2019
Boral Annual Report
BORAL LIMITED ANNUAL REPORT
FOR THE YEAR ENDED 30 JUNE 2019
Working together to
build something great
CONTENTS
01 Year at a glance
02 Who we are
04 Results at a glance
06 Chairman’s review
08 Message from Mike Kane
10 Group President Ventures & Chief Financial Officer’s review
13 Divisional Performance
20 Summary of Boral’s Risks and Responses
22 Sustainability Overview
38 Executive Committee
39 Board of Directors
40 Corporate Governance Statement
55 Directors’ Report
61 2019 Remuneration Report
83 Financial Statements
148 Statutory Statements
154 Shareholder Information
157 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,
Message from Mike Kane, Group President Ventures & CFO’s
review and Divisional Performance comprise our operating and
financial review (OFR) and form part of the Directors’ Report.
FINANCIAL CALENDAR
Record date for final dividend
Final dividend payable
Annual General Meeting
Half year end
Half year results announcement
2 September 2019
1 October 2019
6 November 2019
31 December 2019
20 February 2020
Ex dividend share trading commences
26 February 2020
Record date for interim dividend
27 February 2020
Interim dividend payable
Year end
16 March 2020
30 June 2020
Please note, dates are subject to review.
BORAL LIMITED
ABN 13 008 421 761
01
2 JULY 2018The sale of Boral’s Denver Construction Materials business for US$127 million closed. 29 AUGUST 2018Boral reported a 47% increase in net profit after tax1 to $514 million for the year ended 30 June 2018, compared to the prior year. 17 OCTOBER 2018Boral agreed to sell its US Block business for US$156 million. The transaction closed on 30 November 2018.30 OCTOBER 2018At the Annual General Meeting, Peter Alexander and John Marlay were re-elected as Directors. The resolution to adopt the Remuneration Report was well supported with 91.3% of shareholder votes cast in favour. 4 FEBRUARY 2019Boral provided a trading update and revised FY2019 guidance. 25 FEBRUARY 2019Boral reported a 6% decrease in net profit after tax1 to $224 million for the six months ended 31 December 2018, compared to the first half last year. 21 JUNE 2019Boral entered into a property development management deed with Mirvac in relation to the company’s Scoresby site in Victoria. Mirvac will manage the urban development of the 171-hectare site over a multi-decade period. Boral expects Scoresby to deliver in excess of $300 million over the life of the project subject to rezoning and market conditions. 23 AUGUST 2019Boral agreed to sell its Midland Brick business for $86 million2 in line with strategy. 26 AUGUST 2019Boral entered into an agreement with Knauf to form an expanded 50:50 plasterboard joint venture in Asia and for Boral to return to 100% ownership of USG Boral Australia and New Zealand. Boral delivered a solid result in FY2019 with benefits from cost reductions and improvement initiatives, and continued strong infrastructure activities, helping to offset impacts of residential market declines. In FY2019, we delivered an underlying profit after tax of $440 million, down 7% on the prior year. Headwaters acquisition synergies of US$32 million were slightly ahead of plan, and our year-four synergy target of US$115 million remains on track. Boral’s strategy to deliver improved performance and sustainable growth for all our stakeholders is progressing well. YEAR AT A GLANCE1. Before acquired amortisation and significant items. 2. Boral’s net proceeds are expected to be around $82 million, following adjustments to working capital and other completion adjustments, which is broadly in line with book value.01 Who we are
02
BORAL LIMITED 2019 ANNUAL REPORT
Who we areOUR PURPOSEAt Boral, we help our customers build something great by supplying them with high-quality, sustainable building products and construction materials.OUR GOALSIn operating our three divisions, our key strategic objective is to deliver shareholder returns that exceed the cost of capital through the cycle, while creating value for our customers, employees, suppliers and the communities in which we operate. We strive to create value for our stakeholders by:• driving safety outcomes towards world’s best practice based on Zero Harm Today• investing in our people to enable them to deliver their best• minimising our environmental footprint and building our resilience to climate-related impacts • delivering superior performing, innovative and sustainable products and solutions for our customers, and • operating ethically and making a positive contribution to our local communities. Our strategy to harness sustainable growth has seen Boral invest in less energy-intensive, lighter weight, more innovative products and reduce exposure to lower growth, energy-intensive, higher cost operations.672operating sites154distribution sites17countries022019 BORAL REVIEW 03
CURRENT STRATEGIC PRIORITIES In Boral Australia, maximise returns and maintain leading positions• Profitably supply multi-year growth in major roads and infrastructure • Harness our leading position in Australia, including delivering benefits from quarry, cement and plant network reinvestments• Maintain strong returns and margins through customer, commercial and operational excellence programs In Boral North America, continue the transformation by delivering targeted synergy benefits and growth • Drive improved returns on funds employed (ROFE) • Leverage growth from the Headwaters acquisition, including progressing delivery of our year-four synergy target of US$115 million • Grow through market recovery and innovation, and by delivering our fly ash strategy to increase volumesIn USG Boral, deliver long-term growth and value from strategic opportunities• Continue to grow our business through product penetration and innovation including next generation Sheetrock®• Respond to changes in cyclical demand and competitive pressures through business improvement initiatives and capacity planning• Create value through strategic growth opportunities, including working with our joint venture partner 17,104total employees (including JVs)~9,400contractors (including JVs)EMPLOYEES BY LOCATION (%)4043215 Australia/New Zealand North America Asia Other03 Results at a glance
04
BORAL LIMITED 2019 ANNUAL REPORT
RETURN ON FUNDS EMPLOYED (%)1,2 EARNINGS PER SHARE (¢)1,5DIVIDENDS PER SHARE (¢)EBITDA (A$m)1605FY15FY16FY17FY18FY196457201,0561,0378.2FY15FY16FY17FY18FY199.09.28.48.229.7FY15FY16FY17FY18FY1933.333.740.437.518.0FY15FY16FY17FY18FY1922.524.026.526.5FINANCIAL HIGHLIGHTSResults at a glanceYear ended 30 June (A$ million unless stated) FY2019FY2018Revenue – total operations basis5,8635,869 – continuing operations basis5,8015,579EBITDA1 – total operations basis1,0371,056 – continuing operations basis1,0331,015EBITA1721749EBIT1660688Net interest1(103)(104)Profit before tax1557585Tax1(116)(111)Net profit after tax1440473Net significant items(168)(32)Statutory net profit after tax272441Net profit after tax and before amortisation1486514Cash flow from operating activities762578Gross assets9,5449,510Funds employed 8,0528,183Liabilities3,6853,780Net debt2,1932,453Stay-in-business capital expenditure340375Growth capital expenditure11351Acquisition capital expenditure11–Depreciation and amortisation378368Boral employees11,91611,898Total employees including in joint ventures17,10417,131Revenue per Boral employee, $ million0.4920.493Net tangible asset backing, $ per share2.121.99EBITDA margin on revenue1, %17.718.0EBIT margin on revenue1, %11.311.7EBIT return on funds employed2, %8.28.4EBIT return on average funds employed3, %8.18.6Return on equity1,%7.58.3GearingNet debt/equity, %3743Net debt/net debt + equity, %2730Interest cover1, times6.46.6Earnings per share1, ¢37.540.4Dividend per share, ¢26.526.5Employee safety4: (per million hours worked)Lost time injury frequency rate1.31.6Recordable injury frequency rate7.58.7 Figures may not add due to rounding.OUR RESULTS042019 BORAL REVIEW 05
1. Excluding significant items. 2. Return on funds employed (ROFE) is based on EBIT before significant items on funds employed at period end.3. Calculated as EBIT before significant items on the average of opening and closing funds employed for the year.4. Includes employees and contractors in 100% owned businesses and all joint venture operations regardless of equity interest.5. In accordance with AASB 133, historical earnings per share has been revised to reflect the bonus element in the equity raising completed in December 2016. 6. Includes Boral’s 50% share of underlying revenue from USG Boral and Meridian Brick joint ventures, which are not included in Group-reported revenue. 7. RIFR is the combined lost time injury frequency rate (LTIFR) and medical treatment injury frequency rate (MTIFR).8. Per million hours worked for employees and contractors in 100% owned businesses including Headwaters, and all joint ventures businesses regardless of equity interest from FY2018 onwards. Data for prior years only includes 50% owned joint ventures and excludes Headwaters.9. GHG emissions data excludes some joint ventures, which in aggregate are not deemed to have material emissions. Emissions intensity based on Group-reported revenue adjusted to include a 50% share of underlying revenue from USG Boral and Meridian Brick joint ventures, which are equity accounted. REVENUE BY MARKET (%)6REVENUE BY DIVISION (%)6 Boral Australia Boral North America USG Boral Australian roads, highways, subdivisions & bridges, and other engineering Australian non-residential Australian detatched dwellings Australian multi-dwellings Australian alterations and additions Asia and Middle East USA single-family residential USA multi-family residential USA repair and remodel USA non-residential USA infrastructure OtherTHREE FOCUSED OPERATING DIVISIONSBORAL AUSTRALIA (A$m)FY18FY19FY18FY193,590RevenueEBITDA13,572634593USG BORAL (A$m)FY18FY19FY18FY191,575UnderlyingRevenueUnderlyingEBITDA11,606268252BORAL NORTH AMERICA (A$m)FY18FY19FY18FY191,989RevenueEBITDA12,229349415259957714310452521236RECORDABLE INJURY FREQUENCY RATE (RIFR)7,8 (per million hours worked)HEALTH, SAFETY AND ENVIRONMENTFY13FY14FY15FY16FY17FY18FY1917.413.612.18.88.18.77.5Comparable dataGREENHOUSE GAS EMISSIONS (GHG)9FY13FY14FY15FY16FY17FY18FY193.413.142.642.462.462.602.41644582523491488375348 GHG emissions (million tonnes carbon dioxide equivalent (CO2-e)) GHG emissions intensity (tonnes CO2-e per A$m revenue) 05 Chairman’s review
06
BORAL LIMITED 2019 ANNUAL REPORT
Chairman’s reviewThe announced transaction (which is further explained in the CEO’s message) is compelling for Boral and our shareholders. It is well-aligned with our strategy, and the plasterboard assets of Knauf in Asia are highly complementary to USG Boral’s business in the region. We have maintained a disciplined approach to structuring and funding the transaction, and we are confident that value is created in both the short- and longer-term.Shareholder perspectives The Board declared a 50% franked final dividend of 13.5 cents per share, for a full year dividend of 26.5 cents per share. This was steady on last year and represents a payout ratio for the full year of 71%.We recognise the importance of Boral’s dividends to our shareholders, particularly in an environment of volatile share price performance, which has been the case for many stocks, including Boral, over the past 12 months. Our investor engagement program continued during the year, giving me the opportunity to discuss strategy, governance, safety, climate-related risks and opportunities, and remuneration amongst other issues with our largest shareholders and their representatives. Once again, our Remuneration Report on pages 61 to 82 of Boral’s 2019 Annual Report, reflects some of the feedback we have received in recent years.The Board The Board has been stable over the past year, with the appointment of Peter Alexander as our first North American-based non-executive Director in September 2018 and his endorsement by shareholders at the 2018 Annual General Meeting.ADAPTING TO CONDITIONS AND EMBRACING OPPORTUNITIESOverall, a 4% increase in revenues to $5.8 billion and a 2% increase in EBITDA1 to $1.03 billion for continuing operations was a solid result. Net profit after tax (NPAT) before significant items of $440 million, was 7% lower than last year. Boral’s statutory NPAT of $272 million included $168 million of post-tax significant items with a profit on sale of the Denver Construction Materials and Texas Block businesses more than offset by the $174 million impairment of our investment in the Meridian Brick joint venture. The impairment was triggered by further underperformance of Meridian Brick due to lower US and Canadian housing activity and a continued decline in brick intensity per housing start. Strengthening our USG Boral growth platformOn 26 August we announced that Boral and Knauf have agreed to form an expanded joint venture in Asia and for Boral to return to 100% ownership of the Australian and New Zealand business, with a call option granted to Knauf to buy back a 50% share within five years if Knauf sells its stand-alone Australian plasterboard business, subject to regulatory approvals. This agreement followed our rigorous review of options in relation to USG Boral, triggered by Knauf’s announced acquisition of USG (which closed on 24 April 2019). In reviewing the strategic opportunities for Boral, our approach has been to create value for our shareholders in a way that is aligned with our strategy – and in a way that helps ensure our balance sheet remains strong.My first year as Chairman of Boral has been a busy time for the business as we have faced challenges and embraced opportunities. With conditions in our markets more challenging than expected, our businesses responded by taking costs out, resizing activities and seeking opportunities to grow revenues.1. Earnings before interest, tax, depreciation and amortisation, and excluding significant items.2. Based on Boral’s Scope 1 and Scope 2 emissions of 2.4 million tonnes of CO2-e in FY2019 and emissions intensity of 348 tonnes of CO2-e per A$ million of revenue.062019 BORAL REVIEW 07
Boral’s Board continues to benefit from diversity of gender, tenure and experience across a range of sectors, functions and professions. Our board members demonstrate a depth of operational knowledge and experience in building products and construction materials, as well as financial, merger and acquisitions (M&A), and strategy experience. We also have experience across different geographies, specifically Australia, Asia and North America – aligned with Boral’s operations. However, as previously flagged we would like to enhance that experience by having an Asia-based Director with industry experience. Our operations and cultureBoard site visits, business reviews and employee engagement provide valuable opportunities for the Board to stay connected with our people and see first-hand how we are managing safety, quality and operations, and gain insights into culture, capability and strategy execution.In September 2018, we spent time at our Roofing, Stone and Fly Ash operations in North America reviewing progress around integration of the Headwaters acquisition, including meeting customers. We returned to the USA in January 2019 for an in-depth review of progress against our long-term Fly Ash supply strategy, which is progressing well. In November 2018, we met with Boral Australia’s customer service and digital solutions teams to better understand how digital innovation is supporting our customers and providing safety enhancements. The Board Health, Safety & Environment (HSE) Committee also spent time at our Thornleigh concrete plant and Peats Ridge Quarry to have a first-hand look at safety in action and to meet with our people on the ground.Finally, in May 2019 we spent several days with the USG Boral team reviewing business strategies including customer relationships in key markets, safety initiatives, and their President Operations, to further strengthen our operational, R&D and safety outcomes. Wayne Manners stepped up into the role of President & CEO of Boral Australia from his previous role of Executive General Manager, Western Australia, Building Products & Major Projects, while Joe Goss, who had been Divisional Chief Executive Boral Australia for the previous six years moved to a senior advisory role.In March 2019, Sims Metals Management (Sims) announced Mike Kane’s appointment as a non-executive Director of Sims. Some investors expressed concern this was signalling Mike’s early departure from Boral, which is not the case. In consultation with the Board, Mike assessed his capacity to take on the appointment to Sims, without compromising his ability to perform his role as CEO of Boral. The Sims opportunity seemed to be a good fit for Mike, and with senior executive development and succession well progressed, the Board supported Mike’s appointment. From my experience, there is significant advantage in having an external Board role at the same time as being in an executive role. I have found it energising taking on additional responsibilities, and the broader exposure can strengthen one’s perspective and knowledge. I know Mike is finding the same.I thank Mike, the senior team and all of Boral’s people, for their hard work, persistence and responsiveness during FY2019 as we continue to transform Boral into a higher performing and more sustainable business.Kathryn FaggChairmanconduct risk and compliance program. In Singapore, we met with several of our sales people and our largest customers from Indonesia. We finished the trip with a visit to our NSW operations at Camellia. We have confidence that our people are focused on the right things. Boral’s leaders are committed to a workplace culture that is safety-focused, customer-centric, embraces diversity and drives for sustainability. There is no tolerance for unethical or unlawful behaviour, and where it is found, appropriate action is taken. Our commitment is demonstrated through the safety and environmental improvements delivered for FY2019. Boral’s recordable injury frequency rate of 7.5 represented a 14% improvement on last year, with all divisions making substantial progress. Boral’s greenhouse gas emissions and the emissions intensity2 of our operations both reduced by a further 7%. Further details are provided in our Sustainability Report. Executive development and successionIn February 2019, we announced leadership changes, effective 1 March, intended to provide development opportunities for executives and provide the Board with well developed, experienced and capable internal candidates to be considered for CEO succession and other senior roles at the appropriate time. At the time we confirmed that we expect Mike Kane to stay in the role as Boral’s CEO for another two to three years, which remains the case. Ros Ng, who has been Chief Financial Officer (CFO) for the past six years, has an expanded role as Group President Ventures & CFO. In addition to group strategy and M&A, Ros has responsibility for the USG Boral and Meridian Brick joint ventures, and she has been leading the execution of our strategy in relation to the USG Boral transaction with Knauf. Ross Harper, who was Executive General Manager Cement, stepped up into the new role of Group BOARD OF DIRECTORSPaul RaynerDr Eileen DoyleMike KaneJohn MarlayPeter Alexander Karen Moses 07 Message from Mike Kane
CEO & Managing Director
08
BORAL LIMITED 2019 ANNUAL REPORT
Message from Mike Kane CEO & Managing DirectorIn FY2019, as demand softened in several key markets and some external delays and disruptions impacted the industry, we maintained our focus on improving the things we can control.• delivered US$32 million of Headwaters acquisition synergies in year two versus a target of US$25 million• progressed our Fly Ash supply strategy by commissioning our first landfill reclaim project and introducing imports from Mexico into the USA, and enhanced our fixed and mobile storage capability • completed quarry upgrades at Deer Park (Victoria), Orange Grove (Western Australia) and Ormeau (Queensland)• progressed construction of our $130 million clinker grinding and storage facility at the Port of Geelong in Victoria, and • advanced our strategy to move out of brick manufacturing globally with the 23 August 2019 announcement of the sale of Midland Brick to a Western Australian consortium for $86 million. This follows the $134 million divestment of the east coast Australian brick business to CSR in November 2016, and leaves the Meridian Brick joint venture in the USA as our last remaining brick business. This year, we impaired our investment in Meridian Brick by US$122 million (A$174 million), as a result of continued underperformance. While our strategy is to exit bricks globally, we are working with our joint venture partners to return the business to profitability.Finally, and most significantly, on 26 August, we announced that Boral reached agreement with Knauf, the new owners of USG, to form an expanded joint venture in Asia, and for Boral to return to 100% ownership of USG Boral Australia and New Zealand. Boral has agreed to grant Knauf a call option to buy back 50% of the Australian and New Zealand business, within five years, with both the grant and exercise of the call option subject to Australian and New Zealand regulatory approval. Boral will invest a total of US$441 million, including US$200 million to buy the other half of USG Boral Australia and New Zealand. This is a great business and until Knauf exercises its call option, Boral will enjoy 100% of its strong cash flows while continuing to benefit from USG’s R&D and intellectual property. The remaining US$241 million of Boral’s investment represents our 50% share to acquire Knauf Plasterboard Asia, which will become part of the expanded USG Boral Asia joint venture, substantially increasing USG Boral’s business in China and strengthening its position across South East Asia. The expanded USG Boral joint venture in Asia will be a world-class operation, bringing together Knauf – now the largest plasterboard manufacturer in the world – and USG Boral in Asia, which has an enviable position in the fastest growing plasterboard region in the world.Of Boral’s US$441 million investment, a proportion will be funded within the USG Boral Asia joint venture, with the balance of US$335 million to be funded by Boral through debt and proceeds from recent divestments. The transaction is expected to complete around the end of calendar year 2019, and will be immediately value enhancing for Boral’s shareholders. Based on FY2019 pro-forma financials, we expect earnings per share accretion of around 3% to 5%, before synergies, and we expect synergies of around US$30 million per annum in year four.Focused on delivering resultsWhile volumes were short of expectation in FY2019 as demand softened in several key markets and some external delays and disruptions impacted the industry, we maintained our focus on improving the things we can control. DELIVERING OUR STRATEGYOur strategy is for Boral to be an integrated construction materials player in Australia; a gypsum-based product leader throughout Asia, Australasia; and a leading supplier of fly ash and building products in North America. To harness more sustainable growth, our strategy is focused on investing in less energy-intensive, lighter weight, more innovative products and reducing exposure to lower growth, energy-intensive, higher cost operations.We have deployed capital from non-core businesses into businesses that we know will secure Boral’s future. Specifically, we:• divested Denver Construction Materials for US$127 million, in July 2018• divested the Texas-based Block business for US$156 million, in November 20181. Earnings before interest, tax, depreciation and amortisation, and excluding significant items.2. Recordable injury frequency rate (RIFR) and Lost time injury frequency rate (LTIFR) per million hours worked for employees and contractors in 100% owned businesses and all joint venture businesses regardless of equity interest. 082019 BORAL REVIEW 09
For Boral Australia, infrastructure activity has been very strong, but some unplanned delays, disruptions and phasing of projects put pressure on volumes at a time when Australian housing starts were 15% lower in FY2019.A concerted effort to reduce overhead costs, align our operations with demand and optimise margins, underpinned the strong EBITDA1 of $593 million, including Property earnings of $33 million. This was in line with our long-term average Property earnings but lower than the very high contribution of $63 million in FY2018. Excluding Property, EBITDA margins were strong and broadly steady at 15.8%.In FY2019, the US housing market, which drives around half of the earnings in Boral North America, contracted for the first time in eight years, with extreme rainfalls disrupting activity across the country. Against this backdrop, the US business delivered 10% EBITDA growth to US$297 million (or in Australian dollars, earnings were up 19% to A$415 million), with better than targeted year two synergies of US$32 million. Boral North America EBITDA margins increased from 17.5% to 18.6%, strengthened by synergies, other cost reductions and solid price outcomes.Boral’s equity income from USG Boral was $57 million compared with $63 million last year, reflecting a sharp cyclical downturn in housing activity in South Korea. The South Korean market decline; the Australian housing downturn which will flow through in FY2020; and higher input costs more broadly, were the impetus for USG Boral’s cost reduction program which is expected to deliver $21 million of benefits over two years. Despite the declines in Australian and US housing starts, Boral’s revenue growth of 4% to $5.8 billion and 2% lift in EBITDA to $1.03 billion from continuing operations, highlights the resilience of the underlying business, especially as Property EBITDA was $30 million lower than last year. As we move closer to best practice performance, I am proud of Boral’s safety results delivered in FY2019. A recordable injury frequency rate (RIFR)2 for employees and contractors of 7.5 represents a 14% improvement for the year, and our lost time injury frequency rate (LTIFR)2 of 1.3, is a 19% improvement on last year. During the year, we increased our focus on lead indicators, recording in excess of 150,000 safety observations across the Group, which demonstrates that our people are committed to delivering Zero Harm Today.Boral’s outlookGiven our FY2019 results, the outlook for Boral’s markets in FY2020, and the trading conditions we have seen in July and August, we expect Boral’s net profit after tax (NPAT) before significant items to be around 5–15% lower in FY2020 relative to FY2019. In FY2020, we expect earnings pressure in Boral Australia as the slowdown in residential construction continues to impact and won’t be fully offset by growing volumes in infrastructure projects. Higher than average Property earnings and further benefits from improvement initiatives will help the result. Boral North America is expected to deliver underlying earnings growth with an additional ~US$20m of Headwaters synergies expected.USG Boral will be impacted by the slowdowns in residential construction activity in Australia and South Korea, only partially offset by improvements in other geographies. Of course, once the announced USG Boral/Knauf transaction completes, which is expected around the end of the calendar year, we will see an earnings uplift coming through in the USG Boral plasterboard division. Beyond FY2020, I am confident that Boral is well placed to deliver medium- and longer-term growth. In Australia, we expect continued infrastructure growth in coming years, coupled with forecasters expectations of a more modest downturn in residential construction relative to past cycles. In Boral North America, we remain on track to deliver US$115 million of synergies by the end of FY2021 and our Fly Ash supply strategy is ramping up to deliver growth in the coming years. In USG Boral, we will benefit from 100% earnings from the Australia and New Zealand business until Knauf exercises its call option. The expanded USG Boral joint venture in Asia is expected to deliver US$30 million of synergies in year four and should see continued growth through product innovation, penetration of plasterboard products and economic growth in emerging markets. I am looking forward to continuing in the role of CEO for around two more years, working with Boral’s people across 17 countries to deliver on our strategy and to deliver great results.Mike KaneCEO & Managing DirectorEXECUTIVE COMMITTEERoss HarperGroup President OperationsFrederic de Rougemont CEO, USG BoralDamien Sullivan Group General CounselKylie FitzGeraldGroup Communications & Investor Relations DirectorRosaline Ng Group President Ventures & CFOWayne MannersPresident & CEO, Boral AustraliaDavid Mariner President & CEO, Boral North AmericaDominic MillgateCompany SecretaryLinda CoatesGroup Human Resources DirectorTim Ryan Group Strategy and M&A Director (reporting to Group President Ventures & CFO)09 Group President Ventures &
Chief Financial Officer’s review
2019 has been a busy period of change on many fronts. Earlier this year I took
on the role of Group President Ventures & Chief Financial Officer, with additional
responsibility for delivering the results and strategies of Boral’s joint ventures.
This year, we achieved solid earnings
performance despite softer than expected
market conditions. We made significant
progress executing our long-term
strategy through divestments of the
Denver Construction Materials and US
Block businesses. We also agreed to sell
Midland Brick and finalised the expansion
of our plasterboard footprint through the
announced transactions with Knauf.
2019 RESULT HIGHLIGHTS
Boral’s FY2019 underlying performance
was underpinned by strong Australian
infrastructure activity, Headwaters
acquisition synergies and benefits from
cost savings and improvement initiatives
across the business, which helped to
offset the downturn in Australian and
US housing starts, lower Boral Australia
Property earnings and a cyclical decline
in USG Boral’s key market of South Korea.
Boral’s reported revenue of $5.86 billion
was substantially in line with the prior
year. Excluding discontinued operations,
revenue from continuing operations
increased $221 million to $5.80 billion.
Group EBITDA of $1.04 billion declined
2% on the prior year. For continuing
operations, we saw a 2% lift in Group
EBITDA to $1.03 billion, with strong
earnings growth from Boral North
America, partly offset by lower earnings
from Boral Australia, including $30 million
of lower Property earnings.
Income statement
Year ended 30 June
2019
2018
$m
Sales revenue
EBITDA1
Depreciation and amortisation
EBIT1
Interest expense
Tax expense1
Underlying profit after tax1
Net significant items
Net profit after tax
Group
5,862.7
1,037.4
(377.8)
659.6
(103.1)
(116.4)
440.1
(167.7)
272.4
Continuing
operations
Discontinued
operations
5,800.6
1,033.2
(373.6)
659.6
(103.1)
(116.4)
440.1
(225.5)
214.6
62.1
4.2
(4.2)
–
–
–
–
57.8
57.8
Group
5,869.0
1,056.0
(367.6)
688.4
(103.8)
(111.4)
473.2
(32.2)
441.0
Continuing
operations
Discontinued
operations
5,579.3
1,014.5
(351.0)
663.5
(103.8)
(103.4)
456.3
(32.2)
424.1
289.7
41.5
(16.6)
24.9
–
(8.0)
16.9
–
16.9
1. The presentation of before significant items measures of EBITDA, EBIT and underlying profit after tax are non-IFRS measures 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.
10
BORAL LIMITED 2019 ANNUAL REPORT
Boral’s net underlying interest expense
of $103 million was steady on the prior
period. This reflects reduced expense
as a result of the repayment of loans
using the proceeds from the sale of the
US businesses partially offset by an
unfavourable currency translation of the
US interest expense.
Our tax expense of $116 million increased
from $111 million in FY2018. The average
underlying tax rate for the year increased
from 19% in FY2018 to 21% in FY2019.
Boral’s effective tax rate reflects the
recognition of previously unrecognised
US tax losses and the utilisation of
capital losses, as well as the continued
benefit from lower income tax rates on
US earnings following the reduction of
the US federal tax rate in December
2017. Excluding the benefit of previously
unrecognised US tax losses and utilisation
of capital losses, our effective rate was
around 24%.
Underlying profit after tax of $440 million,
represented a 7% decrease on the prior
year. Boral’s reported net profit after
tax of $272 million included a net loss
of $168 million from significant items.
This compares to a net profit after tax
of $441 million in the prior year, which
included a significant item loss of
$32 million.
The Group recorded a net loss of
$168 million for significant items that were
excluded from the underlying result. This
primarily relates to the impairment of the
Meridian joint venture investment and
costs associated with the integration of
Headwaters and restructuring, partially
offset by the gains from the sale of our
US businesses. Further explanation of our
significant items can be found in Section
2.6 of the financial statements.
DIVISIONAL PERFORMANCE
Boral Australia
Boral Australia’s revenue was steady at
$3.57 billion with softer residential demand
and the completion or near completion
of several major projects offsetting the
increase in infrastructure activity.
Boral Australia’s EBITDA declined 6% from
the prior year to $593 million primarily due
to lower Property earnings. Excluding
Property, EBITDA decreased by $10 million
or 2% in the current year, due to lower
concrete volumes, adverse product and
geographic revenue mix and higher costs.
Cost savings programs and improvement
initiatives implemented across the
business largely offset the impact of softer
market conditions.
Reconciliation of underlying results to reported results for FY2019
Boral North America
Boral North America delivered 12%
revenue growth to $2.23 billion on a
continuing operations basis.
Boral North America’s EBITDA increased
$66 million from the prior year to
$415 million. In US dollars, EBITDA was
10% higher, benefiting from strong growth
in Roofing and Windows and synergies
of US$32 million. This was partially offset
by the impact of lower volumes caused
by high levels of rainfall in our key markets
such as Texas, lower site service revenues
in Fly Ash and a challenged result from
the Meridian Brick joint venture.
USG Boral
USG Boral’s underlying revenue of
$1.61 billion was up 2% on the prior year,
driven by volume growth in Thailand,
China, Vietnam and India and a steady
contribution from Australia. It was partially
offset by a market driven decline in
South Korea and heightened competition
throughout Asia, particularly in Indonesia.
$m
Underlying results
Significant items
Sale of business
Restructure costs
Integration costs
Joint venture matters
Asset impairment
Total significant items
Reported results
EBIT
Finance costs
Tax
Profit after tax
659.6
(103.1)
(116.4)
440.1
69.6
(25.7)
(32.8)
(8.2)
(195.6)
(192.7)
466.9
–
–
–
–
–
–
(103.1)
(11.8)
8.0
6.7
–
22.1
25.0
(91.4)
57.8
(17.7)
(26.1)
(8.2)
(173.5)
(167.7)
272.4
11
STRONG OPERATING CASH FLOW
Cash flow
Free cash flow generated for the year was
$712 million, which was an increase of
$477 million compared to the prior year.
This improvement primarily reflects the
proceeds from the disposal of businesses
and lower restructure, acquisition and
integration costs.
Capital expenditure of $453 million
was $28 million higher than the prior
year. This reflected an increase in
growth expenditure associated with our
investments in the new Geelong clinker
import terminal, quarry upgrades, and
US Fly Ash storage facilities and reclaim
activities. Stay in business expenditure of
$340 million was lower than the prior year,
with fewer plant upgrades in Australia and
lower integration capital expenditure in
Boral North America.
MAINTAINING A STRONG
BALANCE SHEET
At 30 June 2019, Boral’s net debt position
was $2.19 billion, down from $2.45 billion
at 30 June 2018 due to the repayment
of loans using the proceeds from the
business disposals, partially offset by an
unfavourable exchange rate impact of
$143 million.
Boral’s principal debt gearing covenant
with its financiers, measured as gross
debt to gross debt plus equity, decreased
slightly to 29%, comfortably within the
60% threshold.
Boral’s balance sheet remains in a strong
position and continues to support our
existing BBB/Baa2 investment grade
credit ratings.
DIVIDEND
In FY2019, a 50% franked interim dividend
of 13.0 cents per share was declared and
paid and a 50% franked final dividend of
13.5 cents per share was declared, for a
full year dividend of 26.5 cents per share.
The Group’s Dividend Reinvestment Plan
remains suspended.
WRAP UP
Despite softer market conditions, Boral
remains well placed with industry leading
positions across many markets.
I look forward to continuing in my new role
and would like to thank our staff for their
tireless dedication.
Ros Ng
Group President Ventures &
Chief Financial Officer
For the year ended 30 June, $m
EBITDA1
Change in working capital
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
Free cash flow
Dividends paid
Other items
Cash flow2
Debt and gearing
As at 30 June, $m
Total debt
Total cash and deposits
Net debt
Total shareholders equity
Gearing ratios
Net debt/equity (%)
Net debt/equity plus net debt (%)
Interest cover (times)3
2019
1,037
2018
1,056
(35)
(8)
(97)
(51)
(18)
(12)
(54)
762
(453)
(11)
38
376
712
(317)
8
403
2019
2,400
207
2,193
5,859
37
27
6.4
(86)
(22)
(96)
(86)
(22)
(48)
(118)
578
(425)
–
75
8
235
(287)
(2)
(54)
2018
2,527
74
2,453
5,731
43
30
6.6
1. Excluding significant items.
2. Cash flow is the net change in cash and equivalents excluding the impact of borrowing
proceeds/repayments.
3. EBIT before significant items/net interest expense.
12
BORAL LIMITED 2019 ANNUAL REPORT
ANNUAL REPORT 2019
Divisional Performance
BORAL AUSTRALIA
($m)
Revenue
EBITDA1
EBIT1
FY2019
FY2018
3,572
3,590 1%
593
384
634 6%
433 11%
EBITDA margin1
16.6%
17.6%
EBITDA1 (excluding property)
560
570 2%
Net assets
ROFE 2
2,537
15.1%
2,482
17.5%
BORAL NORTH AMERICA
($m) 3
Revenue
EBITDA1
EBIT1
FY2019
FY2018
2,229
1,989 12%
415
252
349 19%
199 27%
EBITDA margin1
18.6%
17.5%
Despite a 15% decline in residential housing starts and a 6%
reduction in concrete volumes, revenue was only down 1%.
EBITDA declined 6% to $593 million, primarily due to lower
Property earnings. Excluding Property earnings, EBITDA
declined 2% on lower volumes, partly offset by price growth,
improvement initiatives and cost savings.
Revenue grew 12% to $2,229 million and EBITDA improved
19% to $415 million, largely driven by growth in building
products, particularly Roofing, and US$32 million of
Headwaters synergies, which were partially offset by softer
Fly Ash earnings and lower results from the Meridian Brick
joint venture. Extreme rainfalls and a 2.4% decline in housing
starts impacted volumes.
4,535
5.6%
4,514
4.4%
FY2019
FY2018
1,592
1,539 3%
297
304
270 10%
271 12%
Net assets
ROFE 2
USD
(US$m) 3
Revenue
EBITDA1
EBITDA (excluding Meridian)1
Figures may not add due to rounding
USG BORAL
BORAL’S REPORTED RESULT
($m)
FY2019
FY2018
Equity income1, 4
57
63 10%
USG BORAL UNDERLYING BUSINESS RESULT
($m)
Revenue
EBITDA 1
EBIT1
FY2019
FY2018
1,606
1,575 2%
252
168
268 6%
194 13%
EBITDA margin 1
15.7%
17.0%
Net assets
ROFE 2
2,082
8.1%
1,955
9.9%
Boral’s equity accounted income of $57 million, down 10%
on the prior year, represents Boral’s 50% share of USG
Boral’s underlying post-tax earnings. Revenue increased
2% to $1,606 million in the underlying business, reflecting
top-line growth in Thailand, China, Vietnam and India, and
a steady contribution from Australia. This was largely offset
by a market-driven decline in South Korea and heightened
competition in Asia, particularly in Indonesia.
1. Excluding significant items.
2. Divisional ROFE is annual EBIT before significant items on divisional funds employed.
3. Continuing operations basis.
4. Post-tax equity income from Boral’s 50% share of the USG Boral joint venture.
13
MARKET CONDITIONS AND EXTERNAL IMPACTS
BORAL FY2019 external revenue1 by market (%)
5 2
4
10
3
14
7
7
5
25
9
9
Australian roads, highways,
subdivisions & bridges, and other
engineering
Australian non-residential
Australian detached dwellings
Australian multi-dwellings
Australian alterations and additions
Asia and Middle East
USA single-family residential
USA multi-family residential
USA repair and remodel
USA non-residential
USA infrastructure
Other
Australia
Boral Australia’s largest exposure is to roads, highways,
subdivisions and bridges (RHS&B). While activity remained at
high levels, based on estimates, RHS&B value of work done2
declined 6% in FY2019, with a reduction of 11% in Queensland
(Qld), 5% in New South Wales (NSW) and 3% in Victoria (Vic).
Other engineering activity2 is estimated to have declined 22%,
as strong activity in Vic and NSW was offset by lower levels of
Western Australia (WA) and (Qld) activity.
Australian housing starts3 declined 15% to an estimated 195,000
annualised starts in FY2019, from 230,200 starts in FY2018.
Detached housing starts are estimated to be down 8%, with
multi-residential starts down 23%.
On a state-by-state basis, housing starts declined by 19% in Vic,
14% in NSW, 13% in Qld, 21% in South Australia (SA) and 16%
in WA.
Australian alterations and additions activity4 grew by an estimated
3% in FY2019.
Non-residential activity4 grew by an estimated 2%, with higher
demand in NSW and Vic.
In FY2020, on average, market forecasters5 expect housing
starts to be ~166,000.
Table 1: Australia − project work
Logan Motorway – Enhancement Works, Qld Est. completion 2019
Barangaroo – Crown Casino, NSW
Est. completion 2020
Bruce Highway Cairns Southern Access, Qld
Norfolk Island Airport, Qld
Northern Road – Stages 4, 5 & 6, NSW
Pacific Motorway M1 M2 upgrade, Qld
Pacific Motorway M1 M3 merge, Qld
RAAF – East Sale, Vic
Sydney Metro rail, NSW
West Gate Tunnel (early works), Vic
Melbourne Metro Rail project (precast), Vic
Est. completion 2021
Road Asset Management Contracts, Qld Est. completion 2024
Armidale Road (Northlake Bridge), WA
Tendering
Brisbane Metro, Qld
Capricorn Highway, Qld
Clark Creek Windfarm, Qld
Cross River Rail, Qld
Haughton River Bridge, Qld
Inland Rail Project – Narrabri to NorthStar,
NSW
Mordialloc Bypass, Vic
Northern Road – Stages 4, 5 & 6, NSW
Queens Wharf – resort development, Qld
Snowy Hydro 2.0, NSW
Suburban Roads – Upgrade North, South
East & West, Vic
Sydney Metro (Victoria Cross & Pitt St
Stations), NSW
Tonkin Highway extension, WA
WestConnex – stage early works, NSW
North East Link Melbourne, Vic
Pre-tendering
In FY2020, concrete volumes are expected to remain high, but
Macromonitor6 is currently forecasting concrete industry volumes
to reduce by ~2% nationally and ~5% in NSW. Macromonitor6 is
forecasting asphalt industry volumes to remain high in FY2020
with further growth in the next two to three years.
Sydney Stewardship Maintenance, NSW
Warragamba Dam raising, NSW
Western Sydney Airport, NSW
Inland Rail Project, stages 10, 11 & 12, Qld
The list of project work in Table 1 includes some of the largest
infrastructure projects Boral is currently supplying and a selection
from the potential pipeline.
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. Average of Macromonitor and BIS Oxford Economics forecasts of
value of work done (constant 2016/17 prices).
3. Australian Bureau of Statistics (ABS) original housing starts; average of
Macromonitor, BIS Oxford Economics and Housing Industry
Association (HIA) forecasts for June 2019 quarter.
4. Original series (constant 2016/17 prices) from ABS to March 2019
quarter. Average of Macromonitor and BIS Oxford Economics
forecasts for June 2019 quarter.
5. Average of HIA, BIS Oxford Economics and Macromonitor forecasts.
6. Macromonitor Construction Materials forecast, July 2019 estimates.
14
BORAL LIMITED 2019 ANNUAL REPORT
USA
US housing starts1 declined 2.4% to an estimated 1.22 million
starts, with single-family starts down 3.4% and multi-family starts
slightly up in FY2019.
In other US construction markets, the repair and remodel2 market
was up an estimated 2%, while non-residential3 construction
market grew an estimated 2%. Based on estimated ready mix
concrete volumes, US infrastructure4 activity increased 6%.
In FY2019, extended periods of well above average rainfall –
in some cases at record levels – impacted activity in the South,
Midwest and Northeast. This led to construction delays, most
notably in our key state of Texas, with the disruption more
extensive and widespread than in the prior period.
In FY2020, on average, market forecasters5 expect total US
housing starts to grow by ~4% to ~1.27 million starts.
Across other US construction markets, in FY2020 the repair
and remodel market6 and the non-residential market7 are both
expected to grow by ~3%, while the infrastructure sector8 is
expected to grow by 4%.
Asia9
In South Korea, the residential construction market has been
in a cyclical decline in FY2019, due to government initiatives to
tighten mortgage lending. The residential market (particularly
multi-residential) and consequently plasterboard demand, is
expected to contract further in FY2020.
In China, while the economy continues to grow, construction
has been slowing due to regulatory controls and tighter lending
policies. US–China trade relations have also created uncertainty.
In Indonesia, market growth has returned and the economy
is strengthening, but conditions are highly competitive as
additional capacity has entered the market and the domestic
manufacturing sector is competing with cheaper imported
building materials.
In Thailand, construction market activity was stable. The
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 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 20 and 21.
BORAL AUSTRALIA
FY2019 revenue by business (%)
47
Concrete and Placing
Quarries
Asphalt
Cement
Building Products
Other
9
21
2
9
12
Revenue
Boral Australia revenue decreased 1% to $3,572 million, with
higher contributions from Quarries and Cement offset by lower
contributions from Concrete & Placing, Asphalt and Building
Products.
A 15% decline in housing starts – particularly impacting activity
in NSW metro, a marked decline in non-residential activity
in Southeast Queensland (SEQ), and completion or near
completion of several major projects slowed revenue growth.
EBITDA
Reported EBITDA10 decreased 6% to $593 million, primarily due
to $30 million of lower Property earnings. Excluding Property,
EBITDA was only down 2%. A concerted effort to reduce
overhead costs, align operations with demand and optimise
margins underpinned the result. Cost savings of $28 million
realised through supply chain optimisation, Organisational
Effectiveness (OE) and rightsizing programs, together with
other improvement initiatives, substantially offset the impact
of 6% lower concrete volumes, a less favourable product and
geographic mix, and operational inefficiencies associated with
project delays.
Excluding Property, EBITDA margins were strong and broadly
steady at 15.8%.
ROFE11 decreased to 15.1% from 17.5% in the prior year. This
reflects the fact that Property contributed $33 million of EBIT this
year versus $63 million in the prior corresponding period.
Concrete & Placing earnings (EBITDA) decreased, with
revenue down 2%. Earnings declined due to the combination
of lower volumes, particularly in SEQ, and a less favourable mix
shift with a higher proportion of revenue derived from the lower
margin Concrete Placing business, which reported strong growth
as project activity stepped up.
Concrete volumes declined 6% as infrastructure growth was
more than offset by softer residential demand across all regions,
lower commercial activity in WA and a marked decline in
non-residential construction in SEQ, with few projects awarded
and commenced during the period. While volumes to major
projects were higher compared to the prior year, they were below
expectation, with project delays impacting both productivity and
costs.
1. US Census seasonally adjusted annualised housing starts. Based on
6. Based on forecasts from Moody’s retail sales (July 2019), LIRA
data up to July 2019.
2. Moody’s retail sales of building products, July 2019.
3. Management estimate of square feet area, using Dodge Data &
Analytics and US Census data.
4. Management estimate of ready mix demand, using Dodge Data &
Analytics and Portland Cement Association shipments.
5. US Census seasonally adjusted annualised housing starts
(July, 2019). Based on average of analysts’ forecasts (Dodge, Wells
Fargo, NAR, NAHB, Fannie Mae, Freddie Mac, MBA).
(July 2019) and HIRA (November 2018).
7. Based on Dodge Data & Analytics (June 2019), Oxford Economics
construction forecast (Q2, 2019) and FMI US construction outlook
(Q2, 2019).
8. Based on Dodge Data & Analytics, Infrastructure Ready Mix Demand
(June 2019) and PCA cement consumption outlook (Spring 2019).
9. Based on various indicators of building and construction.
10. Excluding significant items.
11. Return on funds employed (ROFE) is based on total EBIT before
significant items on funds employed at period end.
15
BORAL AUSTRALIA continued
Organisational Effectiveness
Major infrastructure projects contributing to revenue in FY2019
included NorthConnex, Pacific Highway and Sydney Metro in
NSW and the Toowoomba Second Range Crossing in Qld, with
several projects completing or nearing completion in FY2019
ahead of others commencing, including the Forrestfield Airport
Link (WA), NorthConnex (NSW) and Sydney Metro (NSW).
Concrete like-for-like (LFL) prices were up 2%, with solid
gains in Vic and NSW, moderate price gains in SEQ and lower
prices in WA.
Quarries reported higher revenue. Quarry volumes (internal
and external) were up 1%, with significant growth in NSW and
Vic partly offset by declines in Qld and WA. Growth in external
volumes, primarily driven by roadbase, were largely offset by
lower internal volumes. While revenue grew 9%, earnings grew
modestly, primarily reflecting an increase in lower value product
in Vic, NSW and SEQ.
Nationally, LFL pricing for Quarries was steady as gains in SEQ
and Vic were offset by a decline in NSW and subdued results
across other regions.
Asphalt earnings declined on a 5% reduction in revenue, driven
by lower volumes and weaker margins in Qld and Vic. Earnings
were adversely impacted by higher costs and lower productivity
on some major projects. Major projects contributing to revenue
in the full year included Gateway Upgrade North and Logan
Enhancement in Qld, Geraldton Airport Upgrade in WA, and
Northern Road and Pacific Highway in NSW.
Cement revenue was up 7% and earnings were modestly
higher. Benefits from favourable pricing, higher external volumes
and cost saving programs offset a lower contribution from
our Sunstate joint venture and higher fuel and clinker costs.
Production at the Berrima Kiln also normalised in the second half
of FY2019.
Property reported EBITDA of $33 million, with earnings from the
sales of Jandakot and Donnybrook properties flowing through in
the second half of FY2019. Property earnings were $30 million
lower than the prior year.
Building Products (Timber, Roofing and Bricks WA) reported a
decline in revenue and weaker earnings due to softer detached
residential housing construction in the second half and higher
costs in Timber. These more than offset the benefit of higher
average selling prices and cost reduction programs.
Excellence programs
Our Commercial Excellence program is delivering benefits
across most businesses, including through customer market
segmentation, which helped to deliver the reported price
increases of 1–3%. Through our Customer Experience program
(initiated in FY2018) we continue to focus on transforming the
Boral customer experience and improving customer satisfaction,
as reflected by our improved Net Promotor Scores (NPS) that
have been delivered so far. We are now continually capturing
NPS in the Southern Region and rolling out a similar approach in
other regions.
Our multi-year supply chain optimisation project is part of our
Operational Excellence program, which aims to reduce supply
chain costs. In FY2019, the supply chain optimisation program
delivered around $15 million of savings.
We continue to focus on reducing costs and rightsizing our
business to align resources with demand. Our OE program,
together with regional rightsizing, delivered savings of around
$13 million via the reduction of around 300 positions.
Strategy and priorities
Despite some cyclical market pressures, 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 FY2019, a total of $291 million of capital was invested in
Boral Australia. As part of our capital investment program, we
continued to progress the new 1.3 million tonne clinker and slag
grinding plant and cementitious storage facility at the Port of
Geelong in Victoria, which is expected to cost up to $130 million.
The investment is on track and construction is expected to be
completed by the end of calendar year (CY) 2020.
Our quarry reinvestments at the Orange Grove Quarry (WA) and
Ormeau Quarry (Qld) were completed in FY2019. Orange Grove
is producing at targeted capacity and Ormeau has reached
practical completion and continues to ramp up in line with
expectations. Benefits will be delivered from FY2020.
In Boral’s concrete and asphalt plant network, our new higher
capacity concrete batch plant at West Melbourne (Vic) is
commissioned. In Asphalt, our new plant at Toowoomba (Qld) is
also commissioned.
As market conditions soften, Boral Australia is focused on
lowering overhead costs through our OE program. Rightsizing
the business to align resources with demand remains an
ongoing focus. In FY2019, we reduced our headcount in WA
and SEQ in line with the market softening in those regions, and
we will continue to rightsize our business in response to cyclical
markets.
Overall, through OE and rightsizing, around 300 positions were
taken out of the organisation through a combination of natural
attrition, a hiring freeze and 220 redundancies. These largely
occurred in the last quarter of FY2019 and are expected to
deliver further savings in FY2020.
While a hiring freeze is no longer in place, we continue to
implement tight controls on headcount additions. Net one-off
costs associated with our rightsizing and OE program total
approximately $18 million, with these costs recognised in FY2019
as a significant item.
We are also focused on reducing costs through our Operational
Excellence programs, including through supply chain
optimisation. The supply chain program is targeting to reduce
supply chain costs (which total around $650–$750 million)
by 5–10%.
Through our OE, rightsizing and supply chain optimisation
programs, we delivered around $28 million of savings in FY2019.
We expect further savings of around $40–$50 million in FY2020
from these initiatives.
16
BORAL LIMITED 2019 ANNUAL REPORT
BORAL NORTH AMERICA
FY2019 revenue by business (%)
9
16
10
21
29
15
Fly Ash
Stone
Roofing
Light Building Products
Windows
Meridian Brick
In May 2018, Boral agreed to sell its Denver Construction
Materials business, which settled on 2 July 2018. Boral also
agreed to sell its US Block business on 17 October 2018 which
settled on 30 November 2018.
The following commentary relates to FY2019 results for
continuing operations. Results for the Denver Construction
Materials and US Block businesses are not included in Boral
North America earnings for continuing operations. The result
does include post-tax equity income from the Meridian Brick
joint venture formed 1 November 2016.
An average AUD/USD exchange rate of 71.45c is used for
FY2019, and 77.35c for FY2018.
Revenue
Revenue was up 3% to US$1,592 million, largely driven by
significant growth in Roofing and an improved contribution from
Windows. Extremely high levels of rainfall experienced in the
South, Midwest and Northeast regions disrupted construction
activity during the year and, when coupled with softer housing
starts, slowed volumes.
EBITDA
EBITDA1 increased 10% to US$297 million, with synergy benefits
of US$32 million slightly ahead of plan. In Australian dollar terms,
EBITDA increased 19% to A$415 million, reflecting favourable
currency movement. Price increases helped to offset higher
costs. Several legal cases related to the Headwaters acquisition
were resolved below expected cost outcomes, providing a
one-off benefit of approximately US$10 million in FY2019.
This benefit was largely offset by the impact of lower volumes.
Higher earnings from Roofing and Windows were offset by softer
earnings from Fly Ash and lower results from the Meridian Brick
joint venture. Excluding the Meridian Brick joint venture,
EBITDA was up 12%.
ROFE2 improved to 5.6% from 4.4%. Boral North America
remains well placed to deliver above cost of capital returns over
time through full realisation of acquisition synergies and market
growth.
Fly Ash revenue was broadly steady, with strong 11% like-for-
like (LFL) price gains offsetting a 3% decline in volumes and
lower revenues associated with the completion of two major site
services construction projects, known as Barry and Gaston.
Excluding site services, revenue from Fly Ash was up 7%. In
FY2019, site services represented 23% of Fly Ash revenue, down
from 28% in the prior year, but still above the historical average
of 20%.
Fly Ash earnings were also down because of lower earnings
from site services. EBITDA margins of ~22%, compared to ~24%
in the prior year, reflect higher costs and the completion of the
Barry and Gaston projects, which delivered above average
margins in the prior year. Synergies of US$7 million were in line
with expectations.
Fly Ash volumes declined 3% to ~7 million tons in FY2019; first half
volumes were down 6% while second half volumes were up 3%
on the prior corresponding period. The expected full year impact
of prior period Texas utility closures, unplanned intermittent power
plant outages and extreme wet weather conditions – particularly in
the first half – adversely impacted volumes. Volumes were partly
recovered through network optimisation and additional storage
capacity, as well as new contracts.
Our first landfill reclaim operation at Montour in Pennsylvania was
commissioned during the year, with volumes ramping up by year
end after a slow winter. We are supplying the market with modest
volumes of imports from Mexico, which will grow over time.
Continued investment in fly ash storage has resulted in our total
capacity reaching 600,000 tons, as planned.
Roofing delivered strong earnings growth driven by a 15%
increase in revenue. Despite softer construction markets in the
second half and a lower spring re-roof season due to weather,
concrete tile volumes benefited from strong demand in Colorado,
Nevada and Florida where growth continues to exceed housing
starts.3
An increase in Concrete Roofing average selling prices of 5%
more than offset inflationary and demand-driven cost pressures.
Roofing delivered synergies of US$11 million.
Manufacturing performance continues to improve at the
Okeechobee and Lake Wales plants (FL), and production
constraints at the Oceanside metal roofing plant (CA) were
rectified in the second half.
Stone delivered steady revenue and a modest increase in
earnings. Earnings benefited from price gains, cost savings
associated with the rationalisation of two distribution facilities,
and completion of commissioning at the Greencastle plant
in the prior period. This was partly offset by inflationary costs
pressures, primarily from labour and raw materials, and a decline
in volumes reflecting softer demand in US Central, Northeast and
Southern regions, as well as Canada. Synergies of US$6.4 million
were delivered.
Light Building Products reported stable revenue and modest
earnings growth. Double-digit volume growth in TruExterior®
Siding & Trim and good price gains in Versetta and TruExterior®
were offset by softer volumes across most other product
categories due to weather and lower housing activity. Raw
material costs were steady, while labour and production costs
were higher. The BCI production challenges experienced in the
prior period were rectified and synergies of US$4.5 million were
delivered.
Windows reported a 5% lift in revenue, reflecting market share
gains, partly offset by lower volumes due to adverse weather
conditions. Earnings were higher, benefiting from higher
volumes, modest price growth, reduced raw material costs and
improvements in logistics, which offset higher labour costs.
Meridian Brick joint venture delivered an underlying post-tax
equity earnings loss of US$7 million, compared with a loss of
US$1 million in the prior period. The Meridian Brick joint venture
generated underlying revenue of US$375 million and EBITDA of
US$6 million. Compared to the prior period, revenue declined by
5% and EBITDA declined by 76%.
Underperformance of the business, particularly during the
second half of FY2019, reflects a significant downturn in the
Canadian housing market – which has historically contributed
a significant portion of the earnings of the joint venture – and a
softening of US housing starts in the second half. In response to
lower demand, a significant number of plants were temporarily
closed in the second half, helping to address inventory and
working capital, but adversely impacting EBITDA due to lower
fixed cost recovery.
1. Excluding significant items.
2. Return on funds employed (ROFE) is based total EBIT before significant items on funds employed at period end.
3. Dodge Data & Analytics housing starts.
17
BORAL NORTH AMERICA continued
USG BORAL
These factors, together with the recent decline in brick intensity
per housing start in the USA, triggered a net impairment of the
investment in the Meridian Brick joint venture of $174 million,
reported as a significant item.
Strategy and priorities
We continue to make good progress integrating the Headwaters
acquisition. In Stone, we completed the first phase of plant
network optimisation initiatives, while in Roofing, we continued
to optimise our operations in Florida, and launched our branding
and channel to market strategies around our metal roofing line.
The consolidation of back office, finance and IT systems is
continuing in line with our expectations.
We continue to deliver improvements in plant operational issues
in Roofing, Stone and Windows that impacted in FY2018 and
realise benefits from operational improvements implemented
in FY2019.
Synergies achieved in FY2019 of US$32 million were better
than the expected US$25 million of targeted benefits. We have
now delivered US$71 million of synergies from the Headwaters
acquisition and remain on track to deliver our targeted year-four
synergies of US$115 million per annum.
During FY2019, we invested US$114 million of capital into
Boral North America. This included ~US$40 million in fly ash
fixed and floating storage and completing our Montour fly ash
reclaim facility, and the US$10 million upgrade at our Stonecraft
manufactured stone plant in Ohio.
In the Fly Ash business, we are making progress to deliver our
target of a net increase of 1.5–2 million tons per annum on
FY2018 volumes of available fly ash over the next two years.
By the end of FY2021, we expect to be supplying fly ash at a run
rate of at least 8.6 million tons per annum, with volume growth
coming from a range of initiatives including opportunistic imports,
new contract volumes, fixed and mobile storage of off-season
production, landfill reclamation and mining natural pozzolans to
supplement ash production.
In FY2020, however, the well-flagged (previously disclosed)
closure of the Navajo utility in Nevada will have an adverse
volume impact of approximately 400,000 tons per annum from
December 2019. Despite this, we expect our Fly Ash growth
strategy to result in some volume uplift in FY2020.
In FY2020, revenue and earnings from site services are expected
to be down, with site services returning to ~20% of Fly Ash
revenue as we complete a major Synmat construction project at
the TVA Cumberland utility ahead of starting other potential work
in the pipeline.
FY2019 external revenue (%)
36
17
11
5
11
20
Australia/NZ
South Korea
Thailand
Indonesia
China
Other
Boral’s equity accounted income of $57 million, down 10% on
the prior year, represents Boral’s 50% share of USG Boral’s
underlying post-tax earnings.
Revenue increased 2% to $1,606 million in the underlying
business reflecting top-line growth in Thailand, China, Vietnam
and India, and a steady contribution from Australia. This was
largely offset by a market-driven decline in South Korea and
heightened competition in Asia, particularly in Indonesia. Price
outcomes were mixed.
Non-board revenue, from ceiling tiles, metal stud, compounds
and plasters, gypsum and contracting, represented 42% of total
revenue. It increased 3% mainly due to higher gypsum and metal
studs sales and contracting in Australia.
Underlying EBITDA declined 6% to $252 million, primarily
reflecting lower earnings from South Korea. Excluding South
Korea, earnings were steady, as lower earnings from Indonesia,
China and the Philippines were offset by increased contributions
from Thailand, Vietnam and India, as well as a continued strong
contribution from Australia. Project Horizon, USG Boral’s
rightsizing and LEAN improvement initiative, which was launched
in response to cyclical market declines in South Korea and
Australia, and higher input costs more broadly, benefited the
result. Project Horizon is expected to deliver annualised cost
savings of ~$21 million by FY2021, of which $4.5 million was
delivered in FY2019.
Australia and New Zealand
Australia and New Zealand revenue was stable at $576 million.
Plasterboard volumes remained at reasonably strong and steady
levels in FY2019, as modest market share gains offset the impact
of market softness which began in the fourth quarter. Earnings
were steady, with broadly steady prices and cost reduction
programs offsetting inflationary cost increases.
Asia
Asia revenue increased 3% to $1,031 million, with growth across
most countries offset by a cyclical decline in South Korea and
increased competition in Indonesia. While cost escalation was
largely offset by improvement programs, earnings were adversely
impacted by lower South Korean volumes and softer pricing
more broadly.
• South Korea plasterboard volumes were down ~10% with
residential construction slowing and lower prices reflecting
intense competition as a competitor added new capacity.
The business maintained its market share. While margins
contracted, they continue to be well above USG Boral’s
average.
18
BORAL LIMITED 2019 ANNUAL REPORT
USG BORAL continued
FY2020 OUTLOOK
• China revenue increased due to growth in non-board
product such as metal stud, while earnings were lower with
a reduction in plasterboard volumes and higher production
costs. Both plasterboard demand and price growth were
lower than expected as a number of competitor plants
reopened following the implementation of environmental
controls in the prior period.
Thailand revenue and earnings were higher with margins
improving and market share remaining strong.
Indonesia revenue was lower as price pressures continued,
driven by excess market capacity. Earnings declined due to
price weakness and higher raw material costs.
•
•
• Vietnam reported revenue and earnings growth
underpinned by double digit volume gains and strong
price improvement.
•
India reported improved revenue and earnings with higher
volumes and an unfavourable reserve adjustment in the prior
period not recurring.
Strategy and priorities
The USG Boral joint venture, formed in March 2014, is a
long-term organic growth platform for Boral. The business is
positioned to deliver strong growth through innovation, economic
growth in Asia and as product penetration accelerates for
gypsum-based linings and ancillary products.
In addition to the announced strategic growth transactions with
Knauf, which will significantly strengthen Boral’s earnings from
the business, USG Boral is implementing a rightsizing and lean
improvement initiative known as Project Horizon in response to
cyclical market declines in South Korea and Australia, and higher
input costs more broadly.
While Project Horizon will see a total reduction of around 240
positions in the business – a 7% reduction in the total USG Boral
employee base – the headcount reduction involved close to 140
redundancies across 11 countries, with all employees notified
between April and August 2019. The remaining 100 positions
were eliminated through natural attrition coupled with a hiring
freeze implemented in the second half of FY2019.
Project Horizon delivered early benefits of ~$4.5 million of cost
savings in FY2019, and is expected to deliver ~$21 million of
annual cost savings by FY2021, with the vast majority delivered
in FY2020. One-off costs associated with the project total
approximately $8–9 million, with most of these costs recognised
in FY2019.
Taking into account where we finished the year in FY2019,
the outlook for Boral’s markets in FY2020, and the trading
conditions we have seen in July and August, Boral expects
NPAT1 to be ~5–15% lower in FY2020 relative to FY2019,
due to lower earnings in Boral Australia and USG Boral,
but underlying earnings growth in Boral North America,
together with higher depreciation charges.
Other FY2020 financial considerations
• Above average Property earnings are expected in
FY2020
• Headwaters synergies of ~US$20 million are expected
in FY2020
• Depreciation and amortisation is expected to be
higher and in the range of $400–$410 million in
FY2020 (before the impact of the new leasing
standard), reflecting completion of quarry upgrades in
Australia
• Boral’s interest expense is currently expected to reflect
a continued cost of debt of ~4.25–4.50% per annum
with net debt increasing to reflect the announced
investments in USG Boral
• Boral’s effective tax rate is currently expected to be in
the range of 22–24%
• We expect capital expenditure to be lower in FY2020
in the range of $350–400 million
The above FY2020 outlook is in AUD before the positive
impact of additional earnings from the announced
USG Boral/Knauf transaction and before the impact of
accounting changes resulting from the adoption of the new
leasing standard (IFRS 16).
Implications of the new IFRS Leasing Standard
Changes in accounting treatment of operating leases as set out
in the new IFRS 16 Leasing Standard are expected to impact
Boral’s reported earnings in the following way:
• EBITDA will be ~$90 million higher
• EBIT will be ~$5 million higher
• NPAT will be ~$10 million lower
Implications of the USG Boral/Knauf transaction on
Boral’s reporting and FY2020 earnings
The USG Boral transaction with Knauf is anticipated to close
around the end of CY2019, subject to regulatory approvals.
Once complete, Boral will combine its share of equity accounted
earnings from the expanded Knauf/USG Boral joint venture in
Asia with fully consolidated earnings from USG Boral Australia
and New Zealand and report them under its USG Boral division.
Key financial information regarding the acquired businesses was
provided in the ASX release/presentation material announcing
the transaction on 26 August 2019.
Transaction costs of around A$20 million are expected and will
be reported as a significant item in FY2020.
1. Excluding significant items.
19
ANNUAL REPORT 2019
Summary of Boral’s Risks and Responses
Health, safety and environment (HSE) and social risks
Industry and market risks
S
K
S
R
I
• Heightened stakeholder expectations
• Injury and accidents
• Acute environmental damage
• Regulatory requirements
• Community impacts
• Physical climate-related risks
• Human rights and workplace relations
• Conduct risk, anti-corruption
• Sustainable supply chain and modern slavery
• Structural and cyclical demand changes
• Political and regulatory change
• Macroeconomic and geopolitical conditions
• Inflationary impacts from rising input costs
• Movements in foreign exchange rates
• Future resource supply constraints
• Changes to construction methods and materials
• Changing demographics and urbanisation
Competition risks
• New capacity and market entrants
• Customer concentration
• Pricing dynamics
• Regulatory requirements
• Technology/R&D and product innovation
Business interruption risks
• Plant and systems failure
• Cybersecurity
• Weather impacts
• Reserves and resources
• Supply chain failure
• Digital disruption
• Business partnerships misalignment
• Disruptive product innovation and product substitution
• Business conduct/reputational damage
S • Group-wide commitment to Zero Harm
• Global HSEQ management system and
minimum standards
• HSE performance monitoring, reporting
and accountability
• Monitoring regulatory changes and engaging
with regulators
E
S
N
O
P
S
E
R
P
U
O
R
G
L
A
R
O
B
• Progressive adoption of TCFD recommendations
including climate-related scenario analysis
32–42
27
• Diversified business portfolio to reduce impacts of
• Monitoring and reporting regulatory changes and
• Business continuity planning with regular crisis simulations
individual geographies and markets
industry trends
27–28
• Continued monitoring of government policies
including tax, labour and infrastructure policies
21
• US debt utilised to limit impacts of foreign exchange
rate movements
• Staged and long-dated debt maturity profile
• Adequate liquidity via committed undrawn facilities and cash
• Energy inputs hedged and interest rates swapped to
product innovation
S
E
S
N
O
P
S
E
R
I
/
S
E
V
T
A
T
N
I
I
I
I
I
I
L
A
N
O
S
V
D
F
O
S
E
L
P
M
A
X
E
• Flood mitigation plans
35
reduce cyclical impacts
• Group-led diversity and inclusion program
24–25
• Group procurement to optimise cost base and mitigate
I
A
L
A
R
T
S
U
A
L
A
R
O
B
I
A
C
R
E
M
A
H
T
R
O
N
L
A
R
O
B
L
A
R
O
B
G
S
U
• Organisational culture work
• Leadership development and workforce capability
building activities
• Supply chain modern slavery risk framework
25
26
51
• Third-party managed whistleblower hotline,
monitoring and reporting in all jurisdictions
22, 51
• Heavy vehicle safety management to meet
Heavy Vehicle laws as a minimum
• Vehicle and pedestrian interaction improvement
initiatives
• Community consultation programs and initiatives
to minimise impacts of operations
• Flexible work policy and guidelines
• Ongoing post-Headwaters integration review
of safety exposures and compliance, including audits
• Dedicated capital investment for safety enhancement
projects in Headwaters acquired businesses
• Safety management and recovery plans for major
weather events
• HSE standards applied consistently across Asia,
Australasia and the Middle East
• Anti-corruption measures including clear
accountability, policies, training, and audits
• Use of CCTV to aid incident investigations
and improvements
46
46
25
31
31
36
28
22
31
supply constraints
50
and grow margins
• Cost out initiatives and rightsizing resources to market conditions
• Supply Chain Optimisation program enhancing
• Investment in R&D, innovation and customer-centric
supply logistics and reducing costs
programs
• Leveraging demand shift to major infrastructure through
investments in quarries, asphalt and concrete
operations and strengthened project capability
• Strengthened import capability with Boral Cement
Geelong clinker import terminal under construction
in Victoria
49
11
11
• Reducing costs through Operational Excellence
programs including Supply Chain Optimisation and
Organisational Effectiveness programs
50–51
• Reposition portfolio from high fixed cost, energy intensive
to lighter building products, with more variable cost base
• Delivery of synergy targets to reduce costs, achieve
efficiencies, and capture growth
• Fly Ash strategic initiatives and network
optimisation to grow supply and enhance returns
• Product leadership and product differentiation
strategy underpinning performance
• Securing gypsum supply through acquisition of
reserves and stable supply agreements
• Long-term raw material supply contracts, e.g. paper
• Cost reduction program and lean initiatives
34
48
37
9
20
BORAL LIMITED 2019 ANNUAL REPORT
• Transformation Action Group to foster new ways to
make and sell new and existing products
• Leveraging technology for more targeted sales
and marketing
• Centralised competition law training
• Regionally based dedicated R&D teams focused on
• Commercial Excellence and Customer Experience
initiatives to improve customer-centricity, enhance service
• Innovation hub focused on identifying and implementing
new technologies and processes
• Dedicated Integration and Synergy Delivery program
• Divisional procurement strategy and initiatives
to enhance supply chain, including logistics and
continuity of supply, and reduce costs
50–51
• Regionally focused product price analytics and sales
strategies
49
49
49
50–51
26
• Disaster recovery plans in place for critical IT systems
and operational equipment
• Formal bottom-up enterprise risk management
processes
weather events
• Geographically diversified portfolio mitigates regional
• Reserves planning and capital optimisation
• Centralised Code of Business Conduct and
associated policies
• Centrally managed data breach monitoring and response
• Cybersecurity plans coordinated across divisions
and aligned with National Institute of Standards and
Technology (NIST) Cybersecurity Framework
• Governance structures to monitor performance
of third-party agreements and joint ventures
• Boral Digital Services using agile processes and
cloud-based application and storage
• Targeted technology enhancements to improve
operational and core financial systems
• Monitoring and preparedness for weather affected
disruption including water management plans, flexible
workforces and additional equipment
35–36
• National R&D centre to bring new technologies and
• Long-term availability of fly ash monitored and future
products to market
49
sources identified including reclamation of landfilled ash
13, 34
• Expanded product portfolio aimed at enhancing
revenue and earnings
• Prioritisation of capital investment aligned with product
and market growth, with focus on increasing fly ash storage
15, 48
• Innovation investment to further strengthen
competitive advantage, e.g. EcoSmart Panels, EnsembleTM
49
• New enterprise resource planning (ERP) system,
initially in Australia with roll-out to other countries planned
in Australia
• Streamlining and upgrading IT systems and investment
in cybersecurity controls and tools
• New IT implementation in key regions, e.g. ERP solution
• Investment in cybersecurity controls and monitoring
• Improved anti-bribery and competition training
35
35
22
23
23
23
23
22
To achieve our strategic objectives and create value for our stakeholders, we need to adapt to a continually changing
external environment by mitigating potential risks and capturing opportunities.
Group Risk manages Boral’s risk identification and management process, which includes an annual bottom-up assessment and
review. Here, we identify some of our main near- and longer term risks and challenges across our business. We carefully manage
these risks and, when necessary, adapt our strategies to drive success. 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 2019 Boral Review.
Further information about risk identification and management at Boral can be found in the Corporate Governance Statement.
Boral’s Risk Management Policy is also available on our website.
Health, safety and environment (HSE) and social risks
Industry and market risks
Competition risks
• Heightened stakeholder expectations
• Structural and cyclical demand changes
• Political and regulatory change
• Macroeconomic and geopolitical conditions
• Inflationary impacts from rising input costs
• Movements in foreign exchange rates
• Future resource supply constraints
• Changes to construction methods and materials
• Changing demographics and urbanisation
• New capacity and market entrants
• Customer concentration
• Pricing dynamics
• Regulatory requirements
• Technology/R&D and product innovation
• Disruptive product innovation and product substitution
Business interruption risks
• Plant and systems failure
• Cybersecurity
• Weather impacts
• Reserves and resources
• Supply chain failure
• Business conduct/reputational damage
• Digital disruption
• Business partnerships misalignment
27
• Diversified business portfolio to reduce impacts of
• Monitoring and reporting regulatory changes and
• Business continuity planning with regular crisis simulations
individual geographies and markets
industry trends
27–28
• Continued monitoring of government policies
including tax, labour and infrastructure policies
21
• US debt utilised to limit impacts of foreign exchange
rate movements
• Staged and long-dated debt maturity profile
• Transformation Action Group to foster new ways to
make and sell new and existing products
• Leveraging technology for more targeted sales
and marketing
• Centralised competition law training
• Regionally based dedicated R&D teams focused on
• Energy inputs hedged and interest rates swapped to
product innovation
• Commercial Excellence and Customer Experience
initiatives to improve customer-centricity, enhance service
and grow margins
• Supply Chain Optimisation program enhancing
building activities
• Investment in R&D, innovation and customer-centric
supply logistics and reducing costs
• Innovation hub focused on identifying and implementing
new technologies and processes
• Dedicated Integration and Synergy Delivery program
• Divisional procurement strategy and initiatives
to enhance supply chain, including logistics and
continuity of supply, and reduce costs
• Regionally focused product price analytics and sales
strategies
• National R&D centre to bring new technologies and
products to market
• Expanded product portfolio aimed at enhancing
revenue and earnings
49
49
49
50–51
26
50–51
49
15, 48
• Innovation investment to further strengthen
competitive advantage, e.g. EcoSmart Panels, EnsembleTM
49
• New enterprise resource planning (ERP) system,
initially in Australia with roll-out to other countries planned
• Disaster recovery plans in place for critical IT systems
and operational equipment
• Formal bottom-up enterprise risk management
processes
• Geographically diversified portfolio mitigates regional
weather events
• Reserves planning and capital optimisation
• Centralised Code of Business Conduct and
associated policies
• Centrally managed data breach monitoring and response
• Cybersecurity plans coordinated across divisions
and aligned with National Institute of Standards and
Technology (NIST) Cybersecurity Framework
• Governance structures to monitor performance
of third-party agreements and joint ventures
• Boral Digital Services using agile processes and
cloud-based application and storage
• Targeted technology enhancements to improve
operational and core financial systems
35
35
22
23
23
• Monitoring and preparedness for weather affected
disruption including water management plans, flexible
workforces and additional equipment
35–36
• Long-term availability of fly ash monitored and future
sources identified including reclamation of landfilled ash
13, 34
• Prioritisation of capital investment aligned with product
and market growth, with focus on increasing fly ash storage
• Streamlining and upgrading IT systems and investment
in cybersecurity controls and tools
• New IT implementation in key regions, e.g. ERP solution
in Australia
• Investment in cybersecurity controls and monitoring
• Improved anti-bribery and competition training
23
23
22
21
• Injury and accidents
• Acute environmental damage
S
K
S
I
R
• Regulatory requirements
• Community impacts
• Physical climate-related risks
• Human rights and workplace relations
• Conduct risk, anti-corruption
• Sustainable supply chain and modern slavery
S • Group-wide commitment to Zero Harm
• Global HSEQ management system and
minimum standards
• HSE performance monitoring, reporting
and accountability
• Monitoring regulatory changes and engaging
with regulators
E
S
N
O
P
S
E
R
P
U
O
R
G
L
A
R
O
B
A
I
L
A
R
T
S
U
A
L
A
R
O
B
A
C
I
R
E
M
A
H
T
R
O
N
L
A
R
O
B
L
A
R
O
B
G
S
U
S
E
S
N
O
P
S
E
R
/
S
E
V
I
T
A
I
T
I
N
I
L
A
N
O
I
S
I
V
I
D
F
O
S
E
L
P
M
A
X
E
• Progressive adoption of TCFD recommendations
• Adequate liquidity via committed undrawn facilities and cash
including climate-related scenario analysis
32–42
• Flood mitigation plans
35
reduce cyclical impacts
• Group-led diversity and inclusion program
24–25
• Group procurement to optimise cost base and mitigate
• Organisational culture work
• Leadership development and workforce capability
supply constraints
• Cost out initiatives and rightsizing resources to market conditions
• Supply chain modern slavery risk framework
programs
• Third-party managed whistleblower hotline,
monitoring and reporting in all jurisdictions
22, 51
• Heavy vehicle safety management to meet
Heavy Vehicle laws as a minimum
• Leveraging demand shift to major infrastructure through
investments in quarries, asphalt and concrete
operations and strengthened project capability
• Strengthened import capability with Boral Cement
Geelong clinker import terminal under construction
• Vehicle and pedestrian interaction improvement
in Victoria
initiatives
• Community consultation programs and initiatives
to minimise impacts of operations
• Flexible work policy and guidelines
• Ongoing post-Headwaters integration review
of safety exposures and compliance, including audits
• Dedicated capital investment for safety enhancement
projects in Headwaters acquired businesses
• Safety management and recovery plans for major
weather events
• HSE standards applied consistently across Asia,
Australasia and the Middle East
• Anti-corruption measures including clear
accountability, policies, training, and audits
• Use of CCTV to aid incident investigations
and improvements
• Reducing costs through Operational Excellence
programs including Supply Chain Optimisation and
Organisational Effectiveness programs
50–51
• Reposition portfolio from high fixed cost, energy intensive
to lighter building products, with more variable cost base
• Delivery of synergy targets to reduce costs, achieve
efficiencies, and capture growth
• Fly Ash strategic initiatives and network
optimisation to grow supply and enhance returns
• Product leadership and product differentiation
strategy underpinning performance
• Securing gypsum supply through acquisition of
reserves and stable supply agreements
• Long-term raw material supply contracts, e.g. paper
• Cost reduction program and lean initiatives
25
26
51
46
46
25
31
31
36
28
22
31
50
49
11
11
34
48
37
9
ANNUAL REPORT 2019
Sustainability Overview
How we report
Boral’s 2019 Sustainability Report, which forms part of
the 2019 Boral Review, provides detailed information on
the sustainability issues assessed as material to Boral.
In addition to our Sustainability Report, we provide this
sustainability overview.
Additional information on Boral’s sustainability
performance and approach is available:
•
•
in the Corporate Governance Statement and
Directors’ Report, and
on our website, including our policies, supplementary
sustainability information, Reconciliation Action Plan,
Tax Transparency Report, reports to the Workplace
Gender Equality Agency, community engagement
programs and Boral News magazine.
Managing sustainability
Our commitment and approach to sustainability is embedded
in our business strategy and all that we do. We strive to deliver
returns above our cost of capital through the cycle for our
shareholders and to create value for all our stakeholders. We
recognise that delivering sustainable outcomes is vital to our
long-term success.
To meet the sustainability challenges of today and tomorrow,
it is critical that we drive progress and continuous improvement.
Our governance, accountability, management systems and
reporting frameworks help us drive better outcomes and meet
the evolving and increasing expectations of our stakeholders.
In FY2019, we continued to improve our safety outcomes,
reduce our carbon emissions, and increase gender diversity in
our workforce. We enhanced our customer experience through
digital tools and solutions, strengthened our governance,
strategy and risk management of climate-related impacts, and
enhanced our supply chain, including our approach to identifying
and managing modern slavery risk.
We also continued to strengthen our sustainability approach and
reporting. We:
•
•
•
enhanced our climate-related disclosure, as we
progressively adopt the recommendations of the Financial
Stability Board’s Task Force on Climate-related Financial
Disclosures (TCFD)
strengthened how we identify and manage modern slavery
risks in our operations and supply chains, as we prepare to
publish a Modern Slavery Statement in 2020
broadened our sustainability metrics and related information
that has been subject to independent assurance – these
metrics are listed in Ernst & Young’s (EY’s) assurance
statement on page 52 of the 2019 Boral Review, and
•
identified the United Nations Sustainable Development
Goals (SDGs) and targets we can most impact and
integrated these into our sustainability reporting.
We will consider how we can further contribute to the SDGs
through our planning and sustainability approach, and report on
our progress.
REPORTING SCOPE
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 2019, unless otherwise stated.
Boral’s HSE data includes joint venture entities, irrespective of
equity or management control. Safety data includes employees
and contractors in all businesses.
Safety data reported prior to, and including FY2017, includes
100% owned businesses and joint ventures where our equity
interest was 50% or more – and has not been
retrospectively adjusted.
While Boral’s joint ventures have their own management
structure and regulatory responsibilities, we expect them to meet
the same minimum HSE standards as fully owned Boral sites.
HSE data for Headwaters businesses, acquired in May 2017, is
consolidated from FY2018.
OUR MATERIAL SUSTAINABILITY ISSUES
We define our material sustainability issues by undertaking a
formal biennial materiality assessment, which forms part of our
broader risk management processes.
We assess materiality, in the context of sustainability, based
on the significance of issues to Boral and to our stakeholders.
Specifically, our issues were assessed with reference to the
Global Reporting Initiative’s (GRI’s) definition of materiality which
covers ‘significant economic, environmental and social impacts;
or the issues that substantively influence the assessments and
decisions of stakeholders.’
In FY2019, we updated the materiality assessment completed in
FY2017, to consider evolving stakeholder priorities, megatrends,
regulatory developments, and Boral’s strategy, risks
and opportunities.
The materiality assessment process involved:
•
•
•
•
a desktop assessment, including peer and media analysis,
and analysis of global frameworks and industry reports
internal workshops and discussions with multidisciplinary
leaders, including Executive Committee members with an
understanding of our key external stakeholder groups
issue prioritisation based on the findings of the desktop
analysis and internal stakeholder feedback, and
validation and final review of the outcomes by senior
executives.
22
BORAL LIMITED 2019 ANNUAL REPORT
We engaged EY to undertake the desktop assessment and help
us validate the outcomes.
The updated materiality assessment identified 14 material issues,
some of which were previously embedded in broader categories.
These are:
Divisional management teams and the corporate HSE function
report on HSE performance, risks and management actions,
including climate-related matters, to the Board HSE Committee
on a quarterly basis. The Board HSE Committee considers
energy and climate-related issues at each of its meetings.
•
•
•
•
•
•
•
•
•
•
•
•
•
•
culture and business conduct (2019 Annual Report (AR)
p. 23–24, 2019 Boral Review (BR) p. 22)
cyber and data security (AR p. 24, BR p. 23)
diversity, inclusion and equality (AR p. 25, BR p. 24−25)
employee development and engagement (AR p. 26,
BR p. 25−26)
human rights and workplace relations (AR p. 26, BR p. 26)
health, safety and wellbeing (AR p. 28, BR p. 29−31)
climate-related impacts (AR p. 29–32, BR p. 32−42)
energy (AR p. 32, BR p. 39)
environmental impacts (AR p. 32–34, BR p. 43−45)
social and community impacts (AR p. 34–35, BR p. 46−47)
customers (AR p. 35–36, BR p. 48−49)
sustainable products and innovation (AR p. 35–36,
BR p. 48−49)
sustainable procurement (AR p. 36–37, BR p. 50−51), and
supply chain logistics (AR p. 37, BR p. 51)
In addition, the future of work was identified as an emerging issue.
United Nations Sustainable Development Goals
In collaboration with members of Boral’s leadership team
involved in the materiality assessment, and a broader
representative group from the business, we identified which of
the 17 SDGs and 169 SDG targets Boral can most significantly
contribute to.
We prioritised 10 SDGs and 20 SDG targets that are most closely
connected with our business strategy and material sustainability
issues. See page 20 of the 2019 Boral Review for further details.
SUSTAINABILITY GOVERNANCE
Our approach to sustainability is underpinned by:
•
•
effective governance and risk management
open and constructive engagement with our stakeholders,
and
• monitoring and transparent reporting on our material issues.
The Board of Directors maintains oversight of sustainability
matters, including strategy, risk identification and management,
and external reporting.
The Board Health, Safety & Environment (HSE) Committee is
responsible for reviewing and monitoring:
•
•
•
the Group’s performance, assessed by reference to agreed
targets and measures, in relation to HSE matters
the effectiveness of Boral’s policies, systems and
governance structure in identifying and managing HSE risks
which are material to the Group, and
the policies and systems for ensuring compliance with
applicable legal and regulatory requirements associated with
HSE matters.
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, including climate-related risks.
Management responsibility
The CEO & Managing Director is accountable for the
management of sustainability matters and delegates this
responsibility to Boral’s Executive Committee. The Executive
Committee, which includes the CEO & Managing Director,
is individually and collectively accountable for assessing
and managing sustainability matters. The Group President
Operations is responsible for HSE matters.
Sustainability is embedded into Group and business-level
strategies, action plans and reporting, with performance
monitored at a divisional and corporate level through relevant
senior executives.
Line managers are supported by divisional specialist managers
across HSE, procurement, human resources, marketing and
community engagement, as well as corporate HSE and human
resources teams. The corporate HSE team is responsible for
policy, governance and functional leadership, in consultation with
divisional specialists.
Sustainability risks are also integrated into Boral’s organisation-
wide risk management processes, which identify, assess and
monitor the organisation’s risks. Further information on our
governance of climate-related impacts is on page 30.
Management remuneration
Managing sustainability, including safety, is considered an
integral component of leadership, and is considered in reviewing
performance and setting fixed remuneration increases. We
therefore do not link remuneration incentives to sustainability
metrics, including safety performance.
The Board has discretion to adjust executive remuneration
outcomes if there is evidence that a breakdown in management
oversight and processes has led to poor outcomes, including in
safety performance.
CULTURE AND BUSINESS CONDUCT
Working with integrity, respect and fairness is fundamental to
how we do business, and is underpinned by our values. 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 to adhere
to across our international operations. We are committed to
working with third parties, including customers, subcontractors,
distributors, suppliers and joint venture partners, whose business
ethics and behaviour are consistent with our Code.
23
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 FY2019, 246 employees of Boral Australia and Boral North
America were dismissed, up from 183 in FY2018. This represents
2% of our employees in these two divisions. Of these dismissals,
62 were for breach of policy or misconduct, with the remaining
184 due to violation of rules or poor performance. They ranged
from managers to frontline employees. 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.
Boral’s cybersecurity response plan aligns with the National
Institute of Standards and Technology (NIST) Cybersecurity
Framework, which is recognised as global best practice.
During the year, we implemented improvement plans to achieve
NIST targets across each of our divisions.
Cybersecurity managers in each division are responsible for
reviewing our security framework, and developing mitigation and
improvement plans. We also engage third-party cybersecurity
specialists to conduct regular penetration testing to assess
security controls and identify required remediation measures.
In FY2019, we rolled out a Group-wide information security
awareness training program to all employees, and cybersecurity
training to all USG Boral employees.
The Board monitors cybersecurity risks and strategy, and
engages with external experts and internally with Boral’s Digital
Solutions team to understand cybersecurity risks.
HUMAN RIGHTS
We support the United Nations Guiding Principles on Business
and Human Rights, and are committed to respecting and
promoting internationally recognised human rights through our
operations and supply chain.
Our Human Rights and Modern Slavery Working Group,
established in FY2018, continues to support work being
undertaken to further develop our approach to modern slavery
in light of the Modern Slavery Act 2018. The working group
comprises members of Boral’s Executive Committee and key
functional roles, including human resources, procurement, risk
and legal.
Details about our approach and work undertaken to strengthen
how we assess and manage modern slavery risk in our
operations and supply chain can be found on pages
26 and 37 respectively.
Boral’s Code prohibits political donations or contributions.
INDUSTRY ASSOCIATIONS
TAX TRANSPARENCY
Boral’s approach to taxation is consistent with our Code, and
our tax function works within our broader governance and risk
management framework.
We are committed to meeting our taxation obligations in the
jurisdictions where we conduct business, and to paying our taxes
on time. Tax outcomes do not drive our business transactions.
In response to the Australian Voluntary Tax Transparency Code,
we have published an annual Tax Transparency Report on our
website since 2017. The report discloses Boral’s approach to
taxation and information on our Australian and global income
taxes and other taxes paid in Australia.
CYBER AND DATA SECURITY
Businesses face a growing risk of cybersecurity breaches and
attacks on information systems by increasingly
sophisticated cybercriminals.
In response, we have increased investment in cybersecurity
controls and monitoring across the Group to mitigate potential
risks to our technical infrastructure, data security and
customer privacy.
We are members of, and actively participate in, a number of
industry associations in Australia and the USA.
These industry associations offer a forum for sharing industry
best practice and new ideas, developing technical standards,
and advocating on behalf of the industry, to the government and
the community.
Participants in industry associations are provided competition
law training to ensure that association with other industry
participants is always compliant with the law.
The associations also develop public policy positions. Typically,
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 acknowledge that some industry associations may have
policy positions that do not fully align with Boral’s positions.
When appropriate, we engage with our industry associations to
help them understand our position.
We have not identified any major energy and climate policy
positions held by our industry associations that are materially
inconsistent with our own position.
Further information is available on our website.
24
BORAL LIMITED 2019 ANNUAL REPORT
Our people
We strive to have a diverse, talented and capable workforce, so
we can continue to succeed and innovate. We work to develop
our people, build a culture of respect and trust, and enhance our
employees’ experience.
As at 30 June 2019, we had 17,104 full-time equivalent
employees, including in joint ventures, and approximately 9,400
contractors working across 17 countries. Our contractors work
in a variety of roles, including as product installers and drivers in
our transport operations.
Full-time equivalent
FY2019
FY2018
FY2017
Boral employees
Boral contractors
Joint venture employees2
11,916
~5,300
5,188
11,898
11,4991
~5,200
~4,800
5,233
4,976
Joint venture contractors2
~4,100
~3,500
~3,400
At end FY2019
Boral
Group
Boral
Australia3
USG
Boral3
Boral
North
America4
Women at Boral
19%
13%
17%
25%
Average length of service
(years)
Average age (years)
20+ years service
Employee turnover
Voluntary
Involuntary
8.0
43.4
12%
23%
16%
7%
8.9
44.8
12%
18%
12%
6%
9.3
40.6
16%
9%
6%
3%
6.5
43.5
9%
36%
25%
11%
Boral North America’s employee turnover of 36% was up from
29% last year, reflecting a tight labour market in the USA as
voluntary turnover increased to 25%, up from 19% in FY2018.
However, total turnover was in line with the average for the
manufacturing sector in the USA. Involuntary turnover of 11%,
compared to 10% last year, was impacted by plant closures in
the Meridian Brick and Stone businesses.
We have undertaken a number of initiatives to reduce employee
turnover in the division. These include implementing direct hires,
improving recruitment processes and practices, assessment and
selection capabilities, and leadership development to strengthen
frontline leader capabilities.
DIVERSITY, INCLUSION AND EQUALITY
We value and actively promote workforce diversity. We respect
and value the unique talents and contributions of each employee
and aim to deliver gender pay equity.
Our Diversity and Inclusion Plan, sponsored by Boral’s Diversity
and Inclusion Council, provides a robust framework that
supports our commitment to a diverse and inclusive workplace
and culture.
Our framework focuses on six elements: leadership,
communication and education, system and process design,
gender equality and pay equity, generational diversity, and
Indigenous relations.
In FY2019, we continued to focus on increasing the
representation of women, particularly in leadership roles, and
provided education and training on the impact of unconscious
bias. Women represented 19% of our employees, compared to
18% the prior year.
WORK180, a global advocate for working women, endorsed
us as an employer that proactively supports the increased
representation of women.
Pay equity outcomes in Boral Australia continue to be favourable,
with a female-to-male average base salary ratio5 of 1:1.
Boral recognises the importance of having work environments
that support employees’ work and family responsibilities and,
where practicable, the opportunity to access flexible work
arrangements. To increase awareness and uptake of flexible
work arrangements among employees, we rolled out our flexible
work guidelines and online education module to support our
flexible work policy.
Boral’s 2019–2020 Reflect Reconciliation Action Plan extends
and broadens our existing Indigenous Employment Program.
Our Reconciliation Action Plan outlines planned actions to further
support Aboriginal and Torres Strait Islander peoples through
employment – including through long-term career pathways
and training.
Length of service of employees
Age profile of employees
Employees by occupation (%)
12
44
0102030405060
3
15
0–5
6–10
Male (%)
Female (%)
2
8
11–15
1
5
16–20
1
9
21+
years
Male (%)
Female (%)
5
5
21
21
4
19
1
8
3
12
1
<20 20–29 30–39 40–49 50–59 60+
19
11
8
8
Operators
and drivers
Technicians
and trade
Clerical and
administrative
Sales
Other
54
1. Includes 4,016 full-time equivalent employees from Headwaters and excludes employees from Boral Bricks in North America, who were included as
joint venture employees.
2. Includes USG Boral, Meridian Brick and other small Australia-based joint ventures.
3. Excludes joint ventures.
4. Includes Meridian Brick joint venture.
5. Calculated as the average base cash salary for females as a proportion of the average base cash salary for males, as included in our confidential
report to the Workplace Gender Equality Agency.
25
EMPLOYEE ENGAGEMENT
A motivated and engaged workforce, supported by a culture of
safety, transparency and performance, are critical drivers of our
business success.
We regularly measure employee engagement to better
understand and track our employees’ experiences. This provides
insights to identify opportunities for improvement, enabling us to
develop targeted strategies to enhance our
employees’ experiences.
Our three divisions use formal surveys to gather feedback on our
employees’ experience every few years.
In FY2019, USG Boral completed its third Aon Hewitt Employee
Survey, involving 89% of the workforce across 14 countries.
The engagement score of 65% was a nine-point improvement
on 2017 and a 15-point improvement on the first survey
completed in 2015. In FY2020, USG Boral will continue to focus
on collaboration, learning and development, and empowerment
to achieve its objective of being an Asia Pacific Best Employer.
Boral North America conducted a Safety Cultural Awareness
Survey, which is informing improvement programs that focus
on delivering the next evolution of Zero Harm Today. Information
on the survey findings and focus areas for improvement are on
page 28.
With a top quartile score of 72/100 in Boral Australia’s 2018
employee satisfaction survey – using the McKinsey & Company
Organizational Health Index1 – the division continued to focus on
the three areas identified for improvement: customer-centricity,
innovation, and people development and recognition. It will roll
out a three-year plan for leadership programs in FY2020. The
plan will complement the division’s broader strategic initiatives,
focusing on enhancing customer-centricity and innovation.
TRAINING AND DEVELOPMENT
We invest in training and developing our people to enable them
to perform at their best, providing opportunities to build their
skills, capabilities and knowledge. These range from job-related
skills training to senior leadership development and coaching.
Our leadership programs, together with placements, coaching
and mentoring, focus on developing capable and effective
leaders. In FY2019, more than 680 employees undertook
the zero|one|ten Leader program, with 29 completing the
General Manager and Emerging Leader programs. The more
than 900 frontline leaders who completed the zero|one|ten
Leader program in recent years will build on their learning by
participating in the Leading Safe Systems of Work program
in FY2020.
In Australia, 1,330 employees completed Certificates II, III or
IV, diploma qualifications, units of competency, and tailored
learning solutions and training modules, in areas like chain of
responsibility, sales and marketing, surface extraction, laboratory
skills, driving operations, and work health and safety.
Our centralised training and compliance system, My Learning
Space, provides standardised access to online training and
monitors the ongoing training needs of more than 6,000 staff
members across Boral Australia.
Brandon Hall Group, a leading independent research and analyst
firm, awarded Boral a Gold medal for its use of the My Learning
Space technology to monitor training and learning requirements.
Boral’s Executive Committee, divisional leadership teams and
other managers have continued to participate in a bespoke,
multi-year development program designed to help our leaders to
be more effective by being more self-aware and others-focused.
In FY2019, Boral North America started deploying Skilled4Action
training modules to frontline leaders, providing hands-on training
in management, leadership and lean principles.
HUMAN RIGHTS AND MODERN SLAVERY
Boral is committed to respecting and promoting internationally
recognised human rights in its global operations. This includes
providing a workplace free from discrimination and harassment,
and contributing to eliminating all forms of forced or compulsory
labour, and the effective abolition of child labour.
We have revised our Human Rights and Labour Policy, with our
supporting policy framework to be updated in FY2020.
An initial desktop assessment of the risk of modern slavery in
our operations, including joint ventures, was completed during
the year. While the risk of modern slavery in our operations was
assessed as low, where we have identified areas of potential
risk, we undertake robust employment checks as part of
the commencement and onboarding processes for all new
employees.
An internal training program on human rights and modern
slavery for human resources managers and key leaders will be
developed and launched in FY2020.
WORKPLACE RELATIONS
We respect the rights of our employees to freedom of
association – and to be represented by trade unions, in line
with local laws. We are committed to working honestly and
transparently with labour unions and engaging in constructive
negotiations to reach agreements on employment conditions.
We have 82 enterprise or industrial agreements covering
approximately 3,400 employees in Australia, South Korea,
Indonesia and Vietnam. These agreements on average cover a
term of two to four years.
Our approach is to work collaboratively and cooperatively
with our people and their representatives, and provide fair and
equitable employment conditions that deliver
sustainable performance.
We have accessible, fair and accountable grievance mechanisms
in place. These include Boral’s independent external
whistleblowing service, FairCall, through which people can raise
anonymous concerns. These measures enable our people to
raise concerns without fear of recrimination.
1. Benchmarked against a global database of 1,500 companies.
26
BORAL LIMITED 2019 ANNUAL REPORT
FUTURE OF WORK
HSEQ Management System
Boral’s Group-wide Health, Safety, Environment and Quality
Management System (HSEQ MS) provides the standards,
guidelines and tools that enable us to improve performance.
It establishes a robust governance framework, equips our
businesses with standardised processes where appropriate, and
affords operational teams flexibility on how they meet
minimum requirements.
Our HSEQ MS incorporates a risk-based approach to supplier
safety management. Any supplier who performs work on a
Boral-controlled worksite is required to complete a formal
Supplier Prequalification Program.
Oversight of the effectiveness and ongoing development of
the system rests with the HSEQ MS Governance Council. The
Council, comprising Group and divisional heads of HSEQ, meets
quarterly to review and approve amendments to the system.
We engage with our workforce to drive continuous improvement
in our HSEQ MS and ensure we use standards and tools that are
practicable across our workplaces.
Managing risks
We focus on identifying and eliminating conditions and
behaviours that have the potential to injure people or harm
the environment. This requires carefully planning activities,
thoroughly assessing risks, following effective systems and
processes, and investing in equipment and other improvements.
We review and assess HSE issues and risks as part of
due diligence processes on all potential acquisitions and,
commensurate with HSE risks, new or expansion projects.
Following any acquisition, our integration process includes
aligning the business’s HSE systems and processes to at least
meet our minimum requirements.
HSE incidents
For more serious HSE incidents, including near-miss events,
we have a formal process to communicate, investigate and share
safety learnings, with requirements tailored to the severity of the
actual or potential consequence.
More serious HSE incidents are escalated to senior
management, including the CEO & Managing Director. Incident
review meetings are also held involving relevant divisional
leaders, the Group President Operations, Group HSE Director
and local line management.
Our people are responsible for abiding by our safety
policies and standards. We take poor safety management
or safety breaches very seriously.
In FY2019, 30 employees in Boral Australia and
Boral North America were dismissed for poor safety
management or breaches. Contractors and other service
providers who breach Boral’s safety policies or standards
are also stood down.
Rapid changes and developments in automation, digitalisation
and global demographics are transforming labour markets and
the skills required for emerging jobs. These offer both significant
opportunities and challenges.
In Boral Australia, we created a dedicated innovation facility
called B/HUB to help us adapt and further develop the
innovation capability of our people. At B/HUB, we consider
conceptual ideas and work collaboratively with customers, and
in partnership with startups, to test, validate and commercialise
these ideas. Through our ‘learn to fail fast’ and accelerator
programs, we have strengthened our problem-solving
capabilities, allowing us to develop services for industry trends
and new emerging markets.
HSE management
Our overarching priority is Zero Harm Today, to people and the
environment. We want our people, and those we interact with
through our activities, to be safe today and every day. And we
strive to eliminate any adverse environmental impacts of our
operations, or where this is not possible, minimise harm.
We are committed to maintaining a culture focused on Zero Harm
Today, through strong leadership, management accountability,
engagement and collaboration with our frontline people.
We engage and communicate with our frontline people on
HSE matters in numerous ways. These include holding formal
HSE training, daily pre-start meetings or shift hand-over
meetings, more formal monthly HSE meetings at larger sites,
Kaizen events for focus areas and improvement projects, and
supervisors engaging with their teams on the job and through
peer-to-peer observations.
Boral’s CEO & Managing Director, the Group President
Operations and divisional senior executives regularly spend time
at our operations, which provides an opportunity to discuss
safety and environmental management issues and challenges
directly with site teams.
Our approach to HSE is underpinned by a robust strategy,
systems, policies and processes, and a focus on continuing
improvement.
HSE STRATEGY
Our priorities and approach to managing HSE are guided by our
four Group-wide strategic objectives and supporting programs.
See page 27 of the 2019 Boral Review for a description of these.
Each division is responsible for establishing and implementing
their own HSE strategies and improvement plans, consistent with
Boral’s Group-wide HSE strategy.
In recent years, our HSE journey has been defined by applying
a consistent strategy to deliver improved performance.
We have focused on firmly establishing robust processes and
improvement programs across the Group and engaging all our
people, from business leaders through to frontline staff, to build a
clear and shared understanding of our priorities and processes.
The continued improvement in Boral’s HSE performance is
testament to our people’s commitment to consistently apply our
systems and processes in practice.
27
Health, safety and wellbeing
SAFETY OUTCOMES
We are committed to achieving our Zero Harm safety goal, and
encouraged by our continuing progress in reducing our
injury rates. Each of our three divisions reported a marked
improvement in recordable injury frequency rate (RIFR1,2).
By sticking to the programs and improvement initiatives we have
established, we are confident we will achieve our goal.
Pleasingly, in FY2019, we had no fatalities among employees
or contractors.
Our injury rates improved significantly, continuing our long-term
improvement trend. Our RIFR of 7.5 is a 14% improvement on
8.7 reported in FY2018.
Our lost time injury frequency rate (LTIFR1) of 1.3 is a 19%
improvement on 1.6 reported last year.
Boral Group recordable injury frequency rate
Lost time injury frequency rate
Medical treatment injury frequency rate
)
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
19.0
17.4
17.2
15.5
13.6
12.1
11.7
10.3
Comparable
data
8.8
7.5
8.1
6.6
8.7
7.1
7.5
6.2
1.8
FY12
1.9
1.9
FY13
FY14
1.8
FY15
1.3
FY16
1.5
FY17
1.6
FY18
1.3
FY19
Boral Australia reported an RIFR of 10.5, a 7% improvement on
11.3 last year.
Boral North America’s RIFR improved 15% to 7.6, down from 8.9
in FY2018, demonstrating our continued efforts to embed a Zero
Harm Today culture across the Headwaters businesses.
USG Boral’s 24% improvement in RIFR to 3.4 from 4.5 last year
(including all minority-owned joint ventures) demonstrates the
benefit of targeted safety improvement programs and a maturing
safety culture.
Percentage hours lost3, which monitors the severity of our more
serious injuries by the total time lost, remained steady in FY2019
at 0.05%.
Hours away on restricted or transferred duties3, a more holistic
measure of the effect of all recordable injuries, also remained
steady at the relatively low level of 0.17%. This suggests that
injuries remain generally less severe or respond well to treatment
and return to work programs.
PROMOTING A SAFETY-FOCUSED CULTURE
The acquisition of Headwaters added over 4,000
employees, more than doubling the size of our USA
workforce, and tripling our USA operating sites to 170.
Improving Headwaters’ safety performance has been a key
focus of our integration activities.
Our efforts have focused on embedding a Zero Harm
Today culture through proactive leadership, improvement
programs, safety training and ongoing engagement with
our frontline people. We also invested in safety upgrades,
including machine guarding and improving traffic flow,
facilities’ lighting and processes across
Headwaters’ businesses.
A recent Safety Cultural Awareness Survey conducted
by the Boral North America division had an impressive
80% response rate. The survey results revealed that
the business has a mature safety culture that rates 74%
above other comparable benchmark organisations and is
working hard to embed a Zero Harm Today culture; and
employees feel comfortable stopping work if they feel it is
unsafe, and believe injuries are preventable.
The survey also highlighted several areas for further
improvement, which will be a key focus in FY2020.
These include continuing to standardise common tools
and approaches, developing new leading indicators to
drive behaviours and performance, and increasing
face-to-face interactive training.
REDUCING HEAVY VEHICLE ROAD SAFETY RISKS
Boral Australia’s logistics business manages a fleet of more
than 3,000 heavy road vehicles that drive some 150 million
kilometres a year. Reducing heavy vehicle road safety
risks, including rollover risk, is therefore a high priority.
Since 2012, we have made considerable progress to
reduce the risk of heavy vehicle rollovers through improved
truck design and driver training. For example, we mandate
that new company and contractor agitator trucks are fitted
with electronic roll stability and that new tipper trucks are
fitted with low-friction bin floor liners.
After reviewing our performance against world’s best
practices last year, we established a comprehensive
improvement program in FY2019. The program
encompasses: driver onboarding, ongoing training,
behavioural safety, developing formal minimum operating
standards and improving vehicle standards.
1. Per million hours worked for employees and contractors in 100% owned businesses including Headwaters, and all joint ventures businesses
regardless of equity interest from FY2018 onwards. Data for prior years only includes 50% owned joint ventures and excludes Headwaters.
2. RIFR is the combined LTIFR and medical treatment injury frequency rate.
3. Defined as a percentage of total hours affected against total hours worked – for employees only.
28
BORAL LIMITED 2019 ANNUAL REPORT
Climate-related impacts
The global transition to a low-carbon economy and potential
physical climate-related impacts present both challenges and
opportunities. Our approach is to continue developing strategies
that build our business portfolio’s resilience to climate-related
impacts while capturing opportunities.
Boral recognises that climate-related physical risks and a global
transition to a low-carbon future are expected to impact our
operations, customers and suppliers.
We support the Paris Agreement and mechanisms to achieve
its objective of limiting future average global temperature rises to
well below 2°C, as well as Australia’s 2030 target of a 26−28%
reduction in carbon emissions below 2005 levels.
Looking at how Boral’s carbon emissions are tracking relative to
2005 levels, in Australia we have reduced emissions by around
40% since FY2005. We achieved about half of this decrease
largely by realigning our portfolio away from emissions-intensive
businesses. The remainder of the decrease is due to reducing
clinker manufacturing in Australia in favour of importing it from
more efficient and larger scale operations in Asia.1 Including Boral
North America, our Scope 1 and 2 emissions2 decreased by
43% since FY2005.
We continue to progressively adopt the recommendations of the
TCFD. In FY2019, we enhanced our climate-related governance
and risk management, completed scenario analysis of Boral
Cement’s business and continued to strengthen our resilience
to a 2°C scenario. We also broadened our reporting of physical
climate-related risks and Scope 3 emissions.2
We completed a Group-wide review of our climate-related
risks and opportunities using the TCFD framework. This review
informed a two-year roadmap to undertake further scenario
analysis of key climate-related business risks.
We transparently and constructively engaged with Climate Action
100+ investor representatives and other stakeholders during the
year, sharing our progress in aligning our efforts with the TCFD
recommendations and building greater resilience to climate-
related impacts.
Strategy
Our strategy is to strengthen our resilience to climate-related
impacts by further reducing our operational emissions intensity;
creating innovative solutions and products that support a
lower carbon future; and mitigating our climate-related risks.
Through our Boral North America Fly Ash business, we also
aim to increase our contribution to reducing carbon emissions
in the production of ready mix concrete, by making more fly ash
available as a cement substitute.
In FY2018, Boral set three climate-related goals that reflect our
strategic ambitions. Our performance against these goals and
targets is outlined on pages 31–32.
As a global manufacturer of construction materials and building
products, we are a large emitter of greenhouse gas (GHG),
particularly through our clinker manufacturing operations
in Australia.
Our Cement business accounted for nearly 60% of our total
2.4 million tonnes of GHG emissions in FY2019. Our brick
businesses in Western Australia and the USA together accounted
for a further 9% of our GHG emissions.
Since FY2012, we have reduced our Scope 1 and 2 emissions
from our operations by 32% and our emissions intensity by 48%,
including a 7% reduction in emissions intensity in FY2019.
We achieved this by realigning our portfolio towards
lighter weight products and less carbon-intensive businesses,
reducing clinker manufacturing in Australia in favour of importing
clinker, and investing in energy efficiency and low-carbon
fuels programs.
Repositioning the business has reduced our risks associated
with transitioning to a lower carbon economy and cut our
exposure to energy costs. In FY2019, Boral’s energy and fuel
costs totalled $353 million, accounting for 6% of our cost base.
We are confident we will continue to reduce our emissions
intensity going forward. We do not intend to invest in new cement
or brick kilns, and these manufacturing operations are unlikely to
be in Boral’s portfolio in the long term. In fact, in August 2019, we
announced that we are divesting our Western Australia Midland
Brick business, which will help bring down our GHG emissions
by around 60,000 tonnes per year. We cannot put targeted dates
on the life of remaining kiln-based operations, as this will be
determined by economic drivers.
Clinker manufacturing is highly emissions-intensive, so we
continue to develop ways to reduce carbon emissions from our
Cement business and bolster its resilience to climate-related
transition risks.
We completed scenario analysis to get a better understanding of
the potential transition risks and opportunities facing our clinker
manufacturing operations, which we had begun in FY2018. The
scenario analysis methodology, key assumptions, levers and
implications for the business are detailed on pages 40–41 of the
2019 Boral Review.
Boral Cement’s climate-related strategic priorities, including our
roadmap to reduce Scope 1 and 2 emissions by around 20%,
are detailed on pages 41–42 of the 2019 Boral Review.
More broadly across the Group, we continue to focus on energy
efficiency improvements, and using recycled materials to reduce
our carbon emissions.
We continue to grow the revenue contribution of our lower
carbon and high-recycled-content businesses and products.3
These include our Boral North America Fly Ash and TruExterior®
Siding & Trim businesses, and in Boral Australia, our Recycling
business and lower carbon concretes such as ENVISIA®,
Envirocrete® and Aspire®.
USG Boral is also continuing to progress plant trials and product
development of USG-developed Sheetrock® EcoSmart Panels to
suit the Australian market. EcoSmart Panels are produced using
less water than other boards. This means less energy is used to
dry the product, reducing carbon emissions by 20%
during manufacturing.
1. Following the closure of Boral’s clinker manufacturing plant at Waurn Ponds, Victoria in 2013, we have imported clinker 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).
2. See page 53 of the 2019 Boral Review for definitions of Scope 1, 2 and 3 emissions.
3. Defined as having a minimum of 40% recycled content.
29
Climate-related risks and opportunities review
As part of our planning and risk management efforts during the
year, we undertook a targeted review of our climate-related risks
and opportunities across the Group, using the recommended
framework set out by the TCFD. The work updated and revised
the climate-related review we completed previously in FY2017.
Group HSE managed and coordinated the review, with
assistance from Group Risk and an external consultant. The
review incorporated input from functional managers and senior
representatives of Boral’s three divisions, obtained through a
series of workshops and one-on-one interviews.
The review assessed and prioritised potentially significant
physical and transition climate-related risks and opportunities,
based on high-level climate scenarios.
Boral’s key physical and transition climate-related risks include:
•
•
•
•
•
•
increased severity and frequency of extreme weather such
as cyclones, severe precipitation causing floods or deluge,
and bushfire events
shifts in climate, including precipitation patterns, unseasonal
variability, rising mean temperatures and rising sea levels
carbon policy changes and the potential introduction of
regulatory pricing mechanisms and/or trading systems,
which may impact the cost of non-renewable energy and
the supply and/or cost of fly ash and synthetic gypsum
energy policy changes which may increase energy
costs due to changes in supplied energy mix (such as
more renewables) , resulting in higher cost of raw materials,
either domestic or imported
disruptive technology which may affect our competitiveness,
either through reduced demand or supply-side
cost impacts, and
building and construction industry standards which may
result in decreased demand for higher carbon products.
Boral’s climate-related opportunities include:
•
•
•
increased building and construction rectification and
remediation work
increased demand for more resilient infrastructure
and buildings
growth from changes in construction industry
standards, and
•
reduced energy costs from improved energy efficiency.
Further details on our climate-related risks and key mitigation
measures as well as opportunities are provided on pages 36–37
of the 2019 Boral Review.
TCFD-based scenario analysis roadmap
Based on the outcomes of our climate-related risks and
opportunities review, we established a two-year roadmap to
further assess our most significant risks using comprehensive
TCFD-based scenario analysis.
The planned scenario analysis will enable us to test the
potentially significant business risks identified under different
climate-related and regulatory scenarios. The findings from this
work will inform our business strategies and actions, and be
incorporated into Group-level climate-related financial
risk modelling.
The scenario analysis to be undertaken over
FY2020–21 includes:
•
•
•
•
physical climate-related risks in key geographies
carbon pricing risks across Boral’s supply chain
availability and supply of synthetic FGD1 gypsum at
USG Boral2, and
supply chain impacts on Boral North America Fly Ash from a
potential decline in coal-fired electricity generation.
Governance
Our approach to sustainability governance, including climate-
related impacts, is outlined on page 23.
This year, we established a Group Environmental Sustainability
Governance Steering Group that will be responsible for
coordinating and reviewing climate-related risks, strategy and
reporting. The group, chaired by Boral’s Group President
Operations, comprises senior functional leaders including from
Group HSE, Group Risk and Investor Relations.
The group will oversee the implementation of Boral’s climate-
related scenario analysis roadmap, and review and endorse
assurance activities, including recommendations to Boral’s
Executive Committee and the Board.
The group reviews the climate-related information in this
sustainability overview, including performance against our targets
and goals, as do the CEO & Managing Director, the Board
HSE Committee and the full Board. The Board also reviews
performance against divisional strategic objectives and business
plans. These include initiatives to develop and drive market
expansion of lower carbon products, and to reduce costs and
operational emissions through energy efficiency and low-carbon
fuels programs.
We have had our performance against quantitative climate-
related goals and targets – and our reported energy and
carbon emissions data – independently assured. For more
details, see EY’s limited assurance statement on page 52
of the 2019 Boral Review.
Risk management
Climate-related risks are incorporated into Boral’s enterprise risk
management (ERM) framework and processes, which identify,
assess, monitor and report on our organisation’s risks.
Managed by Group Risk, these processes include business-
specific, bottom-up risk assessments, as well as top-down
reviews. The Group Risk team works with business leaders and
functional managers to ensure risks are adequately considered
through Boral’s ERM process.
Group Risk reports to the Board Audit & Risk Committee at least
annually on Boral’s organisation-wide risks.
Based on our existing categorisation of climate-related risks,
we determine their relative significance using the same
established methodology as for other risks. We review and revise
these categorisations regularly, based on emerging issues.
Climate-related risks are now also incorporated as a standalone
category of risk in our ERM framework.
1. Flue gas desulfurisation.
2. FGD scenario analysis is subject to outcomes of strategic ownership changes of USG Boral.
30
BORAL LIMITED 2019 ANNUAL REPORT
Boral’s risk-scoring methodology assesses risks based on
consequence and likelihood of occurrence, to identify the
severity of the risk. The consequence is rated according to a
number of factors including potential financial impact.
GHG emissions from operations1,5
(million tonnes CO2-e)
Australia – Cement
Australia – other
North America
Asia
Divisional chief executives are responsible for managing identified
risks and implementing mitigation action plans, and may delegate
this responsibility to line managers.
A summary of our key risks and responses, including climate-
related risks, is included on pages 20–21.
Metrics and targets
Our climate-related goals and targets are to:
3.54
0.42
0.20
0.79
3.41
0.47
0.20
0.78
3.14
0.48
0.21
0.80
2.13
1.96
1.65
FY19
GHG emissions
Scope 1 (direct)
Scope 2 (indirect)
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
2.41
0.20
0.30
0.50
1.48
1.50
1.52
1.54
1.42
2.41
0.52
1.90
•
•
•
further reduce emissions intensity by 10−20% on FY2018
by FY20231,2
FY12
FY13
FY14
FY15
FY16
FY17
FY18
FY19
FY19
deliver annual growth in share of revenue from lower carbon
and high-recycled-content products from 9%3, and
GHG emissions intensity from operations1,2
(tonnes CO2-e per A$m revenue)
reduce 1.1−1.5 million tonnes CO2-e in the supply chain on
FY2018 through increased fly ash supply by FY2022.
Our FY2023 emissions-intensity reduction target of 10−20%
on FY2018 does not capture the potential exit of non-core
brick operations, or other possible divestments or acquisitions.
It reflects higher expected growth in our less energy- and
emissions-intensive businesses, and the benefit of our
low-carbon fuels program at Berrima Cement Works (Berrima).
During FY2019, we sold our Denver Construction Materials and
Block businesses in the USA. In August 2019, we announced the
sale of our remaining Australian brick business, Midland Brick,
and an agreement to acquire Knauf’s 50% stake in USG Boral
Australia and New Zealand, and form an expanded USG Boral
Asia joint venture with Knauf. These business portfolio changes
are expected to impact our reported emissions intensity from
FY2020, so we intend to review our emissions-intensity reduction
target in FY2020.
Greenhouse gas emissions from operations
Our Scope 1 and 2 emissions decreased by 7% to 2.4 million
tonnes compared to the prior year.1 The decline largely
reflected lower clinker production, the benefit of the low-carbon
fuels program at Berrima, and the divestment of the Denver
Construction Materials and Block businesses in the USA.
Boral’s GHG emissions intensity decreased by 7% to 348
tonnes of CO2-e per A$ million of revenue, down from 375
tonnes in FY2018, reflecting lower absolute emissions and
steady underlying Group revenue.1,2 Excluding the divestment
of our businesses in the USA in FY2019, our emissions intensity
decreased by 9% compared to the prior year.4
Our lower carbon and high-recycled-content products and
businesses accounted for 10% of Group revenue in FY2019,
up from 9% in FY2018. See page 29 for a description of these.
671
644
582
523
491
488
375
348
10–20%
reduction
on FY18
FY12
FY13
FY14
FY15
FY16
FY17
FY18
FY19
FY23
target
GHG emissions by source1 (%)
1
17
32
21
16
13
Natural gas
Electricity
Diesel and liquid fuels
Coal
Calcination
Biofuels
Scope 3 emissions
This year, we expanded data collection and reporting for our
Scope 3 emissions. We considered each of the 15 categories
of Scope 3 emissions as defined in the GHG Protocol Corporate
Value Chain (Scope 3) Accounting and Reporting Standard.
With the aim of identifying and reporting on more than 95% of
Boral’s indirect emissions, each of our three divisions reviewed
potential sources of Scope 3 emissions likely to account for
more than 50,000 tonnes of CO2-e of emissions per year across
these categories.
1. GHG emissions data excludes some joint ventures, which in aggregate are not deemed to have material emissions.
2. Group-reported revenue adjusted to include a 50% share of underlying revenue from the USG Boral and Meridian Brick joint ventures, which are
equity accounted.
3. Based on Group-reported revenue – this excludes underlying revenue from joint ventures which are equity accounted.
4. Assumes FY2018 emissions and revenue for businesses divested in FY2019.
5. Data may not add due to rounding.
31
On this basis, we identified 3.0 million tonnes of Scope 3
emissions in FY2019. Of these emissions, 90% related to
purchased raw materials, and the remaining 10% related
to the upstream emissions associated with our energy and
fuel purchases, and downstream emissions associated with
contractor haulage. Boral Australia’s clinker imports and
domestic cement purchased, together with Boral North
America’s cement purchased for use in the Stone and Roofing
businesses accounted for 55% of our Scope 3 emissions.
Going forward, we will continue to refine and improve our
Scope 3 reporting and methodologies.
Avoided emissions
GHG emissions avoided through the sale of fly ash in the USA
were modestly lower at 5.1 million tonnes1, down from 5.2 million
tonnes in FY2018. We are targeting a reduction of 1.1–1.5 million
tonnes carbon emissions in the supply chain on FY2018 by
FY2022 through increasing annual supply of fly ash by
1.5−2.0 million tons.
ENERGY
We aim to implement strategies to reduce our energy costs as
well as our carbon footprint. This means we are investing in
opportunities that improve our energy efficiency or decrease our
energy costs while abating carbon emissions, where it makes
economic sense to do so.
For example, the new low-carbon solid-waste derived fuels
program at Berrima reduced our consumption of coal by 16,000
tonnes in FY2019, and we expect to replace more than 40,000
tonnes of coal in FY2020. Our Boral Timber business is also
progressing the development of a project to convert sawmill
residues into renewable diesel and bitumen.
In FY2019, our operations consumed 20.6 petajoules of
energy, down 4% on the prior year. This decline largely reflects
lower clinker production at Berrima and the sale of the Denver
Construction Materials and Block businesses in the USA.
The low-carbon fuels program at Berrima increased the
contribution of biofuels in our energy mix to 5%, up from 2%
last year.
Expenditure on energy was A$353 million in FY2019, down 7%
compared to FY2018.
Energy by fuel source2 (%)
20
22
5
13
Natural gas
Electricity
Diesel and liquid fuels
40
Coal
Biofuels
Further data on Boral’s GHG emissions, including Scope 3
emissions by division, energy consumption and other emissions
is available on our website.
Environmental impacts
We operate a diverse portfolio of businesses across a broad
geographic footprint. Many of these operations are resource-
intensive, including our quarrying, manufacturing and transport
businesses. To ensure our business is sustainable for the long
term, we work to mitigate our environmental impacts.
Our Environment Policy is to eliminate adverse environmental
impacts and where elimination is not possible, seek to minimise
our adverse environmental impacts.
In addition to our overarching climate-related goals and targets,
we have a range of business-level improvement plans and
goals, including targets for improving water efficiency, reducing
waste generation and increasing use of recycled materials in
our products in Boral Australia. We are also working to better
quantify and align targets and improvement plans across
our divisions.
Environmental compliance
Our policy is, at a minimum, to comply with environmental
legislation, regulations, standards and codes of practice relevant
to the particular business. We typically target better performance
than laws require.
With more than 670 operating sites across a broad geographical
footprint, Boral’s environmental management systems and
compliance programs are designed to accommodate local
environmental requirements and business variations.
Operational and functional teams are responsible for ensuring
compliance with environmental regulations. In Boral Australia,
compliance is managed through an information management
system for environmental requirements and regulations.
During FY2019, we conducted 60 internal environmental
compliance audits in Boral Australia and 21 in Boral
North America.
USG Boral conducts a range of compliance activities across its
operations, focusing on the key areas of stack emissions and
dust control, with annual audits conducted on burners and dust
control equipment.
In addition, the Group HSE function undertook 16 audits
across a sample of sites, assessing areas of environmental risk,
including environmental compliance.
We target zero environmental infringements and strive to
continuously improve our environmental management
and performance.
During the year, we received nine infringement penalties across
the Boral Group, totalling $38,820. Seven of these infringements
related to non-compliances in administrative arrangements,
rather than causing environmental impacts.
1. We have used a conservative conversion factor to estimate CO2-e emissions displaced as a result of fly ash substitution for cement in ready mix
concrete, assuming that for every tonne of fly ash approximately 0.8 tonne of CO2-e is displaced. This conversion rate accounts for varying qualities
of fly ash, and so assumes a substitution rate of 1.25 tonnes of fly ash per tonne of cement in ready mix concrete, and assumes 1 tonne of cement
produced results in 1 tonne of carbon emissions. We will review our methodology for calculating avoided emissions in FY2020.
2. Energy consumption data excludes some joint ventures, which in aggregate are not deemed to have material emissions.
32
BORAL LIMITED 2019 ANNUAL REPORT
Two infringements related to:
WASTE MANAGEMENT
• washing out two concrete agitator trucks on a roadside near
Port Stephens in NSW, and
•
the release of water from our Cedars Quarry at Mackay
in Queensland that was outside our licence parameters,
following Tropical Cyclone Debbie.
Infringements and
penalties
Number
Fines1
Penalties1
FY2019
FY2018
FY2017
FY2016
9
6
10
9
$38,820
$82,273 $110,083
$33,888
$0
$0
$30,000 $250,000
Undertakings
$0 $133,000 $133,556
$0
WATER MANAGEMENT
Water supply is essential to our operations. We require fresh
water for our concrete and plasterboard operations, while our
quarry and asphalt operations can use recycled, brackish
and/or process water. Water is used in manufacturing, for dust
suppression, cleaning and sanitation.
In FY2019, we used about 4 gigalitres of municipal water, in line
with the prior year.
In our more water-intensive concrete and plasterboard
businesses, where product specification does not allow the use
of recycled water, we are investing in researching and developing
new products and mixes that require less water.
Over time, we have expanded the use of site-captured rainwater,
which is supplementing our municipal supply. At our larger sites,
including our quarries, captured rainwater is often the primary
source of water and largely used for dust control.
In Boral Australia, we are developing systems to collect reliable
and more comprehensive data on captured rainfall.
Across the Group, we are focused on improving water
consumption per unit of output and ensuring we have plans
to underpin delivery of our efficiency improvement targets,
particularly in geographic areas of potentially high water stress.
Individual Boral sites may from time to time be exposed to the
risk of drought, deluge or flooding. The risk of insufficient or
excess water at our sites is discussed in relation to physical
climate-related risks on pages 35–36 of the 2019 Boral Review.
When building or acquiring new facilities, our due diligence
process includes assessing the risks to water quality from site
discharges, and ensuring sufficient water availability and supply,
which may require river catchment assessments.
Across the Group, a relatively small amount of process water is
discharged to sewers for treatment by water authorities, in line
with our existing licensing conditions at relevant sites. We have
well-established internal compliance systems to prevent pollution
of discharged waters, as well as numerous regulatory controls
through licensing and permitting.
We strive to reduce waste within our operations, recycle the
waste that we generate, and increase the recycling of materials
from other industries as energy or raw materials.
Throughout Boral’s operations, we reuse some materials in our
production processes, including concrete washout, recycled
asphalt pavement, and plasterboard waste from production and
building sites.
Approximately 10% of Boral’s revenue is derived from lower
carbon and high-recycled-content products. A large proportion
of this revenue is from our Fly Ash business in North America and
Boral Recycling in Australia.
Opportunities to reuse production by-products and waste
materials continue to grow and are being actively pursued.
Boral’s businesses generate only small volumes of hazardous
waste (such as waste oil) and this is managed in accordance with
government regulations.
We 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 are signatories to the
Australian Packaging Covenant or fulfil the requirements of state
regulations. Boral Cement, through its membership of Cement
Concrete & Aggregates Australia, is a signatory.
LAND MANAGEMENT, REHABILITATION AND
REMEDIATION
We manage our quarries and land assets responsibly. For
each of our extraction and operating sites, we carefully plan to
mitigate any adverse environmental impacts – from development
applications and operational land use to rehabilitation and end-
use planning and development.
We have a substantial land footprint. Across Australia and the
USA, we own or lease over 150 locations that are greater than
20 hectares in size, totalling more than 26,000 hectares.
At sites where we extract natural resources or manufacture
products, we anticipate having to fulfil environmental
rehabilitation and/or remediation obligations. These obligations
relate to the future rehabilitation of sites, or clean-up of
contamination we caused, at the appropriate point in the life
cycle of these operations. They enable the ongoing use of the
relevant land, either as an industrial property or for a higher value
end use.
The anticipated future costs associated with remediating and
rehabilitating sites are provisioned for in our financial statements,
based upon our estimate of associated costs.2
1. Regulators issue fines and the courts issue penalties.
2. See note 3.6 of the financial statements for details of the provision.
33
Biodiversity
Protecting the diversity of plant and animal species at and
around our operational sites is a core component of our land
management efforts.
Of Boral’s operations, our Quarries business has the highest
potential to contribute to but also mitigate biodiversity impacts.
All greenfield sites or expansions to existing operations undergo
comprehensive internal and – where required – external
assessments to identify biodiversity risks. When we identify
risks we address them through a range of mitigation activities
such as offsets (either on- or off-site) and biodiversity
area enhancements.
We identify biodiversity risks associated with new operations
through Boral’s due diligence processes and address them in
environmental impact assessments.
Biodiversity obligations that are integrated into site permits are
audited under Boral’s environmental audit program
All sites identified as having biodiversity values have
management plans in place in accordance with site-specific
needs. Where appropriate, these include specific targets
and timeframes.
Some examples of the many initiatives in place to protect
biodiversity at Boral’s sites include:
•
collaborating with the Royal Botanic Garden Sydney
in research on the endangered Illawarra Socketwood
population at Dunmore Quarry in NSW
• maintaining koala fodder plantations at Narangba and
Petrie quarries in Queensland, and
•
participating in conservation work to provide habitat for the
threatened legless lizard and spiny rice-flower at Deer Park
Quarry in Victoria.
AIR QUALITY
Controlling air quality around our operations is our responsibility
as a good neighbour, and is typically a regulatory requirement.
Boral has many processes and systems in place to minimise air
emissions across our operations.
Where we have identified that emissions are a significant risk or
local community health concern, our operations have engineered
and procedural controls, ranging from scrubber and filtering
systems at major manufacturing sites (such as cement, bricks
or plasterboard manufacturing), to simpler dust suppression
measures such as water sprinklers that are typical of quarries
and concrete batching plants.
Where relevant, Boral’s operations have either continuous or
scheduled air quality monitoring programs, and data is available
to local communities through regulatory reporting or stakeholder
engagement programs.
At a national level, Boral reports data on various emissions to the
National Pollutant Inventory (NPI) and the National Greenhouse
and Energy Reporting Scheme (NGERS) in Australia.
Social and community impacts
We aim to create value for the local communities in which we
operate, by providing economic and social benefits. We are
committed to managing our operations responsibly and building
positive long-term relationships with our local stakeholders.
Our operations contribute to the economic prosperity of our
local communities by providing employment, supporting local
enterprises, investing in the community more broadly and paying
our fair share of taxes.
In addition to observing our site-specific regulatory requirements
and planning approvals, we openly listen to community
concerns. We address challenges and make improvements
where possible.
We recognise that some elements of our business can contribute
to local community concerns. These elements include traffic,
noise, odours, water, waste, end use of quarry land, and the
potential impact of our activities on biodiversity and cultural
heritage. How we manage our environmental impacts is detailed
on pages 32–34.
Boral’s commitment to stakeholder engagement is underpinned
by communication and consultation with local communities.
As part of our engagement, we operate Community
Consultation Committees across our key sites in Boral Australia.
The committees include elected community representatives
who meet with interested residents and other local stakeholders.
We also seek to keep local communities informed through online
information resources, newsletters, local advertising, community
inspections, community meetings and site tours.
We hold regular community liaison meetings at various operating
sites – attended by community, council and government
representatives – to address local issues concerning
our operations.
INDIGENOUS ENGAGEMENT
Boral’s Reconciliation Action Plan outlines our commitments and
planned actions to strengthen relationships with, respect for and
opportunities in Aboriginal and Torres Strait Island communities.
We are committed to protecting places and items of cultural
significance to local Aboriginal and Torres Strait Island groups
across our Australian operations. We work alongside Indigenous
peoples to protect cultural heritage, including across our sites
that are subject to Cultural Heritage Management Plans.
PUBLIC ROAD SAFETY
Boral operates or engages a large number of trucks on public
roads, particularly in Australia, to transport and deliver our
products and services.
Safety compliance requirements are generally well defined
for heavy vehicle operations in most jurisdictions in which we
operate. We comply with minimum requirements and in some
cases do better than the minimal compliance requirements and
industry norms – for example, by investing in higher-specification
concrete agitator vehicles.
Our largest fleet is in Australia, where our dedicated Compliance
team works to meet the requirements of the National Heavy
Vehicle Regulator. These include mass management, load
restraint, driver hours and vehicle condition.
34
BORAL LIMITED 2019 ANNUAL REPORT
Boral routinely collaborates with state and municipal authorities
to ensure we adhere to legislated traffic safety and management
requirements, including with regard to the road environment
around our sites.
In FY2019, Boral launched a community partnership with Road
Safety Education, to support youth education in road safety
across Australia.
COMMUNITY INVESTMENT
Boral has a long and proud history of supporting the local
communities in which we operate. Through our community
investment program, we aim to make a valued and sustainable
contribution to the wellbeing of these communities.
Our community investment framework helps us identify
organisations and projects that share our values, and for which
our resources can have the greatest impact.
Our community investment framework is underpinned by three
pillars: Our People, Our Places and Our Products. It provides
guidance in identifying and evaluating opportunities, and
deciding how best to address community needs and priorities.
In FY2019, we contributed a total of $1,260,000 to our
community partnerships and local community causes and
projects, comprising $1,036,000 in cash, $63,000 in materials
and $161,000 in fundraising and events. We also actively seek
opportunities to engage our employees in our community
partnerships, and to facilitate knowledge sharing.
Our key community partners are:
• Road Safety Education
• Habitat for Humanity
• Bangarra Dance Theatre
• Conservation Volunteers Australia
•
Taronga Conservation Society, and
• HomeAid America.
Supplementing the work we do with our six key community
partners, we provide modest funding and assistance to several
other organisations, including Outward Bound Australia to
support youth leadership development, and the University of
New South Wales to help fund scholarships for women
studying engineering.
Further information is available on our website.
Customers and sustainable
products
We have tens of thousands of customers across our global
operations, and we play a central role in providing the building
products and construction materials that enable our customers
to build the homes and cities of tomorrow.
Across our three divisions, we supply products to a wide range
of customers, from people renovating their homes through to
large-scale builders and commercial developers.
Through our integrated construction materials business in
Australia, we also supply to major infrastructure projects that
require complex and highly technical solutions. And through
our Fly Ash business in the USA, we are helping cement and
concrete producers deliver construction materials that perform
better and produce fewer carbon emissions.
As construction technologies and the needs of our customers
evolve, we will strive to remain at the forefront of new
developments, and to deliver high-quality, innovative solutions
and sustainable products.
Boral’s concrete innovations
Boral’s concrete solutions address specific engineering, design
and sustainability needs over and above the capability of
conventional concrete available in the market. Some examples of
our advanced concretes are ENVISIA®, Aspire® and Enflo®.
ENVISIA® lower carbon concrete meets the targets of the
Infrastructure Sustainability Council of Australia (ISCA) and helps
the construction industry achieve higher Green Star ratings on
projects assessed by the Green Building Council of Australia.
In addition to its lower carbon qualities, achieving a cement
replacement of up to 65%, ENVISIA® provides other valuable
benefits including high flexural strength, low shrinkage and
high durability. This combination of qualities led to Boral being
selected to supply to the Crown Sydney project at Barangaroo
in NSW.
Its durability and sustainability led to the Queensland
Department of Transport and Main Roads approving the
ENVISIA® binder system, enabling us to supply it for Queensland
infrastructure projects.
Aspire® is a very high-strength concrete specifically developed
to maximise concrete stiffness. This allows designers to
maximise floor space by incorporating thinner vertical elements
in commercial and high-rise buildings. Aspire® also has a
lower overall Portland cement content compared to equivalent
high-strength concrete.
Enflo® is concrete that self compacts, enabling our customers to
place concrete faster without the need for vibration to compact
or consolidate, saving labour and time.
Plasterboard solutions
Launched in 2018, USG Boral’s new Ensemble™ Acoustical
Plasterboard Ceiling is an innovative solution for interior ceilings
that combines the seamless look of plasterboard with acoustical
properties.
USG Boral is also continuing to progress plant trials and
product development to successfully adapt the USG-developed
Sheetrock® EcoSmart Panels technology to local markets.
35
Supply chain
Boral has an extensive global supply chain across more
than 25 countries. Each year, we spend about $4 billion on
purchasing products and services from more than 10,000
suppliers and contractors.
Delivering an efficient, agile and cost-effective supply chain is
vital to meeting our customers’ expectations and delivering on
our business strategy. Our Supply Chain Optimisation initiatives
across Boral Australia and Boral North America are focused on
improving our customer experience by building more reliable,
more transparent and lower cost integrated supply chains.
Our customers and other stakeholders want to be confident
that our products and services are sourced and produced
in a responsible and sustainable way. We are committed to
creating positive change by making responsible and sustainable
purchasing decisions.
SUSTAINABLE PROCUREMENT
Our Sustainable Procurement Policy underpins our approach
to sustainable procurement and outlines our commitments to
purchasing goods and services in a responsible way.
This includes:
•
•
•
ensuring suppliers are aware of and comply with our
Supplier Code of Conduct
promoting diversity and inclusion in our supply chain,
including through social and Indigenous enterprises, and
assessing and managing the risk of modern slavery in our
supply chain.
The policy aims to align our practices with the International
Standard for Sustainable Procurement, ISO 20400.
Boral’s Supplier Code of Conduct requires our suppliers to
adhere to minimum standards relating to health and safety,
environment and labour, including prohibiting the use of child
labour and complying with modern anti-slavery legislation.
Assessing our suppliers
We monitor supply chain risks by assessing suppliers’
performance and their alignment with Boral standards, including
through a pre-qualification questionnaire. In Australia, we
engage a third-party service to register and monitor suppliers’
compliance with our pre-qualification requirements.
We assess supply chain risks including corruption and bribery,
human and labour rights, HSE compliance, and quality
standards. We may also visit a supplier’s factory based on our
risk evaluation results.
In Boral Australia and USG Boral, we use a sanction screening
process to identify any areas of risk associated with elements
such as financial crime, fraud and human rights abuse.
During the year, we established a risk assessment framework
focused on modern slavery risks in our supply chain, as detailed
on the next page.
We are focusing initially on selected geographies including
Australia, where we are optimising the process and formulations
to suit Australia’s thinner boards, and identifying opportunities to
further lower material costs.
High-recycled-content exterior cladding
Boral North America’s poly-ash TruExterior® Siding & Trim
products offer the look of wood while surpassing the durability
and workability of timber and alternative products. The products
are certified by SCS Global as being manufactured using 70%
recycled materials (fly ash) and are Cradle to Cradle Certified™.
IMPROVING THE CUSTOMER EXPERIENCE
In Boral Australia, our Customer Experience program is focused
on delivering better outcomes for our customers and
our business.
To help us understand how we can better serve our customers,
we are strengthening the methods we use to capture customer
feedback. This year, Boral Australia introduced customer surveys
and began reporting three types of Net Promoter Score (NPS):
an Interaction, Episode and Strategic score.
This data will establish a baseline NPS and form the basis of
internal targets for improving our customers’ experiences.
During the year, Boral North America has focused on
cross-branding and providing a single entry point for our
Boral North America suite of building products.
In USG Boral, our new customer-centric improvement program is
underway. The initiative includes a focus on optimising our value
propositions through improved customer segmentation. This
has already led us to roll out several new products and systems,
including EasiFinishTM in emerging markets in Asia.
Boral Connects
Making it easier for customers to deal with us is at the heart of
Boral Australia’s new customer portal, Boral Connects.
Our portal makes our interactions more transparent to our
customers, and saves customers’ time when dealing with Boral,
by allowing them to view, confirm or cancel orders online.
INVESTING IN INNOVATION
In FY2019, we invested about $30 million in research and
development (R&D) across our three innovation centres
in the USA, Australia and Thailand. Our Innovation teams
are helping Boral deliver superior building products and
construction materials to better serve our customers and
develop new markets.
At our Innovation Factory in Maldon, NSW, we are focused
on R&D in cement, concrete and alternative binders with a
lower carbon footprint and improved properties for customers.
The team recently developed and commercialised the Aspire®
high-performance concrete.
At our North America Innovation Factory in San Antonio, Texas,
our efforts are focused on developing the next generation of
composite materials for the Stone, Roofing and Lightweight
Building Products businesses. These product solutions aim
to provide superior performance compared to conventional
products, and will also incorporate recycled content.
USG Boral’s R&D Centre in Saraburi, Thailand, is using world-
class technologies to develop innovative products and systems
that address market needs and deliver superior performance.
36
BORAL LIMITED 2019 ANNUAL REPORT
Modern slavery risk in supply chain
SUSTAINABLE SOURCING OF TIMBER AND PAPER
We respect internationally recognised human rights, and are
committed to preventing and mitigating adverse human rights
impacts throughout our supply chain, as outlined in our Human
and Labour Rights Policy.
We are committed to promoting responsible and sustainable
forest management. Our most significant exposure to
deforestation risk is through our Timber business and the paper
USG Boral purchases for plasterboard lining.
In FY2019, we continued to develop and strengthen our
approach to preventing modern slavery in our Boral Australia
and Boral North America divisions. We will consider USG Boral’s
approach in more detail once strategic ownership changes
impacting the business have been resolved in FY2020.
We mapped our supply chain in Boral Australia and Boral
North America, identifying the key areas of modern slavery risk
for both direct and indirect suppliers, and developed a
risk-ranking methodology.
Our risk assessment focused on supplier categories with
significant expenditure, including raw materials, capital
equipment, plant and equipment, packaging, fuel and labour,
consumer goods and maintenance, and repairs and
operational services.
Risk factor measurements considered the type of products and
services provided, as well as the country of origin and industry.
Our country risk rankings are based on established external
indices and indicators.
During the year, key procurement staff participated in modern
slavery assessment workshops and contributed to peer industry
forums on the topic. We also extended our FairCall external
whistleblowing service to suppliers.
We will continue to develop our approach to modern slavery, and
in FY2020, will finalise the implementation of:
•
•
•
•
•
systems and processes for reviewing new and existing
suppliers, and conducting ongoing monitoring
due diligence processes based on our modern slavery risk
assessments, including third-party assurance for
high-risk suppliers
company-wide modern slavery awareness initiatives
and training
a fully rolled-out framework that includes internal audit
reviews of supplier screening, and reporting to ensure
compliance, and
formal processes for reporting any incidents of modern
slavery identified – including to the Board and Board Audit &
Risk Committee – and implementing remedial actions.
All timber sourced by Boral Timber comes from sustainably
managed forests through an accredited scheme. Boral Timber’s
supplier, Forestry Corporation of NSW, is the largest manager
of commercial native and plantation forest in NSW, and is
certified to meet the Australian Forestry Standard (AFS). AFS
is an independently audited forest management standard that
provides assurance that forests are managed in sustainable way.
Boral Timber’s hardwood products are certified to the AFS Chain
of Custody standard. Compliance with this standard confirms
that our hardwood timber products are sourced from certified,
legal and sustainable resources by tracking products back to
their source.
In FY2019, USG Boral used about 170,000 tonnes of paper in
manufacturing plasterboard, nearly all of which is certified as
recycled paper by the Forest Stewardship Council (FSC) or the
Programme for the Endorsement of Forest Certification (PEFC).
SUPPLY CHAIN LOGISTICS
Ensuring the effective and efficient management of supply chain
logistics is critical to meeting our customers’ expectations.
In Boral Australia and Boral North America, our focus on
customer experience includes improving the rate at which orders
are delivered in full and on time, and invoiced correctly (DIFOTIC).
Our multi-year Supply Chain Optimisation program in Boral
Australia and Boral North America is a key initiative expected to
deliver improved DIFOTIC outcomes. The program focuses on
improving the efficiency and effectiveness of our operated and
outsourced logistics, planning and inventory control, and related
information flows.
Initiatives underway in Boral Australia include the automation
of transport allocations, integrated end-to-end planning, and
digitalisation of the information flow between our operations, fleet
and customers. Our Boral Connects customer portal, discussed
on page 36, is enabling a more efficient flow of information to and
from our customers.
Achieving zero harm to our people, suppliers, customers and the
public is a key priority in managing our logistics operations.
Our approach to managing public road safety and heavy vehicle
safety is detailed on pages 28 and 34–35. Our contracted drivers
must meet the same safety requirements as our employees,
which includes complying with minimum mandated vehicle safety
standards. We also have robust systems and processes in place
to manage safe access and delivery to our customers’ sites,
which includes site inspections on arrival.
Our Supply Chain Optimisation program is expected to reduce
energy and carbon emissions intensity by delivering more
products over fewer kilometres.1
1. The carbon emissions associated with our owned and outsourced transport logistics, encompassing road, rail and shipping, is included in our
Scope 1 and 2, and Scope 3 carbon emissions data on pages 31–32.
37
1. The carbon emissions associated with our owned and outsourced transport logistics, encompassing road, rail and shipping, is included in our
Scope 1 and 2, and Scope 3 carbon emissions data on pages [xx-xx].
ANNUAL REPORT 2019
Executive Committee
Mike Kane | Chief Executive Officer (CEO) & Managing Director
Biography available on page 39.
Rosaline (Ros) Ng | Group President Ventures & CFO
Linda Coates | Group Human Resources Director
Rosaline Ng joined Boral in 1995 and held senior finance roles in Boral’s
Building Products division. Ros left in 2001 to join Phoneware/Sirius
Telecommunications as Finance Director before returning to Boral in late
2002. In 2009, she was appointed Chief Financial Officer (CFO) of Boral
Industries Inc in the USA and since 2013 she has been CFO of Boral
Limited. Ros took on the expanded role of Group President Ventures & CFO
in March 2019, with additional responsibility for delivering the results and
strategies of Boral’s joint ventures. She holds a Bachelor of Commerce from
the University of NSW and is a member of Chartered Accountants Australia
and New Zealand.
Ross Harper | Group President Operations
Ross Harper joined Boral in 2006 and held senior roles in Boral’s Cement
division, including as Executive General Manager Boral Cement from 2012.
In March 2019, Ross was appointed Group President Operations, with
responsibility for Boral Australia, Boral North America and Group HSE.
He has more than 40 years’ experience in industrial process industries,
including the energy, pulp and paper, and building material sectors. He
holds a Doctorate in Chemistry and completed the Executive Management
Programme at the University of Michigan, Ann Arbor.
Wayne Manners | President & CEO, Boral Australia
Wayne Manners joined Boral in 2012 as Regional General Manager WA
Construction Materials after a 20 year career in industrial companies,
including as Chief Executive Officer of Gemco Rail and Fleetwood Pty Ltd.
He became Boral’s Executive General Manager WA/NT and led Boral’s
Building Products in Australia and Boral’s Major Projects Office with overlay
responsibility for Boral Australia’s Transformation & Innovation group and
Value Improvement Program (VIP). In March 2019 Wayne was appointed
President & CEO Boral Australia.
He holds a diploma in Civil Engineering and a Master of Business
Administration from Deakin University, and is a Graduate of the Australian
Institute of Company Directors.
David Mariner | President & CEO, Boral Industries Inc
David joined Boral in 2010 and was appointed President & CEO of Boral
Industries Inc in July 2016. Prior to this he was Executive General Manager
of Building Products and Chief Operating Officer for the Cladding division in
the U.S. Through his career, David has performed a variety of management
roles at Boral and Holcim as well as outside the building products space with
Daimler Chrysler and Detroit Diesel. David holds a degree in Civil Engineering
from Michigan Technological University and a Masters in Business
Administration from Clemson University.
Frederic de Rougemont | CEO, USG Boral
Frederic de Rougemont joined in 2011 and was previously CEO of Lafarge
Boral Gypsum Asia (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 from the University
of Orsay. Since the formation of USG Boral in February 2014, Frederic has
been employed by the USG Boral Building Products joint venture.
Linda Coates joined Boral in 2000 and previously held Group and divisional
human reource roles, including in Construction Related Businesses and
Clay & Concrete Products. Linda was appointed Group Human Resources
Director for Boral Limited in 2013. Prior to joining Boral, Linda was with
Pioneer International in HR roles covering Australia and Asia. She holds a
Master of Business Administration and a Bachelor of Arts with Honours
majoring in Economics and Political Science from the University of NSW.
Kylie FitzGerald | Group Communications & Investor Relations Director
Kylie FitzGerald first joined Boral in 1995 and was appointed Manager,
Investor Relations & Corporate Affairs in 2001, a role she continued in
until August 2010. In January 2011, Kylie joined the GPT Group as Group
Communications Manager, before returning to Boral in July 2012 to again
lead Boral’s Group Communications and Investor Relations. Kylie’s early
roles were in production management in Roofing. She holds an honours
degree in Ceramic Engineering from the University of NSW and an MBA from
the Australian Graduate School of Management.
Dominic Millgate | Company Secretary
Dominic Millgate joined Boral in 2010 and was appointed Company
Secretary of Boral Limited in July 2013. Dom 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 Chartered
Secretary and Fellow of the Governance Institute of Australia, a Member
of the Australian Institute of Company Directors, is admitted to practise
as a solicitor in NSW, and holds a finance degree from the University
of New England, a law degree from the University of Sydney and a Master
of Laws from the University of NSW.
Damien Sullivan | Group General Counsel
Damien Sullivan joined Boral in 2009 and was most recently General
Counsel, Australia before being appointed Group General Counsel in 2013.
Damien has worked as a lawyer in private practice and various in-house
legal roles across a number of industries for more than 20 years in Sydney,
New York and Los Angeles. Damien holds Law and Applied Science degrees
from the University of Newcastle and is admitted as a solicitor in New South
Wales, and as an attorney in New York.
Tim Ryan | Group Strategy & MA Director
Tim Ryan joined Boral in March 2011 in Strategy and the Mergers &
Acquisitions team and was appointed to his current role in January 2017.
Prior to joining Boral, Tim worked at EY in transaction advisory services
roles. He is a Chartered Financial Analyst charterholder and a member of
Chartered Accountants Australia and New Zealand, and he holds a Bachelor
of Commerce from the University of Sydney. He reports to Boral’s Group
President Ventures & CFO.
38
BORAL LIMITED 2019 ANNUAL REPORT
ANNUAL REPORT 2019
Board of Directors
Kathryn Fagg AO | Non-executive Chairman | age 58
Eileen Doyle | Non-executive Director | age 64
Kathryn Fagg joined the Boral Board in September 2014 and became
Chairman effective 1 July 2018.
Ms Fagg is a Director of Incitec Pivot Limited, Djerriwarrh Investments
Limited and a Board Member of the CSIRO. She is also a Director of the
Myer Foundation, Chair of the Breast Cancer Network Australia, a board
member of the Grattan Institute and a board member of Male Champions
of Change. She was previously a Board member of the Reserve Bank of
Australia, immediate past President of Chief Executive Women and former
Chair of the Melbourne Recital Centre and Parks Victoria.
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 Board and a Member of the Remuneration &
Nomination Committee.
Mike Kane | CEO & Managing Director | age 68
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.
He was also appointed as a non-executive Director of Sims Metal
Management Limited in March 2019.
Peter Alexander | Non-executive Director | age 62
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.
Dr Eileen Doyle joined the Boral Board in March 2010. Dr Doyle is a Director
of Oil Search Limited. She was previously the Deputy Chairman of CSIRO, a
Director of GPT Group, 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.
John Marlay | Non-executive Director | age 70
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 Chairman of the Remuneration & Nomination Committee and a
member of the Health, Safety & Environment Committee.
Karen Moses | Non-executive Director | age 61
Karen Moses joined the Boral Board in March 2016. Ms Moses is a Director
of Orica Limited, Charter Hall Group, Snowy Hydro and Sydney Symphony
Limited, 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, Water
Ombudsman (Victoria) Limited and Sydney Dance Company. 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 65
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.
39
ANNUAL REPORT 2019
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, and
• Endurance – operating for the long term rather than the
quick fix, and 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 FY2019, 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. 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 4th edition of the ASX Principles and Recommendations
which will come into effect for Boral in FY2021.
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
2019 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
Recommendations and
reporting
BOARD COMMITTEES
Audit & Risk
Committee
Remuneration &
Nomination Committee
Health, Safety &
Environment Committee
Committees review matters on behalf of the Board and, as determined by the
relevant Charter:
•
• determine matters (where the Committee acts with delegated authority), which the
refer matters to the Board for decision, with a recommendation from the Committees, or
Committees then report to the Board.
40
BORAL LIMITED 2019 ANNUAL REPORT
Delegation
and oversight
Accountability
and reporting
COMPANY
SECRETARY
The Company
Secretary plays
an important role
in supporting the
effectiveness of the
Board and its
Committees
CEO & MANAGING
DIRECTOR
i
t
h
g
s
r
e
v
o
d
n
a
n
o
i
t
a
g
e
e
D
l
g
n
i
t
r
o
p
e
r
d
n
a
y
t
i
l
i
b
a
t
n
u
o
c
c
A
SENIOR
MANAGEMENT
Board and Committee Charters and the
Company’s Constitution are available on
Boral’s website.
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 that 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 40 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 and other stakeholders. The Board’s
engagement with our people through these business level reviews and operational visits provides additional insights and confidence
around Boral’s culture, capability and execution.
FY2019 business reviews and site visits by the Board and/or its Committees
Where
Key focus areas
Lake Wales Roofing (Florida), Greencastle Stone (Pennsylvania),
Bowen Fly Ash operations (Georgia)
Headwaters integration progress, sales showcase and
conversations with customers
Review of NSW operations and our Digital Solutions team
(North Ryde, Sydney)
Health Safety & Environment Committee engagement at
Thornleigh concrete plant and Peats Ridge Quarry (NSW)
Fly Ash management team in the USA (Texas)
Focus on customer service enhancement initiatives
Digital Solutions team – culture and innovation
Review of vehicle and pedestrian separation, heavy vehicle
safety, safety technology and innovation, and leadership
development programs
Deep dive on long-term fly ash supply strategy and the
Group’s progress against the plan
Engagement with the USG Boral leadership team and Indonesia
customers and distributors (Singapore), visited Camellia
operations (NSW)
Review of USG Boral JV strategy, including customer
relationships in key markets, safety initiatives, conduct risk and
compliance program
Composition of the Board
Membership
The accompanying diagram illustrates the composition of the
Board at 30 June 2019.
Boral’s Constitution provides that there will be a minimum of
three Directors and a maximum of 12 Directors on the Board.
The Board of Directors comprises six non-executive Directors
(including the Chairman) and one executive Director, being the
CEO & Managing Director.
The roles of the Chairman and the CEO & Managing Director
are not exercised by the same individual.
Chairman’s appointment and responsibilities
The Board selects the Chairman from the non-executive
independent Directors. The Chairman leads the Board and is
responsible for the efficient organisation and effective functioning
of the Board, 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.
41
n F a g g
a ir m a n
a t h r y
C
h
K
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Mike K
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SKILLS AND DIVERSITY OF THE BOARD
The areas addressed in the matrix are as follows.
Matters relating to the composition of the Board and its
Committees 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
uses a skills matrix, which it reviews regularly. The matrix is an
important, but not the only, basis of criteria applying to Board
appointments. When the Board reviews the skills matrix, it looks
to ensure that it covers the skills needed to address existing and
emerging business and governance issues.
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
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. The matrix 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.
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.
For example, the Board identified that a key consideration in
determining the composition of the Board should be to build on
its existing global experience in the foreign jurisdictions in which
Boral operates. Peter Alexander joined the Board as a non-
executive Director on 1 September 2018. Mr Alexander brings
extensive North American and industry experience to the Board,
which contributes to the Board’s oversight of Boral’s expanding
North American Division. The Board continues to monitor
opportunities for appointing an Asia-based non-executive
Director to build on the Board’s existing experience in Asia.
The skills, experience and expertise of each Director are set out
on page 39 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 (that is, as a supplier or customer) with
a Boral company, or an officer of or otherwise associated
with someone with such a relationship
42
BORAL LIMITED 2019 ANNUAL REPORT
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, and
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 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 (AGM) 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 AGM. 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 39 of 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 AGM 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.
43
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, three of the six 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 is responsible 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 may also request relevant information from members of senior management at any time.
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.
44
BORAL LIMITED 2019 ANNUAL REPORT
Board Committees
The qualifications and experience of each Committee member
are set out on page 39 of this Annual Report. Details of the
number of Committee meetings Directors attended during the
reporting period are set out on page 58 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 that 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 FY2019.
The Audit & Risk Committee has a formal Charter which sets
out its role and responsibilities, composition, structure and
membership requirements. Its responsibilities include review and
oversight of:
•
•
•
the financial information provided to shareholders and
the public
the integrity and quality of Boral’s financial statements and
disclosures
the systems and processes that the Board and management
have established to identify and manage areas of significant
risk, and 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 external audit and
internal audit
Boral’s external auditor is KPMG. At least annually, as occurred
in FY2019, 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 60. The Committee’s role in relation to the internal audit
function is discussed on page 48.
45
REMUNERATION & NOMINATION COMMITTEE
HEALTH, SAFETY & ENVIRONMENT COMMITTEE
Composition and role
Composition and role
The Board has a Remuneration & Nomination Committee that
comprises three independent non-executive Directors.
The Board has a Health, Safety & Environment Committee that
comprises four independent non-executive Directors.
The members of the Committee are:
The members of the Committee are:
John Marlay (Chairman)
Peter Alexander
Kathryn Fagg
Eileen Doyle (Chairman)
John Marlay
Karen Moses
The Committee met four times during FY2019.
The Committee met four times during FY2019.
The Remuneration & Nomination Committee has a formal Charter
that 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 FY2019 is set out in
the Remuneration Report from page 61.
The Health, Safety & Environment Committee has a formal
Charter that 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
Boral’s business (details of the Executive Committee are set out
on page 38 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.
46
BORAL LIMITED 2019 ANNUAL REPORT
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.
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,
and the skills and characteristics required
by the Board to maximise its effectiveness.
It also considers 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.
In FY2019, the review took place as part
of the Board’s orderly succession process
and evaluation.
The next external evaluation of the
performance of the Board, its Committees
and individual Directors is planned for
FY2020.
On an annual basis, the Remuneration &
Nomination Committee and subsequently
the Board formally review the performance
of the CEO & Managing Director.
The criteria assessed are both qualitative
and quantitative, and include profit
performance, other financial measures,
safety performance, 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 applies to 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
CEO & Managing Director took place in
FY2019 in accordance with the process
described above.
An evaluation of the performance of senior
executives of Boral took place in FY2019
in accordance with the process described
above.
REMUNERATION
Remuneration of non-executive Directors
The remuneration of non-executive Directors is fixed. The non-executive Directors do not receive any options, at-risk remuneration or
other performance-related incentives, nor are there any schemes for retirement benefits for non-executive Directors.
The remuneration arrangements for non-executive Directors are distinct from the arrangements for senior executives.
Remuneration of senior executives
Boral’s remuneration policy and practices for senior executives, including the CEO & Managing Director, are designed to attract,
motivate and retain high-quality people. The policy is built around principles that:
•
•
•
•
•
executive rewards be competitive in the markets in which Boral operates
executive remuneration has an appropriate balance of fixed and at risk reward
remuneration be linked to Boral’s performance and the creation of shareholder value
at-risk remuneration for executives has both short- and long-term components, and
a significant proportion of executive reward be dependent upon performance assessed against key business measures.
These principles ensure that the level and composition of remuneration is sufficient and reasonable and that its relationship to
corporate and individual performance is defined.
Further information relating to the remuneration of the non‑executive Directors and senior executives is set out in the Remuneration
Report from page 61.
47
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 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 & 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, who 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
FY2019. 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 &
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 & Risk
Manager, who oversees the execution of the internal audit plan
as approved by the Audit & Risk Committee. The Group Audit
& Risk Manager has a reporting line to the Chief Financial Officer
as well as to the Audit & Risk Committee.
The function comprises a dedicated in-house team of qualified
professionals based in Australia, Asia and the USA, with targeted
support as required from external specialists. The internal audit
function is independent of Management and has full access to
all Boral entities, records and personnel.
The internal audit plan is formulated using a risk-based approach
to align audit activity with the key risks of Boral. Internal
audit activity and outcomes are reported to the Audit & Risk
Committee on at least a quarterly basis.
Business and sustainability risks
Details regarding our approach to managing business and
sustainability risks are contained in the OFR (pages 6–19
of this Annual Report), Sustainability Overview (pages 22–37
of this Annual Report) and the risks section of the Annual
Report (including at pages 20–21 and 55–56). 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 2019 and the half year ended 31 December 2018.
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
ensure 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 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 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.
48
BORAL LIMITED 2019 ANNUAL REPORT
CONDUCT AND ETHICS
The Board’s policy is that Boral’s companies and employees must observe both the letter and the spirit of the law, 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 that 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 periodically, and the next review is scheduled for FY2020.
Boral’s Code of Business Conduct is available on Boral’s website.
REPORTING MISCONDUCT
There are procedures providing employees with alternative means to usual management communication lines through which to raise
concerns relating to suspected illegal or unethical conduct, including an external telephone service that enables reports to be made
anonymously, a facility known as Faircall. The Company believes that whistleblowing can be an appropriate means to protect Boral
and individuals, and to ensure that operations are conducted ethically and within the law.
At least twice a year, the Audit & Risk Committee receives a confidential report about the number, nature and status of Faircall reports
received. All Directors have access to this report.
Material breaches of the Code of Business Conduct and other Boral policies including the anti-corruption and bribery policy
(contained in the Code) are reported to the Board and/or Audit & Risk Committee as appropriate. All material conduct issues are
reported to the Board, whether they are financial or non-financial in nature.
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 that 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 FY2019
Boral’s diversity plan has six strategic elements against which the Board has set measurable objectives for FY2019, 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
Completed
• Two additional senior and operational leader unconscious knowledge
awareness sessions were completed, including piloting an on-line
platform for unconscious bias leadership learning.
Completed
• Diversity targets adopted by Boral Australia. Senior leaders to have at
least one diversity target in zero|one|ten personal objective plans.
49
Strategic Element and Objective
Status
Key Outcomes
2 Communication and Education
2.1
Communication: develop
communications engagement
framework and packages to raise
knowledge and understanding of
diversity
Completed
• Launched communications including brochures, booklets and videos
from employees and senior leaders on what diversity and inclusion
mean to them.
• Extensive video library including messages from Mike Kane, Wayne
Manners and others to educate and promote diversity and inclusion.
• 47% of managers and supervisors in Boral Australia participated in an
unconscious knowledge and awareness session in FY2019 against the
target of 50%.
In progress
• Diversity Alumni sponsored and promoted “Diversity Conversations”; a
series of one hour conversations with employees to progress discussion
and conversations on diversity.
2.2 Education: develop diversity
Completed
• 680 front-line leaders completed the Zero|One|Ten Leader Foundations
educational framework to provide
management with capability to lead
and manage diversity and diverse
teams
program, which includes modules on diversity, inclusion and
unconscious bias.
Ongoing
• Participation of women in leadership development programs in FY2019
as 21% of all participants, slightly down from 26% in FY2018.
• Deploying online learning platform (Cognicity) for unconscious bias
training for all employees from FY2020 onwards.
2.3 Networking: establish Women in
Completed
• Diversity in Leadership Forum series attended by 29 participants in
Leadership Forum series to provide
networking opportunities for key
leaders, with an emphasis on
women leaders across Boral
2.4 Track and report: develop key
performance indicators to
measure, track and report on
change and progress
FY2019, with 46% 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, 160 employees have participated in a Forum and 76%
of participants were women in leadership roles. This group forms the
Diversity in Leadership Alumni which provide feedback on initiatives
including the on-line learning platform on unconscious bias.
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% female participants. In FY2019, 38% of
participants were male.
Completed
• Diversity Dashboard being used to track, measure and report on
progress with the diversity plan.
• Objectives developed by Boral Australia’s leadership team FY2019
reviewed to assess effectiveness on reporting on progression of
diversity and inclusion and representation of women in leadership roles.
Ongoing
• Ongoing reporting and analysis by gender, pay levels, selection,
retention and promotion, with results provided through the Diversity
Dashboard to the Diversity Council for planning and program
development.
2.5 Benchmark: adopt external metric
to measure and benchmark
effectiveness of diversity strategy
Ongoing
• 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.
• Boral is a member of the Australian Veteran’s Employment Coalition,
working to support and progress defence force personnel transition to
civilian employment. In FY2019 Boral won the Prime Ministers Veterans
Employer of the Year – Large Employer Category for work on veterans
employment.
50
BORAL LIMITED 2019 ANNUAL REPORT
Strategic Element and Objective
Status
Key Outcomes
3
System and Process Design
3.1
Search and selection: embed
diversity principles in standardised
recruitment
Ongoing
• Against a target of 50%, in FY2019, 30% of our graduate intake were
women in professional and engineering disciplines. Of the graduates
recruited to commence in FY2020, 75% were women engineers,
reflecting senior leadership’s commitment and focus to exceed the 50%
target.
• 23% of new hires in manager roles were women, and 31% of recruitment
into professional roles were women.
In progress
• 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%. Against placement targets Boral achieved a 7%
improvement into manager, 6% improvement into professional and 17%
improvement into machinery operator/driver/technician/trade roles.
• To increase the number of female candidates applying for roles, Boral
is piloting Work180, a global advocate for working women, providing
job applicants with a transparent directory of endorsed employers who
support diversity, inclusion and equality.
• A pilot program is in progress, supported by traineeships, alumni and
recruitment processes to increase the number of former defence force
personnel joining Boral in front-line roles, with a focus on drivers.
• Survey and focus groups to be run with women across a wide range of
roles in Boral to understand their experiences and inform an approach
to retention for women to commence in FY2020.
3.2 Flexibility and flexible work
Completed
• Workplace Flexibility Guidebook launched across Boral Australia
practices: develop and implement
policy, guidelines and education
program to improve flexibility and
flexible work outcomes
Ongoing
focused on supporting employees and managers with flexible work.
• Since launching the Workplace Flexibility initiative, 81% of employees
who applied for an arrangement to work flexibly had their requested
arrangement approved without change.
• Online learning module released to support Flexibility Guidebook
deployment in FY2020.
• Tracking and reporting of working flexibly arrangement to measure
effectiveness of policy and Workplace Flexibility Guidebook.
In progress
• Metrics and reporting being developed to measure use of Guidebook
and on-line learning module.
Ongoing
• Ratio of female-to-male average base salary is 1.00:1.00, 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.
In progress
• Transition to retirement program piloted in FY2019, with feedback to
inform inititatives in FY2020
4 Gender Equality and Equity
4.1
Analysis: complete an analysis of
Boral pay equity at least annually
to monitor pay rates and identify
issues
5 Generational Diversity
5.1
Investigate: work/life needs of
different generations to understand
need to develop programs to
lift capability of managers to
effectively lead multi-generational
teams
51
Strategic Element and Objective
Status
Key Outcomes
6
Indigenous Relations
6.1
Indigenous Employment: through
Indigenous Employment strategy,
increase the representation of
Indigenous employees in Boral’s
workforce
6.2 Reflect Reconciliation Action
Plan: progress the actionable
commitments set out in the Plan
Ongoing
• Retention of Indigenous employees employed through Indigenous
employment initiatives such as the FY2011 Indigenous Relations and
Employment Plan continues to be a focus.
Completed
• Formal endorsement of Respect Reconciliation Action Plan by
Reconciliation Australia.
In progress
• Working group established under the leadership of the Diversity &
Inclusion Council to work with leaders on achieving the actionable
commitments set out in the Plan.
• Working group to develop dashboard to measure and report on
progress on actionable commitments.
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 2019:
Role
Board
Executive management2
Middle management3
Other roles4
Total
Female
Male
Number
Percentage
Number
Percentage
3
27
114
2,225
2,366
43
17
13
20
20
4
129
742
8,679
9,550
57
83
87
80
80
1. Includes all full-time, part-time and casual employees of Boral and its wholly owned subsidiaries, but excludes employees in joint ventures and
contractors.
2. Executive management includes leadership positions four reporting levels from the CEO & Managing Director.
3. Middle management includes management and leadership positions five 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 25 in the Sustainability Overview.
Boral’s Diversity Policy is available on Boral’s website.
52
BORAL LIMITED 2019 ANNUAL REPORT
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 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 while at different points in time through FY2019 Boral’s non-executive Directors met
and exceeded these guidelines, if reviewed based on a closing share price at 30 June 2019 some holdings were slightly below the
guideline due to the lower share price.
Details of Directors’ shareholdings in the Company are set out on page 58 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.
53
COMMUNICATIONS WITH SHAREHOLDERS
The Company’s policy is to promote effective two-way communication with shareholders and other investors so 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
Boral has a dedicated investor relations team that facilitates ongoing engagement with institutional
shareholders, retail investor groups, analysts and proxy advisors. To encourage two-way
communication, the Company’s investor relations team and share registry can be contacted directly by
shareholders by telephone or electronically via email. The links to these contacts are available on the
Boral website at www.boral.com/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.
Company announcements 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.
General meetings
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 they
would like addressed at the AGM.
At the AGM, 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.
54
BORAL LIMITED 2019 ANNUAL REPORT
ANNUAL REPORT 2019
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 2019.
(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 Message from Mike Kane, CEO &
Managing Director, the Group President Ventures & CFO’s review
and Divisional performance, on pages 6–19 of the Annual Report
accompanying the Directors’ Report.
(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 Group reported a net profit after tax of $272 million after
recognising a net significant item loss of $168 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
Note 8.2 of the financial statements sets out the events which
occurred subsequent to year-end. Other than the matters
disclosed, 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
The OFR sets out information on Boral’s business strategies
and prospects for future financial years. This information has
been provided to enable shareholders to make an informed
assessment of our business strategies and future prospects.
While the Company continues to meet its obligations in respect
of continuous disclosure, we have not included information
where it would be likely to result in unreasonable prejudice to
Boral. This includes information that is commercially sensitive,
is confidential or could give a third party a commercial advantage
(for example, details of our internal budgets and forecasts).
Risks
The achievement of Boral’s future prospects may be adversely
impacted by several risks, some of which are beyond our control.
An overview of the material business risks facing the Group and
our approach to managing those risks is set out below.
Additional information regarding Boral’s material business risks
and climate-related risks is included in the OFR, the Risks and
Responses section (pages 20–21) and Sustainability Overview
section (pages 22–37) of this Annual Report. The Group’s
broader risk identification and management framework is also set
out in the Corporate Governance Statement on pages 40–54 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
(b)
the results of those operations in future financial years, or
• monetary policies in the countries in which Boral operates
(c) Boral’s state of affairs in future financial years.
(such as a change in interest rates)
(5) LIKELY DEVELOPMENTS, BUSINESS STRATEGIES,
PROSPECTS AND RISKS
Likely developments, business strategies and prospects
The OFR refers to likely developments in Boral’s operations
in future financial years and the expected results of those
operations. Other than the information set out in the OFR,
information regarding other likely future developments in Boral’s
operations and the expected results of those operations has not
been included in the Directors’ Report.
•
•
•
the 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.
55
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To manage these 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 22–37 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 unavailable or damaged as a
result of unanticipated failures, outages or force majeure events.
In addition, Boral’s overall maintenance strategies and programs
are designed to mitigate such incidents.
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 systematic risk management program which actively
manages and mitigates risks from a local site operating level
through to Group incorporating 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 response, Boral has
coordinated cyber security response plans across each of its
Divisions which are aligned with the globally recognised National
Institute of Standards and Technology (NIST) security framework.
Divisional cyber security managers are also responsible for
developing and implementing security improvement plans
to mitigate cyber threats. In addition, Boral has rolled-out
information security awareness training to all employees,
invested in market-leading firewall defense and enhanced
external monitoring and reporting 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, including utilising the broader portfolio of sites
and capabilities to support continuity of supply.
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.
56
BORAL LIMITED 2019 ANNUAL REPORT
(6) ENVIRONMENTAL PERFORMANCE
Details of Boral’s performance in relation to environmental
regulation are set out on pages 29–34 of the Sustainability
Overview in this Annual Report.
(7) OTHER INFORMATION
Other than information in the Annual Report, there is no
information that shareholders of the Company would reasonably
require to make an informed assessment of:
(a)
the operations of Boral
(b)
the financial position of Boral, and
(c) Boral’s business strategies and its prospects for future
financial years.
(8) DIVIDENDS PAID OR RESOLVED TO BE PAID
Dividends paid to shareholders during the year were:
Total
dividend
($m)
164.1
152.4
the final dividend of 14.0 cents per ordinary
share (50% franked at the 30% corporate tax rate)
for the year ended 30 June 2018 was paid on
2 October 2018
the interim dividend of 13.0 cents per ordinary
share (50% franked at the 30% corporate tax rate)
for the year ended 30 June 2019 was paid on
15 March 2019
The Directors have resolved to pay a final dividend of 13.5 cents
per ordinary share (50% franked) for FY2019. The dividend is
expected to be paid on 1 October 2019.
(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 2019 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 2020. 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 39 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:
Kathryn Fagg
Djerriwarrh Investments Limited from May 2014 (current)
Incitec Pivot Limited from April 2014 (current)
(9) NAMES OF DIRECTORS
The names of persons who have been Directors of the Company
during or since the end of the year are:
Mike Kane
Sims Metal Management Limited from March 2019 (current)
Peter Alexander
No other directorships to be disclosed
Eileen Doyle
Oil Search Limited from February 2016 (current)
GPT Group from March 2010 to May 2019
John Marlay
Incitec Pivot Limited from December 2006 to December 2016
Karen Moses
Orica Limited from July 2016 (current)
Charter Hall Group from September 2016 (current)
Paul Rayner
Qantas Airways Limited from July 2008 (current)
Treasury Wine Estates Limited from May 2011 (current)
Kathryn Fagg
Mike Kane
Peter Alexander (appointment effective 1 September 2018)
Catherine Brenner (retired at Boral’s AGM 30 October 2018)
Eileen Doyle
John Marlay
Karen Moses
Paul Rayner
With the exception of Peter Alexander, who was appointed
effective 1 September 2018, and Catherine Brenner who retired
at Boral’s AGM on 30 October 2018, all Directors have been
Directors of the Company at all times during and since the end of
the year.
(10) OPTIONS
Boral has no outstanding options granted over unissued shares
of the Company, no options that lapsed during the year and no
shares of the Company that were issued during the year as a
result of the exercise of options. The last outstanding options
expired 6 November 2014.
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(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
Peter
Alexander
Catherine
Brenner
Eileen Doyle
Kathryn Fagg
Mike Kane
John Marlay
Karen Moses
Paul Rayner
11
3
12
12
12
12
12
12
10
3
12
12
12
12
12
12
–
–
4
–
–
–
4
4
–
–
4
–
–
–
4
4
3
1
–
4
–
4
–
–
3
1
–
4
–
4
–
–
–
–
4
1
–
4
4
–
–
–
4
1
–
4
4
–
The Chairman and the CEO & Managing Director attend all Board and Committee Meetings.
(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.
Peter Alexander
Eileen Doyle
Kathryn Fagg
Mike Kane b
John Marlay
Karen Moses
Paul Rayner
Non-executive
Directors’
Share Plana
–
–
–
–
–
–
2,597
Shares
59,571
45,248
83,562
1,239,961
39,310
31,757
121,055
The shares are held in the name of the Director except in the
case of:
• Peter Alexander: 58,571 shares are held by Peter C
Alexander & Arati A Alexander ATF The Peter C Alexander
Revocable Trust
•
Eileen Doyle: 43,324 shares are held by Mr SE Doyle and
Dr EJ Doyle for the S&E Doyle Super Fund A/C
• Kathryn Fagg: 82,000 shares are held by Kathryn Fagg &
Kevin Altermatt on behalf of the K2 Super Fund
•
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 FY2019.
b Mike Kane holds Share Acquisition Rights (SARs) under
Boral’s Equity Incentive Plan, details of which are set out in
the Remuneration Report.
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BORAL LIMITED 2019 ANNUAL REPORT
(16) NO OFFICERS ARE FORMER AUDITORS
(18) AUDITOR’S INDEPENDENCE DECLARATION
No officer of the Company has been a partner in an audit firm, or
a Director of an audit company, that is an auditor of the Company
during the year or was such a partner or Director at a time when
the audit firm or the audit company undertook an audit of the
Company.
(17) NON-AUDIT SERVICES
Amounts paid or payable to Boral’s auditor, KPMG, for non-audit
services provided during the year by KPMG totalled $1,425,000.
These services consisted of:
Taxation compliance services in Australia
Advisory and assurance-related services in
Australia
Taxation compliance services in jurisdictions
other than Australia
Advisory and assurance-related services in
jurisdictions other than Australia
$402,000
$198,000
$210,000
$615,000
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.
The auditor’s independence declaration made under section
307C of the Corporations Act is set out on page 60 of the Annual
Report and forms part of this Report.
(19) REMUNERATION REPORT
The Remuneration Report is set out on pages 61–82 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, 26 August 2019
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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 2019 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, 26 August 2019
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.
60
BORAL LIMITED 2019 ANNUAL REPORT
Liability limited by a scheme approved
under Professional Standards Legislation.
ANNUAL REPORT 2019
2019 Remuneration Report
Message from the Chairman of the Remuneration & Nomination Committee
Dear shareholders,
On behalf of the Remuneration & Nomination Committee (Committee) and the Board, I am pleased to present Boral’s 2019
Remuneration Report (Report).
An important role of the Committee and the Board is to appoint the CEO and effectively manage succession. In February 2019, we
announced changes to our senior executive team to broaden leadership roles and responsibilities. These changes, which are outlined
on page 63, will better position Boral around executive capability today and in the future.
While Mike Kane has the full support of the Board and we expect him to remain in the role as CEO for around two more years, internal
development of executives is critically important to ensure that when the time comes we have good internal candidates to consider
for succession into the most senior roles, including the role of CEO. The new and expanded roles support our senior executive
development program and recognise the skills, capabilities and track record of key executives to deliver results and value for our
shareholders. Adjustments to KMP remuneration were made in FY2019 to reflect the changes in roles and responsibilities.
We remain committed to Boral having remuneration arrangements that take into account the expectations of our stakeholders and
align with good practices in Australia. As such, we continue to actively engage with our shareholders and their proxy advisers. This
has helped us to understand shareholder views and priorities, and to improve our remuneration practices and reporting.
Section 2 of our Report covers the key areas where feedback has been received, including information to improve the clarity and
transparency of our remuneration practices. These include:
1. Boral’s Long-Term Incentive (LTI) Return on Funds Employed (ROFE) performance hurdle
2. Safety and remuneration
3. Foreign exchange translation impacts on CEO remuneration paid in US dollars
4. Property earnings in Short-Term Incentives (STI).
It is important to us to have good alignment between executive pay and shareholder value, and we know this is also important to our
shareholders.
We believe that an executive’s base salary should not be excessive but it should be fair and competitive so that we attract and retain
great people. Executives should meet Boral’s expected standards in order to be paid that salary, which includes leading a safety
culture based on Zero Harm, having a customer-focused and engaged workforce, delivering our sustainability objectives, progressing
our business strategy and delivering financial results.
We believe that incentives should be paid for strong financial performance taking into account market cycles and budgets. Executives
should be rewarded for achieving and exceeding robust financial targets.
In FY2019, Boral delivered solid financial outcomes given some challenging external impacts including macro-economic conditions.
Our financial results however, were below where we expected them to be at the start of the year when our budgets and targets were
set. Our people worked hard to offset the impacts of lower than expected volumes and were able to make up considerable ground
through improvement initiatives and cost reductions. Despite this, across most of our businesses, we did not meet our targeted
EBIT outcomes and most executives, including our CEO and Group President Ventures & CFO, received zero short-term incentive
payments for FY2019.
Long-term incentive hurdles, based on Total Shareholder Returns (TSR) and Return on Funds Employed (ROFE), were also not met
this year, with Boral experiencing share price pressures alongside most other stocks in the materials sector in Australia and beyond.
While we did not meet LTI hurdles in FY2019, our incentive plans are aimed at supporting delivery of our long-term vision for Boral
and our growth plans, including synergies from the Headwaters acquisition, and our recently announced expanded USG Boral Asia
Joint Venture.
The remuneration outcomes for FY2019, clearly demonstrate alignment between executive pay and shareholder value.
Yours sincerely
John Marlay, Chairman, Remuneration & Nomination Committee
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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
FY2019 performance and actual pay received
Remuneration framework for FY2019
Remuneration governance
Non-executive Directors’ remuneration
Statutory remuneration disclosures
Glossary of key terms for the Remuneration Report
63
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BORAL LIMITED 2019 ANNUAL REPORT
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 2019 (FY2019). 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 FY2019.
Name
Position
Senior Executives
Mike Kane
Joseph Goss
Ross Harper
David Mariner
Chief Executive Officer & Managing Director (CEO)
Divisional Chief Executive, Boral Australia (ceased as KMP effective 28 February 2019)
Group President, Operations
President & CEO, Boral North America
Wayne Manners
President & CEO, Boral Australia (appointed as KMP effective 1 March 2019)
Rosaline Ng
Group President Ventures & CFO
Non-executive Directors
Kathryn Fagg
Peter Alexander
Chairman and non-executive Director
Non-executive Director (appointment effective 1 September 2018)
Catherine Brenner
Non-executive Director (retired as a Director at Boral’s AGM, effective 30 October 2018)
Eileen Doyle
John Marlay
Karen Moses
Paul Rayner
Non-executive Director
Non-executive Director
Non-executive Director
Non-executive Director
Section 2: Evolving our remuneration approach
Alignment to Boral’s strategy
Boral’s key strategic objective is to deliver superior shareholder returns through the cycle. To achieve this, our senior executives are
focused on clear strategic priorities for each division, which were underpinned by the following objectives in FY2019:
•
•
deliver Zero Harm, performance excellence and improvement initiatives
deliver the year two synergies from the integration of the Headwaters business into Boral North America
• maintain and strengthen Boral’s leading position in Australia
•
•
progressing strategic growth opportunities to create value and leveraging innovation-based growth in USG Boral, and
deliver strong cash flows and maintain a prudent 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. Executives are incentivised to achieve financial objectives through short- and long-term incentives, and they are motivated to
achieve safety, environmental and other objectives because it is a well understood requirement of maintaining a job at Boral.
Changes to our executive team
Effective 1 March 2019, changes were made to the senior executive team to broaden leadership roles and responsibilities as the
Company looks to the future.
• Ros Ng, took on the expanded role of Group President Ventures & CFO. In addition to Group finance, corporate development,
Strategy and M&A she has broader responsibility for the USG Boral and Meridian Brick joint ventures. In this role, Ros works
closely with the joint venture CEOs to deliver the strategy and results.
• Ross Harper, formerly Executive General Manager Cement, was appointed Group President, Operations, responsible for Boral
Australia and Boral North America as well as Group Health, Safety & Environment and Innovation.
• Wayne Manners, formerly Executive General Manager, Western Australia, Building Products & Major Projects, was appointed
President & CEO, Boral Australia.
Joseph Goss, formerly Divisional Chief Executive, Boral Australia moved to a senior advisory role reporting to the CEO from 1 March
2019.
Mike Kane’s expected tenure as Boral’s CEO remains unchanged. In March 2019, we said we expect Mike to remain as our CEO for a
further two to three years.
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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, which includes the expectations of Boral’s stakeholders
and market practice. In ensuring current and future business needs can be met the Committee has focused its efforts on:
• Making sure 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, recognising that Boral is an Australian
headquartered company, and
•
Enabling the transfer of key talent quickly and easily between businesses and regions.
The Committee has continued to listen to shareholder feedback, which in recent years has been focused on:
•
improving the clarity and transparency of remuneration disclosures, and
• STI and LTI plans that continue to recognise and achieve an appropriate balance for both executives and shareholders.
Prior year decisions impacting from FY2019
Issues and decision
Comments
LTI Performance Hurdle
Decision to retain ROFE as an
appropriate LTI measure, with
a new target-setting approach
adopted for FY2019 grants
onwards.
ROFE targets are now set relative
to the weighted average cost of
capital (WACC) and the target
vesting range has broadened. This
directly incentivises executives
to deliver returns exceeding the
WACC through market cycles.
ROFE targets for grants prior to
FY2019 were not adjusted.
Relative TSR measured against
the S&P/ASX100 Index was
retained.
As indicated in the FY2018 Remuneration Report, Boral reviewed whether ROFE continued to
be the most appropriate measure 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 former approach to setting ROFE targets, and the new approach applied to FY2019 LTI
grants and onwards are summarised below:
FY2018 approach:
FY2019 approach:
ROFE targets set against an absolute measure
ROFE targets determined relative to WACC
Historically, the Board set absolute ROFE
targets with reference to Boral’s forecast long-
term financials. This approach had a number of
limitations:
• forecast and actual ROFE performance
fluctuates materially given the cyclical nature
of business conditions
• targets did not explicitly factor in Boral’s
WACC
• any significant portfolio changes increased 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, increased the chance
of ‘all or nothing’ vesting.
To address limitations of the FY2018
approach, ROFE targets are now set relative
to Boral’s WACC for the relevant testing
period and a broader vesting range has
been introduced which is strongly skewed
to outperformance. These adjustments:
• provide a less volatile approach for
measuring ROFE performance
• 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.
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BORAL LIMITED 2019 ANNUAL REPORT
Prior year decisions impacting from FY2019 (continued)
Issues and decisions
Comments
LTI Performance Hurdle
(continued)
The chart below illustrates how the new approach would have applied to the 17 years
preceding the change and the one year following the change based on FY2019 performance.
Over this period, reported ROFE would have exceeded WACC seven times (39% of the time)
and would have exceeded the stretch target five times (28% 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%
F Y 2002
F Y 2003
F Y 2004
F Y 2005
F Y 2006
F Y 2007
F Y 2008
F Y 2009
F Y 2010
F Y 2011
F Y 2012
F Y 2013
F Y 2014
F Y 2015
F Y 2016
F Y 2017
F Y 2018
F Y 2019
ROFE
Target (WACC)
Stretch (WACC + 2%)
Note: The chart above has not been adjusted retrospectively. Historic ROFE calculations include unadjusted
post-tax joint venture (JV) earnings. FY2019 figures are based on FY2019 results only rather than a
three-year average, and include pre-tax JV earnings.
Broader vesting range from FY2019
The vesting range was expanded from 0.5% to 2.0%, with the new range emphasising
performance above WACC. The vesting range and payout percentages from FY2019 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 internal and 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 from FY2019 LTI Grant
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) is now included in the pre-tax
ROFE calculation, consistent with the treatment for Boral’s wholly owned businesses.
WACC is 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 2019
(for the FY2020 grant). Previous ROFE targets and calculations for grants prior to FY2019 are
not affected.
The WACC and ROFE calculation is overseen by the Audit & Risk Committee, supporting the
Remuneration & Nomination Committee and the Board. It is also reviewed and validated by an
independent external advisor. The calculated WACC for each year and the Company’s ROFE
performance will be disclosed retrospectively in Boral’s Remuneration Report. See Section 4 for
further details.
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Prior year decisions impacting from FY2019 (continued)
Issues and decisions
Comments
Safety & Remuneration
Managing safety well is a
fundamental part of everyone’s
role at Boral.
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. After considering the
cultural aspects and performance outcomes, the Board remains of the view that this is the right
approach for Boral.
Targeted Retention Incentive
No retention incentives were
granted to executives in FY2019.
The retention incentive awarded
to executives in September 2015
vested in September 2018.
CEO Remuneration
The CEO’s Base Cash Salary (BCS)
is paid in US dollars and does not
benefit from any A$/US$ currency
fluctuations.
A$ BCS and FAR equivalent are
used in the Remuneration Report
for reporting purposes only.
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. The Board continues
to examine Boral’s track record in taking appropriate responsive action, including terminating
employment for poor safety management and safety breaches. In FY2019, 30 employees in
various roles across Australia and North America had their employment terminated because
of a breach of safety standards and protocols, including poor management of safety. The
combination of strengthened safety culture and performance management is considered the
right approach for Boral.
The one-off retention incentive awarded to eight key executives in September 2015 contributed
to maintaining stable leadership and continuity in delivering business transformation initiatives. It
was intended to minimise the risk of further targeted approaches from competitors and to retain
our key talent for potential succession opportunities across a number of senior roles.
All employees awarded a Targeted Retention Incentive were successfully retained, enabling the
Board to progress CEO succession development.
The targeted retention incentives awarded in September 2015 vested in September 2018.
No additional executive retention incentives have been awarded since the September 2015
allocation and none will be awarded in FY2020.
From 1 July 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. Under the new arrangements, the CEO’s remuneration is paid in US dollars as Base
Cash Salary (BCS) with STI and LTI opportunity calculated as a percentage of BCS. Outlined
below is the outcome of those changes on the CEO’s remuneration from 1 July 2017:
BCS
STI as % 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.
Adjustments to the CEO’s remuneration are calculated on his US dollar BCS. His US dollar
remuneration is converted to Australian dollars for reporting and accounting purposes based
on the A$/US$ exchange rate, averaged over the 12 months to 30 June for the reporting period.
The effect of the change in A$/US$ exchange rates since 1 July 2017 on reporting of the CEO’s
remuneration is shown in the table below:
1 July 2017
30 June 2018
30 June 2019
A$0.7545*
A$0.7735*
A$0.7145*
US$
A$
A$
A$
1 July 2017
1,299,674
1,722,563
1,680,251
1 September 2018**
1,338,664
1,774,240
–
1,873,568
* The A$/US$ exchange rate averaged over the 12 months for the reporting period to 30 June.
** 1 September 2018 was the effective date of the salary increase.
On 1 July 2017, the A$ value of the CEO’s BCS was reported as A$1,722,563. The US$ value
of the CEO’s BCS did not change in FY2018. However, for reporting purposes his BCS was
A$1,680,251 because of the change in the A$/US$ exchange rate from 1 July 2017 to 30 June
2018.
In FY2019, the CEO was awarded a 3% increase, effective 1 September 2018, to his US$ BCS
to US$1,338,664. The exchange rate used to convert the CEO’s US$ BCS to A$ is 8% less than
the A$/US$ exchange rate used to convert his US$ BCS in FY2018. The effect of this change in
foreign exchange translation between the Australian dollar and US dollar is that it appears the
CEO’s BCS has increased by more than 3%, which is not the case.
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BORAL LIMITED 2019 ANNUAL REPORT
FY2019 review areas and decisions
Issues and decisions
Comments
Culture, governance and
remuneration
Property earnings
Property is an ongoing contributor
to Boral’s earnings results and
its performance is recognised in
Boral incentives.
While Boral recognises that our business is not directly involved in financial services, the
findings and recommendations of several inquiries into corporate governance and practices,
including the Hayne Royal Commission report released in February 2019, provide opportunities
to ensure our practices continue to meet internal and external expectations.
Boral is looking more closely at what aspects of our organisational culture can reinforce strong
governance and accountability. This includes taking a holistic approach to the employee
lifecycle, which includes culture, leadership, safety, competency, performance and pay.
The Property business unit was established in 2001 to optimise returns from property
transactions. Since that time, the Property business has on average contributed $33m EBIT per
annum.
Following feedback at the 2018 AGM, the Board reviewed the appropriateness of including
property earnings in incentive plan calculations. While the Board recognises that property
earnings can be lumpy from year to year, the fact is that property earnings are ongoing and
management has to work hard to deliver those earnings for our shareholders.
On the basis of its review, the Board affirmed it remains appropriate for Boral to include
property in Boral’s incentive plan calculations. Analysis of historical outcomes showed that
property is a regular contributor to EBIT outcomes.
The Board continues to review targets and outcomes from the Property business as part of its
annual process.
Property EBIT and percentage STI paid
101%
94%
100%
127%
137%
104%
36%
14%
7%
84%
Property EBIT
STI (% of target)
8
0
Y
F
9
0
Y
F
0
1
Y
F
1
1
Y
F
2
1
Y
F
3
1
Y
F
4
1
Y
F
5
1
Y
F
6
1
Y
F
7
1
Y
F
8
1
Y
F
9
1
Y
F
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Section 3: FY2019 performance and actual pay received
During FY2019, construction activity and demand for building products was lower than expected by market forecasters and by Boral.
In Australia, housing starts were 15% lower than the prior year and volumes were impacted by unplanned delays and disruptions
to several major infrastructure projects. In North America, housing starts declined by 2% and activity was impacted by extreme
wet weather over an extended period in several of Boral’s key markets. While Boral’s business delivered solid gains through cost
reduction programs, price and other business improvement initiatives, to help offset the lower than expected volumes, the FY2019
results were below budget which is reflected in the level of STI achieved.
Financial performance
FY2015
FY2016
FY20172
FY2018
FY2019
Earnings per share1,3 (cents)
Dividends per share (cents)
Return on equity1 (%)
29.7
18.0
7.1
33.3
22.5
7.6
33.7
24.0
6.3
40.4
26.5
8.3
37.5
26.5
7.5
Boral share price
$8.50
$8.00
$7.50
$7.00
$6.50
$6.00
$5.50
$5.00
$4.50
$4.00
FY2015
FY2016
FY2017
FY2018
FY2019
Boral’s performance and 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, recognising the importance of ensuring that the level of payments received reflects performance achieved. Year-on-year, EBIT
targets for the STI have been set at challenging levels against our budget.
For FY2019, Boral reported EBIT1 of $660 million, which was $28 million or 4% lower than the prior year. This reduction in EBIT
reflects lower property earnings and lower volumes in Australia and USG Boral, and is partially offset by growth and synergies in
North America.
On average, less than one percent of maximum STI opportunity was paid out to Senior Executives for FY2019 performance, which is
equivalent to 1.1% of target STI on average. This compares to 84.4% of target STI and 52.3% of maximum STI, paid out for FY2018
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 (FY2010 to FY2019), Boral’s STI has paid out at an average 70.4% of target. This includes three years where no STI was paid
to the CEO: FY2012, FY2013 and FY2019.
Senior Executive historical STI % of target outcomes
Year
FY2010
FY2011
FY2012
FY2013
FY2014
FY2015
FY2016
FY2017
FY2018
FY2019 Average
(% of target)
93.8%
36.4%
14.0%
6.9% 100.4% 126.7% 136.5% 103.7%
84.4%
1.1%
70.4%
STI
Further details in Section 4
STI awards in FY2019 were close to zero, reflecting the 4% decrease in Group EBIT before significant
items, and equating to an achievement of 87% of the EBIT target set by the Board at a Group level for
STI purposes. Divisional EBIT increased by 27% for Boral North America, and decreased by 11% for
Boral Australia and 13% for USG Boral.
The Group President, Operations received an STI of $33,466, representing 7% of his target STI and
4% of his maximum STI, with 80% of this amount paid in cash and 20% deferred into equity for two
years. This STI outcome for the Group President, Operations was for the business unit portion of
his pro-rated STI for the period 1 July 2018 to 28 February 2019, when he was Executive General
Manager, Cement.
All other Senior Executives, including the CEO, received zero STI payments for FY2019.
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.
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BORAL LIMITED 2019 ANNUAL REPORT
Boral’s performance and LTI awards
Total Shareholder Returns performance in FY2019
Boral’s relative TSR performance declined in FY2019. Taking into account share price and dividends paid, Boral delivered a TSR
of -13.4% for shareholders between 1 July 2018 and 30 June 2019. This TSR ranked Boral below the median (18th percentile) of ASX
100 companies for FY2019.
Total Shareholder Returns performance over three years and seven years
Over the three year period from September 2015 to September 2018, Boral’s TSR of 32.8% was at the 43rd percentile of the
Company’s TSR comparator group, resulting in the 2015 LTI grant lapsing in full. Over the period from September 20111 to September
2018 (being the third testing date for the 2011 LTI grant), Boral’s TSR of 132.8% was at the 51st percentile. Given this was below the
59th percentile performance achieved in 2016, this resulted in the remainder of the 2011 LTI grant lapsing in full.
TSR for Boral vs ASX 100 companies: Sept 2015 to Sept 2018
TSR for Boral vs ASX 100 companies: Sep 2011 to Sep 2018
500%
400%
300%
200%
100%
0%
-100%
1st Quartile
2nd Quartile
3rd Quartile
4th Quartile
32.8%
BLD
700%
600%
500%
400%
300%
200%
100%
0%
-100%
1st Quartile
2nd Quartile
3rd Quartile
4th Quartile
132.8%
BLD
Return on Funds Employed performance
The use of ROFE is designed to test the efficiency and profitability of the Company’s capital investments. It links executive reward
with the achievement of improved ROFE performance and a long-term goal of ROFE exceeding the cost of capital through the cycle.
Boral’s 8.6% ROFE in FY2018 was below the 11.5% to 12.0% vesting range for the 2015 LTI grant and none of the ROFE tranche
vested.
Boral’s ROFE performance of 8.1% in FY2019, as measured by EBIT2 return on average funds employed, declined from previous
years, reflecting lower earnings from Boral Australia (including Property) and USG Boral, only partially offset by higher earnings
from Boral North America. The decline in ROFE also reflects the adverse impact of divested businesses (US Block and Denver
Construction Materials) which were sold early in the year. The opening funds employed includes divested businesses, but their
earnings contribution was negligible.
EBIT return on average funds employed (ROFE)2, %
8.5
9.1
9.2
8.6
8.1
6.6
4.7
FY2013
FY2014
FY2015
FY2016
FY2017
FY2018
FY2019
1. The 2011 LTI grant was the last year of retesting grants over a seven year period.
2. 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 FY2018, which was calculated on a monthly average funds employed basis,
recognising the impact of the Headwaters acquisition part way through the year.
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LTI
2015 LTI
Further details in Section 4
Vesting for the 2015 LTI was 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 43rd
percentile of the ASX 100 comparator group, below the vesting target. The ROFE target was not
met. Based on these outcomes, all awards lapsed.
Legacy plans
Until 2013, LTI awards were tested at different times over a seven year period based on relative
TSR performance. The 2011 LTI was the last LTI grant that was subject to multiple testing.
The 2011 LTI had its final test date on 1 September 2018. The target required for additional
vesting was not met with all outstanding awards lapsed.
Fixed annual remuneration (FAR) outcomes
The key remuneration outcomes for Boral’s Senior Executives in FY2019 are outlined below.
Component
Outcomes
FAR (or BCS for
US employees)
Further details in
Section 4
Increases in FAR/BCS were considered by the Board with reference to role responsibilities, including expanded
responsibilities and accountabilities, experience of individuals, Boral’s need to retain Senior Executives to support
succession planning, minimising the risk of competitors targeting executives and positioning remuneration against
the market. They were also made in conjunction with a restructure of the executive team.
In FY2019, the Board approved the following adjustments to Senior Executive FAR/BCS:
• CEO received an increase equivalent to 3% of BCS, reflective of market benchmarking undertaken against
Boral comparators
• Group President Ventures & CFO received a 9.9% increase to her FAR, reflecting the significant increase in
job size, responsibilities and role complexity, including assuming additional responsibility for the results of the
USG Boral and Meridian Brick joint ventures, in addition to Group finance, strategy and mergers & acquisitions
• President and CEO, Boral North America received a 3% increase to his BCS, reflective of market
benchmarking undertaken against Boral comparators and market movements for Senior Executive roles
• former Divisional Chief Executive, Boral Australia received a 2.5% increase to his FAR, reflective of market
benchmarking undertaken against Boral comparators and market movements for Senior Executive roles, and
• Group President, Operations received a 36.2% increase to his FAR, reflecting his promotion to a significantly
expanded role in terms of geographical scope, strategic impact, job size, complexity and additional
operational leadership responsibilities.
The President & CEO, Boral Australia commenced in his role and became a KMP on 1 March 2019. His FAR was
reflective of comparable senior executive roles and market benchmarking against Boral comparators.
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BORAL LIMITED 2019 ANNUAL REPORT
Actual remuneration for FY2019
The remuneration outcomes table below has been prepared to provide shareholders with a view of remuneration that was actually
paid to Senior Executives for FY2019. 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.
FY2019 remuneration cash outcomes table
Cash payments and other benefits received
Vesting of prior year
“at risk” equity awards
Super/
pension
payments
Expat
& other
allowancesc
Other
non-cashd
Total
payments
FBT
Vesting of
STI deferral
earned in
2016e
Vesting of
2011 & 2015
LTI Grantsf
Vesting of
2015 TRI
Rightsg
A$’000s
Fixed rema STI (cash)b
Mike Kane
1,842.8
Joseph Goss
Ross Harper
Wayne Manners
David Mariner
Ros Ng
679.2
679.8
225.0
755.4
925.9
US-based Senior Executivesh
US$’000
Mike Kane
David Mariner
1,316.7
539.7
–
–
26.8
–
–
–
–
–
308.9
–
27.3
8.3
155.8
27.8
220.7
111.3
–
8.7
–
–
–
–
–
100.5
–
2,252.2
103.5
17.9
106.2
906.8
745.6
248.1
968.2
4.5
3.0
–
7.2
3.1
57.0
42.8
19.0
1,015.5
428.9
145.4
78.5
–
63.5
127.2
71.8
40.8
–
–
1,609.2
691.8
306.5
45.4
–
–
–
–
–
–
–
–
–
496.5
349.5
–
365.1
465.5
–
260.8
A portion of actual remuneration received in FY2019 relates to the vesting of deferred STI and vesting of the Targeted Retention
Incentive. By providing these awards as equity, outcomes for Senior Executives were aligned to the outcomes for shareholders over
the vesting period.
Boral’s share price increased by 2.9% from September 2016 to September 2018. The following graph shows the difference between
grant and vesting value of the deferred STI award. It also shows the difference between grant and vesting value of the TRI rights
granted to eight senior executives in 2015, excluding the CEO.
Deferred STI
TRI Rights
A$’000s
$820
(97%)
$23
(3%)
$1,350
(81%)
$326
(19%)
Value at grant date
Additional value at vesting due to share price change
Ref
Item
Notes relating to the FY2019 remuneration cash outcomes table
a.
b.
c.
Fixed remuneration Fixed remuneration is cash salary paid to the Senior Executive for their period as a KMP. For Joseph Goss,
this is for the period to 28 February 2019, and for Wayne Manners, it is for the period from 1 March 2019.
STI (cash)
Expat & other
allowances
The value of STI represents 80% of the total STI with the remaining 20% deferred into equity for two years.
Expatriate allowances, travel 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.
d.
Other non-cash
e.
STI deferral
f.
LTI
g.
TRI Rights
Other non-cash is comprised of non-monetary benefits, including medical, life and disability insurance,
vehicle costs and parking. 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 2016 which vested on 1 September 2018,
calculated using the volume weighted average price (VWAP) of Boral ordinary shares in the five trading
days up to 1 September 2018, being $6.9291, multiplied by the number of rights which vested.
LTI performance targets were not met for the 2011 and 2015 LTI grants which resulted in these awards
lapsing in full.
The value for Targeted Retention Incentive (TRI) Rights provided as a one-off retention award in
September 2015 which vested on 1 September 2018. The value of these rights was calculated using the
VWAP of Boral ordinary shares in the five trading days up to 1 September 2018, being $6.9291, multiplied
by the number of rights which vested.
h
US-based Senior
Executives
Remuneration for US-based Senior Executives is converted from US$ to A$ for reporting and accounting
purposes based on the A$/US$ exchange rate, averaged over the 12 months to 30 June for the reporting period.
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Section 4: Remuneration framework for FY2019
Remuneration strategy
Boral’s remuneration strategy and framework provides the foundation for how remuneration is determined and paid. The chart below
summarises Boral’s remuneration strategy for FY2019.
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 FY2019, 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
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BORAL LIMITED 2019 ANNUAL REPORT
Remuneration framework details
Remuneration strategy
FAR / BCS
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.
2019 Outcomes
Description
Considerations in setting FAR / BCS:
• Position responsibilities and financial impact
• Individual’s knowledge, skills and experience, and
• Market practice for companies of similar size and
complexity to Boral.
Based on benchmarking outcomes, the CEO received a 3% adjustment to his Base Cash Salary from 1 September 2018.
Other Senior Executives not subject to significant role changes received FAR increases of between 2.5% and 3.0% from 1
September 2018. Senior Executives who assumed substantively larger roles received adjustments as described on page 70,
which reflect 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 hurdles
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 hurdles 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.
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.
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 malus or clawback provisions, should this be
required.
2019 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
FY2019, being EBIT (excluding significant items):
• CEO, Group President Ventures & CFO and Group
President, Operations: 100% Group EBIT, and
• Other Senior Executives: 50% Group EBIT and 50%
Divisional or Business EBIT.
The use of EBIT effectively aligns rewards for Senior
Executives with Boral’s focus on delivering strong earnings
through the business cycle.
Significant items are generally excluded on the basis
STI outcomes should reflect performance during the
relevant period and should not be skewed upwards (or
downwards) due to one-off investments or decisions in
prior performance periods.
The Board, supported by the Remuneration & Nomination
Committee and the Audit & Risk Committee, reviews
the treatment and classification of significant items
for remuneration purposes, when reviewing the
appropriateness of reward outcomes.
An STI of $33,466 (made up of a cash payment of $26,773 and the remainder deferred into equity for 2 years) was achieved
by the Group President, Operations based on performance over FY2019. The Group President, Operations’ STI payment
represented 7% of his target STI and 4% of his maximum STI. This outcome represented the business unit portion of his
pro-rated STI for the period 1 July 2018 to 28 February 2019, being the period when he was the Executive General Manager,
Cement.
The CEO and all other Senior Executives, received no STI payments for FY2019. This outcome reflected below-threshold
EBIT results for Boral Group and its divisions. Further information on the financial performance of the divisions is found on
pages 15–16 for Boral Australia and 17–18 for Boral North America.
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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
ROFE tests the efficiency and profitability of the Company’s
capital investments and is determined by the Board based on
EBIT (before significant items) in the year of testing as a
percentage of average funds employed (where funds employed
is the sum of net assets and net debt).
The ROFE performance hurdle is intended to reward
achievement linked to improving the Company’s ROFE
performance through the cycle.
Since the introduction of ROFE in FY2013, our long-term goal
has been to exceed the WACC over the whole of the
construction cycle, even though at some points in the cycle
returns may be lower than WACC. ROFE targets for annual LTI
awards have been set progressively with a view to achieving this
objective.
Since FY2013, Boral’s ROFE has generally increased alongside a
decreasing WACC. While the FY2019 ROFE result is lower than
FY2018, Boral Australia delivered a divisional ROFE which
substantially exceeded its cost of capital.
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
100% of FAR / BCS
The FY2019 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 2018 to
1 September 2021
Year ending 30 June
2021
The TSR vesting schedule to be applied for the FY2019 LTI
grant is:
If at the end of the period
the TSR of the Company is:
Proportion vesting:
Below the 50th percentile
At 50th percentile
0%
50%
Between the 50th and 75th percentile
Pro-rata vesting from
50% to 100%
Reaches or exceeds 75th percentile
100%
The ROFE vesting schedule to be applied for the FY2019
LTI grant is:
If the Company’s ROFE
performance for FY2021 is:
Proportion vesting:
Below WACC
At WACC (target)
Between WACC and
WACC plus 2.0%
0%
50%
Vesting on a straight
line basis
At or above WACC plus 2.0%
(stretch)
100%
2019 Outcomes
In September 2018, the 2015 LTI did not vest. TSR was at the 43rd percentile which was short of the minimum required for
vesting (50th percentile). Actual ROFE of 8.6% for FY2018 was below the 2015 LTI ROFE target for FY2018 of 11.5%.
While LTI grants will only be measured using the new FY2019 approach (ROFE targets determined relative to WACC) in three
years for the FY2019 grants, Boral’s FY2019 WACC on a ROFE equivalent basis was ~8.6%. This figure represents the first
year of the 3 year average pre-tax WACC that will be used to test the FY2019 grants in FY2021. Boral’s ROFE performance
adjusting for JV equity earnings for FY2019 was ~8.6%.
Legacy plans
Until 2013, LTI awards were tested at different times over a seven year period based on relative TSR performance. The 2011
LTI was tested during FY2019 and all outstanding equity lapsed on its third and final test date on 1 September 2018 as the
hurdle was not met.
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BORAL LIMITED 2019 ANNUAL 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 FY2019 is shown below, reflecting the remuneration mix should all performance
hurdles at maximum be met in full.
CEO
22%
32%
46%
Other
Senior Executives
34%
33%
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 FY2019 the Committee was supported
by the:
• Audit & Risk Committee in reviewing the calculation of ROFE relative to WACC, and reviewing financial results, and
• Health, Safety & Environment Committee in reviewing safety, 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.
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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 FY2019
The Board did not have cause
during FY2019 to apply its
discretion.
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.
Further information is available on
page 62 of the 2018 Annual Report.
Component
Board discretion
STI
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 Remuneration & Nomination Committee assists the Board on these
matters, supported also by the Audit & Risk Committee and Health, Safety
& Environment Committee, including in respect of financial performance,
safety performance and the treatment and classification of significant items,
considered in the context of reviewing the appropriateness of reward outcomes.
The Board also has the discretion to exercise malus or 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.
LTI
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 BCS
As at 30 June 2019, the CEO well exceeds the requirement
Senior Executives
50% of FAR / BCS
As at 30 June 2019, the majority of Senior Executives achieved the requirement*
* Progress is monitored on an ongoing basis, and while at different points through FY2019 all of Boral’s Senior Executives met and exceeded
these guidelines, if reviewed following the organisational changes announced in March 2019 and based on the closing share price at
30 June 2019, some holdings were below the guideline due to an increased requirement and the lower share price.
The Company’s guidelines for non-executive Directors’ minimum shareholdings are set out in the Corporate Governance Statement
on page 53 of this Annual Report.
External advice on remuneration
The Committee seeks information and advice regarding remuneration directly from external remuneration consultants Ernst & Young
(EY), who are independent of the Company’s management.
During FY2019, 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 FY2019 by the Committee and no changes were considered necessary.
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BORAL LIMITED 2019 ANNUAL 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/BCS
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, and
• 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. These are structured on a
total fee basis and 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 FY2019 were as follows:
Fees (A$)
Board
Audit & Risk
Remuneration & Nomination
Health, Safety & Environment
2019
2018
Chair
465,600
42,300
31,800
31,800
Member
155,000
21,600
15,900
15,900
Chair
454,200
41,300
31,000
31,000
Member
151,200
21,100
15,500
15,500
The total annual non-executive Director remuneration for the current Board of six non-executive Directors for FY2019 was $1,464,600
including superannuation. This was within the current aggregate fee limit of $2,000,000 per annum, which was approved at the
Company’s Annual General Meeting in November 2016.
A comprehensive review of the level of fees paid to Boral’s non-executive Directors was undertaken during the year, and included
a review of market benchmarking information prepared by EY, Boral’s external remuneration consultant. The review considered the
elements of size and complexity of the business, time commitments and fees paid for non-executive Directors of companies of a
comparable size. As a result of the market review, with effect from 1 July 2019, fees for non-executive Directors were increased by
2.0%, including fees for the Board Chairman, each Committee Chairman, base fees, and Committee member fees.
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Section 7: Statutory remuneration disclosures
The following Senior Executive remuneration table has been prepared in accordance with the accounting standards and has been
audited. The values in the table below align with the amounts expensed in Boral’s financial statements. Additional information has
been included for Mike Kane and David Mariner, who are paid in US$. The impact of currency movements in FY2019 when their US$
remuneration is converted to A$ may create the impression of significant increases in cash salary, which was not the case.
Senior Executive remuneration table
Short-term
Post-
employment
Share-based paymentsa
Other
Total
At-risk remuneration
A$’000s
Year Cash salaryb
Short-term
incentivec
Non-
monetary
benefitsd
Super-
annuation/
pensione
Rights
Deferred
equity
Retention
awards
(Sept 15)f
Long
service
leave
accrual
% of
remuneration
related to
performance
Total
% of target
STI paid
Senior Executives
Mike Kane
2019
1,842.8b
–
100.5
308.9 1,315.5
224.5
2018
1,654.4
1,108.0
162.6
301.8 1,302.3
363.5
Joseph Goss1
2019
632.2
–
227.7
2018
1,026.8
579.8
315.9
Ross Harper
2019
2018
693.2
580.8
26.8
340.8
Wayne Manners2 2019
243.5
2018
–
David Mariner
2019
Rosaline Ng
2018
2019
2018
755.4
679.5
929.6
869.8
–
–
–
125.7
–
327.3
11.7
8.4
14.8
–
57.0
52.8
61.8
63.4
231.5
56.8
336.9
132.4
133.3
–
–
27.3
36.3
8.3
27.8
27.3
153.1
144.6
32.7
47.2
70.5
9.1
–
–
–
155.8
242.7
131.7
203.9
24.2
44.8
62.0
–
–
–
49.8
3,842.0
40.1%
0.0%
20.4
13.3
18.0
4,913.0
1,161.5
2,543.1
56.5%
74.9%
24.8%
0.0%
41.3% 120.8%
–
63.6
1,022.9
22.2%
6.6%
93.8
–
–
–
98.0
10.8
15.1
–
–
–
1,286.0
43.2% 113.8%
323.5
12.9%
0.0%
–
–
–
1,235.1
1,336.4
21.6%
28.0%
26.5%
0.0%
37.5%
0.0%
318.4
–
38.5
1,438.1
306.2
103.2
125.0
12.9
1,835.1
40.1%
74.9%
Total
2019
5,096.7
26.8
473.5
528.1 2,293.9
423.8
–
180.3
9,023.1
30.4%
1.1%
2018
4,811.3
2,481.6
603.1
497.1 2,293.9
714.4
450.1
62.1
11,913.6
46.1%
84.4%
US-Based Senior Executives3
US$’000s
Mike Kane
2019
1,316.7
–
71.8
220.7
939.9
160.4
2018
1,279.7
857.0
125.8
233.5 1,007.3
281.2
David Mariner
2019
2018
539.7
525.6
–
97.3
40.8
40.8
111.3
173.4
101.9
157.7
17.3
34.6
–
–
–
75.8
35.5
2,745.0
40.1%
0.0%
15.8
3,800.3
56.5%
74.9%
–
–
882.5
1,033.7
21.6%
28.0%
0.0%
37.5%
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.
b.
Cash salary
For the grants prior to FY2013, the value is allocated to each reporting period evenly over the period of five
years from the grant date. For the grants issued from FY2014, the value is allocated evenly over the period
of three years from the grant date. The value disclosed above is the portion of the fair market value of the
rights for each relevant reporting period, including the value of deferred equity.
Cash salary includes all fixed salary and accrued annual leave. As noted in Section 2, the change in Mike
Kane’s cash salary is the result of change in the value of the A$/US$ foreign exchange used to convert his
US dollar base cash salary to Australian dollars. In FY2018 his cash salary was converted based on A$/
US$ exchange rate averaged over the 12-month period to 30 June 2018 of $0.7735. For FY2019, the rate
used to convert his cash salary was $0.7145, or 8% less than the rate applied in FY2018.
c.
d.
e.
f.
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, travel allowances, vehicle costs and applicable fringe benefits tax payable by the Company
upon providing these benefits.
Superannuation /
Pension
Under the terms of his expatriate agreement, superannuation contributions have not been made in FY2019
for Joseph Goss.
Retention awards
(Sept 15)
These values relate to awards made in September 2015, which are expensed over the three years to
FY2019. No retention awards were made in FY2019.
1. Joseph Goss ceased to be a KMP effective 28 February 2019.
2. Wayne Manners became a KMP effective 1 March 2019.
3. Share-based payments are converted at the average exchange rates for the respective years, being $0.7145 for FY2019 and $0.7735 for FY2018.
78
BORAL LIMITED 2019 ANNUAL 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.
Balance
as at 30
Other
Equity Type
June 2018
balancesa
Granted during
the year as
remunerationb
Value of
Grantc
Exercised/
Vested during
the year
Value of Rights
Vestedd
No.
No.
No.
$
549,487
2,412,247
No.
–
$
–
Lapsed/
Cancelled
during the
Balance
as at 30
yeare
June 2019
No.
No.
(638,803)
1,632,812
Mike Kane
LTI Rights
1,722,128
Deferred STI Rights
120,638
Joseph Goss1
LTI Rights
421,757
Deferred STI Rights
37,425
TRI Rightsf
71,649
Ross Harper
LTI Rights
202,409
Deferred STI Rights
18,713
TRI Rightsf
50,435
–
–
–
–
–
–
–
–
Wayne Manners1
LTI Rights
Deferred STI Rights
–
–
122,270
11,886
David Mariner
LTI Rights
287,074
Deferred STI Rights
15,250
TRI Rightsf
52,684
Rosaline Ng
LTI Rights
398,466
Deferred STI Rights
33,783
TRI Rightsf
67,187
–
–
–
–
–
–
Notes relating to the Equity grants table are outlined below:
Ref
Item
Explanation
39,977
277,005
(61,902)
428,925
–
98,713
147,927
649,400
–
–
(135,560)
434,124
20,921
144,964
(20,979)
145,366
–
–
(71,649)
496,463
–
–
37,367
–
64,615
283,659
–
–
(78,230)
188,794
12,296
85,200
(11,330)
78,507
–
–
–
–
–
–
103,930
456,252
(50,435)
349,469
–
–
–
–
–
–
4,537
31,437
(9,170)
63,540
–
–
(52,684)
365,053
–
–
–
–
19,679
–
122,270
11,886
(79,612)
311,392
–
–
10,617
–
135,271
593,839
–
–
(139,762)
393,975
11,810
81,833
(18,363)
127,239
–
–
(67,187)
465,545
–
–
27,230
–
a.
b.
Other balances Rights held by Wayne Manners at the time of his appointment as a KMP on 1 March 2019.
Rights granted
during the year
as remuneration
All rights were granted to Senior Executives effective 1 September 2018.
c.
Value of grant
The fair market value of LTI Rights granted on 1 September 2018, calculated using a Monte Carlo
simulation analysis, is $3.52 per right for two-thirds of the grant relating to the TSR measure and $6.13
per right for one-third of the grant relating to the ROFE hurdle. The fair market value of the Deferred STI
Rights is $6.9291 per right, reflecting a face value at time of grant calculated by taking the volume weighted
average price (VWAP) of Boral shares on the ASX during the five-day trading period up to but not including
1 September 2018.
d.
e.
f.
Value of rights
vested
Calculated per right as the market price of Boral shares on the date of vesting. No exercise price is payable
in respect of rights that vest.
Lapsed rights
Rights that lapsed during the year were granted to Senior Executives under the 2011 LTI Grant (the
remaining unvested portion of this grant lapsed) and the 2015 LTI Grant (100% lapsed).
TRI Rights
Targeted Retention Incentive Rights provided as a one-off retention award in September 2015, which
vested on 1 September 2018.
1. Joseph Goss ceased to be a KMP effective 28 February 2019. Wayne Manners became a KMP effective 1 March 2019.
79
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A
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T
A
T
E
M
E
N
T
S
I
N
O
T
E
S
T
O
T
H
E
F
N
A
N
C
A
L
S
T
A
T
E
M
E
N
T
S
I
S
T
A
T
U
T
O
R
Y
R
E
P
O
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S
H
A
R
E
H
O
L
D
E
R
I
N
F
O
R
M
A
T
O
N
I
I
I
F
N
A
N
C
A
L
H
S
T
O
R
Y
I
Senior Executive equity rights balances
The number of rights included in the balance at 30 June 2019 for the Senior Executives is set out below:
Senior Executives
Mike Kane
Joseph Goss1
Ross Harper
Wayne Manners1
David Mariner
Rosaline Ng
Year of grant
2016
2017
2018
Balance as at
30 June 2019
LTI Rights
Deferred STI Rights
LTI Rights
Deferred STI Rights
LTI Rights
Deferred STI Rights
LTI Rights
Deferred STI Rights
LTI Rights
Deferred STI Rights
LTI Rights
Deferred STI Rights
522,096
–
138,101
–
59,490
–
38,544
–
101,312
–
123,937
–
561,229
58,736
148,096
16,446
64,689
7,383
40,300
4,455
106,150
6,080
134,767
15,420
549,487
39,977
147,927
20,921
64,615
12,296
43,426
7,431
103,930
4,537
135,271
11,810
1,632,812
98,713
434,124
37,367
188,794
19,679
122,270
11,886
311,392
10,617
393,975
27,230
Non-executive Directors’ total remuneration
The remuneration of the non-executive Directors is set out in the following table.
A$’000s
Kathryn Fagg, Chairman
Peter Alexander
Catherine Brenner
Eileen Doyle
John Marlay
Karen Moses
Paul Rayner
Total
2019
2018
Short-Term
Board and
Committee Fees
Travel
Allowances
Post-
employment
superannuation
Total Fees
Short-Term
Board and
Committee Fees
Post-
employment
superannuation
Total Fees
445.1
142.4
51.5
190.3
180.3
175.8
180.2
–
5.0
–
–
–
–
–
1,365.6
5.0
20.5
–
4.8
18.0
17.1
16.6
17.0
94.0
465.6
147.4
56.3
208.3
197.4
192.4
197.2
180.5
–
155.8
185.7
166.4
171.5
175.8
1,464.6
1,035.7
17.2
–
14.8
17.6
15.8
16.3
16.7
98.4
197.7
–
170.6
203.3
182.2
187.8
192.5
1,134.1
Fees for Catherine Brenner are for part of the year from 1 July 2018 to the Annual General Meeting held on 30 October 2018, at
which time Catherine retired by rotation and decided not to stand for re-election. Fees for Peter Alexander are from his appointment
date as a non-executive Director, effective 1 September 2018. Fees for Kathryn Fagg reflect her appointment as Chairman effective
1 July 2018.
1. Joseph Goss ceased to be a KMP effective 28 February 2019. Wayne Manners became a KMP effective 1 March 2019.
80
BORAL LIMITED 2019 ANNUAL 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
Senior Executives
Mike Kane
Joseph Goss1
Ross Harper
2019
2018
2019
2018
2019
2018
Wayne Manners1 2019
David Mariner
Rosaline Ng
2018
2019
2018
2019
2018
Non-executive Directors
Kathryn Fagg, Chairman
Peter Alexander
Catherine Brenner
Eileen Doyle
John Marlay
Karen Moses
Paul Rayner
Loans
1,207,153
946,073
173,391
74,224
54,510
44,510
117,154
–
95,557
95,557
92,831
68,717
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
61,902
492,620
92,628
99,167
61,765
55,131
–
–
61,854
56,332
85,550
116,107
–
–
–
–
–
–
–
–
–
–
–
–
(29,094)
(231,540)
(46,314)
–
(50,435)
(45,131)
–
–
(61,854)
(56,332)
(58,381)
(91,993)
1,239,961
1,207,153
219,705
173,391
65,840
54,510
117,154
–
95,557
95,557
120,000
92,831
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
38,562
38,562
–
–
48,405
48,405
45,248
39,948
39,310
39,310
31,757
21,757
123,652
103,152
–
–
–
–
–
–
–
–
–
–
–
–
–
–
45,000
–
59,571
–
–
–
–
5,300
–
–
–
10,000
-
20,500
83,562
38,562
59,571
–
48,405
48,405
45,248
45,248
39,310
39,310
31,757
31,757
123,652
123,652
There were no loans made or outstanding to Senior Executives or non-executive Directors during FY2019.
1. Joseph Goss ceased to be a KMP effective 28 February 2019. Wayne Manners became a KMP effective 1 March 2019.
81
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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, 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.
Section 8: Glossary of key terms for the Remuneration Report
Term
BCS
Description
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:
Face value of LTI
performance rights
Fair market value of LTI
performance rights
FAR
KMP
• 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).
The face value of LTI performance rights is determined from the Volume Weighted Average
Price (VWAP) of Boral shares on the ASX during the 5 day trading period up to but not including
1 September.
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 the TSR performance hurdle will not be met. Other factors taken into account when
determining the discount from face value include the time to vesting, expected volatility of the share
price and the dividends expected to be paid in relation to the shares. This approach is in line with the
methodology used for valuing TSR tested rights for accounting purposes. The fair value is determined
by an independent valuer (being PwC).
Fixed Annual Remuneration (FAR) includes base salary, non-cash benefits such as provision of a
vehicle (including any fringe benefits tax) and superannuation contributions.
The Key Management Personnel of the Company. Defined as the people accountable for planning,
directing and controlling the affairs of the Company and its controlled entities. Includes each of the:
• non-executive Directors, and
• Senior Executives.
Performance right
Upon vesting, each performance right entitles the executive to one ordinary share.
Relative TSR
Relative Total Shareholder Return (TSR) measures the compound growth in the Company’s TSR over
the performance measurement period compared with the TSR performance over the same period of a
comparator group.
ROFE
TSR represents the change in capital value of a listed entity’s share price over a three year
performance period, plus reinvested dividends, expressed as a percentage of the opening value.
Return on Funds Employed (ROFE) tests the efficiency and profitability of the Company’s capital
investments and is determined by the Board based on EBIT (before significant items) in the year of
testing as a percentage of average funds employed (where funds employed is the sum of net assets
and net debt).
Senior Executives
The CEO & Managing Director as well as other current and former members of the senior executive
team who are KMP of the Company.
WACC
The broader management group (who also participate in the various reward programs) are referred to
as “executives”.
Weighted Average Cost of Capital (WACC) reflects the aggregate cost of the Company’s debt and
equity. For the purposes of Boral’s LTI plans, WACC is calculated on a pre-tax basis so that it can be
compared to ROFE on an equivalent basis.
82
BORAL LIMITED 2019 ANNUAL REPORT
FINANCIAL STATEMENTS
Contents
Boral Limited and Controlled Entities
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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
3.7 Contract liabilities
84
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86
87
88
89
92
97
98
99
100
101
103
104
105
106
108
110
111
112
Section 4: Capital and financial structure
4.1 Loans and borrowings
4.2 Financial risk management
4.3 Issued capital
4.4 Reserves
Section 5: Taxation
5.1 Income tax expense
5.2 Deferred tax assets and liabilities
Section 6: Group structure
6.1 Discontinued operations
6.2 Equity accounted investments
6.3 Acquisitions
6.4 Controlled entities
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
113
115
125
125
126
128
130
132
134
135
139
139
139
141
142
142
143
144
144
145
146
148
The presentation of before significant items measures of EBITDA,
EBITA, EBIT and net profit after tax 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.
83
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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
1. Refer note 1D for further details.
2019
$m
5,800.6
(3,845.6)
(1,006.5)
(398.5)
(5,250.6)
36.5
(61.5)
(127.7)
397.3
2.3
(105.4)
(103.1)
294.2
(79.6)
214.6
57.8
272.4
23.2c
23.2c
18.3c
18.2c
Restated1
2018
$m
5,579.3
(3,701.3)
(941.3)
(428.2)
(5,070.8)
65.5
(97.7)
85.6
561.9
1.8
(105.6)
(103.8)
458.1
(34.0)
424.1
16.9
441.0
37.6c
37.4c
36.2c
36.0c
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
The Income Statement should be read in conjunction with the accompanying notes, which form an integral part of the
financial statements.
84
BORAL LIMITED 2019 ANNUAL REPORT
FINANCIAL STATEMENTS
Statement of Comprehensive Income
Boral Limited and Controlled Entities
For the year ended 30 June
Net profit
Other comprehensive income
Note
2019
$m
2018
$m
272.4
441.0
Items that may be reclassified subsequently to Income Statement:
Net exchange differences from translation of foreign operations taken
to equity
Foreign currency translation reserve transferred to net profit on
disposal of controlled entities
4.4
Fair value adjustment on cash flow hedges
Income tax on items that may be reclassified subsequently to
Income Statement
Total comprehensive income
166.3
115.5
(10.8)
(15.9)
32.6
444.6
-
10.5
22.5
589.5
The Statement of Comprehensive Income should be read in conjunction with the accompanying notes, which form an integral part
of the financial statements.
85
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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
Note
2.7
3.1
3.2
3.1
3.2
6.2
3.3
3.4
5.2
4.1
7.1
3.6
4.1
5.2
7.1
3.6
4.3
4.4
2019
$m
207.2
877.4
683.8
3.8
39.6
-
2018
$m
74.3
879.7
613.8
11.2
38.1
121.2
1,811.8
1,738.3
27.8
11.4
1,292.0
41.6
2,880.4
3,372.8
78.7
27.2
7,731.9
9,543.7
832.6
339.7
23.8
29.0
118.7
48.4
-
1,392.2
2,060.8
-
50.8
46.1
118.6
16.3
2,292.6
3,684.8
5,858.9
4,265.1
330.0
1,263.8
5,858.9
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
The Balance Sheet should be read in conjunction with the accompanying notes, which form an integral part of the financial statements.
86
BORAL LIMITED 2019 ANNUAL REPORT
FINANCIAL STATEMENTS
Statement of Changes in Equity
Boral Limited and Controlled Entities
For the year ended 30 June 2019
Balance at 30 June 2018
Issued capital
$m
Reserves
$m
Retained
earnings
$m
Total equity
$m
4,265.1
155.8
1,309.9
5,730.8
Transition impact from implementation of AASB 15
-
-
(2.0)
(2.0)
Balance at 1 July 2018
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
Share-based payments
Total transactions with owners in their capacity as owners
4,265.1
155.8
1,307.9
5,728.8
-
-
-
-
-
-
-
-
-
-
-
-
272.4
272.4
258.8
(92.5)
(10.8)
(15.9)
32.6
-
-
-
-
-
258.8
(92.5)
(10.8)
(15.9)
32.6
172.2
272.4
444.6
(7.5)
-
9.5
2.0
-
(7.5)
(316.5)
(316.5)
-
9.5
(316.5)
(314.5)
Balance at 30 June 2019
4,265.1
330.0
1,263.8
5,858.9
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)
-
(287.2)
(22.4)
(287.2)
10.4
(299.2)
Balance at 30 June 2018
4,265.1
155.8
1,309.9
5,730.8
The Statement of Changes in Equity should be read in conjunction with the accompanying notes, which form an integral part of the
financial statements.
87
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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
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
Dividends paid
Proceeds from borrowings
Repayment of borrowings
Net cash used in financing activities
NET CHANGE IN CASH AND CASH EQUIVALENTS
Cash and cash equivalents at the beginning of the year
Note
2019
$m
2018
$m
6,243.3
(5,333.8)
909.5
55.0
1.9
(100.2)
(50.6)
(54.0)
761.6
6,209.0
(5,399.1)
809.9
68.4
1.8
(97.7)
(86.0)
(118.4)
578.0
(447.1)
(421.5)
2.7
2.7
(6.3)
(10.9)
7.6
38.4
375.8
(42.5)
(316.5)
-
(272.6)
(589.1)
130.0
74.3
2.9
207.2
(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
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.
88
BORAL LIMITED 2019 ANNUAL REPORT
FINANCIAL STATEMENTS
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 (the
“Company”) 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 26 August 2019.
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 2018, 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
Receivables
Property, plant and equipment
Intangible assets
Carrying value assessment
Provisions
Income tax expense
Deferred tax assets and liabilities
Acquisitions
Share-based payments
3.1
3.3
3.4
3.5
3.6
5.1
5.2
6.3
7.3
104
106
108
110
111
126
128
134
139
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
Reporting date
Non-monetary assets and
liabilities carried at fair value
89
Date fair value is determined
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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 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.
Effective 1 July 2018, the Group adopted AASB 15 Revenue
from Contracts with Customers. The Group elected to use the
cumulative effect method on the initial application of the standard,
and therefore has not applied the requirements of AASB 15 to the
comparative period presented in the financial statements. The net
transition impact was recorded as a reduction in retained earnings
of $2.0 million, and is disclosed in the Statement of Changes
in Equity.
The implementation of this standard did not have a significant
impact on the revenue recognition practice of the Group and its
consolidated financial statements. Further information is provided
below with respect to the impact of Boral’s accounting for revenue
under AASB 15.
Sale of goods
In the comparative period, for the sale of goods (such as quarry
product, concrete, cement, fly ash, roofing and building products),
revenue is 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 is recognised at the point in time the
customer obtains control of the goods, which is typically at the
time of delivery to the customer.
Contracting businesses
In the comparative period, contract revenue includes the initial
amount agreed in the contract plus any variations in contract
work, claims and incentive payments, to the extent that it is
highly probable that a significant reversal of the revenue will not
occur. This probability assessment is based on contract terms,
historical experience and in certain cases the views of subject
area specialists. 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, revenue from contracting businesses, such as
asphalt and concrete placing, is included in sale of goods and is
recognised progressively over the period of time the performance
obligation is fulfilled and the customer obtains the control of the
goods being provided in the contract, with the Group having a
right to payment for performance to date.
The Group predominantly uses the output method based
on volumes delivered to determine the amount of revenue to
recognise in a given period.
When estimating the transaction price, variable consideration
is considered, which typically relates to claims or variations
submitted in connection with the performance of a contract.
Assumptions are made in order to determine the amount
of variable consideration that can be recognised, including
consideration of whether the variable consideration is
constrained. Claims and variations are included to the extent
they are approved, or if not approved, are estimated whilst also
considering the constraint requirement.
Rendering of services
The Group is involved in a range of service contracts,
predominantly in the Fly Ash business in North America. In the
comparative period, 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 was recognised using the stage-of-completion
method.
Under AASB 15, revenue from the rendering of services is
allocated across each service or performance obligation based on
their stand-alone selling price, and recognised as the service or
performance obligation is performed.
Sale of land
In the comparative period, 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.
Under AASB 15, revenue from the sale of land is recognised at
the point in time the customer obtains control of the land. This
is typically at the point in time the customer obtains unrestricted
access to the land which was sold. The revenue is measured at
the transaction price agreed under the contract and classified as
other income.
Bundling of performance obligations
Contracts with customers, particularly in concrete and asphalt,
may contain revenue items for ancillary services such as
mobilisation and demobilisation of plant, concrete testing, and
other related services. These services are typically combined into
the core performance obligation of delivering concrete, or the
supply and lay of asphalt. On occasion, ancillary services may
be deemed to have a stand-alone value to the customer, and are
accounted for as a separate performance obligation
under AASB15.
90
BORAL LIMITED 2019 ANNUAL REPORT
D. Comparative figures
Where applicable, certain comparative figures have been
reclassified to align with current year presentation, as a result of
the implementation of AASB 15 and the sale of US Block.
E. New accounting standards and interpretations not
yet adopted
A number of new standards are effective for annual periods
beginning after 1 July 2019 with early adoption permitted.
However, the Group has not early adopted the new or amended
standards in preparing these financial statements.
AASB 16 Leases: This standard provides a new lessee accounting
model, which will require Boral’s operating leases with a term of
more than 12 months, unless the underlying asset is of low value,
to be recognised on the Balance Sheet as “right to use (ROU)
assets” and “lease liabilities”. The depreciation of the ROU asset
and interest on the lease liability will replace the existing straight
lining of rent expense practice.
The Group will apply the modified retrospective approach to
existing operating leases on transition with the lease liability
measured as the present value of future lease payments
at the adoption date, being 1 July 2019. The ROU asset
will be measured as if AASB 16 had been applied from the
commencement of the lease with any difference between the ROU
asset and lease liability recognised as an adjustment to opening
retained earnings with no restatement of comparative information
in the financial statements.
The Group has updated all of the relevant internal policies and
implemented appropriate system solutions to ensure ongoing
compliance with AASB 16. The Group has completed an impact
assessment of AASB 16 on the Balance Sheet and estimates that
the transition adjustment will increase assets (specifically ROU
assets) by $360 to $400 million and liabilities by $380 to
$420 million (including lease and dismantling liabilities) with the net
effect, adjusted for deferred tax, recognised against
retained earnings.
91
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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
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).
USG Boral
50/50 joint venture between USG Corporation and Boral Limited responsible for the manufacture and
sale of plasterboard and associated products.
Boral North America
Fly ash, stone, roofing, light building products, windows and 50% share of the Meridian Brick
joint venture.
Discontinued Operations
Denver Construction Materials and US Block.
Unallocated
Non-trading operations and unallocated corporate costs.
The major end-use markets for Boral’s products include residential and non-residential construction and the engineering and
infrastructure markets.
Inter-segment pricing is determined on an arm’s length basis.
The Group has a large number of customers to which it provides products, with no single customer responsible for more than 10% of
the Group’s revenue.
Segment results, assets and liabilities 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
2019
$m
5,862.7
(62.1)
5,800.6
Restated1
2018
$m
5,869.0
(289.7)
5,579.3
Profit before net interest expense and income tax from reportable segments
466.9
586.8
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
1. Refer Note 1D for further details.
6.1
2.2
(69.6)
397.3
(103.1)
294.2
(24.9)
561.9
(103.8)
458.1
92
BORAL LIMITED 2019 ANNUAL REPORT
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94
BORAL LIMITED 2019 ANNUAL REPORT
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Section 2: Business performance (continued)
2.1 Segments (continued)
(b) Geographic location
In presenting information on a geographical basis, assets are based on the geographical location of the assets.
NON-CURRENT ASSETS
Australia
Asia
North America
Other
Tax assets
Financial assets
2019
$m
2018
$m
2,606.5
2,531.0
729.0
670.0
4,187.1
4,323.6
89.0
145.0
7,611.6
7,669.6
78.7
41.6
69.6
32.8
7,731.9
7,772.0
96
BORAL LIMITED 2019 ANNUAL REPORT
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.
Revenue from the sale of goods is recognised at the point in time the customer obtains control of the goods, which is typically at the
time of delivery to the customer.
Revenue from contracting businesses is included in sale of goods and is recognised progressively over the period of time the
performance obligation is fulfilled and the customer obtains the control of the goods being provided in the contract, with the Group
having a right to payment for performance to date. The Group predominantly uses the output method, which typically matches
delivery to the customer, to determine the amount of revenue to recognise in a given period.
Revenue from the rendering of services is allocated across each service or performance obligation based on their stand-alone selling
price, and recognised as the service or performance obligation is performed.
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For the year ended 30 June
Revenue from continuing operations
Sale of goods
Rendering of services
Revenue from continuing operations
1. Refer Note 1D for further details.
2019
$m
5,559.8
240.8
5,800.6
Restated1
2018
$m
5,312.5
266.8
5,579.3
(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.
Revenue from the sale of land is recognised at the point in time the customer obtains control of the land and is measured at the
transaction price agreed under the contract.
Other income and expenses also include significant items recorded in the period. These items relate to significant 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
Note
2.6
2019
$m
21.6
7.2
7.7
36.5
(61.5)
-
(61.5)
2018
$m
58.1
-
7.4
65.5
(97.0)
(0.7)
(97.7)
97
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Section 2: Business performance (continued)
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 expense is capitalised as part of the
cost of the asset up to the time it is ready for its intended use and is then amortised over the expected useful economic life.
For the year ended 30 June
Interest income received or receivable from:
Other parties (cash at bank and bank short-term deposits)
Unwinding of discount
Interest expense paid or payable to:
2019
$m
1.9
0.4
2.3
2018
$m
1.5
0.3
1.8
Other parties (bank overdrafts, bank loans and other loans)1
(101.2)
(101.7)
Finance charges on capitalised leases
Unwinding of discount
Net interest expense from continuing operations
(0.4)
(3.8)
(105.4)
(103.1)
(0.5)
(3.4)
(105.6)
(103.8)
1. In 2019, interest of $4.2 million (2018: $6.5 million) was paid to other parties and capitalised in respect of qualifying assets. The capitalisation rate used
was 5.4% (2018: 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/(loss)
The Group’s share based on % ownership:
Net profit before significant items
Significant items net of tax
Net profit/(loss)
Further information regarding equity accounted investments is provided in note 6.2.
Note
2019
$m
2018
$m
2,457.1
216.7
(65.5)
(3.8)
147.4
(401.6)
(254.2)
73.1
(200.8)
(127.7)
2,407.6
274.4
(86.4)
(5.7)
182.3
(9.2)
173.1
90.2
(4.6)
85.6
2.6
98
BORAL LIMITED 2019 ANNUAL REPORT
2.4 Dividends
Dividends Paid or Declared
(cents per share)
2018
2019
26.5
26.5
12.5
13.0
14.0
13.5
$146.5m
paid on
09/03/181
$152.4m
paid on
15/03/191
$164.1m
paid on
02/10/181
$158.3m
payable on
01/10/192
$310.7m
paid
$310.7m
paid/payable
Interim
Final
Annual Declared
1. Declared, paid and 50% franked.
2. Estimated final dividend payable, 50% franked, subject to variations in number of shares up to record date. The financial effect of the final dividend
for the year ended 30 June 2019 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 2019 is $33.0 million (2018: $32.2 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 $33.9 million (2018: $35.2 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.
99
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Section 2: Business performance (continued)
2.5 Earnings per share
Basic earnings per share
Basic earnings per share (EPS) is calculated by dividing the net profit 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.
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
Continuing
operations
Discontinued
operations
2019
$m
440.1
(225.5)
214.6
18.3c
18.2c
37.5c
37.4c
2019
$m
-
57.8
57.8
4.9c
4.9c
0.0c
0.0c
Earnings reconciliation
Net profit excluding significant items
Net significant items (refer note 2.6)
Net profit
Basic earnings per share
Diluted earnings per share2
Basic earnings per share
(excluding significant items)2
Diluted earnings per share
(excluding significant items)2
1. Refer Note 1D for further details.
2. Numbers may not add due to rounding.
Total
2019
$m
440.1
(167.7)
272.4
23.2c
23.2c
2019
2018
1,172,331,924
1,172,331,924
3,699,914
5,462,105
1,176,031,838
1,177,794,029
Restated1
Continuing
operations
Restated1
Discontinued
operations
2018
$m
2018
$m
Total
2018
$m
456.3
(32.2)
424.1
36.2c
36.0c
16.9
473.2
-
(32.2)
16.9
441.0
1.4c
1.4c
1.4c
1.4c
37.6c
37.4c
40.4c
40.2c
37.5c
38.9c
37.4c
38.7c
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.
100
BORAL LIMITED 2019 ANNUAL REPORT
2.6 Significant items
Net profit includes the following significant items, which relate to material transactions that are disclosed separately in order to better
explain financial performance. Management considers significant items when assessing performance of the Group, and in order to
provide a meaningful and consistent representation of the underlying performance of each operating segment and the Boral Group.
Significant items is not a defined performance measure in IFRS and the Company’s definition of significant items may not be
comparable with similarly titled performance measures and disclosures by other entities.
2019 Significant items
Continuing operations
Other expenses
Share of equity accounted income
Loss before interest and tax
Income tax benefit
Net significant items from continuing operations
Discontinued operations
Profit before interest and tax
Income tax expense
Net significant items from discontinued operations
Note
2.2
2.3
6.1
Summary of significant items
Profit/(loss) before interest and tax
Income tax (expense)/benefit
Net significant items
Sale of
business (i)
$m
Restructure
costs (ii)
$m
Integration
costs (iii)
$m
Joint venture
matters (iv)
$m
Asset
impairment
(v)
$m
Total
$m
-
-
-
-
-
(25.7)
(32.8)
-
-
(25.7)
(32.8)
8.0
6.7
(3.0)
(5.2)
(8.2)
-
-
(61.5)
(195.6)
(200.8)
(195.6)
(262.3)
22.1
36.8
(17.7)
(26.1)
(8.2)
(173.5)
(225.5)
69.6
(11.8)
57.8
69.6
(11.8)
57.8
-
-
-
-
-
-
-
-
-
-
-
-
69.6
(11.8)
57.8
(25.7)
(32.8)
(8.2)
(195.6)
(192.7)
8.0
6.7
-
22.1
25.0
(17.7)
(26.1)
(8.2)
(173.5)
(167.7)
(i) Sale of business
In July 2018, the Group sold the Denver Construction Materials business for cash proceeds of $173.2 million, and generated a profit
before tax of $66.1 million.
In November 2018, the Group sold the Block business for cash proceeds of $210.6 million, and generated a profit before tax
of $3.5 million.
(ii) Restructure costs
During the period, $25.7 million of restructuring related costs have been incurred to align the Australian business with current
market conditions.
(iii) Integration costs
During the period, A$32.8 million of costs have been incurred on the integration of Headwaters business into the Boral North
America business, which forms part of the integration costs of US$90 million – US$100 million expected. The costs during the period
predominantly relate to redundancies, consultant fees supporting the integration, integration of IT systems and closure costs arising
from rationalisation of Stone plants.
(iv) Joint venture matters
This relates to joint venture matters in USG Boral. This includes $4.0 million of legal and consulting costs ($3.0 million incurred by Boral
Limited) related to negotiating and agreeing a new ownership and operating structure as a result of Knauf’s acquisition of USG,
$3.4 million of restructuring costs incurred as a result of the significant downturn in Korea and the housing decline in Australia and
$0.8 million of costs resulting from an ownership reorganisation in Thailand.
(v) Asset impairment
The significant decline in the Canadian housing market and intensity deterioration in the US bricks market triggered an impairment of
the investment in the Meridian Brick joint venture. A value in use methodology was used to determine the recoverable amount of the
investment, leading to an impairment of $195.6 million. The $22.1 million tax benefit is recognised directly by Boral North America due
to the Meridian joint venture ownership structure.
101
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Section 2: Business performance (continued)
2.6 Significant items (continued)
2018 Significant items
Summary of significant items from
continuing operations
Other expenses
Share of equity accounted income
Loss before interest and tax
Income tax benefit
Net significant items from continuing operations
Note
2.2
2.3
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)
19.0
(54.2)
-
(23.8)
7.0
(16.8)
-
-
-
42.5
42.5
-
(97.0)
(4.6)
(4.6)
(4.6)
(101.6)
0.9
(3.7)
69.4
(32.2)
(i) Headwaters integration costs
In the prior year, A$73.2 million of costs were 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 – US$100 million expected over financial years 2018 and
2019. The costs 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
In the prior year, the organisation progressed its plans on the long term cement position in Victoria, which 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 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 resulted in a net tax benefit of A$33.7 million, reflecting a net reduction in deferred tax liabilities.
In addition, the Group reassessed its US tax losses, which had not been recognised on the Balance Sheet, as a result of improved
earnings following the acquisition of Headwaters Incorporated in May 2017. This reassessment led to a benefit of A$8.8 million
being recorded.
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.
Asset Impairment
Property, plant and equipment
Investments accounted for using the equity method
2019
$m
(3.1)
(195.6)
(198.7)
2018
$m
(4.8)
-
(4.8)
102
BORAL LIMITED 2019 ANNUAL REPORT
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 1.81% (2018: 2.66%).
(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)/expense
Net cash provided by operating activities before change in assets and liabilities
Changes in assets and liabilities net of effects from acquisitions/disposals
Receivables
Inventories
Payables
Provisions
Current and deferred taxes
Other
Net cash provided by operating activities
(iii) Restructure, acquisition and integration costs:
During the year, the Group settled 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
Changes in fair values
Net foreign currency exchange differences
Balance at the end of the year
2019
$m
2018
$m
104.9
102.3
207.2
57.1
17.2
74.3
272.4
441.0
377.8
367.6
3.4
(91.2)
11.6
9.5
182.7
766.2
(0.5)
(61.4)
63.8
(58.3)
40.8
11.0
3.1
(58.1)
31.1
10.4
(17.2)
777.9
(11.5)
(27.8)
(81.8)
(12.9)
(44.0)
(21.9)
761.6
578.0
-
(30.3)
(23.7)
(54.0)
2,526.8
-
(272.6)
20.5
125.8
(54.9)
(49.8)
(13.7)
(118.4)
2,571.1
1,664.2
(1,775.2)
(14.7)
81.4
2,400.5
2,526.8
103
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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 profit or loss.
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
2019
$m
856.4
2.0
858.4
(11.8)
846.6
30.8
877.4
2018
$m
875.0
0.8
875.8
(14.5)
861.3
18.4
879.7
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:
Current
Overdue 0 – 60 days
Overdue > 60 days
Total
Gross
2019
$m
710.9
120.6
24.9
856.4
Impairment
2019
$m
(1.1)
(1.4)
(9.3)
(11.8)
Net
2019
$m
709.8
119.2
15.6
844.6
Gross
2018
$m
754.3
100.5
20.2
875.0
Impairment
2018
$m
(3.2)
(0.6)
(10.7)
(14.5)
Net
2018
$m
751.1
99.9
9.5
860.5
104
BORAL LIMITED 2019 ANNUAL REPORT
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
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
2019
$m
(14.5)
3.3
(1.1)
0.4
-
0.1
2018
$m
(18.8)
4.0
(0.1)
-
0.8
(0.4)
(11.8)
(14.5)
2019
$m
16.1
11.7
27.8
2018
$m
19.8
15.3
35.1
No amounts owing by associates or included in other receivables were past due as at 30 June 2019 (30 June 2018: nil).
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
2019
$m
200.3
43.7
439.0
0.8
683.8
2018
$m
174.8
52.1
386.4
0.5
613.8
11.4
11.4
0.8
11.4
12.2
0.5
11.4
11.9
105
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F
N
A
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A
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A
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M
E
N
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I
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O
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A
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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, less 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
2019
2018
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.
106
BORAL LIMITED 2019 ANNUAL REPORT
-
-
-
3.3 Property, plant and equipment (continued)
Reconciliation of movements in property, plant and equipment
Land and buildings
Mineral reserves,
licences and quarry
stripping
Plant and equipment¹
Total
2019
$m
2018
$m
2019
$m
2018
$m
2019
$m
2018
$m
2019
$m
2018
$m
Balance at the beginning of the year
911.3
867.5
159.1
160.9
1,711.7
1,695.4
2,782.1
2,723.8
Additions
Disposals
Acquisitions of entities or operations
1.1
(10.4)
-
Disposals of entities or operations
(18.2)
2.8
(6.5)
-
-
-
(0.5)
-
(14.6)
3.4
446.0
415.3
447.1
421.5
-
-
-
(9.8)
6.9
(8.6)
(7.6)
(20.7)
(14.1)
-
-
6.9
(41.4)
Transferred (to)/from other property,
plant and equipment
Impairment disclosed as
significant items
Transfer (to)/from other assets
or liabilities
Transferred to assets held for sale
Depreciation or
amortisation expense
Net foreign currency
exchange differences
51.4
93.2
29.8
19.4
(81.2)
(112.6)
-
-
(0.5)
(2.7)
-
1.9
(33.5)
-
-
-
-
-
(4.6)
(3.1)
(4.3)
(3.1)
(4.8)
(8.5)
-
18.7
(40.0)
(11.2)
-
20.6
(78.1)
(24.4)
(20.5)
(20.1)
(20.6)
(269.4)
(264.1)
(313.9)
(305.2)
12.0
6.9
0.1
0.6
22.5
10.9
34.6
18.4
Balance at the end of the year
920.1
911.3
153.8
159.1
1,806.5
1,711.7
2,880.4
2,782.1
At cost
1,154.3
1,105.6
336.8
333.7
4,588.1
4,301.9
6,079.2
5,741.2
Less: Accumulated depreciation,
amortisation and impairment
(234.2)
(194.3)
(183.0)
(174.6)
(2,781.6)
(2,590.2)
(3,198.8)
(2,959.1)
Balance at the end of the year
920.1
911.3
153.8
159.1
1,806.5
1,711.7
2,880.4
2,782.1
1. Total capital work in progress for the year is $334.2 million (2018: $294.8 million).
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 $123.2 million (2018: $122.6 million).
107
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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 value on a straight-line basis over its
estimated useful life.
The estimated useful lives for each class of intangible asset are as follows:
Estimated useful lives – years
2 to Indefinite
19 – 20
14 – 20
Trade names
Fly ash
contracts
Customer
relationships
Patents
6 – 19
Other
3 – 17
Amortisation is recognised in the Income Statement from the date the assets are available for use unless their lives are indefinite.
The total value of indefinite life intangible assets (excluding goodwill) is $131.1 million (2018: $124.4 million). Intangible assets with an
indefinite useful life are tested for impairment annually (see note 3.5).
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. Estimation of useful lives of other intangible assets has been based on historical experience with reassessments of
remaining useful life performed at least annually. Adjustments to useful lives are made when considered necessary.
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
2019
$m
2,230.2
1,287.7
(145.1)
1,142.6
3,372.8
2018
$m
2,159.9
1,334.2
(99.0)
1,235.2
3,395.1
2,159.9
2,097.8
4.2
(44.1)
-
110.2
2,230.2
-
-
(16.6)
78.7
2,159.9
108
BORAL LIMITED 2019 ANNUAL REPORT
3.4 Intangible assets (continued)
Reconciliation of movements in other intangible assets
As at 30 June 2019
Trade names
$m
Fly ash
contracts
$m
Customer
relationships
$m
Patents
$m
Balance at the beginning of the year
141.5
469.0
608.8
Additions
Disposals of entities or operations
Amortisation expense
Net foreign currency exchange differences
-
-
(3.8)
7.8
-
-
(25.8)
24.8
-
(95.9)
(31.3)
27.9
Balance at the end of the year
145.5
468.0
509.5
At cost
Less: Accumulated amortisation
Balance at the end of the year
155.5
(10.0)
145.5
524.5
(56.5)
468.0
563.4
(53.9)
509.5
4.1
-
-
(0.6)
0.1
3.6
8.8
(5.2)
3.6
Other
$m
11.8
6.3
-
(2.4)
0.3
Total
$m
1,235.2
6.3
(95.9)
(63.9)
60.9
16.0
1,142.6
35.5
(19.5)
16.0
1,287.7
(145.1)
1,142.6
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
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
109
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Section 3: Operating assets and liabilities (continued)
3.5 Carrying value assessment
The Group 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
2019
$m
2,136.9
93.3
2,230.2
2018
$m
2,071.8
88.1
2,159.9
1. Relates to multiple business units, which are not considered to be individually significant.
North America
Goodwill of $2,136.9 million is recorded at 30 June 2019, 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 four years, with cash flows beyond the
projection period extrapolated using growth rates of 2.5%. 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 10.1% (2018: 11.5%).
110
BORAL LIMITED 2019 ANNUAL REPORT
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 2019. 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.
Other cash generating units
The recoverable amount of other CGUs containing goodwill has been reviewed and exceed their carrying values as at 30 June 2019. 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.
3.6 Provisions
A provision is recognised in the Balance Sheet when:
• Boral has a present obligation (legal or constructive) as a result of a past event
•
•
a reliable estimate can be made of the amount of the obligation, and
it is probable that an outflow of economic benefits will be required to settle the obligation.
Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments
of the time value of money and the risk specific to the liability.
Provision
Description
Rationalisation
and restructuring
Claims
Restoration and
environmental
rehabilitation
Provisions for rationalisation and restructuring are recognised when the Group
has a detailed formal plan identifying the business or part of the business
concerned, the location and approximate number of employees affected, a
detailed estimate of the associated costs, and an appropriate timeline, and
the restructuring has either commenced or been publicly announced. Costs
related to ongoing activities are not provisioned.
Provisions are raised for liabilities arising from the ordinary course of business,
in relation to claims against the Group, including insurance, workers
compensation insurance (previously included in other provisions), legal and
other claims. Where recoveries are considered virtually certain in respect of
such claims, these are included in other receivables.
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 restoration and environmental rehabilitation
requirements of areas from which natural resources were 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.
Significant accounting
judgements, estimates
and assumptions
Future costs associated with
the restructuring and the
expected time period.
Likelihood of settling customer
and insurance claims.
Future costs associated with
dismantling and removing
assets and restoring sites to
their original condition, requiring
assumptions on closure dates,
application of environmental
legislation, available
technologies, regulatory
requirements, expected future
use of the site and consultant
cost estimates.
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Section 3: Operating assets and liabilities (continued)
3.6 Provisions (continued)
Rationalisation
and restructuring
$m
10.1
7.6
-
(1.7)
-
0.5
16.5
16.5
-
16.5
Rationalisation
and restructuring
$m
2.1
7.8
-
(0.2)
-
0.4
10.1
10.1
-
10.1
Restoration
and
environmental
rehabilitation
$m
Claims
$m
59.9
5.4
-
(21.6)
9.2
2.9
55.8
14.4
41.4
55.8
103.7
(13.3)
3.8
(8.5)
2.6
0.9
89.2
15.0
74.2
89.2
Restoration
and
environmental
rehabilitation
$m
Claims
$m
59.3
0.2
-
(1.5)
-
1.9
59.9
10.3
49.6
59.9
85.4
23.5
3.0
(8.4)
(0.3)
0.5
103.7
15.4
88.3
103.7
Other
$m
29.3
(3.9)
-
(8.3)
(11.8)
0.2
5.5
2.5
3.0
5.5
Other
$m
45.9
3.1
0.4
(20.3)
-
0.2
29.3
19.3
10.0
29.3
Total
$m
203.0
(4.2)
3.8
(40.1)
-
4.5
167.0
48.4
118.6
167.0
Total
$m
192.7
34.6
3.4
(30.4)
(0.3)
3.0
203.0
55.1
147.9
203.0
As at 30 June 2019
Reconciliations
Balance at the beginning of the year
Provisions made/(released) during the year
Unwind of discount
Payments made during the year
Transferred (to)/from provisions
Net foreign currency exchange differences
Balance at the end of the year
Current
Non-current
Total
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
3.7 Contract liabilities
In the case of certain contracts, the Group receives payments in advance of the services being rendered, which is recognised as a
Contract Liability within Trade Creditors. The Contract Liability balance as at 30 June 2019 is $48.7 million (2018: $34.6 million) with the
majority expected to be recognised as Revenue in the next financial year given the nature of the projects.
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BORAL LIMITED 2019 ANNUAL REPORT
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
Term and debt repayment schedule
Terms and conditions of outstanding loans were as follows:
2019
$m
336.6
3.1
339.7
2,057.8
3.0
2,060.8
2,400.5
2018
$m
13.0
6.2
19.2
2,497.0
10.6
2,507.6
2,526.8
Current
US senior notes
– private placement – unsecured
CHF notes – unsecured
Other loans – unsecured
Finance lease liabilities
Non-current
US senior notes
– private placement – unsecured
CHF notes – unsecured
US senior notes
– 144A/Reg S – unsecured
Term credit facility – unsecured
Effective
interest rate
2019
Calendar year
of maturity
Currency
30 June 2019
30 June 2018
Carrying
amount
$m
Fair value
$m
Carrying
amount
$m
Fair value
$m
USD
CHF
GBP
7.22%
2.25%
2020
2020
1.87% 2019 - 2020
AUD/USD
4.60% 2019 - 2020
108.6
219.0
9.0
3.1
112.9
223.3
9.0
3.1
339.7
348.3
-
-
13.0
6.2
19.2
-
-
13.0
6.2
19.2
USD
CHF
USD
Multi
4.04% 2025 - 2030
708.1
808.2
-
-
771.5
204.3
793.0
213.5
3.39% 2022 - 2028
1,349.7
1,486.6
1,261.2
1,253.7
2021
-
3.0
-
260.0
260.0
3.0
10.6
10.6
2,060.8
2,297.8
2,507.6
2,530.8
2,400.5
2,646.1
2,526.8
2,550.0
Finance lease liabilities
AUD/USD
4.96% 2020 - 2024
Total
113
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A
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N
A
N
C
A
L
S
T
A
T
E
M
E
N
T
S
I
N
O
T
E
S
T
O
T
H
E
F
N
A
N
C
A
L
S
T
A
T
E
M
E
N
T
S
I
S
T
A
T
U
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O
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Y
R
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P
O
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A
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H
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F
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Section 4: Capital and financial structure (continued)
4.1 Loans and borrowings (continued)
US SENIOR NOTES – PRIVATE PLACEMENT – UNSECURED
Borrower
Boral Limited
Boral Limited
Boral Limited
Boral Industries Inc.
Boral Industries Inc.
Boral Industries Inc.
Total
Notional amount
US$m
Issue date
Interest rate
Maturity date
AUD equivalent
$m
135.0
41.0
24.0
76.2
225.0
75.0
576.2
05/2015
05/2015
03/2015
04/2008
04/2018
04/2018
4.01%
4.16%
4.31%
7.22%
4.05%
3.66%
05/2025
05/2027
03/2030
04/2020
04/2026
04/2026
189.5
57.5
33.6
108.6
320.6
106.9
816.7
CHF NOTES – UNSECURED
Borrower
Boral Limited
Notional amount
CHF $m
Issue date
Interest rate
Maturity date
AUD equivalent
$m
150.0
02/2013
2.25%
02/2020
219.0
US SENIOR NOTES – 144A/REG S – UNSECURED
Borrower
Boral Finance Pty Ltd
Boral Finance Pty Ltd
Total
BANK FACILITIES
Notional amount
US$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
638.7
711.0
1,349.7
Acquisition loan facility
The Group entered into a new committed US$1.0 billion syndicated loan facility upon the announcement of the USG acquisition by
Knauf, which matures on 28 August 2020. The facility was undrawn as at 30 June 2019.
Term credit facility
The Group has a multi-currency syndicated loan facility with a limit of US$750 million maturing on 1 July 2021. The facility was undrawn
as at 30 June 2019.
Bank overdraft, lease liabilities and other
The Group operates unsecured bank overdraft facility arrangements in Australia and the USA that have combined limits of
A$20.2 million (2018: A$20.0 million). The facilities within Australia are conducted on a set-off basis. All facilities are subject to annual
review where repayment can occur on demand by the lending bank. Finance leases are subject to lease terms of various maturities.
The Group has complied with the borrowing covenants throughout the year ended 30 June 2019.
114
BORAL LIMITED 2019 ANNUAL REPORT
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. The Group
documents the relationship between hedging instruments and hedged items, including the risk management objective and strategy for
undertaking each transaction.
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 for the effective portion of the hedge. The gain or loss relating
to the ineffective portion of the hedge 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
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.
115
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A
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T
S
I
N
O
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E
S
T
O
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H
E
F
N
A
N
C
A
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S
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A
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M
E
N
T
S
I
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A
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H
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Section 4: Capital and financial structure (continued)
4.2 Financial risk management (continued)
CREDIT RISK (continued)
The following table indicates the Group’s maximum credit exposure from non-derivative financial assets.
Non-derivative financial assets
Loans to and receivables from associates
Trade and other receivables
Cash at bank, on hand and bank short-term deposits
Equity securities
Carrying
amount
2019
$m
Carrying
amount
2018
$m
18.1
887.1
207.2
34.8
20.6
894.2
74.3
32.3
1,147.2
1,021.4
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
1.6
6.4
2.6
1.6
6.4
2.6
1.7
7.0
2.6
10.6
10.6
11.3
1.7
(0.2)
1.1
2.6
-
0.5
0.8
1.3
-
1.7
0.7
2.4
-
3.7
-
3.7
-
1.3
-
1.3
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
-
-
-
-
-
-
-
-
30 June 2019
Derivative financial assets
Forward exchange contracts1
Interest rate swaps2
Commodity swaps/options1
30 June 2018
Derivative financial assets
Forward exchange contracts1
Interest rate swaps2
Commodity swaps/options1
1. Designated as cash flow hedges.
2. Designated as fair value hedges.
116
BORAL LIMITED 2019 ANNUAL REPORT
US senior notes – 144A/Reg S – unsecured
1,349.7
(1,758.3)
(16.2)
4.2 Financial risk management (continued)
LIQUIDITY RISK
Liquidity risk is the risk that the Group has insufficient funds to meet its financial obligations when they fall due. It is also associated with
planning for unforeseen events or business disruptions that may cause pressure on liquidity.
The Group manages liquidity risk by ensuring that:
(a) Boral has a well spread debt facility maturity profile with a target of exceeding 3.5 years;
(b) Current debt less cash deposits, is not to exceed 20% of the sum of Total Debt plus Committed Undrawn Facilities > 1 year;
(c) Committed Undrawn Facilities plus cash exceeds A$500 million.
Carrying
amount
$m
Contractual
cash flows
$m
6 months
or less
$m
6-12
months
$m
1-2 years
$m
2-5 years
$m
More than
5 years
$m
30 June 2019
Non-derivative financial liabilities
US senior notes
– private placement – unsecured
CHF notes – unsecured
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 2018
Non-derivative financial liabilities
US senior notes
– private placement – unsecured
CHF notes – unsecured
816.7
219.0
(1,011.5)
(11.0)
(222.3)
-
9.0
6.1
(9.0)
(6.5)
832.6
(832.6)
3,233.1
(3,840.2)
(9.0)
(1.6)
(832.6)
(870.4)
(126.5)
(222.3)
(24.3)
-
(1.7)
-
(27.7)
(83.5)
(762.8)
-
-
-
(48.6)
(767.9)
(901.3)
-
(2.0)
-
-
(1.2)
-
-
-
-
(374.8)
(78.3)
(852.6)
(1,664.1)
0.6
1.5
21.1
0.6
23.8
(0.6)
(1.5)
(22.5)
(0.6)
(25.2)
(0.6)
(1.5)
(3.0)
(0.6)
(5.7)
-
-
(19.5)
-
(19.5)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
3,256.9
(3,865.4)
(876.1)
(394.3)
(78.3)
(852.6)
(1,664.1)
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
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)
-
Derivative financial liabilities
Forward exchange contracts1
Commodity swaps1
Cross currency swaps1,2
Interest rate swaps3
1. Designated as cash flow hedges.
2. Designated as net investment hedges.
3. Designated as fair value hedges.
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)
117
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M
E
N
T
S
I
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O
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S
T
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F
N
A
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A
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A
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M
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F
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A
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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 the 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$0.5 million must be 100% hedged at the time of capital
expenditure approval.
(c) Net investments, including net intercompany loans, in overseas domiciled investments are hedged, where regulatory conditions and
available hedge instruments permit.
The Group uses forward exchange contracts to hedge foreign exchange risk. Most of the forward exchange contracts have maturities
of less than one year. Where necessary and in accordance with policy compliance, forward exchange contracts can be rolled over
at maturity.
(i) Translation risk
Foreign currency translation risk is the risk that upon consolidation for financial reporting the value of the Group’s investment in foreign
domiciled entities will fluctuate due to changes in foreign currency rates.
The Group uses foreign currency denominated borrowings and cross currency swaps to hedge the Group’s net investment in overseas
domiciled assets. The related exchange gains/losses on foreign currency movements are taken to the Foreign Currency
Translation Reserve.
The table below shows the Group’s net exposure to translation risk. The Group’s investment in foreign operations is partially offset
against foreign currency borrowings, reducing the Group’s overall exposure to translation risk. Amounts below are calculated based
on notional amounts:
Currency
30 June 2019
Balance sheet
USD
CAD
Notional A$ equivalent ($m)2
Euro
GBP
Multi1
Net investment in overseas domiciled entities
4,100.4
62.6
Cash
Foreign currency borrowings
Currency
30 June 2018
Balance sheet
21.7
(1,880.6)
2,241.5
USD
-
-
62.6
1.8
2.2
-
4.0
6.8
0.1
(9.0)
(2.1)
729.0
-
-
729.0
CAD
Notional A$ 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
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.
118
BORAL LIMITED 2019 ANNUAL REPORT
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
2019
$m
104.9
-
2018
$m
98.6
(85.0)
2019
2018
0.7110
-
0.7860
0.7397
Buy EUR/sell AUD – One year or less
20.1
28.2
0.6115
0.6375
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 2019 (2018: nil). The related exchange gains/losses on
foreign currency movements are taken to the Income Statement.
Sensitivity
At 30 June 2019, 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 increased/decreased by $0.4 million in 2019 (2018:
unchanged) and equity would have increased/decreased respectively by around equivalent A$191.5 million (2018: equivalent
A$229.1 million).
The following significant exchange rates applied during the year:
USD
Euro
GBP
CAD
Average rate
Reporting date spot rate
2019
2018
2019
2018
0.7145
0.6267
0.5526
0.9450
0.7735
0.6470
0.5730
0.9840
0.7018
0.6170
0.5527
0.9183
0.7394
0.6339
0.5606
0.9725
119
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S
I
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O
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S
T
O
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H
E
F
N
A
N
C
A
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S
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A
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M
E
N
T
S
I
S
T
A
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U
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P
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H
A
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A
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A
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I
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:
2019
Carrying amount
$m
2019
Notional amount4
$m
2018
Carrying amount
$m
2018
Notional amount4
$m
Fixed rate instruments
US senior notes – private placement – unsecured
CHF notes – unsecured1,2
709.8
219.0
714.2
219.1
US senior notes – 144A/Reg S – unsecured3
1,349.7
1,353.7
Finance lease liabilities
Variable rate instruments
Bank Loans – unsecured
US senior notes – private placement – unsecured
6.1
6.1
2,284.6
2,293.1
9.0
106.9
115.9
9.0
106.9
115.9
670.1
204.3
1,261.2
16.8
2,152.4
273.0
101.4
374.4
677.8
204.6
1,284.8
16.8
2,184.0
273.0
101.4
374.4
2,400.5
2,409.0
2,526.8
2,558.4
Pay variable interest rate derivatives
Interest rate swap pay floating US$ LIBOR2,3
(5.9)
526.9
14.5
500.1
Other interest rate derivatives
Cross currency swap pay fixed US$/receive fixed CHF1
21.1
219.1
19.3
204.6
1. CHF150 million (equivalent A$219.1 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$241.9 million) fixed rate notes due February 2020 have been swapped to USD floating rate via interest rate swaps.
3. US$200 million (equivalent A$285.0 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 a $0.2 million loss in 2019 due to credit and execution
charge cost of hedge on the interest rate swaps (2018: $0.6 million loss).
Sensitivity
At 30 June 2019, if interest rates had changed by +/- 1% pa from the year-end rates with all other variables held constant, the Group’s
pre-tax profit for the year would have been A$0.9 million higher/lower (2018: A$1.1 million) and the change in equity would have been
A$1.6 million (2018: A$3.7 million) mainly as a result of a higher/lower interest cost applying to interest rate derivatives.
120
BORAL LIMITED 2019 ANNUAL REPORT
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. The Group’s primary exposures to
commodity price risk are the purchase of diesel, natural gas, electricity and coal 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
2019
Notional $A
equivalent1
$m
2019
Fair value/
Carrying amount
$m
2018
Notional $A
equivalent1
$m
2018
Fair value/
Carrying amount
$m
17.8
-
4.1
14.7
(0.6)
-
(0.6)
2.4
40.6
2.9
-
12.6
4.2
-
-
(0.2)
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 a $1.0 million loss in 2019 due to
amortisation of the premium paid on options (2018: $0.4 million loss).
Sensitivity
At 30 June 2019, 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 (2018: unchanged) and the change in equity would have been
$4.0 million (2018: $4.8 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
121
I
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I
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 2019 plus an adequate credit spread
to discount financial instruments. The interest rates used are as follows:
Derivatives
Loans and borrowings
Finance leases
2019
% pa
2018
% pa
3.25 – 4.76
2.28 – 4.45
2.25 – 7.22
2.25 – 7.22
2.73 – 6.89
3.10 – 6.01
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
2019
$m
34.8
-
34.8
-
-
2018
$m
32.3
-
32.3
-
-
2019
$m
-
10.6
10.6
23.8
23.8
2018
$m
-
11.7
11.7
35.5
35.5
The Group does not have financial instruments that have been valued at Level 3.
122
BORAL LIMITED 2019 ANNUAL REPORT
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124
BORAL LIMITED 2019 ANNUAL REPORT
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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 event of a winding up of Boral Limited, ordinary shareholders rank after creditors and are fully entitled to any proceeds
of liquidation.
2019
$m
2018
$m
Issued and paid up capital
1,172,331,924 (2018: 1,172,331,924) ordinary shares, fully paid
4,265.1
4,265.1
There were no movements in issued capital during the current or prior period.
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.
Balance at the beginning of the year
Net gain on translation of assets and liabilities of overseas entities
Foreign currency translation reserve transferred to net profit on disposal of controlled entities
Net loss on translation of long-term borrowings and foreign currency forward contracts net of tax
benefit $27.8 million (2018: $25.6 million)
Balance at the end of the year
Hedging reserve
2019
$m
115.2
258.8
(10.8)
(64.7)
298.5
2018
$m
(25.9)
201.2
-
(60.1)
115.2
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 benefit/(expense)
Balance at the end of the year
5.3
(7.1)
(0.4)
(8.4)
4.8
(5.8)
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
35.3
9.5
(7.5)
37.3
(2.1)
1.7
(0.9)
9.7
(3.1)
5.3
47.3
10.4
(22.4)
35.3
Total Reserves
330.0
155.8
125
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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.
126
BORAL LIMITED 2019 ANNUAL REPORT
5.1 Income tax expense (continued)
For the year ended 30 June
(i) Income tax expense
Current income tax expense
Deferred income tax expense
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% (2018: 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
Share of associates’ net profit (excluding significant items)
Non-deductible significant items
Tax benefit arising from share acquisition rights vested
Change in US federal tax rate
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 expense from discontinued operations
Income tax expense excluding significant items
Income tax expense 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
1. Refer to Note 1D for further details.
2019
$m
52.7
32.9
5.8
91.4
109.1
(1.6)
107.5
(30.3)
(22.3)
38.5
(2.3)
-
(5.5)
85.6
5.8
91.4
116.4
(36.8)
79.6
-
11.8
11.8
91.4
(27.8)
(4.8)
(32.6)
Restated1
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
103.4
(69.4)
34.0
8.0
-
8.0
42.0
(25.6)
3.1
(22.5)
127
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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
2019
$m
78.7
(50.8)
27.9
2018
$m
69.6
(39.5)
30.1
56.9
81.9
The gross amount of capital and revenue tax losses carried forward that have not been recognised and the range of expiry dates for
recovery by tax jurisdiction are as follows:
Tax jurisdiction
Germany
United Kingdom1
Expiry date
No restriction
No restriction
United States of America
30 June 2029 – 30 June 2037
1. Unbooked capital losses.
2019
$m
44.5
42.1
137.0
2018
$m
45.7
41.5
230.6
128
BORAL LIMITED 2019 ANNUAL REPORT
5.2 Deferred tax assets and liabilities (continued)
Movement in temporary differences during the year
Balance at
the beginning
of the year
$m
Recognised
in income
$m
Recognised
in equity
$m
Change in US
federal tax rate
$m
Other
movements
$m
Balance at
the end
of the year1
$m
As at 30 June 2019
Receivables
Inventories
Other financial
instruments
Property, plant and
equipment
Intangible assets
Payables
Loans and borrowings
Provisions
Other
Unrealised foreign
exchange
Tax losses carried
forward
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
2.2
0.6
11.1
(79.7)
(258.4)
13.0
(1.9)
109.1
(12.9)
7.8
239.2
30.1
(0.8)
(2.5)
2.3
2.6
61.6
0.7
0.2
(30.0)
(16.1)
(2.6)
(48.3)
(32.9)
-
-
4.8
-
-
-
-
-
-
27.8
-
32.6
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(0.4)
(14.8)
-
-
1.2
0.1
-
12.0
(1.9)
Balance at
the beginning
of the year
$m
Recognised
in income
$m
Recognised
in equity
$m
Change in US
federal tax rate
$m
Other
movements
$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
(0.5)
-
-
24.4
122.8
-
-
(18.7)
17.4
0.1
(2.6)
14.4
(24.0)
(23.7)
2.7
(16.9)
17.5
22.0
-
(4.1)
7.8
(111.7)
33.7
(5.1)
(19.7)
239.2
30.1
1.4
(1.9)
18.2
(77.5)
(211.6)
13.7
(1.7)
80.3
(28.9)
33.0
202.9
27.9
Balance at
the end
of the year1
$m
2.2
0.6
11.1
(79.7)
(258.4)
13.0
(1.9)
109.1
(12.9)
1. Balance represents deferred tax asset $78.7 million (2018: $69.6 million) and deferred tax liability $50.8 million (2018: $39.5 million) giving rise to net
deferred tax balance of $27.9 million (2018: $30.1 million).
129
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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
A discontinued operation is a component of the Group’s business that represents a separate major line of business or geographical
area of operations that has been disposed of or is held for sale. An operation would be classified as held for sale if the carrying value
of the assets of the operation will be principally recovered through a sale transaction rather than continuing use. Classification as a
discontinued operation occurs upon disposal or when the operation meets the criteria to be classified as held for sale, if earlier. When
an operation is classified as discontinued, the comparative Income Statement is restated as if the operation had been discontinued from
the start of the comparative period.
During the current year, the Group completed the divestment of its Concrete and Quarries business in Denver, Colorado and the
divestment of its US Block business.
As a result, the earnings in the current and comparative periods for these respective businesses, as well as the gain on sale, have been
presented as “Discontinued Operations” in the Income Statement, and are summarised below.
Results of discontinued operations
Revenue
Expenses
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
Net profit
Cash flows from discontinued operations
Net cash provided by operating activities
Net cash (used in)/ provided by investing activities
Net cash provided by discontinued operations
1. Refer note 1D for further details.
Note
2.6
5.1
2019
$m
62.1
(62.1)
-
69.6
69.6
-
69.6
(11.8)
57.8
7.5
372.4
379.9
Restated1
2018
$m
289.7
(264.8)
24.9
-
24.9
-
24.9
(8.0)
16.9
35.3
(7.4)
27.9
130
BORAL LIMITED 2019 ANNUAL REPORT
6.1 Discontinued operations (continued)
Disposal of Denver Construction Materials
During July 2018, the Group sold its Concrete and Quarries business in Denver, Colorado to Brannan Sand and Gravel Company,
LLC for A$173.2 million. Proceeds from the sale were used to reduce debt.
The following disposal entries were recorded in the current period.
Consideration
Receivables
Inventories
Property, plant and equipment
Intangible assets
Other assets
Payables
Provisions
Net assets disposed
Costs incurred
Foreign currency translation reserve transferred to net profit on disposal of controlled entities
Gain on disposal before income tax
Disposal of US Block business
2019
$m
173.2
(20.6)
(2.9)
(78.1)
(16.6)
(3.2)
9.9
0.4
(111.1)
(4.3)
8.3
66.1
In November 2018, the Group sold the US Block business to Quikrete Holdings, Inc for A$210.6 million. This divestment helped to
further strengthen the Group’s Balance Sheet and focus on core operations.
The following disposal entries were recorded in the current period.
Consideration
Receivables
Inventories
Property, plant and equipment
Intangible assets
Other assets
Payables
Provisions
Net assets disposed
Costs incurred
Goodwill allocated to disposal
Foreign currency translation reserve transferred to net profit on disposal of controlled entities
Gain on disposal before income tax
131
2019
$m
210.6
(15.8)
(14.2)
(41.4)
(95.9)
(0.2)
3.0
4.1
(160.4)
(5.1)
(44.1)
2.5
3.5
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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. However, the
carrying value of the investment is tested for impairment when there are indicators that the investment is potentially impaired.
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.
Significant accounting judgements, estimates and assumptions
Assessing the recoverability of the carrying value of investments accounted for using the equity method requires judgement
and estimates in determining the fair value of the asset. The value in use calculation requires the Group to estimate several
key assumptions such as market forecasts, discount rate, long-term growth rate and EBITDA forecasts to calculate the future
discounted cash flows expected to be generated by the CGU.
Principal
activity
Country of
incorporation date
Balance
2019
%
2018
%
2019
$m
2018
$m
OWNERSHIP INTEREST
INVESTMENT
CARRYING AMOUNT
Name
Details of equity accounted
investments
30-Jun
31-Dec
31-Dec
30-Jun
Bitumen Importers Australia Pty Ltd
Bitumen importer Australia
Caribbean Roof Tile Company Limited1
Roof tiles
Trinidad
Flyash Australia Pty Ltd
Fly ash collection Australia
Highland Pine Products Pty Ltd
Meridian Brick2
Penrith Lakes Development
Corporation Ltd
South East Asphalt Pty Ltd
Sunstate Cement Ltd
Timber
Bricks
Property
development
Asphalt
Cement
manufacturer
Australia
USA/ Canada 30-Jun
Australia
Australia
30-Jun
30-Jun
Australia
30-Jun
USG Boral Building Products3
Plasterboard
Australia/
Singapore
US Tile LLC
TOTAL
Roof tiles
USA
30-Jun
31-Dec
50
-
50
50
50
40
50
50
50
50
50
50
50
50
50
40
50
50
50
50
6.8
-
3.1
-
7.7
-
2.9
-
228.6
410.6
-
1.3
-
1.3
11.1
11.1
1,041.1
977.7
-
-
1,292.0
1,411.3
1. Sold during June 2019.
2. The Group has a 50% interest in the joint ventures in the USA (Meridian Brick LLC) and Canada (Meridian Brick Canada Ltd).
3. 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).
132
BORAL LIMITED 2019 ANNUAL REPORT
6.2 Equity accounted investments (continued)
Movements in carrying value of equity accounted investments
Balance at the beginning of the year
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
2.6
2019
$m
2018
$m
1,411.3
1,353.7
73.1
(200.8)
(55.0)
(2.3)
6.3
59.4
90.2
(4.6)
(68.4)
(3.3)
5.1
38.6
1,292.0
1,411.3
Summarised Income Statement at 100%
Revenue
Profit/(loss) before income tax
Income tax (expense)/benefit
Non-controlling interest
Net profit/(loss) before significant items
Significant items net of tax
Net profit/(loss)
The Group’s share based on % ownership:
Net profit/(loss) before significant items
Significant items net of tax
Net profit/(loss)
Significant Equity Accounted Investments
USG Boral
Building Products
Meridian Brick
Total
Note
2019
$m
2018
$m
20191
$m
2018
$m
2019
$m
2018
$m
1,605.5 1,574.9
524.6
519.4
2,457.1 2,407.6
167.8
193.1
(24.7)
(50.6)
(61.2)
(3.8)
(5.7)
5.9
-
113.4
126.2
(18.8)
(10.4)
(2.0)
(391.2)
(0.6)
(2.6)
-
(3.2)
(7.2)
216.7
274.4
(65.5)
(86.4)
(3.8)
(5.7)
147.4
182.3
(401.6)
(9.2)
103.0
124.2
(410.0)
(10.4)
(254.2)
173.1
56.7
63.1
(9.4)
2.6
(5.2)
(1.0)
(195.6)
51.5
62.1
(205.0)
(1.6)
(3.6)
(5.2)
73.1
90.2
(200.8)
(4.6)
(127.7)
85.6
Depreciation and amortisation
Net interest expense
(83.6)
(74.1)
(29.3)
(27.5)
(0.4)
(0.7)
(3.1)
(2.3)
1. Underperformance of the business in the current year, particularly the second half of FY2019, which was primarily driven by a significant downturn in
the Canadian housing market, a deterioration in the US housing starts and significant plant closures resulting in lower fixed cost recovery, triggered an
assessment of the recoverability of the carrying value of the investment in the Meridian Brick CGU. A value in use methodology was used to determine
the recoverable amount of the CGU, leading to an impairment of $195.6 million. The key assumptions used in the model were a post-tax discount
rate of 10.5%, a long-term growth rate of 2.5% and housing starts aligned to future estimates prepared by reputable third parties. Given that the asset
has been written down to value in use, any significant adverse change in an assumption in isolation or combination would increase the amount of
impairment recognised.
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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
USG Boral Building
Products
Meridian Brick
Total
2019
$m
2018
$m
2019
$m
2018
$m
2019
$m
2018
$m
591.2
574.5
209.9
236.5
874.2
891.5
1,901.0
1,786.8
404.2
745.1
2,427.1
2,660.7
2,492.2
2,361.3
614.1
981.6
3,301.3
3,552.2
(223.2)
(237.4)
(144.1)
(108.1)
(390.1)
(372.1)
(71.5)
(65.2)
(12.9)
(52.4)
(212.0)
(254.2)
(294.7)
(302.6)
(157.0)
(160.5)
(602.1)
(626.3)
(115.3)
(103.2)
-
-
(115.3)
(103.2)
2,082.2
1,955.5
457.1
821.1
2,583.9
2,822.7
The Group’s share of net assets based on % ownership
1,041.1
977.7
228.6
410.6
1,292.0
1,411.3
Cash and cash equivalents
Current financial liabilities
Non-current financial liabilities
89.9
164.7
13.6
23.2
(17.5)
(12.9)
(29.5)
(21.5)
(46.7)
(12.8)
-
(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.
Acquisition of Pro Concrete Group
On 2 July 2018, the Group acquired 100% of the assets of Pro Concrete Pumping, a concrete placing business in Queensland,
Australia for total consideration of $10.9 million.
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BORAL LIMITED 2019 ANNUAL REPORT
6.4 Controlled entities
The consolidated financial statements include Boral Limited (parent entity) and the following wholly owned subsidiaries, unless stated
otherwise, in the table below.
Country of
incorporation
Beneficial ownership by
Group
2019
%
Group
2018
%
Boral Limited
Boral Cement Limited >*
Barnu Pty Ltd*
Boral Building Materials Pty Ltd >*
Boral International Pty Ltd >*
MJI (Thailand) Ltd
Eldorado Stone Philippines, Inc.
Piedras Headwaters, S. de R.L. de C.V.
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 IP Holdings LLC
Headwaters Incorporated
Global Climate Reserve Corporation
Boral Windows LLC
Magnolia Windows & Doors, LLC **
Evonik Headwaters LLP
Boral Building Products Inc.
Boral Composites Inc. **
Headwaters Building Products Inc.
Boral Concrete Products Louisiana LLC ***
Boral Concrete Products LLC ***
Headwaters Stone LLC
Boral Stone Products LLC
Eldorado Stone LLC
Stonecraft Manufacturing, LLC
Eldorado Stone Operations, LLC
Chihuahua Stone, LLC
Quarry Stone, LLC
Dutch Quality Stone, Inc.
Australia
Australia
Australia
Australia
Australia
Thailand
Philippines
Mexico
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
USA
USA
USA
USA
100
100
100
100
100
100
100
100
100
100
-
-
-
-
100
100
100
100
100
100
100
100
-
50
100
-
100
-
-
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
50
100
100
100
100
100
100
100
100
100
100
100
100
100
135
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Section 6: Group structure (continued)
6.4 Controlled entities (continued)
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
Headwaters Resources Limited
Headwaters Energy Services Corp.
American Lignite Energy, LLC
Covol Fuels Chinook, LLC
Covol Fuels Rock Crusher, LLC
Covol Engineered Fuels, LLC
Covol Fuels No.2, LLC
Covol Fuels No.4, LLC
Boral Lifetile Inc.
Boral Roofing de Mexico, S. de R.L. de C.V.
Boral Roofing LLC
Gerard Roof Products, LLC
Boral Roofing Products Canada Ltd. ***
Metrotile Manufacturing, LLC
Boral Concrete Tile Inc.
Tile Service Company LLC
E.U.M. Tejas De Concreto Servicios, S. de R.L. de C.V.
Boral (UK) Ltd
Tapco Europe Limited
Boral Investments BV
Boral Industrie GmbH
Boral Klinker GmbH
Boral Mecklenburger Ziegel GmbH
Boral Canada Ltd
Boral Investments Pty Ltd >*
Boral Construction Materials Ltd >*
Boral Resources (WA) Ltd >*
Boral Contracting Pty Ltd*
Boral Construction Related Businesses Pty Ltd >*
Country of
incorporation
USA
USA
USA
USA
USA
USA
USA
USA
Canada
USA
USA
USA
USA
USA
USA
USA
USA
Mexico
USA
USA
Canada
USA
USA
USA
Mexico
UK
UK
Netherlands
Germany
Germany
Germany
Canada
Australia
Australia
Australia
Australia
Australia
Beneficial ownership by
Group
2019
%
Group
2018
%
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
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
136
BORAL LIMITED 2019 ANNUAL REPORT
6.4 Controlled entities (continued)
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 >*
Pro Concrete Group Pty Limited*
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 >*
Boral Concrete Contracting Pty Ltd >*
Bayview Pty Ltd*
Dandenong Quarries Pty Ltd*
Boral Insurance Pty Ltd
Allen Taylor & Company Ltd >*
Oberon Softwood Holdings Pty Ltd >*
Duncan’s Holdings Ltd >*
Boral Bricks Pty Ltd >*
Boral Masonry Ltd >*
Boral Hollostone Masonry (South Aust) Pty Ltd >*
Boral Montoro Pty Ltd >*
Boral Timber Fibre Exports Pty Ltd >*
Boral Shared Business Services Pty Ltd >*
Boral Building Products Ltd >*
Boral Bricks Western Australia Pty Ltd >*
Boral IP Holdings (Australia) Pty Ltd
Boral Finance Pty Ltd >*
Country of
incorporation
Beneficial ownership by
Group
2019
%
Group
2018
%
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
> 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.
< A Delaware general partnership.
All the shares held by Boral Limited in controlled entities are ordinary shares.
137
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Section 6: Group structure (continued)
6.4 Controlled entities (continued)
The following controlled entities were disposed of or deregistered during the financial year ended 30 June 2019:
Entities disposed:
Ready Mixed Concrete Company
Sprat-Platte Ranch Co. LLLP
Morton Lakes, LLC
Aggregate Investments, L.L.C.
Boral Concrete Products Louisiana LLC
Boral Concrete Products LLC
Boral Roofing Products Canada Ltd.1
Date of
disposal
Jul 2018
Jul 2018
Jul 2018
Jul 2018
Nov 2018
Nov 2018
Apr 2019
1. Sold to Meridian Brick Canada Ltd, an equity accounted investment of the Group.
Entities deregistered:
Boral Composites Inc.
merged into Boral Building Products Inc.
Magnolia Windows & Doors, LLC
merged into Boral Windows LLC
Date of deregistration
Dec 2018
Jun 2019
The following controlled entities had name changes during the financial year ended 30 June 2019:
Name changes during the financial period:
De Martin & Gasparini Concrete Placers Pty Ltd
Tapco International Corporation
Allmet Roof Products, Ltd
to
to
to
Pro Concrete Group Pty Limited
Boral Building Products Inc.
Boral Roofing Products Canada Ltd.
138
BORAL LIMITED 2019 ANNUAL REPORT
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, are 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 that 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.
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Employee liabilities
Current
Non-current
2019
$m
118.7
46.1
164.8
2018
$m
129.6
40.6
170.2
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 $53.0 million (2018: $50.1 million).
2019
$m
2018
$m
1,305.5
1,254.5
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.
139
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Section 7: Employee benefits (continued)
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 $3.52 per right, while SARs with a Return on Funds Employed (ROFE) target were valued at $6.13 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
2019
$7.00
1.99%
4.50%
25%
2018
$6.62
2.51%
4.12%
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 $6.93 per right, being the volume weighted average price traded on the ASX over the five trading
days up to 1 September 2018.
Further details of the terms and conditions of the issue of rights are contained in the Remuneration Report.
Set out below are summaries of share acquisition rights granted under the plans.
Rights
Grant date
Expiry date
Consolidated - 2019
TSR
TSR
ROFE
TRI1
TSR
ROFE
1/9/2011
1/9/2018
1/9/2015
1/9/2018
1/9/2015
1/9/2018
1/9/2015
1/9/2018
1/9/2016
1/9/2019
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
TSR
ROFE
1/9/2018
1/9/2021
1/9/2018
1/9/2021
Deferred STI
1/9/2018
1/9/2020
1. Targeted retention incentive.
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
707,871
1,762,939
881,442
427,463
1,564,024
781,982
654,731
1,959,988
979,539
502,189
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
-
-
-
-
-
-
-
-
-
-
(707,871)
(1,762,939)
(881,442)
-
-
-
-
(427,463)
-
-
-
-
(67,147)
(33,572)
-
-
1,496,877
748,410
(8,466)
(646,265)
-
(188,694)
(93,897)
(21,666)
2,024,426
(140,092)
1,012,212
490,579
(70,046)
(12,906)
-
-
-
-
-
-
1,771,294
885,642
480,523
1,884,334
942,166
477,673
10,222,168
3,527,217
(3,988,738)
(1,073,728)
8,686,919
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BORAL LIMITED 2019 ANNUAL REPORT
7.3 Share-based payments (continued)
Share Acquisition Rights (SAR) (continued)
Rights
Grant date
Expiry date
Consolidated - 2018
TSR
TSR
TSR
ROFE
TSR
ROFE
TRI1
12/11/2010
12/11/2017
1/9/2011
1/9/2018
1/9/2014
1/9/2017
1/9/2014
1/9/2017
1/9/2015
1/9/2018
1/9/2015
1/9/2018
1/9/2015
1/9/2018
Deferred STI
1/9/2015
1/9/2017
TSR
ROFE
1/9/2016
1/9/2019
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.
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
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
1,406,102
711,495
1,709,810
854,919
1,817,015
908,500
427,463
798,823
1,598,624
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
During the year ended 30 June 2019, the Group recognised an expense of $9.5 million (2018: $10.4 million) in relation to
share-based payments.
7.4 Key management personnel disclosures
Key management personnel compensation is set out below. Detailed remuneration disclosures are provided in the audited
Remuneration Report section in the Directors’ Report.
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Short-term employee benefits
Post-employment benefits
Share-based payments
Long-term employee benefits
2019
$'000
6,967.6
622.1
2,717.7
180.3
2018
$'000
9,365.9
615.5
3,458.4
62.1
10,487.7
13,501.9
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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
2019
$m
2018
$m
42.4
38.5
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 provisioned. 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 has recognised appropriate provisions based on consideration of available
information and, where appropriate, independent advice.
8.2 Subsequent events
On 23 August 2019, the Group agreed to sell its Midland Bricks business for $86.0 million, subject to customary completion
adjustments. The transaction is expected to complete by the end of this calendar year, or soon after.
On 26 August 2019, the Group announced that its USG plasterboard joint venture entered into an agreement with Gebr Knauf KG
(“Knauf”) to expand the joint venture by acquiring Knauf’s plasterboard business in Asia. In addition, the Group has agreed to acquire
Knauf’s 50% ownership interest in USG Boral Australia & New Zealand (NZ), subject to a call option to buy back their ownership interest
that Knauf can exercise within five years. The transactions are subject to typical conditions precedent, including regulatory approvals.
The Group’s total net investment is approximately US$441.0 million being US$200 million to buy the remaining 50% of USG Boral
Australia & NZ and US$241.0 million for the Group’s 50% share of the USG Boral JV's investment in Knauf Asia Plasterboard after
divesting the Middle East business.
142
BORAL LIMITED 2019 ANNUAL REPORT
8.3 Commitments
The Group leases property, equipment and vehicles under operating leases expiring from one to 25 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
2019
$m
2018
$m
19.5
32.3
3.3
3.2
-
6.5
(0.4)
6.1
2019
$m
106.7
222.2
134.5
463.4
6.8
10.3
0.2
17.3
(0.5)
16.8
2018
$m
99.6
211.6
74.2
385.4
143
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Section 8: Other notes (continued)
8.4 Auditors’ remuneration
Audit services:
KPMG Australia – audit and review of financial reports
KPMG overseas firms – audit and review of financial reports
KPMG Australia – other assurance services
Other services:
KPMG Australia – taxation services
KPMG Australia – due diligence
KPMG Australia – advisory
KPMG Australia – other
KPMG overseas firms – due diligence and advisory
KPMG overseas firms – taxation services
8.5 Related party disclosures
Controlled entities
Interests held in controlled entities are set out in note 6.4.
2019
$'000
1,465
1,189
102
2,756
402
178
20
-
615
210
1,425
4,181
2018
$'000
1,466
1,249
616
3,331
256
-
209
16
-
47
528
3,859
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.
144
BORAL LIMITED 2019 ANNUAL REPORT
8.6 Parent entity disclosures
For the year ended 30 June
RESULT OF THE PARENT ENTITY
Profit after tax
Other comprehensive income after tax
Total comprehensive income 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
2019
$m
369.7
2.3
372.0
4,989.3
1,382.5
6,371.8
1,022.6
287.9
1,310.5
5,061.3
4,265.1
36.4
759.8
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
5,061.3
5,003.8
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
42.2
38.3
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.
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.
145
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Section 8: Other notes (continued)
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.
There were no discontinued operations during the year.
STATEMENT OF COMPREHENSIVE INCOME
Revenue
Profit before income tax expense
Income tax expense
Net profit
Other comprehensive income
Items that may be reclassified subsequently to Income Statement:
Exchange differences from translation of foreign operations taken to equity
Fair value adjustment on cash flow hedges
Income tax on items that may be reclassified subsequently to Income Statement
Total comprehensive income
Reconciliation of movements in retained earnings
Balance at the beginning of the year
Transition impact from implementation of AASB 15
Net profit
Dividends paid
Balance at the end of the year
2019
$m
2018
$m
3,572.0
3,589.8
575.8
(51.9)
523.9
25.9
(15.9)
4.8
538.7
435.8
(40.7)
395.1
53.0
10.5
(3.2)
455.4
1,113.1
1,005.2
(1.4)
523.9
(316.5)
-
395.1
(287.2)
1,319.1
1,113.1
146
BORAL LIMITED 2019 ANNUAL REPORT
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
147
2019
$m
2018
$m
95.0
853.6
396.6
3.8
29.5
25.0
822.7
363.9
11.2
28.3
1,378.5
1,251.1
139.9
11.4
1,063.5
4,011.9
2,155.2
75.9
78.7
10.9
7,547.4
8,925.9
1,111.1
230.1
23.8
18.0
108.5
28.4
1,519.9
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
1,630.7
2,092.0
-
10.8
70.6
15.2
1,727.3
3,247.2
5,678.7
4,265.1
94.5
1,319.1
5,678.7
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
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ANNUAL REPORT 2019
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 83 to 147 and the Remuneration Report in the Directors’
Report, set out on pages 61 to 82, 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 2019 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 2019.
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, 26 August 2019
148
BORAL LIMITED 2019 ANNUAL REPORT
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 2019 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 2019;
•
Income Statement, Statement of Comprehensive Income, Statement of Changes in Equity, and Statement of Cash Flows for the
year then ended;
• Notes including a summary 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;
• 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.
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.
149
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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 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.
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:
•
•
•
forecasting operating cash flows – the Group has experienced
competitive market conditions in the current year as a result
of the slower than expected recovery of the US housing and
construction markets. This drives additional audit effort in
consideration of the appropriateness of the future cash-flow
assumptions and consistency with economic indicators and
the Group’s strategy;
calculating discount rate, forecast growth rate and terminal
growth rate – these are complicated in nature and vary
according to the conditions and environment a Cash
Generating Unit (CGU) is subject to from time to time, and
the approach taken to incorporate risks into the cash flows or
discount rates;
calculating terminal value – 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; and
•
determining the appropriate level of disclosure of the key
assumptions used in the Group’s valuation model.
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;
assessing management’s terminal value assumptions by
considering the impact of alternative assumptions and
assessing the impact on the present value calculation;
• assessing the adequacy of the related disclosures against
the requirements of the accounting standards; and
• using our valuation specialists to:
–
–
–
independently develop a discount rate range using
publicly available market data for comparable entities,
adjusted by risk factors specific to the Group and the
industry it operates in;
compare the Group’s long term growth rate
assumptions against publicly available long term
economic forecasts specific to the United States; and
assess the methodology logic of discounted cash flow
models.
150
BORAL LIMITED 2019 ANNUAL REPORT
Carrying value of the investment in USG Boral JV (A$1,041 million) and Meridian Brick JV (A$229 million)
How the matter was addressed in our audit
Our procedures included, amongst others:
•
evaluating 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;
recalculating the impairment charge against the recorded
amount disclosed; and
assessing the adequacy of the related disclosures against
the requirements of the accounting standards.
•
•
•
•
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 (the Joint Ventures) 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;
the sectors in which the Joint Ventures operate experienced
competitive market conditions during the year. This increased
the uncertainty of forecast cash flows used in the Joint
Ventures valuation models; and
in addition to the above, the Group recorded an impairment
charge of $195.6m against the investment in the Meridian
Bricks JV, increasing the sensitivity of the model to small
changes in the assumptions.
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. 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;
consideration of impairment indicators across multiple
countries with varied economic conditions; and
determining the appropriate level of disclosure of the key
assumptions used in the Group’s valuation model.
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.
151
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Availability and recoverability of US tax loss asset (A$203 million)
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 and
construction markets; and
the period of the forecast utilisation of the US tax losses and
the US federal and state restrictions on utilisation over the
forecast period.
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 US federal and state restrictions on utilisation;
using our US taxation specialists to assess availability of
US tax losses against US taxation requirements;
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.
152
BORAL LIMITED 2019 ANNUAL REPORT
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 2019 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 61 to 82 of the Directors’ Report for the year ended 30 June 2019.
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, 26 August 2019
Daniel Camilleri
Partner
Sydney, 26 August 2019
153
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ANNUAL REPORT 2019
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
ONLINE SERVICES
Shareholders can access information and update information
about their Boral shareholdings via the internet by visiting Link
Market Services’ website at www.linkmarketservices.com.au or
Boral’s website at www.boral.com.
Some of the services available online include: checking current
and previous holding balances, choosing a preferred Annual
Report option, updating address and bank details, confirming
that a tax file number (TFN), Australian business number (ABN) or
proof of exemption has been lodged, checking the share prices
and graphs, and downloading a variety of forms.
DIVIDENDS
Boral expects to pay the final dividend for FY2019 of 13.5 cents
per share on 1 October 2019. The dividend will be 50% franked.
Dividend Reinvestment Plan
Following payment of the interim dividend on 24 March 2014,
Boral’s Dividend Reinvestment Plan (DRP) was suspended
until further notice. Shareholders were notified about additional
amendments to the terms and conditions of the DRP on 24
March 2014. For further information on the suspension and
amendments to the DRP, please visit Boral’s website. If the DRP
is reactivated in the future, Boral will notify shareholders through
an ASX announcement.
Dividend payments
Since 2012, Boral has used direct credit as the preferred method
for paying cash dividends.
For those shareholders with a registered address in Australia
or New Zealand, dividend payments will only be made by direct
credit to a nominated bank account (rather than by cheque
posted to a registered address). To provide or update bank
account details, please contact the share registry or visit its
website at www.linkmarketservices.com.au.
Shareholders who don't have a registered address in Australia
or New Zealand and who wish their dividends to be paid directly
to a bank, building society or credit union account in Australia
or New Zealand should contact the share registry or visit its
website at www.linkmarketservices.com.au for an application
form. Payments are electronically credited on the dividend
payment date and confirmed by a payment advice 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 or exemption
Shareholders are strongly advised to lodge their TFN, ABN or
exemption. If these details are not lodged with the share registry,
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
a TFN. Shareholders can confirm whether they have lodged
a 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 request them from 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
statements. For security reasons, shareholders should keep their
Securityholder Reference Numbers confidential.
154
BORAL LIMITED 2019 ANNUAL REPORT
ANNUAL REPORT MAILING LIST
SHARE SALE FACILITY
Shareholders (whether Issuer or Broker Sponsored) not wishing
to receive the Annual Report should advise the share registry in
writing so that their name 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 the
Boral Review.
Issuer-sponsored shareholders, particularly small shareholders,
can sell their entire Boral shareholding using the share registry’s
sale facility. To do so, contact 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.
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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 website 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, and
• 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.
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 calling from within the
United States. If calling from outside the United States, please
call 201-680-6825.
By email:
Send email enquiries to
shrrelations@bnymellon.com or visit the website at
www.bnymellon.com/shareowner
SHARE INFORMATION AS AT 20 AUGUST 2019
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 its subsidiaries), by notice
of change of interest of substantial holder dated 16 August 2019,
advised that it and its associates were entitled to 66,849,618
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.
Sumitomo Mitsui Trust Holdings Inc., by notice of initial
substantial holder dated 9 August 2019, advised that it and its
associates were entitled to 58,915,250 ordinary shares.
155
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Distribution schedule of shareholders as at 20 August 2019
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 (100 shares)
Number of
shareholders
% of ordinary
shares
26,496
34,968
9,031
5,643
187
76,325
1,423
1.14
7.47
5.60
10.36
75.43
100.00
0.004
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 20 August 2019
1
2
3
4
5
6
7
8
9
10
11
12
HSBC CUSTODY NOMINEES
J P MORGAN NOMINEES AUSTRALIA LIMITED
CITICORP NOMINEES PTY LIMITED
NATIONAL NOMINEES LIMITED
BNP PARIBAS NOMS PTY LTD
ARGO INVESTMENTS LIMITED
CS FOURTH NOMINEES PTY LIMITED
ANZ EXECUTORS & TRUSTEE
EQUITAS NOMINEES PTY LIMITED
PACIFIC CUSTODIANS PTY LIMITED
BNP PARIBAS NOMINEES PTY LTD
AMP LIFE LIMITED
13 MUTUAL TRUST PTY LTD
14
15
CS THIRD NOMINEES PTY LIMITED
GWYNVILL INVESTMENTS PTY LTD
16 MILTON CORPORATION LIMITED
17
18
19
20
INVIA CUSTODIAN PTY LIMITED
NETWEALTH INVESTMENTS LIMITED
NAVIGATOR AUSTRALIA LTD
AUSTRALIAN EXECUTOR TRUSTEES LIMITED
Ordinary shares
% of ordinary shares
348,040,432
245,643,941
111,035,211
49,141,325
37,996,106
11,596,552
8,710,079
5,440,981
3,842,265
3,610,133
3,473,259
3,106,624
2,688,618
2,682,303
2,521,264
2,089,293
1,972,351
1,791,581
1,555,109
1,532,510
29.69
20.95
9.47
4.19
3.24
0.99
0.74
0.46
0.33
0.31
0.30
0.26
0.23
0.23
0.22
0.18
0.17
0.15
0.13
0.13
156
BORAL LIMITED 2019 ANNUAL REPORT
ANNUAL REPORT 2019
Financial History
Boral Limited and Controlled Entities
2019
$m
2018
$m
2017
$m
2016
$m
2015
$m
2014
$m
2013
$m
2012
$m
2011
$m
2010
$m
5,863
5,869
4,388
4,311
4,415
5,204
5,286
5,010
4,711
4,599
1,037
1,056
720
260
460
(51)
409
(67)
-
343
(46)
297
9,381
3,940
5,441
2,333
7,774
281
368
688
(104)
585
(111)
-
473
(32)
441
9,510
3,780
5,731
2,453
8,183
311
66%
1.5
40.4c
40.4c
8.3%
82%
1.2
33.7c
33.7c
6.3%
378
660
(103)
557
(116)
-
440
(168)
272
9,544
3,685
5,859
2,193
8,052
311
26.5c
71%
1.4
37.5c
37.5c
7.5%
8.1%
6.4
37%
8.6%
6.6
43%
7.6%
9.1
43%
645
247
398
(63)
335
(67)
-
268
(12)
605
249
357
(64)
293
(44)
-
249
8
256
5,801
2,294
3,506
893
257
5,865
2,341
3,524
817
556
261
294
(83)
211
(37)
519
291
228
(97)
130
(20)
(3)
(6)
171
2
173
5,559
2,211
3,348
718
104
(316)
(212)
6,316
2,923
3,394
1,446
4,840
85
473
273
200
(88)
111
(9)
(1)
101
75
522
245
277
(64)
213
(40)
2
175
(8)
177
6,499
3,096
3,403
1,518
4,921
82
168
5,668
2,512
3,156
505
3,662
105
505
253
252
(97)
155
(22)
(1)
132
(222)
(91)
5,209
2,583
2,626
1,183
3,809
88
4,399
4,341
4,066
167
139
117
62%
1.6
35.8c
33.3c
7.6%
9.2%
9.0%
9.1%
6.3
25%
56%
1.8
31.9c
29.7c
7.1%
8.1%
8.2%
8.5%
5.6
23%
68%
1.5
22.0c
20.5c
5.1%
5.7%
7.2%
6.6%
3.5
21%
81%
1.2
13.6c
12.7c
3.2%
4.3%
4.7%
4.7%
2.3
43%
81%
1.2
13.6c
12.7c
3.0%
4.0%
4.1%
4.7%
2.3
45%
60%
1.7
24.4c
22.7c
5.6%
5.9%
7.6%
7.4%
4.4
16%
67%
1.5
22.1c
20.5c
5.0%
5.5%
6.6%
6.2%
2.6
45%
26.5c
24.0c
22.5c
18.0c
15.0c
11.0c
11.0c
14.5c
13.5c
27%
30%
30%
20%
19%
18%
30%
31%
14%
31%
$2.12
$1.99
$1.79
$4.40
$4.31
$4.03
$3.17
$3.31
$3.91
$3.92
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
Dividends paid or declared
Statistics
Dividend per ordinary share
Dividend payout ratio1
Dividend cover1
Earnings per ordinary share1
Earnings per ordinary share1,2
Return on equity1
EBIT to sales1
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)
Net tangible asset backing
per share
EBIT to funds employed1,3
8.2%
8.4%
9.2%
11.3% 11.7% 10.5%
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1. Excludes significant items.
2. Adjusted to reflect the bonus element in the renounceable entitlement offer that 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.
Results have been prepared under Australian equivalents to International Financial Reporting Standards (A-IFRS).
Figures may not add due to rounding.
157
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158
BORAL LIMITED 2019 ANNUAL REPORT
BORAL LIMITED
ABN 13 008 421 761
Level 18, 15 Blue 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
Level 12, 680 George St, Sydney NSW 2000
Locked Bag A14, Sydney South NSW 1235
Telephone: +61 1300 730 644
Internet: www.linkmarketservices.com.au
Email: boral@linkmarketservices.com.au
AGM DETAILS
The Annual General Meeting of Boral Limited
will be held at the Civic Pavilion, The Concourse,
Chatswood, NSW on Wednesday, 6 November 2019
at 10.30am.
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