018
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; and
assessing the Group’s ability to continue as a going concern and whether the use of the going concern basis of accounting
is appropriate. 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_responsibilities/ar1.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 2018 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 55 to 77 of the Directors’ Report for the year ended 30 June 2018.
Our responsibility is to express an opinion on the Remuneration Report, based on our Audit conducted in accordance with Australian
Auditing Standards.
KPMG
Kevin Leighton
Partner
Sydney, 29 August 2018
Boral Limited Annual Report 2018 151
Shareholder
Information
Boral Limited and Controlled Entities
Shareholder communications
Enquiries or notifications by shareholders regarding their
shareholdings or dividends should be directed to Boral’s share
registry:
Link Market Services Limited
Locked Bag A14
Sydney South NSW 1235 Australia
Hand deliveries to:
Level 12, 680 George Street
Sydney NSW 2000 Australia
Telephone +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 FY2018 of 14.0 cents per share is expected
to be paid by Boral on 2 October 2018. 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.
152
Boral Limited Annual Report 2018
For those shareholders with a registered address in Australia
or New Zealand, dividend payments will only be made by direct
credit to your nominated bank account (rather than by cheque
posted to your registered address). To provide or update your
bank account details, please contact the share registry or visit
its website at www.linkmarketservices.com.au
For those shareholders without a registered address in Australia
or New Zealand, if you wish your dividends to be paid directly
to a bank, building society or credit union account in Australia
or New Zealand, please contact the share registry or visit its
website at www.linkmarketservices.com.au for an application
form. The payments are electronically credited on the dividend
payment date and confirmed by payment advices mailed to
the shareholder’s registered address. All instructions received
remain in force until amended or cancelled in writing.
Shareholders are also reminded to bank dividend cheques as
soon as possible. Dividend cheques that are not banked are
required to be handed over to the Chief Commissioner of State
Revenue under the Unclaimed Money Act 1995 (NSW).
Tax File Number (TFN), Australian Business Number (ABN)
or exemption
You are strongly advised to lodge your TFN, ABN or exemption.
If you choose not to lodge these details with the share registry,
then Boral Limited is obliged to deduct tax at the highest
marginal rate (plus the Medicare levy) from the unfranked
portion of any dividend payment. Certain pensioners are exempt
from supplying their TFNs. You can confirm whether you have
lodged your TFN, ABN or exemption via the internet at
www.linkmarketservices.com.au
Uncertificated forms of shareholding
Two forms of uncertificated holdings are available to Boral
shareholders:
Issuer Sponsored Holdings: This type of holding is
sponsored by Boral and provides shareholders with the
advantages of uncertificated holdings without the need to
be sponsored by any particular stockbroker.
Broker Sponsored Holdings (CHESS): Shareholders may
arrange to be sponsored by a stockbroker (or certain other
financial institutions) and are required to sign a sponsorship
agreement appointing the sponsor as their “controlling
participant” for the purposes of CHESS. This type of holding
is likely to attract regular stock market traders or those
shareholders who have their share portfolio managed by
a stockbroker.
Holding statements are issued to shareholders not later than five
business days after the end of any month in which transactions
alter the balance of a holding. Shareholders requiring
replacement holding statements should be directed to their
controlling participant.
Shareholders communicating with the share registry should
have to hand their Securityholder Reference Number (SRN) or
Holder Identification Number (HIN) as it appears on the Issuer
Sponsored/CHESS holding statements or dividend advices. For
security reasons, shareholders should keep their Securityholder
Reference Numbers confidential.
Annual report mailing list
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 17 August 2018
Substantial shareholders
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.
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 Vanguard Group, Inc., by notice of initial substantial holder
dated 1 August 2018, advised that it and its associates were
entitled to 58,648,100 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.
Boral Limited Annual Report 2018 153
Shareholder
Information
Shareholder Information
Boral Limited and Controlled Entities
Distribution schedule of shareholders as at 17 August 2018
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 (76 shares)
Number of
shareholders
% of ordinary
shares
24,640
32,520
7,652
4,902
181
69,895
1197
1.05
6.85
4.70
8.93
78.48
100.00
30,085
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 17 August 2018
1
2
3
4
5
6
7
8
9
10
11
12
13
HSBC CUSTODY NOMINEES
J P MORGAN NOMINEES AUSTRALIA LIMITED
CITICORP NOMINEES PTY LIMITED
NATIONAL NOMINEES LIMITED
BNP PARIBAS NOMS PTY LTD
CS THIRD NOMINEES PTY LIMITED
ARGO INVESTMENTS LIMITED
AUSTRALIAN FOUNDATION INVESTMENT
ANZ EXECUTORS & TRUSTEE
EQUITAS NOMINEES PTY LIMITED
PACIFIC CUSTODIANS PTY LIMITED
AMP LIFE LIMITED
BOND STREET CUSTODIANS LIMITED
14 GWYNVILL INVESTMENTS PTY LTD
15
16
17
EQUITY TRUSTEES LIMITED
INVIA CUSTODIAN PTY LIMITED
BNP PARIBAS NOMINEES PTY LTD
18 MILTON CORPORATION LIMITED
19
20
UBS WEALTH MANAGEMENT AUSTRALIA
UBS NOMINEES PTY LTD
154
Boral Limited Annual Report 2018
Ordinary shares
% of ordinary shares
339,814,185
255,209,182
102,545,305
72,359,888
53,789,848
11,630,315
8,585,327
7,843,653
4,392,627
3,842,265
3,450,902
3,327,363
2,564,854
2,521,264
2,407,002
2,380,350
2,108,791
2,089,293
1,761,242
1,719,105
28.99
21.77
8.75
6.17
4.59
0.99
0.73
0.67
0.37
0.33
0.29
0.28
0.22
0.22
0.21
0.2
0.18
0.18
0.15
0.15
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 interest expense1
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
2018
$m
20175
$m
2016
$m
2015
$m
2014
$m
2013
$m
2012
$m
2011
$m
2010
$m
2009
$m
5,869
4,388
4,311
4,415
5,204
5,286
5,010
4,711
4,599
4,875
1,056
368
688
(104)
585
(111)
-
473
(32)
441
9,510
3,780
5,731
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
297
256
257
173
(212)
177
168
(91)
142
9,381
5,801
5,865
5,559
6,316
6,499
5,668
5,209
5,491
3,940
2,294
2,341
2,211
2,923
3,096
2,512
2,583
2,738
5,441
3,506
3,524
3,348
3,394
3,403
3,156
2,626
2,754
2,453
2,333
893
817
718
1,446
1,518
505
1,183
1,514
8,183
7,774
4,399
4,341
4,066
4,840
4,921
3,662
3,809
4,268
Dividends paid or declared
311
281
167
139
117
85
82
105
88
77
Statistics
Dividend per ordinary share
26.5c
24.0c
22.5c
18.0c
15.0c
11.0c
11.0c
14.5c
13.5c
13.0c
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)
66%
1.5
40.4c
40.4c
82%
1.2
33.7c
33.7c
8.3% 6.3%
11.7% 10.5%
8.4% 9.2%
62%
1.6
35.8c
33.3c
7.6%
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%
6.5%
8.6% 7.6%
9.1%
8.5%
6.6%
4.7%
4.7%
7.4%
6.2%
6.3%
6.6
43%
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%
30%
30%
20%
19%
18%
30%
31%
14%
31%
35%
Net tangible asset backing per share
$1.99
$1.79
$4.40
$4.31
$4.03
$3.17
$3.31
$3.91
$3.92
$4.12
1. Excludes significant items.
2. Adjusted to reflect the bonus element in the renounceable entitlement offer which occurred during November and December 2016.
3. Return on funds employed (ROFE) calculated as EBIT (before significant items) on funds employed at 30 June, except for FY2017 ROFE which 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.
5. Restated. Refer note 6.3 of the FY2018 Financial Report for further details.
Results have been prepared under Australian equivalents to International Financial Reporting Standards (A-IFRS).
Figures may not add due to rounding.
Boral Limited Annual Report 2018 155
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156
Boral Limited Annual Report 2018
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