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Boral Limited Annual Report 2020
Contents
01 Year at a glance
02 Who we are
04 Results at a glance
06 Chairman’s review
08 Message from Zlatko Todorcevski
10
Performance overview
20 Our response to COVID-19
24 Our risks and responses
28 Sustainability highlights
30 Sustainability overview
36
37 Board of Directors
38 Corporate Government Statement
54 Directors’ Report
59 2020 Remuneration Report
Financial Statements
84
156 Statutory Statements
163 Shareholder information
166 Financial history
Executive Committee
USG Boral decorative ceiling product AO-Gami™ and ASONA Triton
acoustic ceiling tiles at Fairmont Group’s office in South Australia
Find Boral’s reporting suite at www.boral.com
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Sustainability Report
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Performance measures used in this report
Earnings before interest and tax before significant items and net profit after tax before significant items are alternative
measures to those prescribed under International Financial Reporting Standards (IFRS) that Boral uses 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 2.1 of the financial statements and relate to income and expenses that are
associated with significant business restructuring, impairment or individual transactions.
Commentary throughout this report, unless otherwise stated, is based on earnings from continuing operations excluding
the impact of the new IFRS leasing standard (AASB 16) to provide a more comparable basis for analysis with the prior
year. In addition, FY2019 comparative figures have been restated. Further details of restatements are contained in
note 1d of the financial statements. The sections of this report from pages 6–27, titled Chairman’s review, Message
from Zlatko Todorcevski, Performance overview, Our response to COVID-19, and Our risks and responses comprise our
operating and financial review (OFR) and form part of the Directors’ Report.
Financial calendar
Annual General Meeting
Half year end
27 October 2020
31 December 2020
Half year results announcement
18 February 2021
Year end
30 June 2021
Full year results announcement
24 August 2021
Please note, dates are subject to review.
BORAL LIMITED
ABN 13 008 421 761
Annual Report2020Build somethinggreatBoral Review & Sustainability Report2020Build somethinggreat 11
Year at a glance
Boral Limited’s (Boral) FY2020 results reflect challenging conditions,
including a housing downturn in Australia and COVID-19 impacts. In light of the
high level of uncertainty, efforts were focused on preserving cash, including
by reducing capital expenditure and discretionary spend, and curtailing
production where inventories were available to maintain supply.
ASX announcements
23 August 2019
19 March 2020
Boral agreed to sell its Midland Brick business for
$86 million in line with strategy.
26 August 2019
Boral reported a net profit after tax before significant
items of $440 million for the year ended 30 June 2019.
27 October 2019
At the Annual General Meeting, Eileen Doyle and Karen
Moses were re-elected as Directors. The resolution to
adopt the Remuneration Report was supported, with
81.3% of shareholders voting in favour.
5 December 2019
Boral advised that it had identified financial irregularities
in its North American Windows business, involving
misreporting in relation to inventory levels and raw
material and labour costs at the Windows plants.
10 February 2020
The Board announced that after more than seven years
as Boral’s Chief Executive Officer (CEO) & Managing
Director, Mike Kane would be retiring in 2020.
Boral issued an update on the Company’s results for the
six months ended 31 December 2019 and its FY2020
earnings guidance.
Boral announced the findings of the investigation into
financial irregularities at its North American Windows
business. The financial irregularities resulted in the
overstatement of pre-tax earnings by US$24.4 million
between March 2018 and October 2019.
20 February 2020
Boral reported a net profit after tax before significant
items of $159 million for the six months to
31 December 2019.
Boral withdrew its FY2020 earnings guidance due to
COVID-19 and provided an update on a plasterboard
transaction with Knauf.
30 March 2020
S&P Global Ratings affirmed its issuer ratings of ‘BBB’
for Boral. The rating outlook was revised from stable
to negative.
8 April 2020
Moody’s Investors Service affirmed its issuer rating
of ‘Baa2’ for Boral. The rating outlook was revised from
stable to negative.
14 April 2020
Boral announced that regulatory approvals required to
allow the USG Boral transaction with Knauf were not
achievable by the 30 June 2020 sunset date. Boral and
Knauf entered into preliminary discussions to consider
other potential options, with Boral’s objective being to
target a cash-neutral transaction.
20 May 2020
Boral received a favourable judgment from the
Queensland Supreme Court in relation to a legal case
brought against Boral Resources (Qld) Pty Ltd by
Wagners Cement Pty Ltd.
15 June 2020
Zlatko Todorcevski was appointed as Boral’s CEO &
Managing Director, effective 1 July 2020.
24 August 2020
Boral announced that it expected to recognise a
non-cash, pre-tax impairment charge of A$1,346 million
in its FY2020 results.
2
2
Boral Review & Sustainability Report 2020
Boral Limited Annual Report 2020
Who we are
Our purpose
At Boral, we help
our customers build
something great by
supplying them with
high-quality, sustainable
construction materials
and building products.
1. Full-time equivalent (FTE),
including in joint ventures.
Our strategy
In 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 stakeholders.
How we strive to create value for our stakeholders, including our customers,
employees, suppliers and the communities in which we operate, is outlined
28–29.
on pages 24–25.
Boral Australia is the largest integrated construction materials
company in Australia, with a leading position underpinned by
strategically located quarry reserves and a network of 379 operating
sites. We also manufacture and supply a focused range of building
products. We serve customers nationally in the infrastructure,
commercial and residential construction markets.
Boral North America has industry-leading positions in fly ash
processing and distribution. We also manufacture and supply stone
veneer, roof tiles, windows and light building products, including trim,
siding and shutters, for residential and commercial markets, and have
a 50% share of the Meridian Brick joint venture.
USG Boral, a 50:50 joint venture with Knauf/USG Corporation, is
a leading manufacturer and supplier of wall and ceiling solutions.
With a presence in 14 countries across Asia Pacific and the Middle
East, USG Boral produces plasterboard-based wall and ceiling
lining systems, mineral fibre ceiling systems, metal framing, joint
compounds, high-performance panels and accessories.
33
646
operating sites
17
countries
137
distribution sites
Current priorities
Across all our businesses, we are focused on continuing to safely supply and flex production in response to COVID-19
and maximise cash flows.
In Boral Australia
In Boral North America
In USG Boral
• Maintain a strong market position
in a declining market, including
securing supply to major projects
• Deliver benefits from quarry, cement
and network investments
• Enhance the customer experience
by delivering innovative materials
solutions
• Reduce costs, including
by rightsizing, operational
improvements and reducing fixed
costs to reflect market declines.
• Grow fly ash volumes through
• Maintain market position by
network optimisation, harvesting and
import opportunities
continuing to differentiate our offer
with improved products and services
• Improve building products margins
through targeted share recovery
programs in Stone, Roofing
and Meridian Brick, structured
procurement programs and
price increases
• In Roofing, increase available
product through plant operational
improvements.
• Optimise the customer and product
mix through customer segmentation
to improve margins
• Drive cost efficiencies, including by
targeted procurement and operating
efficiencies to offset variable cost
inflation, and strong cost control
across fixed costs, including sales,
general and administrative costs.
16,169
employees1
~7,600
contractors1
Employees by location (%)
2
15
39
44
Australia/New Zealand
North America
Asia
Other
4
4
Boral Limited Annual Report 2020
Boral Review & Sustainability Report 2020
Results at a glance
Our results
A$ million unless stated
Revenue – total operations basis
– continuing operations basis
EBITDA1 – total operations basis
– continuing operations basis
EBIT1
Net interest
Profit before tax1
Tax1
Net profit after tax1
Net significant items
Statutory net profit/(loss) after tax
Net profit after tax and before amortisation1
Cash flow from operating activities
Gross assets
Funds employed
Liabilities
Net debt
Stay-in-business capital expenditure
Growth capital expenditure
Acquisition capital expenditure
Depreciation and amortisation (D&A)
D&A excluding acquired amortisation
Boral employees
Total employees including in joint ventures
Revenue per Boral employee, $ million
Net tangible asset backing, $ per share
EBITDA margin on revenue1, %
EBIT margin on revenue1, %
EBIT return on funds employed2, %
EBIT return on average funds employed3, %
Return on equity1, %
Gearing
Net debt/equity, %
Net debt/net debt + equity, %
Interest cover1, times
Earnings per share1, ¢
Dividend per share, ¢
Safety4: (per million hours worked)
Lost time injury frequency rate
Recordable injury frequency rate
FY2020
reported
FY2020
pre-AASB 16
FY2019
restated
Financial highlights
5,728
5,671
821
825
329
(126)
203
(25)
177
(1,316)
(1,139)
224
631
9,202
7,115
4,667
2,580
228
118
-
492
429
11,073
16,169
0.516
1.89
14.3
5.7
4.6
4.3
3.9
57
36
2.6
14.8
9.5
1.6
7.6
5,728
5,671
710
715
317
(109)
207
(26)
181
(1,316)
(1,135)
228
537
8,829
6,741
4,284
2,197
232
118
-
393
330
11,073
16,169
0.516
1.89
12.4
5.5
4.7
4.3
4.0
48
33
2.9
15.2
9.5
1.6
7.6
5,861
5,738
1,010
1,005
632
(103)
529
(110)
419
(168)
251
464
762
9,520
8,026
3,688
2,193
340
113
11
378
316
11,916
17,104
0.492
2.10
17.2
10.8
7.9
7.8
7.2
38
27
6.1
35.7
26.5
1.3
7.5
Revenue (A$m)
5,869
5,861
5,728
4,311
4,388
FY16
FY17
FY18
FY19
FY20
EBITDA (A$m)1
(pre-AASB 16)
1,051
1,010
720
645
710
FY16
FY17
FY18
FY19
FY20
Return on funds employed (%)2
(pre-AASB 16)
9.0
9.2
8.4
7.9
4.7
FY16
FY17
FY18
FY19
FY20
Dividends per share (¢)
22.5
24.0
26.5
26.5
9.5
FY16
FY17
FY18
FY19
FY20
55
Three focused
operating divisions
Health, safety and
environment
Revenue by division (%)5
Boral Australia (A$m)
11
39
50
Boral Australia
Boral North America
USG Boral
Revenue
EBITDA1
(pre-AASB 16)
Recordable injury
frequency rate6,7
Lost time injury
frequency rate7
3,511
3,336
592
7.5
7.6
1.3
1.6
447
FY19
FY20
FY19
FY20
FY19
FY20
FY19
FY20
Revenue by market (%)5
Boral North America (A$m)
Revenue
EBITDA1
(pre-AASB 16)
2,227
2,336
388
281
Greenhouse gas
(GHG) emissions8
(million tonnes
CO2-e)
Scope 1 and 2 GHG
emissions intensity8
(tonnes CO2-e per
A$m revenue)
2.41
2.22
348
329
5 2
4
10
3
14
7
7
6
25
9
8
Australian roads, highways, subdivisions
& bridges, and other engineering
Australian non-residential
Australian detached housing
Australian multi-residential
Australian alterations and additions
Asia and Middle East
USA single-family residential
USA multi-family residential
USA repair and remodel
USA non-residential
USA infrastructure
Other
FY19
FY20
FY19
FY20
FY19
FY20
FY19
FY20
USG Boral (A$m)
underlying business result
Revenue
EBITDA1
(pre-AASB 16)
1,606
1,474
252
190
FY19
FY20
FY19
FY20
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 all businesses and all joint venture operations regardless of equity interest.
5. Includes Boral’s 50% share of underlying revenue from USG Boral and Meridian Brick joint ventures, which are equity accounted.
6. Recordable injury frequency rate is the combined lost time injury frequency rate and medical treatment injury frequency rate.
7. Per million hours worked for employees and contractors in 100% owned businesses and all joint ventures businesses.
8. GHG emissions data excludes some joint ventures, which in aggregate are not deemed to have material emissions. Emissions intensity is
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.
6
6
Boral Limited Annual Report 2020
Boral Review & Sustainability Report 2020
Chairman’s review
On a reported basis, Boral’s FY2020
net profit after tax (NPAT) was
$177 million excluding significant items.
Comparable NPAT2 was 55% lower
than in FY2019.
Boral Australia’s performance
reflected a 19% decline in housing
starts together with bushfire and
flood disruptions. Revenue was down
5% and EBITDA1 of $447 million was
25% lower reflecting lower pricing
outcomes, higher costs, lower
production, and an adverse geographic
and product mix shift.
Boral North America revenue declined
2% to US$1.57 billion and EBITDA1
was down 32% to US$188 million with
lower sales volumes, higher costs and
~80% of plants experiencing COVID-19
related volume impacts and disruptions
in the second half of the year.
For the USG Boral joint venture,
underlying revenue was down 8%
and EBITDA1 was down 25% to
$190 million. This reflected housing
downturns in South Korea and
Australia, price declines in South
Korea, and a significant impact from
COVID-19 related plant closures and
production slowdowns. Boral’s equity
accounted post-tax earnings from USG
Boral were down by 56% to $25 million
due to lower underlying earnings and a
higher effective tax rate.
Boral paid an interim dividend of
9.5 cents per share on 15 April 2020.
The Board determined not to pay a
final dividend for FY2020 given the
significant uncertainty and on the
basis that Boral’s interim dividend
represents about 63% of full year
earnings. This payout ratio is in line
with Boral’s dividend policy to pay 50%
to 70% of earnings before significant
items, subject to the Company’s
financial position.
We recognised $1.316 billion of net
significant items, primarily relating
to non-cash impairment charges.
This reflects revised carrying value
assessments for Boral North America,
Boral’s investment in Meridian Brick
and Boral Australia’s construction
materials business in Western Australia
and Northern Territory, and the Timber
and Roofing businesses.
I could not have
predicted the extent
of the challenges
Boral faced in FY2020,
my second year as
Chairman. In addition to
Boral-specific, internal
challenges, we were faced
with the global COVID-19
pandemic, which closely
followed the devastating
Australian bushfires.
A very challenging year
The COVID-19 crisis has affected
our daily lives, changing the way
we interact, and manage health
and hygiene. In most areas across
Boral, we have continued to operate
as an essential industry, with
appropriate social distancing and
hygiene measures. However, we have
experienced widespread disruption,
production curtailments and higher
costs, substantially impacting Boral’s
FY2020 earnings, and creating
significant uncertainty.
In response to COVID-19, Boral’s
Crisis Management Team was
activated and there was strong board
involvement, focusing on health
and safety, maintaining deliveries
to customers and ensuring strong
liquidity. We strengthened our debt
facilities and implemented cash
preservation measures.
The disruptions and slowdowns caused
by the pandemic added to the impacts
of the cyclical decline in residential
markets in Australia, and in our core
USG Boral market of South Korea.
In addition to the challenges presented
by the external environment, our
North America business, including
the Headwaters acquisition, has not
yet met our expectations, reflecting
shortcomings in operational execution
and a softer than expected US
housing market. We also announced
financial irregularities in the North
American Windows business on
5 December 2019.
We took a range of actions in response
to these internal challenges. In
Boral North America, we bolstered
business leadership resources,
expanded the scope of external audits,
made organisational and systems
changes in Windows, and conducted
post-acquisition reviews of the
Headwaters acquisition.
Ultimately, CEO succession was
brought forward, recognising the
need to refresh our approach.
The Board also initiated a review of
Boral’s portfolio, which our new CEO
is now completing.
FY2020 results
Boral’s sales revenue from continuing
operations of $5.67 billion was down
1%. However, EBITDA1 of $715 million
was down 29%, reflecting lower
EBITDA from all three divisions due to
the challenges in FY2020.
1. Earnings before interest, tax, depreciation and amortisation before significant items. Excludes the impact of AASB 16 leasing standard.
2. NPAT for continuing operations, excluding significant items and excluding the impact of AASB 16 was $187 million and compares with
$419 million in FY2019.
77
and occupational hygiene programs in
our quarry operations.
While COVID-19 travel restrictions and
lockdowns have meant many of us have
been working remotely, the Board has
stayed connected with the organisation
and our shareholders through video
and web-based technologies. Online
engagement and connection was also
critically important during the CEO
recruitment process.
I appreciate the patience, support
and candour of our investors and their
representatives who have remained
closely connected with us and engaged
on the topics of performance, strategy,
governance, climate-related risks and
opportunities, and remuneration.
I also thank Boral’s people for their
dedication and hard work in what
has been an extraordinary year.
I particularly recognise the work
done to comprehensively adopt
social distancing, hygiene and other
safety practices to ensure we have
been able to operate and continue
to supply customers through
extraordinary circumstances.
While considerable uncertainty remains
around the near-term market conditions
and longer-term recoveries, we are
focused on the things we can control
and positioning Boral for a much
stronger future for the benefit of our
shareholders and all of Boral’s people.
Kathryn Fagg
Chairman
After significant items, Boral reported
a statutory net loss after tax of
$1.139 billion.
The substantial impairment
acknowledges the recent under-
performance of Boral’s businesses,
and recognises the current market
uncertainty and lower forward volumes
than prior expectations.
Acknowledging the under-
performance, we have reviewed the
Headwaters acquisition in very close
detail. The review concluded there
was a strong strategic fit between
Boral and Headwaters, however we
recognise we paid a value that left little
room for error. Unfortunately, there
were some disappointing aspects of
operational execution.
There is no doubt that the acquisition
has failed to meet our expectations and
those of our shareholders.
The Board and I are disappointed
with Boral’s performance and the
need to take such a large impairment.
However, we are focused on making
the right decisions for the Company
and for shareholders.
CEO succession
Our CEO transition has progressed
very well with the appointment of
Zlatko Todorcevski as Boral’s new
CEO. We are fortunate that Zlatko was
able to start on 1 July 2020, which was
earlier than expected.
Zlatko has a strong track record as a
senior executive in a number of large
industrial and energy companies
with international operations.
His experience in leading major
transformations, including business
turnarounds, as well as in capital
allocation and strategic portfolio
management, are critically important
for Boral.
Board of Directors
His mandate is at the outset to finalise
the portfolio review and reset the
business to strengthen Boral’s financial
performance and improve returns for
our shareholders.
On behalf of the Board, I thank Mike
for his commitment and dedicated
effort. We wish him a healthy and
happy retirement.
Board renewal
We are also in the process of renewal
of independent directors. We are
currently recruiting two new directors,
one with deep operational experience
in the sector and the other with strong
finance experience. These new
directors will be based in Australia and
we expect to make these appointments
this calendar year.
Of our longer-serving directors, John
Marlay will retire at the end of this
year, Eileen Doyle will retire in 2021
and Paul Rayner, who is standing
for re-election this year, will retire
following the successful transition of
the chairmanship of the Board Audit &
Risk Committee.
Engaging in a COVID-19
environment
In the first half of FY2020, the Board
spent three days with the Boral North
America executive team and customers
in California. In addition to visiting the
Napa Stone plant and spending time
with customers, the Board reviewed
the Headwaters integration progress,
performance improvement plans and
the Fly Ash strategy.
The Board’s Health, Safety &
Environment Committee was also able
to visit our Lysterfield and Montrose
quarries in Victoria in late 2019,
reviewing safety and environmental
programs, including dust management
Zlatko Todorcevski
Peter Alexander
Dr Eileen Doyle
John Marlay
Karen Moses
Paul Rayner
8
8
Boral Limited Annual Report 2020
Boral Review & Sustainability Report 2020
Message from Zlatko Todorcevski
CEO & Managing Director
These efforts to preserve cash through
working capital actions, combined
with suspending non-essential capital
expenditure, helped maintain Boral’s
net debt steady on the prior year,
at $2.2 billion.
Health and safety
I am determined to ensure safety
remains our first priority, building on
Boral’s strong culture of targeting
Zero Harm Today.
In FY2020, Boral’s recordable injury
frequency rate2 of 7.6 was steady
compared with FY2019. Our attention is
focused on further improving our safety
and delivering the next step change.
There has been urgent and thorough
implementation of measures to help
manage the risk of COVID-19. Strict
hygiene, social distancing, cleaning
and quarantine protocols are now part
of how we operate.
At the time of our full year results
announcement, there had been
288 COVID-19 cases among Boral
employees, mainly in the USA and
in geographies where community
transmission is higher. Pleasingly, most
affected employees had fully recovered
but sadly two of our employees in the
USA passed away due to COVID-19
complications. Our thoughts remain
with their families and team mates.
While we did not have any reportable
fatalities in FY2020, in recent months
we have been involved in two tragic
heavy vehicle incidents on public
roads. In June 2020, a contractor driver
was involved in a serious incident in
Brisbane, sadly resulting in the fatality
of a cyclist. A month later, an employee
cement tanker driver was involved in a
devastating crash that resulted in the
death of a young girl and serious harm
to several others.
We were deeply saddened by these
tragic events, and our heartfelt
sympathy remains with those affected.
These tragic events reinforce the need
to stay vigilant and to continue to
improve road safety for all road users.
First impressions
During my initial period at Boral, in
addition to getting across our FY2020
I joined Boral as CEO &
Managing Director on
1 July 2020. I am excited
by the potential of our
Company to perform at
a higher level and to be
recognised as a great
business. Boral’s FY2020
results however, serve
as a reminder that these
are tough times for
businesses globally, and
Boral is no exception.
FY2020 – a challenging year
Boral’s FY2020 NPAT before significant
items was down 55% on the prior year
on a comparable basis1, reflecting
the impacts of a global pandemic,
and Australian bushfires and floods
on Boral’s operations. At the same
time, Boral’s underlying business
performance was not where we
wanted it to be.
Boral’s reported NPAT before
significant items was $177 million
and significant items after tax
totalled $1.316 billion. This resulted
in a statutory net loss after tax of
$1.139 billion.
Significant items include a non-cash
impairment charge of $1.346 billion,
with $1.223 billion relating to assets
within Boral North America including
goodwill, intangible assets and our
investment in the Meridian Brick joint
venture. The lower carrying value for
these assets was determined after
taking into account:
• increased demand uncertainty
caused by the COVID-19 pandemic
and potential longer-term impacts of
prevailing economic and operating
conditions, and
• recent operating performance of
our businesses.
The remaining $123 million of the
impairment relates to construction
materials assets in Western Australia
and the Northern Territory as well as
roofing and timber assets in Australia.
COVID-19 impacts
Boral took decisive steps to mitigate
the disruption and uncertainty resulting
from the COVID-19 pandemic.
In most jurisdictions we were allowed
to operate, but in some areas we
experienced mandated temporary
closures and substantial disruption.
Where demand was slowing
and stock was available, we cut
production to reduce cash costs and
manage inventories.
In the US in particular, we were
required to temporarily shut plants and
slow production, with around 80% of
our building products plants impacted.
It was a similar story in Asia.
While plant closures, production
slowdowns and disruptions adversely
impacted our earnings through lower
fixed-cost recoveries, cash generation
was strong.
In FY2020, operating cash flow of $537
million, compared to $762 million in
FY2019, included $108 million of cash
released through inventory reductions.
1. For continuing operations, excluding significant items, and excluding the impact of AASB 16 leasing standard, NPAT of $187 million was
55% below the prior year.
2. Per million hours worked for employees and contractors in 100% owned businesses and all joint ventures, regardless of equity interest.
99
results and assessing the carrying
values of our assets, I was involved
in completing a detailed review of the
Headwaters acquisition to understand
the learning opportunities, and to assist
the Board with their review process.
I also tried to meet as many of Boral’s
leaders and people as possible, visiting
operations where I could travel, starting
to meet with customers, and hearing
from external stakeholders, including
Boral’s largest shareholders and joint
venture partners.
Together with the divisional teams,
I led a number of internal budget
and portfolio review sessions. These
gave me the opportunity to review
our businesses and work with key
individuals and teams to better
understand our current position and
potential opportunities.
My overarching first impression is
that Boral is an opportunity-rich
environment, which is incredibly exciting
and provides a basis for optimism.
I have been impressed by the quality
of our assets, the hard work and
commitment of our people, and the
determination to make this a great
business again.
We have excellent brands, strong
market positions, and solid underlying
business fundamentals. But we can
improve the way we operate and
Executive Committee
organise ourselves, and we can better
leverage our assets and businesses.
Recently, the company has not
performed in line with expectations.
We have let our shareholders down
and, in the process, we have let our
own people down. I am determined to
rectify that.
Review of Boral’s portfolio
We are currently completing a
comprehensive portfolio review,
looking at all of Boral’s businesses and
assets. We are analysing the market
outlook, our competitive positioning
and the potential to improve earnings
and growth in the near term and into
the future.
We are also looking at the future
operating model for Boral and how we
organise ourselves, as well as the right
capital structure.
Boral’s balance sheet needs to support
our future portfolio. It needs to reflect
the cyclical nature of segments in which
we operate, ensuring we maintain
sufficient capacity and flexibility to
operate in challenging conditions while
also being able to take advantage of
opportunities as they arise.
We have very good liquidity headroom,
having extended our debt facilities and
added new ones during FY2020.
FY2021
Our immediate focus in FY2021 is to
maintain a safe and careful response
to ongoing COVID-19 developments,
including flexing production to align
with demand and avoid unintended
inventory builds.
We are focused on recovering and
strengthening margins, maintaining
strong cash flows, and delivering
benefits from improvement initiatives.
Given the uncertainty and lack of
visibility around market outlook, we are
not providing guidance for the year but
we will provide a further trading update
at the Annual General Meeting at the
end of October.
At the end of October, I will also present
Boral’s future portfolio direction and
operating model, at which time we will
commence execution with urgency.
Boral is a good company but we can
be much better. Better for our people,
our customers, our shareholders,
and our broader stakeholders who all
deserve to be proud of the company.
The potential is really evident to me,
which is why I’m so excited to be part
of resetting Boral for the future.
Zlatko Todorcevski
CEO & Managing Director
Rosaline Ng
Group President
Ventures & CFO
Wayne Manners
President & CEO,
Boral Australia
Darren Schulz
Acting President
& Chief Executive,
Boral North America
Frederic de
Rougemont
CEO, USG Boral
Ross Harper
Group President, HSE,
Sustainability, Innovation
& Operations Excellence
Linda Coates
Group Human
Resources Director
Kylie FitzGerald
Group Communications
& Investor Relations
Director
Dominic Millgate
Company Secretary
Damien Sullivan
Group General
Counsel
10
Boral Limited Annual Report 2020
Performance overview
Commentary in this performance
overview, unless otherwise stated, is
based on earnings from continuing
operations excluding the impact of the
new IFRS leasing standard (AASB 16)
to provide a more comparable basis
for analysis with the prior year. In
addition, FY2019 comparative figures
have been restated – see note 1d for
further details.
Group performance
This year, Boral’s results were impacted
by challenging conditions, including a
housing downturn in Australia, coupled
with extreme weather events, and
COVID-19 related impacts across each
of our three divisions.
Group earnings before interest, tax,
depreciation and amortisation
(EBITDA)1 of $710 million declined by
30% on revenue of $5.73 billion, down
2% on the prior year. This reflects
adverse impacts from COVID-19
related costs and production impacts
totalling $76 million, a $26 million
impact from the bushfires and floods
in Australia, as well as an adverse mix
shift and higher costs.
Depreciation and amortisation of
$393 million increased by $15 million,
largely reflecting completion of capital
investments in prior periods.
Net interest of $109 million was
modestly higher than the prior year,
reflecting an effective cost of debt of
4.5%, up from 4.3% in FY2019.
Tax expense of $26 million declined
by $84 million compared to the prior
year due to lower earnings and an
effective tax rate of 12.5% compared
to 21% in FY2019. Boral’s effective tax
rate in FY2020 reflects the utilisation
of previously unrecognised US tax
losses and Australian capital losses.
Excluding these, the effective tax rate
was 19.5%.
Underlying Group profit after tax1 of
$181 million was down 57% on the prior
year. The Group recorded a net loss
of $1.316 billion for significant items
that were excluded from the underlying
result, including $1.27 billion relating to
asset impairments. Further explanation
of our significant items can be found in
note 2.1 of the financial statements.
Income statement
FY2020
FY2020
pre-AASB 16
FY2019
$m
Sales
EBITDA1
Depreciation and amortisation
EBIT1
Net interest
Tax expense1
Underlying profit after tax1
Net significant items
Statutory net profit/(loss)
Group
5,728
821
(492)
329
(126)
(25)
177
(1,316)
(1,139)
Continuing
operations
5,671
825
(488)
337
(126)
(28)
183
(1,316)
(1,133)
Group
5,728
710
(393)
317
(109)
(26)
181
(1,316)
(1,135)
Continuing
operations
5,671
715
(391)
325
(109)
(28)
187
(1,316)
(1,129)
Group
5,861
1,010
(378)
632
(103)
(110)
419
(168)
251
Continuing
operations
5,738
1,005
(371)
634
(103)
(111)
419
(225)
194
Reconciliation of underlying results to reported results for FY2020
$m
Underlying Group result1 pre-AASB 16
Significant items
Asset impairments
Profit/(loss)
before tax
207
Boral North America – goodwill and intangibles assets
(1,146)
Boral North America – investment in Meridian Brick
joint venture
Boral Australia – WA and NT construction materials
businesses, and Timber and Roofing businesses
Restructuring costs
Joint venture matters
Integration costs
Total significant items
Reported results
(77)
(123)
(36)
(13)
(9)
(1,404)
(1,197)
Tax
(26)
20
19
37
10
-
2
88
62
Profit/(loss)
after tax
181
(1,126)
(58)
(86)
(26)
(13)
(7)
(1,316)
(1,135)
11
FY2019
1,010
(19)
-
(8)
(149)
(18)
(54)
762
-
(453)
(11)
414
712
(317)
8
403
FY2019
(2,400)
207
(2,193)
5,832
38
27
6.1
Cash flow
$m
EBITDA1
Change in working capital and other
Property development receivable
Share acquisition rights vested
Interest and tax (includes lease interest)
Equity earnings less dividends
Restructuring, transaction and integration costs
Operating cash flow
Repayment of lease principal
Capital expenditure
Investments
Proceeds on disposal of assets
Free cash flow
Dividends paid
Other items
Cash flow
FY2020
FY2020
pre-AASB 16
821
41
(30)
(2)
(152)
(13)
(34)
631
(98)
(346)
-
40
227
(158)
-
69
710
41
(30)
(2)
(135)
(13)
(34)
537
-
(350)2
-
40
227
(158)
-
69
Operating cash flow
Operating cash flow of $537 million
was strong but declined 30%,
reflecting lower earnings partially offset
by improvements in working capital
including a reduction in inventory
levels. Free cash flow generated was
$227 million, compared to $712 million
in the prior year, with the prior year
benefiting from proceeds from the
disposal of businesses.
Capital expenditure of $346 million was
$107 million lower than the prior year.
Growth capital expenditure of
$118 million compared to $113 million in
the prior year and included investments
in the new Port of Geelong clinker
import terminal in Victoria and the new
Windows plant in Houston.
Stay-in-business capital expenditure of
$228 million was 33% below the prior
year, as non-essential expenditure was
curtailed to preserve cash in response
to COVID-19 demand uncertainties.
Debt and gearing
$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
FY2020
(3,484)
904
(2,580)
4,535
57
36
2.6
FY2020
pre-AASB 16
(3,101)
904
(2,197)
4,545
48
33
2.9
Boral’s principal debt gearing
covenant with its financiers, measured
as gross debt to gross debt plus
equity, increased to 41% from 30%
at June 2019 due to cash drawn
and asset impairments. Boral remains
comfortably within the less than 60%
covenant threshold.
With a weighted average debt maturity
of 4.7 years, Boral does not have any
debt maturities until May 2022.
Boral has considerable liquidity
and undrawn committed facilities
of $1.66 billion, including $904 million
in cash at 30 June 2020. Boral does
not have any earnings-based
debt covenants.
1. Excluding significant items.
2. Capital expenditure includes assets acquired through lease purchase options.
3. EBIT before significant items/net interest expense.
12
Boral Limited Annual Report 2020
Performance overview (continued)
Divisional performance
Boral Australia
$m
Revenue
EBITDA1
EBITDA1 pre-AASB 16
EBIT1
EBIT1 pre-AASB 16
EBITDA1 margin pre-AASB 16
EBITDA1 (excluding property) pre-AASB 16
Net assets pre-AASB 16
ROFE1,2 pre-AASB 16
Boral North America
$m
Revenue
EBITDA1
EBITDA1 pre-AASB 16
EBIT1
EBIT1 pre-AASB 16
EBITDA1 margin pre-AASB 16
Net assets pre-AASB 16
US$m
Revenue
EBITDA1
EBITDA1 pre-AASB 16
ROFE1,2 pre-AASB 16
USG Boral
FY2020
FY2019
3,336
3,511
486
447
229
225
13.4%
392
2,363
592
592
385
385
16.9%
559
2,457
9.5%
15.7%
FY2020
FY2019
2,336
2,227
350
281
121
113
12.0%
3,189
388
388
225
225
17.5%
4,500
FY2020
FY2019
1,566
235
188
3.4%
1,592
278
278
5.1%
5%
18%
25%
41%
42%
30%
5%
10%
28%
46%
50%
2%
15%
32%
Revenue declined 5% to $3,336 million,
reflecting a 19% decline in housing
starts, completion of key projects,
bushfire disruptions and softer prices.
EBITDA of $447 million was 25% lower,
reflecting an adverse geographic
and product mix shift, higher costs
and lower production. Cost savings
of $99 million from improvement
programs were delivered and Property
made a strong earnings contribution of
$55 million.
Revenue increased 5% to
$2,336 million, reflecting favourable
foreign exchange translation. Revenue
in local US currency declined 2% to
US$1.57 billion with lower volumes
partially offset by a 10% increase in fly
ash prices.
EBITDA declined 28% to $281 million
due to increased costs, and
COVID-19 related production and
cost impacts, with around 80%
of building products plants impacted
by closures, production curtailments
or other disruptions.
Boral’s reported result ($m)
FY2020
FY2019
Equity income1,3
25
57
56%
USG Boral underlying result ($m)
FY2020
FY2019
Revenue
EBITDA1
EBITDA1 pre-AASB 16
EBIT1
EBITDA1 margin pre-AASB 16
Net assets pre-AASB 16
ROFE1,2 pre-AASB 16
1,474
1,606
8%
217
190
107
12.9%
2,070
5.2%
252
252
168
15.7%
2,082
8.1%
25%
36%
Boral’s equity accounted post-tax
earnings decreased 56% to $25 million
due to lower underlying earnings and a
higher effective tax rate.
Underlying revenue decreased 8% to
$1,474 million and EBITDA declined
25% to $190 million, reflecting housing
downturns in Australia and South
Korea, price declines in South Korea,
and a significant impact from COVID-19
related sales and production volume
declines in the second half FY2020.
1. Excluding significant items.
2. Divisional ROFE is annual EBIT before significant items on divisional funds employed.
3. Post-tax equity income from Boral’s 50% share of the USG Boral joint venture.
13
COVID-19 operating environment
In most jurisdictions, Boral’s operations are considered
to be within the critical construction sectors permitted to
operate as essential businesses through the duration of the
COVID-19 pandemic. We have adopted extensive hygiene,
safety and quarantine practices and protocols, and in some
cases plant reconfigurations have been undertaken to allow
for social distancing.
In some jurisdictions, stricter mandates and measures have
resulted in temporary closures, and substantial disruptions
and complexity to manage. In Boral North America alone,
the business has had over 225 state and government health
orders to comply with.
In general, Boral has not met eligibility to access government
incentives and concessions. In FY2020, Boral received no
wage subsidies for 100% owned businesses in Australia
or the USA. Boral’s share of wage subsidies through joint
venture businesses (received in New Zealand, Canada
and Australia), together with a small direct wage subsidy
received in the UK, totalled ~$800,000 in FY2020.
Market conditions
Boral’s FY2020 external revenue1 by market (%)
5 2
4
10
3
14
7
7
6
25
9
8
Australian roads, highways, subdivisions
& bridges, and other engineering
Australian non-residential
Australian detached housing
Australian multi-residential
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 & bridges (RHS&B).2
FY2020 RHS&B value of work declined by an estimated
2%. While the value of work in New South Wales (NSW)
and Western Australia (WA) grew 2%, in Queensland
(Qld), South Australia (SA) and Victoria (Vic) it declined
11%, 6% and 3% respectively. Other engineering activity2
declined by ~9% with lower levels of activity in SA, Qld, Vic,
NSW and WA.
FY2020 Australian housing starts3 were down around 19% to
an estimated 160,000 annualised starts. Detached housing
starts were estimated to be down 15%, with multi-residential
starts down 24%. On a state-by-state basis, housing starts
declined 27% in NSW, 24% in Qld, 13% in Vic and 13% in
WA. SA starts increased 4%.
Australian alterations and additions (A&A) activity4 declined
by ~6%. Non-residential activity4 grew by an estimated 5%
with higher demand in NSW, Vic, Qld and WA. Activity in SA
was steady.
Selection of Australian project work and potential
pipeline (as at July 2020)
Estimated completion
Barangaroo 1B – Tower 1, NSW
Norfolk Island Airport
Melbourne Metro Rail Project (Precast), Vic
Pacific Motorway, Varsity Lakes to Tugun
Upgrade, Qld
RAAF – East Sale, Vic
Karratha Tom Price Road, WA
Queens Wharf – resort development, Qld
Mordialloc Bypass, Vic
West Gate Tunnel, Vic
FY2021
FY2022
Snowy Hydro 2.0, NSW (precast)
FY2023
FY2024
Sydney Metro (Martin Place Station), NSW
WestConnex 3B (above ground), NSW
Road Asset Management Contracts, Qld
DPTI Road Work Network maintenance,
Zone 4, SA
Bruce Highway upgrade (various), SE Qld
Cross River Rail, Qld
Gold Coast Light Rail, 3A, Qld
Golden Plains Wind Farm, Vic
Kidston Hydro Project, Qld
M6 – Kogarah, NSW
Monash Freeway Upgrade – Stage 2, Vic
North East Link, Melbourne, Vic
Pacific Motorway M1 (various), SE Qld
Tendering
RAAF Williamtown, NSW
Snowy Hydro 2.0, NSW
Sydney Gateway Project, NSW
Sydney Road Asset Performance Contract,
NSW
Sydney Metro (various stations), NSW
Tonkin Highway extension, WA
Western Sydney Airport, NSW
Bunbury Outer Ring Road, WA
Coffs Harbour Bypass, NSW
Inland Rail Project, Qld, NSW & Vic
New M12 Motorway, NSW
Sydney Metro, West extension, NSW
Warragamba Dam raising, NSW
Pre-tendering
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 BIS Oxford Economics and Macromonitor forecasts.
3. Australian Bureau of Statistics (ABS) original housing starts to
March 2020. Average of BIS Oxford Economics, Macromonitor
and HIA for June 2020 quarter.
4. Original series from ABS to March 2020 quarter. Average of BIS
Oxford Economics and Macromonitor forecast for June
2020 quarter.
14
Boral Limited Annual Report 2020
Performance overview (continued)
Boral North America
US housing starts5 increased ~8%, with a significant lift in
December, to an annualised 1.31 million starts. Single-family
starts were up ~5% and multi-family starts up ~14%.
Activity in the US repair and remodel6 and infrastructure7
sectors grew by ~4% and ~2% respectively.
Non-residential8 construction markets were lower by an
estimated 2%.
Asia9
Boral Australia
FY2020 revenue by business (%)
Concrete and Placing
Quarries
Asphalt
Cement
Building Products
Other
44
9
24
8 2
13
South Korean residential and non-residential construction
declined further following the onset of COVID-19.
Revenue
In China, the country was mostly in lockdown from late
January to early March due to COVID-19. Growth slowed
due to lower exports, ongoing trade tensions and global
economic uncertainty.
In Indonesia, economic growth has slowed further as the
impacts from COVID-19 are being fully realised.
Thailand construction activity was stable as the sector was
permitted to operate as an essential business.
Activity in India was constrained by closure orders.
Conditions in Vietnam are mixed, with retail market growth
being driven by better household disposal income and
urbanisation, which is helping to offset weakness elsewhere.
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 24 and 25.
5. US Census seasonally adjusted annualised housing starts
(August 2020). Based on data up to June 2020.
6. Moody’s retail sales of building products, July 2020.
7. Management estimate of ready mix demand utilising Dodge Data
& Analytics June 2020 report and other industry sources.
8. Management estimate of square feet area utilising Dodge Data &
Analytics June 2020 report.
9. Based on various indicators of building and construction activity.
10. Excluding significant items.
FY2020 underlying revenue declined 5% to $3,336 million,
reflecting:
• Higher revenue from Asphalt and Concrete Placing was
offset by lower revenue from Concrete, Cement and
Building Products.
• Concrete volumes declined 10% on the prior
corresponding period (pcp), with second half FY2020 (2H)
down 12%, due to the housing market decline, bushfires
and floods in January and February.
• Average selling prices and like-for-like prices were broadly
steady in Aggregates and Cement, and down 2% in
Concrete.
EBITDA
FY2020 EBITDA10 declined 25% to $447 million which
reflects the following:
• a negative mix shift with a substantial decline in NSW
concrete / cement volumes, and a higher share of revenue
from lower margin Asphalt and Concrete Placing work.
Asphalt as a share of total external revenue increased from
22% in FY2019 to 25% in FY2020.
• one-off costs of $23 million, including costs associated
with first half FY2020 (1H) outages at Peppertree Quarry
and Berrima Cement, and direct costs associated with
bushfires and COVID-19.
• inflationary cost pressures, largely offset by cost savings
from improvement programs of ~$99 million.
• COVID-19 related production slowdowns and temporary
plant shuts resulted in under-recovery of fixed costs
impacting EBITDA by $36 million, and
• Property earnings contribution up $22 million to
$55 million, with earnings from Scoresby in 1H and
Donnybrook in 2H.
2H EBITDA margins were negatively impacted by ~2% due
to lower price and adverse product (concrete versus asphalt)
and geographic mix (NSW versus other states); and ~4%
due to extraordinary events (bushfires and COVID-19).
As a result of the lower production, including targeted
inventory deleveraging to maximise cash, inventory reduced
by $47 million from 31 December to $378 million at 30 June.
15
Major projects contributed ~13% of Boral Australia
revenue. During FY2020, Boral supplied concrete to Sydney
Metro Rail in NSW and precast concrete to Vic Metro
Rail projects; asphalt for roadwork including the Logan
Enhancement project (primarily in 1H) and the Mudgeeraba
to Varsity Lakes upgrade in Qld. Asphalt was also supplied
to the Pacific Highway and Northern Road in NSW. Work
on the Norfolk Island Airport ramped up in 2H, and Boral
commenced supply of asphalt to the West Gate Tunnel in
Vic, however, this project has been delayed.
Concrete reported 10% lower volumes and 2% price
declines, partially offset by strong Concrete Placing
revenue growth and higher earnings. Concrete volumes and
pull-through margins were adversely impacted by lower
residential activity, particularly multi-residential declines.
Major project completions such as NorthConnex and
Sydney Metro Rail in NSW added to the Sydney metro
volume declines.
Concrete Placing completed a number of majors pours at
the Crown Sydney project at Barangaroo, Wynyard Place,
Parramatta Square and Greenland Centre project in NSW.
Quarries delivered modest growth in external volumes in
NSW, Vic and WA, which helped offset lower internal pull-
through volumes due to lower concrete demand. Earnings
declined due to significantly lower aggregate volumes,
an adverse product mix, soft pricing and higher costs
associated with unplanned disruptions and one-off costs.
As reported in 1H, an unplanned disruption at Peppertree
and subsequent remediation works resulted in a one-off
cost of ~$5 million. Higher direct costs of ~$4 million were
incurred in December and January as a result of bushfires
including for purchasing water.
Cement earnings declined due to lower volumes (particularly
in NSW), unscheduled downtime at the Berrima kiln in
1H, costing $7 million, and a three-week kiln shutdown in
June to manage inventory levels; an adverse product mix
shift, higher clinker costs and a lower contribution from the
Sunstate joint venture.
Asphalt posted solid revenue and earnings primarily due
to the commencement of major projects such as Norfolk
Island and Emerald Airport in Qld and the RAAF East Sale
project in Vic. Other projects that contributed to revenue
and earnings in the full year included the Pacific Highway
upgrade in NSW and various WA projects such as Murdoch
Drive, Kwinana Highway and Port Hedland.
Building Products (Timber and Roofing) reported lower
volumes and higher costs, which offset the benefit of
cost improvement initiatives and higher price outcomes in
Roofing. The Timber business was substantially disrupted
by bushfires and continues to be impacted by wood supply
issues. Building Products was also affected by actions taken
in response to COVID-19. A number of timber plants and
the Wyee clay roof tile plant were temporarily shut, resulting
in lower fixed-cost recoveries and contributing to lower
margins.
Responding to challenges
Boral Australia remained focused on responding to the
impacts of COVID-19 and maintaining a safe and reliable
supply to its customers, with enhanced safety and hygiene
measures in place. As the cyclical decline in housing
markets gathered pace and was exacerbated by bushfire
impacts in 2H, our key priority was to focus on maximising
cash generation and lowering costs.
Boral Australia has been lowering overhead costs through
our Organisational Effectiveness (OE) program and
rightsizing the business to align resources with reduced
demand. Overall, through OE and rightsizing, 544 positions
were taken out of the business in FY2019/FY2020.
Boral Australia delivered $99 million in benefits from
structured improvement programs in FY2020 (which includes
$38 million of savings from headcount reductions).
In addition to continuing to safely supply customers in a
COVID-19 environment while flexing production to match
demand, in FY2021 Boral Australia is focused on a range of
initiatives to address the current cyclical market challenges
and margin pressures. These include:
• salary freezes, organisational rightsizing and operational
improvement plans, including the recently announced 250
headcount reduction.
• targeting a reduction in fixed costs and sales, general and
administration costs to reflect market declines.
• deliver benefits from quarry, cement and plant network
investments, and
• build supply chain capabilities to improve customer
service and lower costs.
Capital projects and transactions
A total of $246 million of capital was invested, down from
$290 million in the prior year.
• Concrete network: Essential works and upgrades at
West Melbourne (Vic), Bringelly (NSW) and Nowra (NSW)
Concrete plants now complete.
• Quarry reinvestment program: The generational capital
expenditure program finished with the upgrade of Ormeau
Quarry in Qld, completed in early FY2020. Work at
Bacchus Marsh sand operations (Vic) was also completed.
• Cement Geelong storage and grinding facility:
Construction of the 1.3 million tonne clinker and slag
grinding plant and cementitious storage facility at the Port
of Geelong in Vic remains a key priority. However, there
have been some delays in delivery of key components
from overseas. The facility is now expected to be
operational by the end of FY2021.
• Sale of Midland Brick: In August 2019, Boral entered into
an agreement with a WA consortium to sell its Midland
Brick business, including associated landholdings. Net
proceeds are expected to be ~$82 million following
working capital and other completion adjustments. Boral
has received $9 million with ~$73 million due at financial
close. Together with the consortium, Boral continues
to work through a number of pre-closing conditions
(including third-party consents) with an objective to
complete the transaction in FY2021.
16
Boral Limited Annual Report 2020
Performance overview (continued)
Boral North America
FY2020 revenue1 by business (%)
Fly Ash
Stone
Roofing
Light Building Products
Windows
Meridian Brick
11
10
16
19
Revenue
30
14
FY2020 underlying USD revenue declined 2% to
US$1,566 million, reflecting:
• steady revenues from Fly Ash and Light Building Products,
offset by lower revenues from Stone and Roofing, and
• strong price gains in Fly Ash, which helped offset a decline
in Fly Ash site services work and substantial volume
declines in building products businesses, particularly in 2H.
EBITDA
FY2020 underlying USD EBITDA2 declined 32% to
US$188 million, which reflects the following:
• EBITDA2 declined by 17% in 1H, followed by a 47% decline
in 2H due to substantially lower volumes and higher costs,
including one-off costs.
• several mandated plant closures, restrictions and business
interruptions associated with COVID-19 as well as
production curtailments to reduce inventory substantially
lowered fixed cost recoveries. COVID-19 related direct
costs, production slowdowns and disruptions adversely
impacted earnings by US$19 million.
• Sales volumes were down 11% in Stone and 6% in Roofing
with a more severe decline in production volumes of 24%
and 10% respectively, compared to the pcp.
• EBITDA2 was also impacted by lower fly ash supply with
sales volumes down 2% for the year and completion of
major fly ash site services contracts and projects, which
lowered site services earnings by US$13 million.
• One-off costs of US$24 million included Windows legal
and investigation costs and provisions, a provision
associated with the BCI light building product reported in
1H (US$6 million), and one-off gains in the pcp.
• Synergies of US$7 million were delivered in 1H, taking
the cumulative total to US$78 million (versus target of
US$115 million).
2H EBITDA margins were negatively impacted by ~3%
due to lower price and net cost increases, partially offset
by improvement from Meridian Brick; and ~4.5% due to
extraordinary events and one-offs.
As a result of the lower production, including inventory
deleveraging to maximise cash, inventory reduced by
US$48 million to US$139 million. Inventory as a ratio of
revenue improved from 11.7% to 8.8%.
Fly Ash revenue growth of 1% was underpinned by a 10%
price gain, which strengthened in 2H. Fly ash volumes
declined 100,000 tons or 2% to 6.8 million tons primarily due
to lower available ash supply in 2H as power plants were
impacted by COVID-related slowdowns and intermittent
shutdowns. Lost volumes associated with the previously
advised closure of the Navajo plant in Arizona were offset
by volumes from new contracts and additional volumes
associated with storage and logistics optimisation.
Lower fly ash site services revenue reflects the completion
of two major projects which contributed in FY2019. Site
services represented 17% of total fly ash revenue (compared
to 22% in FY2019 and 28% in FY2018).
Earnings were lower with EBITDA margins of ~19%
compared to ~22% in FY2019 primarily due to the
completion of site services construction projects, site
closures and higher costs.
Roofing revenue was down 10% for FY2020 with a 1H
decline of 3% and a 2H significantly impacted by COVID-
related disruptions. While prices in 1H were up 3%, 2H
prices were weaker on a geographic mix basis, resulting
in overall steady prices for the year. Earnings were lower in
FY2020, particularly in 2H, due to:
• lower re-roofing activity in Florida and Colorado following
completion of prior period hurricane and hailstorm work,
and heightened competition
• an adverse mix shift with higher sales of lower-margin
product from Arizona and California
• unplanned maintenance and downtime at Lake Wales and
Okeechobee plants in Florida, and
• COVID-19 related disruptions, temporary shutdowns and
inventory reduction and lower production in 2H including
extended closures at six plants.
Stone revenue declined 9% due to a housing slowdown
in Canada; higher volumes in the prior period when a
competitor’s plant was shut; and lower sales volumes in
the USA including lower volumes associated with COVID-
related slowdowns.
A considerable earnings decline, particularly in 2H, reflects
disruptions, temporary plant shutdowns, inventory reduction
and lower production in 2H, as well as higher operational
and inflationary costs (raw materials and labour), and
COVID-related cleaning and other costs.
In the Stone business, mandated and partial closures
impacted the Mexico and Napa stone plants, and there
was an extended three-month closure of the Washington
molds plant.
Light Building Products revenue increased 1% as strong
revenue growth between July and February was offset by
a decline in revenue from March to June due to COVID-19
impacts. TruExterior and Versetta achieved good average
selling price outcomes for the year. Following solid 1H
earnings growth, 2H weakness resulted in slightly softer
earnings for FY2020.
1. Based on external revenue, including Boral’s 50% share of Meridian Brick joint venture’s revenue, which is not included in
reported revenue.
2. Excluding significant items.
17
As reported in 1H, the result was negatively impacted by a
~US$6 million provision adjustment for BCI associated with
a poor quality product discontinued in the prior period. In
2H, COVID-19 related production disruptions coupled with
costs associated with cleaning and the provision of personal
protective equipment (PPE) had an adverse impact. The
Metamora plant was closed for approximately two months
due to local government mandated COVID-19 shutdowns.
Shorter disruptions occurred elsewhere as plants were
reconfigured to accommodate social distancing and new
safety practices.
Windows revenue increased 18% as sales volumes
increased through to the end of February, reflecting
improved housing activity in Texas relative to the weather-
affected prior period. From March, sales were broadly
steady as COVID-19 slowed industry activity and sales.
Earnings declined due to higher legal costs associated
with the Windows investigation and provisions, as well as
COVID-19 related production impacts and costs associated
with cleaning, providing PPE and inefficiencies related to
social distancing in 2H.
While construction of the new manufacturing plant in
Houston was completed, its ramp up has been delayed
pending assessment of COVID-19 impacts on demand
in FY2021.
Meridian Brick joint venture delivered post-tax equity
earnings of US$1 million, compared with a loss of US$7
million in the prior period, underpinned by cost reduction
and a targeted share recovery program. Meridian Brick
generated underlying revenue of US$401 million, up 7% on
the prior year, and EBIT of US$2 million, up from a loss of
US$15 million in FY2019.
A solid lift in underlying performance reflected higher
US brick and resale revenues, lower production costs and
lower SG&A costs. Brick volumes were up 7% on pcp with
strong volume growth in the west and central USA. After a
soft first half, Canada recorded a strong finish.
Responding to challenges
While Boral North America continued to operate in line
with strict hygiene measures, more stringent mandates
and restrictions resulted in temporary closures of several
operations. Boral’s US Fly Ash business, which provides an
essential service to the energy sector, continued to operate
but was impacted by lower available fly ash as demand on
power utilities reduced as a result of COVID-19 slowdowns.
While the ongoing COVID-19 impacts on the US housing
and other end markets remain uncertain, we are focused on
continuing to generate strong cash flows while also lowering
costs and addressing operational challenges.
In FY2020, total synergies of US$7 million were achieved,
all in 1H, to bring the cumulative Headwaters synergies
to US$78 million against a target of US$115 million.
While opportunities remain to deliver further synergy
benefits, the immediate priorities for the business are to
safely supply in a COVID-impacted environment while
addressing the specific issues of declining volumes and
higher costs.
In FY2021, the priorities are to focus on safely operating
and maintaining customer supply in a COVID-19
environment, while flexing production to match demand to
avoid inventory builds.
The business is focusing efforts on growing volumes and
margins with targeted overall equipment effectiveness and
quality improvement programs in place in all businesses,
together with targeted price increase strategies. The
following specific initiatives are also underway:
• In Stone, new products are planned to be launched in
Q2 and Q3; a targeted premium segment share recovery
program is in place; the sales organisation and incentives
have been restructured; and there is a renewed focus on
brand strategy.
We are optimising the sales mix in Stone to maximise
margins, plus we expect enhanced Stonecraft margins
in FY2021 as a result of improvements delivered in the
Stonecraft plant at the end of FY2020.
• In Roofing, improved product availability is expected
through production and operational improvements in the
Florida plants.
• In Fly Ash, the strategy to grow volumes is continuing.
We are working to minimise volume loss through current
channels, including via network optimisation; harvesting
and import opportunities; and, the Kirkland natural
pozzolan source, which is due to come on line in June
2021. New contracts secured in FY2020 representing
1.3 million tons per annum will progressively deliver
benefits from FY2021. This is partially offset by lower
volumes associated with contracts lost in FY2020
representing ~230,000 tons per annum. We continue to
target new sources of fly ash to grow supply and offset
expected utility closures over time and potential contract
losses.
• The reorganised Windows business is now operating
within Light Building Products with stronger financial and
operational oversight. The margin growth program in
Windows is focused on plant network optimisation and
manufacturing operations to reduce waste and lower
labour and materials costs.
Other Light Building Products businesses remain focused
on optimising margins including through production and
targeted sales strategies.
• In Meridian Brick, the targeted share recovery program is
expected to continue to deliver gains in FY2021.
Capital projects
A total of US$69 million of capital was invested, down from
US$113 million in the prior year.
• Fly Ash: Development of the Kirkland natural pozzolan
deposit in Arizona is on track (after a two-month pause)
and material is expected to be available for sale in
Q4 of FY2021
• Windows: Construction of the Houston manufacturing
plant is complete. However, ramp up has been delayed
pending assessment of COVID-19 impacts on demand
in FY2021.
18
Boral Limited Annual Report 2020
Performance overview (continued)
USG Boral
FY2020 external revenue (%)
35
Australia/New Zealand
South Korea
Thailand
Indonesia
China
Other
14
12
5
16
18
Boral’s equity income of $25 million, down 56% on the
prior year, represents Boral’s 50% share of USG Boral’s
underlying post-tax earnings. The decline in equity income
reflects:
• lower underlying profitability of the joint venture,
predominately due to COVID-19 impacts and actions, and
• a higher effective tax rate of 44% compared to 30% in
FY2019, due to various tax audits and tax loss benefits
written off or not recognised in certain jurisdictions due to
recoverability uncertainty.
Revenue
FY2020 underlying revenue declined 8% to $1,474 million
due to:
• total board sales down 6% on pcp and down 15% in
2H, due to declining housing markets in South Korea
and Australia, coupled with COVID-19 restrictions and
slowdowns.
• non-board sales (42% of total revenue) down 5% pcp and
14% in 2H.
• average selling price (ASP) outcomes in Australia (+3%)
offset by lower ASP in South Korea (-8%).
EBITDA
FY2020 underlying EBITDA declined 25% to $190 million,
reflecting:
• cost savings of $53 million, including $13 million from
Project Horizon, more than offset by lower volumes, lower
prices and higher costs.
• 2H COVID-19 disruptions resulting in $32 million of direct
volume impacts and under-recovery of fixed costs as
production slowed in China, Korea and Thailand, and
shutdowns impacted sales in most markets including
India, Malaysia, the Philippines, Singapore and
New Zealand.
2H EBITDA margins were negatively impacted by ~3% due
to lower price and the impact of lower recovery of fixed and
sales, general and administration costs because of lower
sales volumes: and 2% due to COVID production slows and
disruptions, and other one-offs.
Australia and New Zealand
Revenue of $523 million declined 9% on pcp and declined
9% in 2H. Board sales volumes declined in FY2020,
reflecting the cyclical downturn in the Australian housing
market. Volume declines were evident in NSW and Qld, while
Vic volumes were steady.
Sales of other manufactured product categories (including
ceiling tile and metal stud) were lower in FY2020.
Cost savings helped to offset inflationary cost increases;
however, earnings primarily declined due to lower volumes,
and higher transport costs associated with the transfer
of product to support growth in commercial projects in
Melbourne, Vic.
Asia
Revenue of $951 million from Asia declined 8% on pcp and
declined 18% in 2H. Board sales volumes declined 6% on
pcp and by a more substantial 17% in 2H, primarily due to
COVID-19 interruptions and slowdowns.
Other manufactured product sales were lower and recorded
double-digit declines in 2H, with the exception of China,
which recorded higher metal stud volumes in FY2020.
Higher earnings in China and Thailand were offset by
declines across other Asian markets.
South Korea reported lower revenue as plasterboard
volumes declined 9% on pcp and 23% in 2H; and non-board
volumes were lower in 2H. While average selling prices
were significantly lower in the first half, reflecting intense
competition, pricing improved in 2H but remained soft
(down ~6%). Earnings declined as prices, lower volumes and
COVID-19 shutdowns offset cost savings.
China reported lower revenue. While technical board and
metal stud product grew, standard board declined. Even
though our operations were temporarily shut from late
January and until mid to late February, sales were quick to
recover with Q4 FY2020 revenue exceeding
Q4 FY2019. Earnings were higher than in the prior year as
lower costs (including lower raw material and energy prices)
and sales excellence initiatives offset volumes declines.
Thailand reported lower revenue. While board volumes
grew 10% as USG Boral’s market share position continued
to strengthen; non-board sales and inter-company sales
to India were lower. The Boonya mine, which temporarily
ceased operations in April 2019 also led to lower volumes
and revenues. Earnings improved, as cost savings (including
lower raw material prices) helped to offset lower prices,
softer non-board volumes and COVID-19 impacts.
Indonesia revenue was lower as plasterboard volumes
declined 5% on pcp and 3% in 2H. Average selling prices
were soft and reflected a highly competitive market driven
by excess market capacity. Earnings were steady as cost
savings (including lower raw material prices) helped to offset
lower selling prices, lower volumes and COVID-19 impacts.
19
Vietnam revenue was lower as plasterboard volumes
declined 9% on pcp and 29% in 2H; and non-board sales
were significantly weaker over the year and in 2H. Average
selling prices were soft due to heighted competitive
pressure, especially in 2H. Earnings declined as cost savings
were offset by lower volumes and COVID-19 impacts. Lower
levels of activity also coincided with expansion of our Ho Chi
Minh City plant.
India reported lower revenue and earnings as our operations
were subject to closure orders for six weeks which coincided
with the ramp up of the newly completed Chennai plant.
Responding to challenges
In response to cyclical market declines in South Korea
and Australia, USG Boral implemented cost excellence
programs. In FY2020, total cost savings of $53 million were
delivered, including cost benefits of ~$13 million, from
Project Horizon.
In FY2021, USG Boral will continue to manage
manufacturing to match demand in the short term with some
businesses having shifted to a shorter working week. The
business is targeting around ~$13 million of savings through
further headcount reductions, with 133 positions taken out in
late FY2020 and first quarter FY2021.
USG Boral is maintaining a strong focus on keeping
variable costs flat, with targeted procurement and operating
efficiencies to offset variable cost inflation. A customer-
focused program is also in place, intended to deliver
improved market share and margins with a better customer
and product mix.
Capital projects
A total of $82 million of capital invested, down from
$111 million in the prior year.
• Plants: Construction of the cornice plant in Australia has
been postponed by six months. The new plasterboard
plant in Chennai (India) and a new plasterboard line at the
Ho Chi Minh plant (Vietnam) were both completed and
commissioned in late calendar year 2019.
• USG Boral transaction: Discussions with Knauf around
potential transactions are continuing. Options for USG
Boral are being considered in the context of Boral’s
broader portfolio review.
FY2021 outlook, trading and priorities
FY2021 outlook
The business environment remains challenging with
continued disruptions and risks due to COVID-19,
declining demand in key housing markets and mixed
views on market recovery.
At this point in time, we are unable to provide
guidance on FY2021 due to insufficient market
visibility and uncertainty.
Early FY2021 trading
In early FY2021 trading, we are experiencing
fewer disruptions in most businesses, providing
an opportunity for improved outcomes. However,
there is potential for further disruptions and
uncertainty remains.
In July, lower revenues were delivered but only
slightly lower earnings relative to pcp.
Overall, July EBITDA margins recovered relative to 2H
FY2020 and they were broadly in line with 1H FY2020
margins.
From a divisional perspective:
• Boral Australia: July concrete volumes were down
~12%. Melbourne Stage 4 lockdown, which
started in August, is impacting our business with
Melbourne metro concrete volumes down ~20% on
pcp. It is unclear how long the Stage 4 lockdowns
will continue.
• Boral North America: there are positive signs
of demand lifting, but labour constraints and
absenteeism are resulting in industry lead times
increasing. July sales volumes improved relative
to recent months but were still below pcp; Stone
volumes were down ~1%, Roofing was down ~9%,
and Fly Ash was down ~10% in July relative to pcp.
• USG Boral: July plasterboard volumes were down
~6% in Australia and ~11% in Asia versus pcp.
FY2021 priorities
Our immediate priorities are:
• delivering divisional improvement initiatives to
recover margins/reduce costs
• safely operating with continuity of supply in a
COVID-19 environment, while maintaining strong
cash conversion, and
• completing our portfolio review, including operating
model and capital structure, by the end of October.
20
Boral Limited Annual Report 2020
Our response to COVID-19Boral has responded to the global crisis with the health and safety of our people, our customers and our communities as the number one priority throughout the pandemic. While in many countries, Boral was allowed to continue to operate, many of our plants in North America and Asia were affected by mandated and temporary closures, production curtailments and absenteeism.Quickly adapting and introducing measures to stop the spread of the virus – and positioning the business for the subsequent economic impacts – has required focused efforts with strong leadership, governance controls and clear communications. At Boral, four foundations have supported our response:• a strong safety culture and engaged workforce• effective crisis management and governance controls• Boral’s leading network of operations and integrated supply chain, and• financial strength and liquidity.The social and economic disruption caused by the COVID-19 pandemic, which started in early 2020, has been significant. Key facts• 48 current cases among employees and 240 recovered1, mainly in the USA and in geographies where community transmission is higher; sadly two employee deaths due to COVID-19 complications• More than 225 public health/government orders to comply with. In total ~80% of plants in the USA impacted by closures, production curtailments, re-tooling, cleaning and/or absenteeism• No government subsidies received in the USA in FY2020; Boral’s share of wage subsidies from other governments totaled ~$800,0002• $11 million in direct costs (e.g. cleaning, PPE, legal, and additional leave) plus significant adverse impact on earnings due to lower production/fixed cost recoveries in FY2020.1. As at 24 August 2020.2. Includes Australia, Canada, New Zealand and the United Kingdom, primarily through joint ventures. No wage subsidies received for 100% owned businesses in Australia.Boral Review & Sustainability Report 202016 21
Effective crisis management and governance From the time COVID-19 was first reported, Boral closely monitored the outbreak and took decisive actions as USG Boral’s plants in China were closed from January through to late February. Starting in January, we introduced travel restrictions and quarantine protocols across Boral and hygiene measures, and on 2 March activated our Global Crisis Management response. The CEO chaired regular meetings and we reported daily to the Board in the initial weeks of the crisis.Key governance activities included:• Crisis Management Team activated• expert advice and support from International SOS and Control Risks• strong Board engagement – including regular calls with initial daily reporting• early identification of critical business functions and supply chain risks• continuous monitoring and adherence to government restrictions and mandates• supply chain risks and disruption minimised through business continuity planning• working closely with customers, suppliers, industry associations, government, rating agencies, banks, unions and local authorities• employee communications and consultation programs with HR policies adapted and remote working capabilities updated• regular financial market updates with FY2020 guidance withdrawn on 19 March 2020, and• recovery planning and measures to respond to economic downturns and uncertainty.Strong safety culture and engaged workforceIn many jurisdictions, Boral was allowed and encouraged to operate as an essential industry. As other industries temporarily shut down, we took our responsibility to maintain supply to customers, maximise employment for our people and operate with appropriate safety measures extremely seriously.Key actions included:• travel restrictions and quarantine protocols ahead of government mandates• strict hygiene, social distancing and quarantine protocols introduced, with communications, monitoring and internal reporting controls• reconfigured operations to allow social distancing• tracking and reporting of suspected and confirmed cases of COVID-19 in the workplace, with associated cleaning regimes• monitoring and protecting ‘vulnerable employees’ from age and health risk perspectives• social distancing for customers strengthened, including docketless deliveries• protocols for visitors and community members to minimise face-to-face contact while maintaining engagement• employee wellbeing support initiatives• early consultation with employees and their representatives where operations were impacted, and• continuing to pay wages in many jurisdictions for employees affected by temporary shutdowns and, where available, providing access to leave provisions and assistance to access government support while maintaining benefits such as medical coverage.12COVID-19 Pulse SurveyIn June 2020, over 10,000 of Boral’s employees across the Group were invited to participate in a COVID-19 Work Pulse Survey run by Kincentric. In Boral Australia, a bespoke survey provided additional feedback on our response to the pandemic.The survey results found that our people felt well-supported by Boral during the pandemic, with concern and connection receiving a positive perception score from 82% of respondents. Respondents identified that Boral’s communication during the pandemic was clear and trusted, they felt more trusted by their leaders, and flexible and remote working arrangements were delivering positive benefits, including greater engagement and productivity. The feedback from the surveys will be used to improve our approach to provide leading flexible work arrangements in our businesses.17 22
Boral Limited Annual Report 2020
Restrictions impacting some parts of AsiaMore widespread COVID-19Australian bushfire impactsJANUARYFEBRUARYMARCHAPRIL19 MarchAustralia closes international borders11 MarchWHO classifies COVID-19 as a pandemic25 JanuaryFirst case reported in Australia21 JanuaryFirst US COVID-19 case confirmed13 JanuaryFirst case of COVID-19 outside of China23 MarchAustralia shuts down non-essential services and social gatherings29 JanuaryBoral introduces travel restrictions & quarantine protocols24 FebruaryUSG Boral’s four China plants approved to re-start; starting up from March after ~3–4-weeks shutdown 1 MarchBoral’s crisis response activated 15 MarchBoral suspends international travel 19 MarchBoral’s ASX COVID-19 update including withdrawal of guidance30 MarchS&P affirms Boral’s credit rating with -ve outlook8 AprilMoody’s affirms Boral’s credit rating with -ve outlook14 AprilBoral’s ASX update on COVID-19 impactsEarly and decisive action in response to the COVID-19 pandemicOur response to COVID-19 (continued)Leading network and integrated supply chain In jurisdictions where the construction industry continued to operate, some of our customers experienced delays and disruptions due to impacts from other suppliers, which slowed the industry. However, Boral was well positioned to maintain supply and effectively manage supply chain risks with inputs largely integrated or sourced locally.With our leading network of 646 operating and 137 distributing sites, where plants or operations were impacted, Boral’s product was sourced from inventory or alternative locations.Through Boral’s effective risk management practices, which include managing for a range of potential supply chain scenarios, disruptions were remedied and broadly contained to the following areas:• some delays in delivery of capital plant and equipment• slowdown of supply of certain plasterboard additives from China, and• certain protective equipment and hand sanitisers were in short supply, with effective sharing of supplies across the Boral network. Boral’s laboratories in Australia are now equipped to produce hand sanitiser that meets World Health Organisation standards to supplement our supplies from external suppliers.Throughout the early months of the pandemic, we worked closely with key industry associations and various levels of government to identify and address potential supply chain issues; economic, operational and environmental risks; and opportunities. In Australia, we continue to provide input and engage with government around opportunities to stimulate activity and support the economic recovery. Financial strength and liquidityFrom the outset of the pandemic, we were not only focused on the health and safety of our people but also on the financial health of the business and the industry more broadly. We worked closely with suppliers and customers to continue payments to suppliers and receipts from customers. We were focused on maintaining Boral’s liquidity under all scenarios, through a range of measures, including:• reactivating the dividend reinvestment plan for the interim dividend, which was fully underwritten for the dividend paid on 15 April 2020• accessing debt capital markets to increase and extend Boral’s debt financing facilities, including a new US Private Placement (USPP) note issue of US$200 million; new bilateral two-year bank loan facilities totalling A$365 million; and new bilateral loan facilities totalling US$740 million replacing the Company’s US$750 million debt facility with maturity extended from July 2021 to June 2024• reducing costs and discretionary expenditure across the entire business• right-sizing operations, including temporarily closing plants to align production with lower activity levels• reducing non-essential capital expenditure, resulting in capital expenditure in FY2020 14% lower than previously planned, and• where eligible, accessing available relief initiatives.Boral’s investment grade credit ratings BBB and Baa2, were affirmed by S&P and Moody’s in March and April, with outlooks revised to negative due to COVID-19.34Boral Review & Sustainability Report 202018 23
More widespread COVID-19restrictions impacting Boral’s marketsMAYJUNE External event Boral internal response Boral-related external release/action15 MayUSPP program priced, raising US$200 millionLeveraging technology to adaptOur HSE teams have worked to fast-track cost- effective technology solutions that enable us to undertake key HSE risk management controls remotely.In USG Boral, we completed virtual Critical Control Gembas across a number of our operations. These remote Gembas use web-based video technologies to undertake inspections to verify that controls around high-risk activities are in place and effective. We are working to implement a simple and cost- effective virtual solution across the Group. Boral Australia has also used new technology in the form of a distributed drone network to undertake volumetric stocktakes at our quarries. While stocktakes are typically done using an aircraft, COVID-19 travel restrictions meant this method wasn’t available.Continuing to respond to changing restrictions including Melbourne Stage 4 restrictions implemented 2 August Enhanced health, safety and hygiene protocolsThe Stone facility in Tijuana, Mexico is Boral’s most complicated site for execution of enhanced health, safety and hygiene (HSH) protocols in response to COVID-19. The facility typically has more than 500 employees, multiple employees from the same household, close working conditions and employee transportation via bus. Tijuana had a high level of COVID-19 community transmission and significant government mandates were enacted. This included temporary closure of the facility and furloughing of employees until it was proven the business was essential and could operate with appropriate safety measures in place.A detailed report of HSH protocols to be put in place was presented to the Mexican government. As a result of Boral’s proven success as a safety-first employer and the detailed plan, Boral was among the first Tijuana businesses to be approved for reopening. The business has successfully scaled operations and there have been no transmissions on site to date.Using drones to facilitate stocktakes at our quarries19 20
24
Boral Review & Sustainability Report 2020
Boral Limited Annual Report 2020
Our risks and responses
Our risks and responses
Risks
Health, safety and environment (HSE)
Market and 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 more than
3,000 on-road heavy vehicles, exposing us to a risk
of traffic accidents.
Any such incidents may impact our people and
communities, result in costs and fines, cause business
interruption and adversely affect Boral’s reputation.
The risks of community and global health issues and
responses to Boral’s markets and operations have been
demonstrated in FY2020.
Our business performance is closely tied to demand
in the end-markets in which we operate, across our
countries of operation. These markets are cyclical
and affected by various macroeconomic, geopolitical,
demographic and regulatory factors, and the
allocation and timing of government funding for public
infrastructure and other building programs.
For major projects, particularly infrastructure
in Australia, our business is impacted by delays
in delivery schedules or changes to scopes of work.
• Group-wide commitment to Zero Harm Today
28
• Focus on continuing to achieve better safety
outcomes as part of broader strategy to deliver
world-class safety performance
• Strict minimum operating standards, policies,
28–30
procedures and training to ensure compliance with
all applicable HSE laws
• Group-standardised response to COVID-19,
including strict hygiene, social distancing and
quarantine requirements and weekly site self-
assessment of COVID-19 related controls
16–19
• Global HSEQ management system
29
• HSE performance monitoring, reporting
27, 28–30
and accountability
• Established reserves for known environmental
47
liabilities, including quarry remediation
• Heavy vehicle safety management to comply with
30
(at a minimum) heavy vehicle laws
• Leading Safe Work Program training
• Comprehensive approach to dust management,
including respirable dust, focused on best practice
• Safety improvement initiatives focused
33
on standardisation, new lead indicators and
leveraging technology
• Reduced manual handling and ambient dust in
Stone business due to manufacturing improvements
• HSE standards applied consistently across Asia,
Australasia and the Middle East
29, 50
30
9
• Diverse business portfolio may reduce cyclical
impacts of individual geographies and markets
• Continued monitoring and reporting of
government policies, regulatory changes and
industry trends, and engagement with regulators
• Review of Boral’s portfolio is underway
including market outlook, competitive
positioning and potential for each of Boral’s
businesses to deliver improved earnings
and growth
• Leveraging demand shift to major infrastructure
through investments in quarries, asphalt
and concrete operations and strengthened
project capability
• Diversified base of major projects across our
regional businesses
• Dedicated Project Management Office to
maintain best-practice project management
processes and respond to changes in
programs of work
• Strengthened import capability;
11
Boral Cement Geelong clinker import
terminal under construction in Victoria
• Prioritisation of capital investment aligned
with product and market growth, with focus
on increasing fly ash supply
• Operations appropriately scaled
13
to respond to regional demand changes
resulting from COVID-19
• Use of closed-circuit television (CCTV) to aid
• Exposure to diverse geographies,
incident investigations and improvements
• New program reducing isolation incidents
32
with strong economic growth potential
across Asian developing countries
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Rigorous and effective risk management is critical in helping us respond to a complex environment that is
Rigorous and effective risk management is critical in helping us respond to a complex environment that is
changing at an accelerating pace, and to deliver on our strategic priorities.
changing at an accelerating pace, and to deliver on our strategic priorities.
Boral’s future prospects may be adversely impacted by a number of risks, some of which are beyond our control. An overview of
Boral’s future prospects may be adversely impacted by a number of risks, some of which are beyond our control. An overview of
our material business risks and our approach to managing those risks is set out below. Page references indicate where the topics
our material business risks and our approach to managing those risks is set out below. Page references indicate where the topics
are covered throughout this report.
are covered in the 2020 Boral Review & Sustainability Report.
Group Risk manages Boral’s risk identification and management process, which includes an annual bottom-up assessment and
Group Risk manages Boral’s risk identification and management process, which includes an annual bottom-up assessment and
review. Information about risk identification and management at Boral can be found in the Corporate Governance Statement in this
review. Information about risk identification and management at Boral can be found in the Corporate Governance Statement.
annual report. Boral’s Risk Management Policy is available on our website.
Boral’s Risk Management Policy is also available on our website.
Market and industry
Competition and customer
Weather and climate-related impacts
Boral operates in competitive markets, against domestic
suppliers and, in some cases, imported product suppliers.
These competitive environments can be significantly
affected by local market forces, such as new entrants,
production capacity utilisation, economic conditions
and disruptive product innovation, as well as customer
strategies and preferences, and changes in construction
methods and materials. This impacts prices and demand
for our products.
• Investment in future technology innovation
to diversify our product range and develop new
products in our core markets
• Leveraging technology for more targeted sales
and marketing
• Group-led, global Innovation team restructured
to foster new ways to make and sell new and
existing products, with regionally based dedicated
innovation teams
• New University of Technology Sydney (UTS) and
Boral partnership to strengthen materials-based
product innovation
• Commercial Excellence and Customer
Experience initiatives to improve customer-centricity,
enhance service and grow margins
• Customer surveys and Net Promoter Score tracking
• Digital initiatives, including Boral’s online concrete
customer portal, Boral Connects
• Regionally focused product price analytics and
sales strategies
• National R&D centre to bring new technologies
and products to market
52
53
52
52
53
53
53
Extreme 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 limit customers’ ability to
construct, reducing or postponing demand.
Prolonged periods of wet weather can impact our
performance through lower productivity and loss of fixed
cost recovery.
Our short- and long-term physical and transition risks
associated with climate change and key mitigation
measures are outlined on pages 38–39 in the 2020 Boral
Review & Sustainability Report.
• Large operating footprint supports continuity
of supply, by using broad portfolio of operating sites
and capabilities
• Ability to flex production schedules to reduce
cost impacts
• Flood, bushfire and hurricane mitigation plans
37
• Weather monitoring processes to identify where
and when extreme weather events may impact the
business so we can initiate planning processes early
• TCFD physical climate-related risk
36, 42–44
scenario analysis underway to assess longer
term weather risks and assess controls and
mitigation strategies in place
• Review of longer term carbon emissions
35
reduction targets consistent with Science-based
Targets initiative methodology
• Monitoring and preparedness for weather-related
disruption, including flexible workforces and
additional equipment
• Boral Cement decarbonising projects
35–36
and initiatives, including increasing use of
low-carbon fuels
• Customer segmentation driving further
53
differentiation based on product and systems
innovation, and improved service
• New product development focused on lower
carbon products to support customer needs
52
• Safety management and recovery plans for major
weather events
• Fly Ash strategies to grow supply, supporting
lower supply chain carbon emissions
• Safety management and recovery plans for major
weather events
• Ability to leverage network of plants
26
22
Boral Limited Annual Report 2020
Boral Review & Sustainability Report 2020
Our risks and responses (continued)
Risks
Operations and technology
License to operate
The Group’s manufacturing processes and related
services depend on critical plant, which may
occasionally be unavailable as a result of unanticipated
failures, outages or force majeure events.
Boral’s operations, operational efficiency, and its
financial and commercial systems depend on our
information technology (IT) systems, capabilities
and assets. Ongoing investment in IT is required to
adequately support the business, including to address
customer needs.
A cybersecurity breach could lead to the loss of
sensitive data, breach of customer data privacy,
business interruption and reputational damage.
Failure to meet the increasing expectations of Boral’s
stakeholders, could impact our future plans, reputation
and ability to operate.
Attracting and retaining talented employees and
engaging our workforce underpins the delivery of
Boral’s strategic initiatives and business plans.
Boral is subject to a broad range of laws,
regulations and standards in the jurisdictions in which
we operate. Non-compliance due to inadequate
processes, systems, people or conduct could lead
to losses and liabilities, reputational damage and
business interruption.
• Plant maintenance strategies and programs
• Business continuity and emergency response
• Succession planning, leadership development
and workforce capability building activities
plans, with regular simulated crisis response training
• Group-led diversity and inclusion program
• Global Crisis Management and governance
17
supported by external crisis experts, activated in
response to COVID-19 from 2 March 2020 with
expert advice and support
• Comprehensive Group insurance program that
covers damage to facilities, associated business
interruption and product performance
• Disaster recovery plans for critical IT systems
and operational equipment
• Centrally managed data breach monitoring
and response
• Cybersecurity plans coordinated across divisions
and aligned with National Institute of Standards and
Technology Cybersecurity Framework
59
• IT system upgrades in key regions including a
new ERP in Australia and ERP integration across
North America
• Information security awareness training and
targeted ‘phishing’ email tests for all employees
and enhanced external monitoring and
reporting capabilities
• Boral Digital Services using effective project
management and agile processes
• Targeted technology enhancements to improve
operational and core financial systems and
customer solutions
• Streamlining and upgrading IT systems and
investment in cybersecurity controls and tools
• IT implementation in key regions, including ERP
solution in Australia
• Increased use of outsourced cybersecurity
services and service providers, to enhance controls
and monitoring
• Organisational culture work to reinforce
governance and accountability – including
measuring and monitoring workplace culture
38
• Third-party managed whistleblower hotline,
monitoring and reporting in all jurisdictions
• Centralised Code of Business Conduct
and associated policies
• Centralised competition law training
• Governance structure that monitors
performance of third-party agreements
and joint ventures
• Monitoring regulatory changes and engaging
with regulators, including modifying procedures
and protocols to meet regulations in the
jurisdictions in which we operate
• Modern slavery risk framework, and
revised Human Rights Policy and Supplier
Code of Conduct
• Community consultation programs and
• Flexible work policy and guidelines
• Reconciliation Action Plan initiatives to
50, 56
support Aboriginal and Torres Strait Islander
peoples and communities
• Execution of Code of Business Conduct
based on clear accountability, policies,
training and audits
• Annual anti-trust and competition law training
• Annual training on anti-bribery
58
and corruption for all employees of
100% owned businesses
• Investments in market-leading firewall defence
initiatives to minimise impacts of operations
50
49
50
59
58
58
55
56
49
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License to operate
Supply chain and cost management
Financial and capital management
Our business performance is exposed to inflationary
impacts from rising input costs and the availability
of labour.
Maintaining an appropriate capital structure is key to
delivering investor returns and access to equity and
debt funding.
Disruption in the supply of raw materials or other critical
inputs as a result of force majeure type events could
impact Boral’s ability to manufacture products and
meet market demand.
Failure to secure access to long-term reserves or future
resource supply constraints could adversely impact our
long-term growth.
Managing our liquidity and funding requirements is also
essential to the financial health of our business.
Boral is exposed to movements in foreign exchange
rates through its international operations, and to a
lesser degree through imported products and supply of
plant and equipment.
• Effective response to supply chain disruptions
due to COVID-19 led by Crisis Management Team
• Reduced costs and discretionary expenditure
across the business, including organisational
restructuring in response to COVID-19 impacts
18
18
• Key initiatives to improve operating efficiencies
3
• Short-term fluctuations in fuel and energy costs
managed through hedging and electricity demand
management
• Reserves planning
• Reducing costs through Operational Excellence
and Organisational Effectiveness programs
• Supply Chain Optimisation program enhancing
54
supply logistics and reducing costs
• Largely integrated and locally sourced supply chain
• Operational improvement projects
• Divisional procurement initiatives to enhance our
supply chain, including logistics and continuity of
supply, and reduce costs
• Long-term availability of fly ash monitored and
future sources identified, including reclamation of
landfill ash
• Cost reduction program to right-size operations
in response to market declines and COVID-19,
and cost excellence programs
• Securing gypsum supply through acquisition of
reserves and stable supply agreements
• Long-term raw material supply contracts (for
paper, for example)
3
54
13
3
• Maintain a prudent capital structure targeting
BBB/Baa2 credit rating metrics through the cycle
• Maintain prudent debt profile with staged and
18
long-dated debt maturities from diverse funding
sources in global capital markets
• Disciplined capital expenditure and investment
decision making with post-implementation reviews
• Immediate and decisive actions to manage
COVID-19 impacts and to maintain a strong
liquidity position, including rigorously managing cash
flow and working capital, and strengthening Boral’s
debt facilities
18
• Excess liquidity via committed undrawn facilities
and cash on hand
• US dollar net assets partially hedged with US
dollar-denominated debt to limit impact of
foreign exchange rate movements, including
on funding covenants
• Cross-currency swaps used to hedge US dollar-
denominated debt
• Forward exchange contracts used for material
product and equipment supply, to hedge
currency movements
• Interest rates swapped to reduce cyclical impacts
• Counterparty credit risk distributed across a
number of highly-rated global financial institutions
28
24
Boral Limited Annual Report 2020
Boral Review & Sustainability Report 2020
Sustainability highlights
We recognise that delivering sustainable outcomes is a business imperative and
critical for us to thrive over the long term. We strive to deliver value and positive
change for all our stakeholders, our communities and the environment.
Our sustainability priorities
Safety
World-class
health and safety
outcomes for our
people –
Zero Harm Today
Nil
employee and
contractor reportable
fatalities
>130,000
hazards reported
7.6
recordable injury frequency rate1
Comparable data
8.8
8.1
8.7
7.5
7.6
FY16
FY17
FY18
FY19
FY20
Our people
Diverse, capable
and engaged
workforce,
enabling them to
deliver their best
0.20
0.15
0.10
0.05
0.00
19%
women at Boral
1:1
female to male base salary
pay equity in Boral Australia
14% 14%
18%
19% 19%
~700
employees completed
Leading Safe Work program
FY16
FY17
FY18
FY19
FY20
Environment
Minimise our
environmental
footprint and
build resilience to
climate change
2.2million tonnes CO2-e
8%
Scope 1 and 2
GHG emissions
Completed stage 1 of
climate-related physical
risks scenario analysis
6%
Scope 1 and 2
GHG emissions intensity2
491
488
375
348
329
FY16
FY17
FY18
FY19
FY20
1. Per million hours worked for employees and contractors in all businesses and all joint ventures from FY2018. Prior years excludes less
than 50%-owned joint ventures and Headwaters.
2. Tonnes CO2-e emissions per A$million revenue.
2529
External recognition
Customers
Deliver innovative
and sustainable
products and
superior customer
experience
Suppliers
More efficient and
sustainable supply
chain delivering
better customer
outcomes
Communities
Make a positive
contribution
to our local
communities
Constituent of
FTSE4Good Index Series
As of 2020, Boral received
an MSCI ESG Rating of AA
15%
revenue from lower carbon,
high-recycled-content products3
~$30m
invested in R&D, in
line with prior year
11%
13%
15%
FY18
FY19
FY20
>50%
of our concrete customers
using Boral Connects
digital portal
>$4b
procurement spend
Multi-year supply chain
optimisation program
focused on improving our
customers’ experience
$1.14m
to community partnerships,
causes and projects
$m
>$4m
spend with
Indigenous-owned and
social enterprises4
Strengthened approach
to modern slavery risk
Delivered 2019–2020
Reflect Reconciliation
Action Plan commitments
0.88
0.99
1.09
1.26
1.14
FY16
FY17
FY18
FY19
FY20
Cement Concrete & Aggregate
Association NSW/ACT
Innovation Award for community
leadership and engagement
3. Defined as having a minimum 40% recycled content, and based on share of Group-reported revenue adjusted to include Boral’s 50%
share of underlying revenue from USG Boral and Meridian Brick joint ventures, which are equity accounted.
4. Excludes indirect spend with Indigenous-owned businesses.
30
Boral Limited Annual Report 2020
Sustainability overview
Our comprehensive disclosure
on our sustainability outcomes
for FY2020 and how we manage
sustainability issues is included in our
2020 Boral Review & Sustainability
Report. Further information is also
available at boral.com/sustainability.
In FY2020, we:
• broadened disclosure and metrics
to align where possible with the
Sustainability Accounting Standard
Board (SASB) Construction Materials
standard, and we are committed to
strengthening our processes, and to
progress further alignment
• made further progress towards full
alignment with the recommendations
of the Task Force on Climate-related
Financial Disclosures, including
improving Scope 3 emissions data
collection and methodologies, and
completing the first stage of our
physical risks scenario analysis, and
• broadened supplementary
information on our website, including
providing a Global Reporting
Initiative (GRI) content index.
We are also publishing our first modern
slavery statement in conjunction
with this annual report.
Our approach to sustainability
is underpinned by:
• effective governance
structure and risk
management
• open and constructive
engagement with our
stakeholders, and
• monitoring and transparent
reporting of our material
issues.
Boral’s material sustainability issues
We consider sustainability issues to be material if they represent significant issues to Boral and to our stakeholders. We
assess sustainability issues with reference to the GRI definition of materiality.
We conduct a materiality assessment every two years to identify our material sustainability issues. The content of our 2020
Sustainability Report is defined by our FY2019 materiality assessment, which identified 14 material issues.
Social and community impacts
Health, safety and wellbeing
Communities
Safety
Sustainable procurement
Supply chain logistics
Supply chain
Operating
with integrity
Culture and
business conduct
Cyber and
data security
Diversity, inclusion
and equality
People
Employee development
and engagement
Human rights and
workplace relations
Sustainable products and innovation
Climate-related impacts
Customers
Environment
Customers
Environmental impacts
Energy
Prioritised United Nations Sustainable Development Goals
HSE management and safety outcomes
31
Nil employee and contractor
reportable fatalities
7.6 recordable injury
frequency rate1,2
65% reduction in Serious
Harm Incident Frequency Rate1
in Boral Australia to 2.7 in
FY2020, from 7.7 in FY2016
Leading Safe
Work program
being rolled out across Boral
Australia – focused on coaching
and educating frontline leaders
and workers in how to make
better decisions on the job
Focus on effective
controls for high
risk activities
Continued to increase our use
of inspections that focus on
verifying we have effective
controls in place for high-
risk activities
Zero Harm Today
Our leading priority is the health,
safety and wellbeing of our people,
and those we interact with through
our activities. We also strive to
eliminate or minimise our adverse
environmental impacts.
• an engaged, empowered and
competent workforce
• fit-for-purpose health, safety,
environment, quality (HSEQ)
systems and processes, and
• maintain our privilege to operate
and grow.
HSE strategy
We are committed to continually
improve our processes and eliminate
health, safety and environment (HSE)
risks to achieve our goal of Zero
Harm Today. We work to maintain a
safety-driven culture focused on trust,
transparency and learning.
Our priorities and approach to
managing our key HSE risks are
guided by our Group-wide strategic
objectives and supporting programs.
These objectives are to have:
• capable and confident leaders
Boral’s Group-wide Health, Safety,
Environment and Quality Management
System (HSEQ MS) provides the
standards, guidelines and tools that
enable us to improve our performance.
Our HSEQ MS enables us to certify
operations against external standards.
Our approach focuses on identifying
and eliminating conditions and
behaviours that have the potential to
injure people or harm the environment.
This includes thoroughly assessing
risks, following effective systems and
processes, and continually investing in
equipment and other improvements.
Outperforming Australian
industry safety benchmarks
According to Safe Work Australia’s
latest injury statistics reports3, the
broader industries in which Boral
Australia operates have an extended
duration lost time injury rate (eLTIFR4)
four to five times that of Boral.
Boral Australia’s operations pour
concrete and lay asphalt across major
projects and construction sites; have
around 70 quarries and 300 operating
sites producing cement, concrete,
asphalt, bricks, roof tiles and timber
products; and manage a fleet of more
than 3,000 heavy vehicles.
Boral Australia’s eLTIFR (five or more
days lost) for employees was 1.8
in FY2020, compared to industry
averages ranging from 7.7 to 8.1 for
manufacturing and transport, postal
and warehousing.
1. Per million hours worked for employees and contractors in 100% owned businesses and all joint ventures.
2. Recordable injury frequency rate is the combined lost time injury frequency rate and medical treatment injury frequency rate.
3. Statistics on workers in Australia published by Safe Work Australia, Table 21 – number, frequency rate and incidence rate of serious claims
by industry (2017-18). Based on Safe Work Australia’s definition of lost time injury frequency rate, which is based on workers’
compensation claims for work-related injuries that resulted in five or more days of lost time from work.
4. Per million hours worked.
32
Boral Limited Annual Report 2020
Climate-related impacts
We are progressing strategies to
leverage the opportunities of a lower
carbon economy and to further
mitigate our climate change risks.
Strategy
Our approach to addressing
climate change is focused on three
interrelated priorities:
Performance
against targets
We are committed to playing our role
in addressing climate change. We
support the 2015 Paris Agreement
objective of limiting global warming
to well below 2°C above pre-industrial
levels, and to pursue efforts to
limit the temperature increase even
further, to 1.5°C.
As a construction materials and
building products company with a
footprint in 17 countries, Boral’s clinker
manufacturing operations in Australia
accounted for 45% of our total Scope 1
and 2 greenhouse gas (GHG) emissions
in FY2020.
FY2020 GHG emissions
tonnes CO2-e
Scope 1 and 2
8% to
2.2m
Scope 3
3.1m
• reduce the carbon footprint of our
operations and value chain
• grow revenue from lower carbon
construction materials and building
products
• strengthen resilience by mitigating
our climate change risks.
In FY2020, we undertook a review
of longer term carbon emissions
reduction targets consistent with
the Science-based Targets initiative
(SBTi) methodology, including early
development of possible emissions
reduction pathways. In FY2021, we
will conduct further analysis of possible
pathways to strengthen our confidence
in meeting science-based targets.
Importantly, in FY2021, we will
complete the necessary work to
adopt science-based targets and
carbon emissions reduction pathways,
taking into account the outcomes of
the portfolio review that is currently
underway, and to ensure alignment
with Boral’s broader sustainability and
business strategy.
We will also consider the ongoing
appropriateness of our existing carbon
emissions intensity and fly ash based
supply chain targets in light of the
reset business strategy.
1
Reduce GHG emissions
intensity by 10–20% on
FY2018 by FY20231
12% on FY2018
Deliver annual growth
2
in share of revenue from
lower carbon, high-recycled-
content products2
2% to 15%
Reduce CO2-e in supply
3
chain by 1.1−1.5 million
tonnes by increasing fly
ash supply by FY2022
0.2
million tonnes CO2-e
Physical climate-related scenario
analysis
The first stage of our physical climate-
related scenario analysis, which was
completed in FY2020, identified the
geographic regions where Boral
operates that are most vulnerable to
the impacts of physical climate-related
risks under various warming scenarios
in the mid-century and end-of-century
periods.
The second stage, which will be
completed in FY2021, will quantify
the potential operational and financial
impacts on Boral of an increase
in climate hazards at a site and/or
business level, considering existing
mitigation measures and controls.
Our low-carbon solid waste-derived fuels facility at Berrima (NSW) reduced our coal-related GHG
emissions by 25,000 tonnes CO2-e in FY2020.
1. Tonnes CO2-e per A$million underlying revenue, which is Group-reported revenue adjusted to include Boral’s 50% share of underlying
revenue from the USG Boral and Meridian Brick joint ventures, which are equity accounted.
2. Based on Group-reported revenue adjusted to include Boral’s 50% share of underlying revenue from the USG Boral and Meridian Brick
joint ventures, which are equity accounted.
33
Environmental impacts
We are committed to minimising
our environmental impacts so that
our business is sustainable for the
long term.
We work to mitigate adverse
environmental impacts from our
operations, and wherever possible,
eliminate them altogether.
In addition to reviewing science-based
emissions targets, we are advancing
a range of new business-level plans
and targets. These focus on improving
water efficiency, reducing waste
generation and increasing use of
recycled materials in our products.
During the year, we received 11
infringement penalties across the
Group, totalling $53,576. Eight related
to non-compliance in administrative
arrangements, rather than causing
environmental impacts.
Water
Many of our operations use recycled
water in their production processes,
including for concrete, plasterboard,
quarry, asphalt and some building
products. While the proportion of
recycled water used at our operations
varies, it can be as high as 100%.
Waste
We re-use materials in our production
processes, including concrete
washout, recycled asphalt pavement,
plasterboard waste, process water
from our production facilities and
quarry by-products.
We are exploring additional
opportunities to further reduce waste
in our operations and build capacity
in the recycled products space,
including through re-using production
by-products and waste materials.
Our people
We strive to attract and retain a
diverse and talented workforce;
build a culture of safety, respect and
trust; and improve our employees’
experiences. We also invest in
developing our employees to provide
them with the skills and capabilities
to deliver their best.
Since March 2020 our people have
been significantly impacted by the
COVID-19 pandemic.
We have supported and continue
to support our employees who
have been impacted by temporary
closures, providing paid leave, unpaid
leave, flexible and remote working
arrangements where possible,
and assistance accessing relevant
government support.
Diversity, inclusion and
equality
We are committed to driving greater
diversity and inclusion in our
workplace.
Increasing the representation of women
at Boral, particularly in leadership
roles, is a key priority. During the
year, Boral Australia completed a
comprehensive review of issues
impacting the retention of women. We
have identified a number of initiatives
we will implement in FY2021.
Culture and engagement
In FY2020, we piloted a survey of
2,000 employees across our Australian
and North American businesses to
gain insight into our organisational
culture. The results of this survey will
be available in FY2021.
4 gigalitres of municipal water
used, in line with prior year
Water stress review
resulted in 22 quarry sites,
out of 67, being categorised
at high risk of water stress
84 internal environmental
compliance audits
Training and development
In Boral Australia, 2,954 employees
completed learning through Learning@
Boral in FY2020, including more than
1,800 employees who completed
training through our registered training
organisation. In Boral North America,
our employees completed training
across a range of skill areas.
16,169
FTE employees
~7,600
FTE contractors
35%
of professional
positions held
by women
24%
employees
covered by
industrial or enterprise
agreements
34
Boral Limited Annual Report 2020
Customers and sustainable products
Our commitment is to always put our
customers first. We strive to offer our
customers innovative and sustainable
construction materials and building
product solutions, and to deliver a
superior customer experience.
Across our international operations,
our customers range from people
renovating their homes to large-scale
builders, commercial developers and
infrastructure contractors.
Sustainable products
Our key priorities include reducing our
carbon footprint and working towards
a circular economy by using more
recycled materials and products.
In FY2020, our lower carbon, high-
recycled-content products1 accounted
for 15% of our underlying revenue2, up
from 13% in FY2019. These products
and businesses include: Fly Ash, Boral
Recycling, lower carbon concretes,
TrueExterior® Siding & Trim and
plasterboard in South Korea and China
manufactured using synthetic gypsum,
a by-product of coal-fired plants.
Lower carbon concretes
Developed by Boral’s innovation centre
in Australia, ENVISIA® is a lower carbon
concrete that achieves a cement
replacement of more than 50% without
impacting performance.
ENVISIA® meets the requirements of
the Infrastructure Sustainability Council
of Australia and helps the construction
industry achieve higher Green Star
ratings on projects assessed by the
Green Building Council of Australia.
Aspire® is an advanced lower
carbon concrete solution specifically
developed to maximise floor space, by
incorporating thinner vertical elements
in commercial and high-rise buildings,
and having a lower overall Portland
cement content than equivalent high-
strength concrete.
To deepen our research, development
and innovation efforts in lower carbon
concrete, we entered into a five-year
partnership with the University of
Technology Sydney (UTS), harnessing
the combined capabilities of industry
and academia.
Artist impression of Suncorp headquarters
being built using Boral’s ENVISIA® and Aspire®
lower carbon concretes. Photo courtesy of Mirvac.
Customer experience
In Boral Australia, we monitor customer
feedback through customer surveys
and by reporting on three types of Net
Promoter Score (NPS): an Interaction,
Episode and Strategic score.
Since FY2019, we have been
monitoring our Interaction NPS daily
across a number of product lines,
gathering feedback on individual
customer interactions. This feedback
enables our frontline team to respond
to any negative feedback quickly and
rectify any concerns. Our business
leadership teams also discuss this
NPS each month and use it to inform
systematic improvement initiatives.
>50% of our concrete
customers using Boral
Connects digital portal
~$30m invested in R&D,
in line with prior year
New UTS Boral Centre
for Sustainable Building
partnership with University
of Technology Sydney
Boral Connects
In Boral Australia, our Boral Connects customer portal is revolutionising
our concrete experience. The streamlined platform allows our customers
to place, modify, confirm, cancel and track orders online. Customers
can also use Boral Connects to access electronic dockets, enabling
paperless delivery.
In FY2020, we continued to work with customers to further enhance and
develop this online portal, including capturing customer feedback.
To date, more than 50% of our concrete customers have registered with
Boral Connects.
1. Defined as having a minimum of 40% recycled content.
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.
35
Supply chain
We are focused on continuing to
deliver a more efficient and cost-
effective supply chain to achieve the
best outcomes for our customers.
We also work to source, produce
and deliver our products in a safe,
responsible and sustainable way.
In Boral Australia and Boral North
America, we are progressing multi-year
supply chain optimisation initiatives
which aim to deliver a superior
customer experience by building more
reliable, more transparent and lower
cost integrated supply chains.
The success of these transformation
programs will be seen through our
customers experiencing improved
service – as measured through delivery
in full and on time – and through
reduced supply chain and logistics
costs to provide that service.
Sustainable procurement
We strive to create positive change by
making responsible and sustainable
purchasing decisions. Our approach
to sustainable procurement seeks to
achieve industry best practice.
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
• maintaining an industry-leading
supplier pre-qualification
questionnaire, and evaluation
processes and tools, for assessing
each supplier’s performance and
ability to meet our expectations
• promoting diversity and inclusion
in our supply chain, including
through social and Aboriginal
and Torres Strait Islander-owned
enterprises, and
• assessing and managing the risk
of modern slavery in our supply
chain. See our 2020 Joint Modern
Slavery Statement.
Promoting diversity and inclusion in our supply chain
During the year, we developed a partnership with WV Technologies (WV), a
certified Social Trader and member of Supply Nation.
As a part of Boral’s Supplier Success Program, we worked with WV
to tailor its offering to suit our need for additional goods and services.
WV expanded its product range to include essential protective personal
equipment supplies, and has become a key supplier to Boral for these
items during the COVID-19 pandemic.
Communities
We are committed to managing
our operations responsibly
and building positive long-term
relationships with the communities
in which we operate. We do this by
listening to our stakeholders, and
understanding and managing the
impact of our activities.
We recognise that our activities
– which include extracting and
processing raw materials, and
manufacturing and transporting
products and materials – can attract
community interest and concerns.
As part of our engagement, we
hold regular community liaison
meetings across our key sites in Boral
Australia to inform local communities
about our operations, including
site-specific health, safety and
environmental aspects.
We also keep local communities
informed through more informal
channels, including online information
resources, newsletters, local
advertising and site tours.
Aboriginal and Torres Strait
Islander communities
We are committed to strengthening
our relationships with and the
opportunities we provide for
Aboriginal and Torres Strait Islander
peoples and communities.
In FY2020, we achieved the
deliverables and planned actions
set out in our 2019–2020 Reflect
Reconciliation Action Plan. In
FY2021, we intend to launch our
second Reconciliation Action Plan,
an Innovate plan, to advance our
contribution to reconciliation.
Community investment
Through our community investment
program, we aim to make a positive
and sustainable contribution to the
communities in which we operate.
This program focuses on long-term
capacity-building projects that will
have a lasting impact. We also support
projects and organisations that provide
support and care during emergencies.
$1,140,000
contributed to our community
partnerships and local
community causes and projects
7 key community
partnerships, including new
partnership with Black Dog
Institute
36
Boral Limited Annual Report 2020
Executive Committee
Zlatko Todorcevski |
Chief Executive Officer (CEO) & Managing Director
Zlatko Todorcevski was appointed as CEO & Managing Director
effective 1 July 2020, replacing former CEO & Managing Director Mike
Kane. Biography details of Zlatko Todorcevski are available on
page 37.
Rosaline (Ros) Ng | Group President Ventures & CFO
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.
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 CEO 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.
Darren Schulz | Acting President & CEO, Boral Industries Inc
Darren joined Boral in 2002 and was appointed Acting President &
CEO, Boral Industries Inc effective 1 June 2020. He has built a career in
building products that includes senior leadership roles in multi-national
operations across the Americas, South East Asia, Africa, Middle
East, Europe and Australia. He spent two years in Boral’s Australian
operations as Vice President, Performance and Executive General
Manager, Building Products. In 2015 he joined Fletcher Building Limited
as President & General Manager, Roof Tile Group, before returning to
Boral in 2017 to take up the role of President, Roofing North America.
Darren holds a Master of Business Administration from The Wharton
School, a Bachelor of Business (Accounting) Honours and is a
Chartered Accountant.
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.
Ross Harper | Group President HSE, Innovation, Sustainability &
Operations Excellence
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. From 1 April 2020, he transitioned to a
more focused role as Group President HSE, Sustainability, Innovation
& Operations Excellence. 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.
Linda Coates | Group Human Resources Director
Linda Coates joined Boral in 2000 and previously held Group and
divisional human resources (HR) 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
and a Member of the Australian Institute of Company Directors. He is
admitted to practise as a solicitor in NSW. Dom 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.
37
B
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Board of Directors
Kathryn Fagg AO | Non-executive Chairman | age 59
Eileen Doyle | Non-executive Director | age 65
Kathryn Fagg joined the Boral Board in September 2014 and became
Chairman effective 1 July 2018. Ms Fagg is a Director of National
Australia Bank 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 Male Champions of Change. She was previously
Director of Incitec Pivot Limited, 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 & Co. She
holds an Honorary Doctor of Business and a Master of Commerce
in Organisation Behaviour from University of NSW, 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.
Zlatko Todorcevski | CEO & Managing Director | age 52
Zlatko Todorcevski joined the Boral Board on 1 July 2020, when he
was appointed CEO & Managing Director. His 30-year executive career
spans the oil and gas, logistics and steel building products sectors.
Zlatko started his career in the downstream building products arm of
BHP Steel and held a number of executive roles with BHP’s Petroleum
business before being appointed the Chief Financial Officer (CFO)
for Energy at BHP. He later joined Oil Search Limited as CFO with
responsibilities for all finance activities, strategy and planning, legal, IT
and company secretarial functions. He was also previously the CFO
of Brambles Limited, where he led the $3 billion demerger of Recall
Holdings as well as multiple global acquisitions and divestments and
a major cross-company transformation program. He ceases as a non-
executive Director of The Star Entertainment Group Limited on
31 August 2020 and he will transition off the board of Coles Group
Limited in the coming months. Zlatko was previously on the Board
of Adelaide Brighton Limited, where he served as both Chairman,
and Deputy Chairman and Lead Independent Director. He holds a
Bachelor of Commerce and Masters of Business Administration from
the University of Wollongong. He is also a Fellow of CPA Australia,
FINSIA and the Governance Institute of Australia and a Member of the
Australian Institute of Company Directors.
Peter Alexander | Non-executive Director | age 63
Peter Alexander joined the Boral Board in September 2018. He 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 CEO of ORCO Construction Distribution from
2005 to 2009, serving large residential, commercial and concrete
construction builders. He previously served as President and CEO 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 and NEXTDC 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 71
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 62
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 66
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.
38
Boral Limited Annual Report 2020
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 FY2020, 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 2020 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
• approving Boral’s statement of values and Code of Business Conduct
• demonstrating leadership and monitoring Boral’s culture and adherence to the ethical standards
Delegation
and oversight
set out in the Code of Business Conduct
• appointing, rewarding and determining the duration of the appointment of the CEO and ratifying
the appointments of senior executives including the CFO and the Company Secretary
• guiding development of the Group’s strategy, approving that strategy, and monitoring its
Accountability
and reporting
implementation
• approving the financial statements and budget, monitoring financial performance against budget
•
reviewing and approving overall financial goals and performance objectives for the Company
• monitoring business performance and ensuring that appropriate resources are being applied
• setting the risk appetite within which the Board expects management to operate
•
reviewing, ratifying and monitoring systems of risk management (for both financial and non-
financial risks) and internal control, codes of conduct and legal compliance (including in respect
of matters of sustainability, safety, health and the 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
• monitoring the effectiveness of systems in place for keeping the market informed, including
shareholder and community relations
• satisfying itself that appropriate processes and procedures exist for relevant information to be
reported by Management to the Board so that the Board can effectively oversee and challenge
Management and hold it to account.
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 Committees
refer matters to the Board for decision, with a recommendation from the Committees, or
then report to the Board.
CEO &
MANAGING
DIRECTOR
i
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A
COMPANY
SECRETARY
The Company
Secretary plays
an important role
in supporting the
effectiveness of the
Board and its
Committees
SENIOR
MANAGEMENT
Board and Committee
Charters and the Company’s
Constitution are available on
Boral’s website.
39
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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 38 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 around Boral’s culture, capability and execution.
Composition of the Board
Membership
The accompanying diagram illustrates the composition
of the Board at 30 June 2020.
As announced on 15 June 2020, Zlatko Todorcevski was
appointed as CEO & Managing Director of Boral Limited,
effective 1 July 2020, replacing former CEO & Managing
Director Mike Kane.
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.
n F a g g
a ir m a n
a t h r y
C
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K
CEO &
Managing Dire
Executiv
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*
s
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s
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M
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a
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Board
Composition
s
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v
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x
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A
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P
N
Independent
John Marlay
P
a
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R
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Eileen Doyle
* Zlatko Todorcevski was appointed CEO & Managing Director of
Boral Limited effective 1 July 2020, replacing former CEO &
Managing Director Mike Kane.
40
Boral Limited Annual Report 2020
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 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. 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 for the Company.
Board skills matrix – skills and experience across the
Board as a whole to support Boral’s strategy and business
priorities
Element
Skills
Leadership
Executive leadership
Health, safety and environment
Portfolio
Strategy, mergers and acquisitions
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 and priorities for 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 progressed the search process
towards appointing an Asia-based non-executive Director
to build on the Board’s existing experience in Asia, however
this process was put on hold early this year due to the
impacts of COVID-19.
The Board renewal plan is currently focused on recruiting
two new directors, one with deep operational experience
in the sector and the other with strong finance experience.
These new directors will be based in Australia and we
expect to make these appointments this year. Of our longer-
serving directors, John Marlay will retire at the end of this
year, Eileen Doyle will retire in 2021 and Paul Rayner, who
is standing for re-election this year, will retire following the
successful transition of the chairmanship of the Audit & Risk
Committee.
The skills, experience and expertise of each Director are set
out on page 37 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
they have 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
41
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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
discussions with other Directors and, where practicable,
site visits to some of Boral’s key operations.
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 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
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 37 of this Annual Report, and while the Board has been
well served with an appropriate and diverse mix of tenure
over time, the Board is actively progressing its plan for
Board renewal, as outlined on the previous page.
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.
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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
Shareholder communications
• 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.
• 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 management at any time through the
Chairman or the Company Secretary.
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.
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Board Committees
The qualifications and experience of each Committee
member are set out on page 37 of this Annual Report.
Details of the number of Committee meetings Directors
attended during the reporting period are set out on page
56 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 FY2020.
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 financial and non-financial risk, and
the effectiveness of Boral’s risk management framework
•
risk management culture, 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 FY2020, 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 58. The Committee’s role in relation to the
internal audit function is discussed on page 46.
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Boral Limited Annual Report 2020
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 three 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 six times during FY2020.
The Committee met four times during FY2020.
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 that 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 material reports, which are prepared and
lodged in compliance with its statutory obligations
concerning the environment and sustainability reporting.
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.
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)
• whether the Group’s remuneration policies are aligned
with Boral’s values, strategic objectives and culture
• whether remuneration outcomes are consistent with
the Company’s remuneration philosophy, are aligned
with the Company’s performance and the shareholder
experience, and demonstrate alignment between
executive reward and shareholder value
•
•
•
•
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 FY2020 is set out
in the Remuneration Report from page 59.
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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 36 of this Annual Report).
The Executive Committee is also responsible for providing timely and accurate reports to the Board on Boral’s business and
operations, in order to assist the Board in discharging its duties and responsibilities effectively.
Members of the Executive Committee (as well as other senior executives) are employed by Boral through individual Executive
Services Agreements. The pre-employment process for executives includes obtaining background checks with the
assistance, where appropriate, of an external consultant, to verify qualifications and determine suitability for the role.
Performance evaluation and remuneration
Performance evaluation process
The following table explains the Company’s performance evaluation processes for the Board, Committees, individual
Directors and senior executives.
Board, Committees and Directors
CEO & Managing Director
Senior executives
The Board undertakes an evaluation
of the performance of the Board, its
Committees, individual Directors and the
Chairman.
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.
An external evaluation of the performance
of the Board, its Committees and
individual Directors took place in FY2020
in accordance with the process described
above.
On an annual basis, the Remuneration
& Nomination Committee and
subsequently the Board formally review
the performance of the CEO & Managing
Director.
The criteria assessed are both qualitative
and quantitative, and include profit
performance, other financial measures,
safety performance, 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
FY2020 in accordance with the process
described above.
An evaluation of the performance of senior
executives of Boral took place in FY2020
in accordance with the process described
above.
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Boral Limited Annual Report 2020
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 59.
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 FY2020. 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.
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Business and sustainability risks
Details regarding our approach to managing business and
sustainability risks are contained in the OFR (pages 6-27),
including in this year’s expanded Risks and Responses
section (pages 24–27), as well as in the Sustainability
highlights and overview section (pages 28–35) of this
Annual Report. 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 2020 and the half year ended 31 December 2019.
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.
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, with the next review to occur in FY2021.
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. 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.
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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 the 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 FY2020
Boral’s diversity plan has six strategic elements against which the Board has set measurable objectives for FY2020, as outlined
below:
Strategic Element and Objective
Status
Key Outcomes
1
Leadership
1.1
Leadership engagement:
engage senior leaders to take
carriage of deploying diversity
communication and education
2
Communication and Education
2.1
Communication: develop
communications engagement
framework and packages
to raise knowledge and
understanding of diversity
2.2
Education: develop diversity
educational framework to
provide management with
capability to lead and manage
diversity and diverse teams
Completed
• Unconscious bias learning integrated into zero|one|ten Leader
Foundations and Leading Safe Work programs for front line leaders.
• Unconscious bias programs available to all employees through Boral’s
learning management system.
• Online platform for unconscious bias leadership learning.
In progress
• Approach, structure and content of zero|one|ten Build Leadership
program to include the next stage of learning on inclusion and the
impact of unconscious bias on leadership behaviour.
Completed
• ‘Diversity Conversations’ program completed, planning an updated
approach for FY2021.
In progress
• Communication on the ‘Why’ of diversity and inclusion refreshed to
increase awareness and desire for an inclusive workplace culture;
materials being developed to communicate the message more broadly.
• ‘Listening Groups’ to commence in FY2021 to build networks and
capabilities, share experiences and increase connections and inclusion.
Completed
• Deployed unconscious bias training through Cognicity and LinkedIn
Learning, made available to employees in FY2020.
Ongoing
• 116 leaders participated in zero|one|ten Leader Foundations and
Coaching programs, including modules on diversity, inclusion and
unconscious bias.
• Participation of women in leadership development programs in FY2020
was 13% of participants, down from 21% in FY2019.
2.3
Networking: establish
networks, alumni and support
groups across Boral to educate,
support and engage employees
Completed
• Of the 37 participants who attended a Diversity in Leadership Forum
in FY2020, 43% were women in leadership roles. Forums provide
opportunities for women leaders to develop networks and consult with
key leaders on issues of gender and diversity in their businesses.
• Since FY2014, 197 employees have participated in a forum and 73%
of participants were women in leadership roles. This group forms the
Diversity in Leadership Alumni, providing feedback on initiatives.
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Strategic Element and Objective
Status
Key Outcomes
2.3
Networking: establish
networks, alumni and support
groups across Boral to educate,
support and engage employees
(continued)
In progress
• Development, coordination and promotion of networks, alumni and
support groups to provide networking and development opportunities.
Ongoing
• Mentoring Circles for women was piloted, providing development and
networking opportunities for women.
• Boral Women in Science & Engineering (WISE) was formed by women in
Boral wanting to connect with other women with STEM backgrounds.
• Diversity in Leadership Alumni meets quarterly to progress discussion on
diversity and inclusion, and provides support and information on diversity
initiatives.
• Veterans Alumni meets at least quarterly to progress initiatives and
engage veterans. Initiatives include Anzac and Remembrance Day
memorial services, membership award ceremonies, and promotion of
veteran’s employment through promotional advertising on Boral vehicles.
2.4
Track and report: develop key
performance indicators to
measure, track and report on
change and progress
2.5
Benchmark: adopt external
metric to measure and
benchmark effectiveness of
diversity strategy
3
System and Process Design
Completed
• Boral Australia’s Diversity & Inclusion Council reviewed objectives for
FY2020 to assess impacts on progression of diversity and inclusion and
the representation of women in leadership roles.
Ongoing
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 further planning and program development.
• 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 Veterans Employment Coalition,
working to support and progress defence force personnel in transition
to civilian employment.
3.1
Search and selection:
embed diversity principles in
standardised recruitment
Completed
• Implemented Work180, a global advocate for working women, providing
job applicants with a transparent directory of endorsed employers who
support diversity, inclusion and equality.
• More than 700 employees were surveyed and interviewed, with a
comprehensive examination of issues affecting retention of women and
recommendations to increase awareness and design of an inclusive
workplace culture to improve diversity and inclusion; and established
support groups to improve retention, equipping leaders to build more
inclusive culture through listening, and leveraging talent management and
flexible working to improve retention.
Ongoing
• Against a target of 50%, in FY2020, 60% of our graduate intake were
women in professional and engineering disciplines.
• 23% of all new hires were women, and 18% of recruitment into
management roles were women.
In progress
• Targets for Boral Australia for FY2020 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, 9% improvement into professional and 17%
improvement into machinery operator/driver/technician/trade roles.
• Review of recruitment and engagement processes to support defence
force personnel joining Boral.
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Strategic Element and Objective
Status
Key Outcomes
3.2
Flexibility and flexible work
practices: develop and
implement policy, guidelines
and education program to
improve flexibility and flexible
work outcomes
Completed
• Online learning module released to support deployment of Workplace
Flexibility Guidebook in FY2020.
Ongoing
• Tracking and reporting of arrangements for working flexibly, to measure
effectiveness of policy and Workplace Flexibility Guidebook.
In progress
• Workplace Flexibility Policy and Guidebook to be reviewed in FY2021 to
incorporate learnings and improvements in flexible work practices from
approaches being taken in response to the COVID-19 pandemic.
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
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
• Female-to-male average base salary ratio is 1.00:1.00, with Boral
continuing to focus on pay equity outcomes on a total compensation
basis.
• Completed annual external industry benchmarking of pay equity and
comprehensive gender remuneration gap analysis.
In progress
• Transition to retirement program piloted in FY2020, with feedback from
the pilot to be used in reviewing our approach in FY2021.
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
• Boral’s first Respect Reconciliation Action Plan (RAP) fully implemented.
• Working group established to review progress to plan on a quarterly
basis.
In progress
• The first RAP was a Reflect RAP. The second stage is an Innovate RAP,
including a roadmap and plan to deliver outcomes.
• Development of the Innovate RAP has been deferred until FY2021
because of the COVID-19 pandemic. The Innovate RAP will cover a
two-year period.
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Proportion of female and male employees
The table below is a detailed representation of women and men working in Boral1 as at 30 June 2020:
Role
Board
Executive management2
Middle management3
Other roles4
Total
Female
Male
Number
Percentage
Number
Percentage
3
23
104
2,090
2,217
43
15
15
20
20
4
127
576
8,151
8,854
57
85
85
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 from page 28 in the Sustainability highlights and overview.
Boral’s Diversity Policy is available on Boral’s website.
Dealings in Boral shares
Under Boral’s Share Trading Policy, trading in Boral shares by Directors, senior executives and other designated employees
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.
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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 FY2020 Boral’s non-executive
Directors met and exceeded these guidelines, if reviewed based on a closing share price at 30 June 2020 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 56 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.
Process for verifying periodic corporate reports
The Company has an appropriate process for preparing, verifying and approving corporate reporting. The process for
verifying the integrity of periodic corporate reports is tailored based on the nature of the relevant report, its subject matter
and where it will be published. Boral seeks to adhere to the following principles in respect of the preparation and verification
of corporate reporting:
•
•
periodic corporate reports are prepared with appropriate input and oversight by relevant senior management and
subject matter experts for the area being reported on
the relevant report and its supporting information is reviewed having due regard to ensuring it is not inaccurate, false,
misleading or deceptive.
Consistent with these principles, the non-audited sections of the Annual Report, Boral Review and Sustainability Report,
and Corporate Governance Statement for the reporting period were prepared with input and oversight by relevant senior
management and subject matter experts, and reviewed and verified by relevant senior management prior to Board review
and approval for release. ASX announcements (other than administrative announcements), are also reviewed and confirmed
by relevant senior management prior to Board review and approval for release.
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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
Boral’s website at www.boral.com.
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
specifically elect to receive them.
Company announcements All formal reporting and Company announcements made to the ASX are published on Boral’s
General meetings
website after confirmation of lodgement has been received from the ASX. These documents are also
available for download by mobile devices from Boral’s Investor Relations (IR) app, which is available
for no cost from the App Store or Google Play. Furthermore, Boral has an email list of investors,
analysts and other interested parties who are sent relevant announcements via email alert after those
announcements have been lodged with the ASX. Announcements are also sent to major media outlets
and newswire services for broader dissemination.
Boral encourages shareholders to participate in all general meetings including annual general
meetings. Given the current restrictions on gatherings and travel imposed by governments as a
consequence of the COVID-19 virus, this year the Annual General Meeting will be held virtually (online)
via a virtual platform.
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 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 participate in
general meetings, they may vote by appointing a proxy.
Annual General Meeting
Shareholders are invited, at the time of receiving or accessing 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.
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Boral Limited Annual Report 2020
Directors’ Report
The Directors of Boral Limited (the Company) report on the
consolidated entity, being the Company and its controlled
entities (‘the Group’ or ‘Boral’) for the financial year ended
30 June 2020.
(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 pages 6–27 of the Annual Report and forms part
of this 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 that the Group reported a net profit after tax
(NPAT) of $177 million excluding significant items for the
year ended 30 June 2020. Significant items, as detailed in
note 2.1 to the financial statements, totalled $1,316 million,
resulting in a statutory net loss after tax of $1,139 million.
(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 that
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
(b) the results of those operations in future financial years, or
(c) Boral’s state of affairs in future financial years.
(5) Likely developments, business strategies,
prospects and risks
Likely developments, business strategies and prospects
The OFR refers to likely developments in Boral’s operations
in future financial years and the expected results of those
operations. Other than the information set out in the OFR,
information regarding other likely future developments
in Boral’s operations and the expected results of those
operations has not been included in the Directors’ Report.
The OFR sets out information on Boral’s business strategies
and prospects for future financial years. This information has
been provided to enable shareholders to make an informed
assessment of our business strategies and future prospects.
While the Company continues to meet its obligations in
respect of continuous disclosure, we have not included
information where it would be likely to result in unreasonable
prejudice to Boral. This includes information that is
commercially sensitive, is confidential or could give a third
party a commercial advantage (for example, details of our
internal budgets and forecasts).
Risks
The achievement of Boral’s future prospects may be
adversely impacted by several risks, some of which are
beyond our control. The material business risks and climate-
related risks facing the Group and our approach to managing
those risks are set out in the OFR (pages 6-27), including
in this year’s expanded Risks and Responses section
(pages 24–27), as well as in the Sustainability highlights
and overview section (pages 28–35) of this Annual Report.
The Group’s broader risk identification and management
framework is also set out in the Corporate Governance
Statement on pages 38–47 of this Annual Report. Those
sections address the material business risks, including:
•
health, safety and environment
• market and industry
•
•
•
•
•
•
customer and competition
sustainability – weather and climate-related impacts
business interruption– operations and technology
licence to operate
supply chain and cost management
financial and capital management.
Forward looking statements
This report contains forward looking statements, including
statements of current intention, opinion and expectation
regarding the Company’s present and future operations,
possible future events and future financial prospects
(including statements related to the ongoing impact of the
COVID 19 pandemic). These forward looking statements
are based on the information available as at the date of this
report and they are, by their nature, subject to significant
uncertainties, many of which are outside of the control of the
Company. Actual results, circumstances and developments
may differ materially from those expressed or implied, and
Boral cautions against reliance on any forward looking
statements in this report.
(6) Environmental performance
Details of Boral’s performance in relation to environmental
regulation are set out on pages 30–35 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.
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(8) Dividends paid or resolved to be paid
Dividends paid to shareholders during the year were:
the final dividend of 13.5 cents per ordinary share
(50% franked at the 30% corporate tax rate)
for the year ended 30 June 2019 was paid on
1 October 2019
the interim dividend of 9.5 cents per ordinary
share (50% franked at the 30% corporate tax
rate) for the year ended 30 June 2020 was paid
on 15 April 2020
Total
dividend
($m)
158.4
111.3
The Board has resolved not to pay a final dividend for
FY2020 given the significant uncertainty in the economic
outlook and on the basis that Boral’s interim dividend
of 9.5 cents per share paid on 15 April 2020 represents
~63% of full year earnings. This payout ratio is in line with
Boral’s dividend policy to pay 50% to 70% of earnings
before significant items, subject to the Company’s financial
position.
(9) Names of Directors
The names of persons who have been Directors of the
Company during or since the end of the year are:
Kathryn Fagg
Zlatko Todorcevski (CEO & Managing Director, 1 July 2020)
Mike Kane (ceased as CEO & Managing Director, 30 June 2020)
Peter Alexander
Eileen Doyle
John Marlay
Karen Moses
Paul Rayner
With the exception of Zlatko Todorcevski, who was
appointed effective 1 July 2020, and Mike Kane who ceased
on 30 June 2020, 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.
During the year, Boral paid premiums in respect of Directors’
and Officers’ Liability and Legal Expenses insurance
contracts for the year ended 30 June 2020 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
2021. 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 37 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
National Australia Bank Ltd from December 2019 (current)
Djerriwarrh Investments Limited from May 2014 (current)
Incitec Pivot Limited from April 2014 to December 2019
Zlatko Todorcevski
Coles Group Limited from November 2018 (current)
Star Entertainment Group Limited from May 2018 (current)
Adelaide Brighton Ltd from March 2017 to June 2020
Mike Kane
Sims Metal Management Limited from March 2019 to
November 2019
Peter Alexander
No other directorships to be disclosed
Eileen Doyle
Oil Search Limited from February 2016 (current)
NEXTDC Limited from August 2020 (current)
GPT Group from March 2010 to May 2019
John Marlay
Incitec Pivot Limited from December 2006 to
December 2016
Karen Moses
(11) Indemnities and insurance for officers and
auditors
Orica Limited from July 2016 (current)
Charter Hall Group from September 2016 (current)
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).
Paul Rayner
Qantas Airways Limited from July 2008 (current)
Treasury Wine Estates Limited from May 2011 (current)
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Boral Limited Annual Report 2020
(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
Eileen Doyle
Kathryn Fagg
Mike Kane
John Marlay
Karen Moses
Paul Rayner
26
26
26
26
26
26
26
26
26
26
26
26
26
26
–
4
–
–
–
4
4
–
4
–
–
–
4
4
6
–
6
–
6
–
–
6
–
6
–
6
–
–
–
4
1
–
4
4
–
–
4
1
–
4
4
–
The Chairman and the CEO & Managing Director attend all Board and Committee meetings. There were an additional four
Board meetings held during the year for the purposes of CEO succession, where only the non-executive Directors were in
attendance.
(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 NSW, a finance degree from
the University of New England and a law degree from the
University of Sydney.
(15) Directors’ shareholdings
Set out below are details of each Director’s relevant interests
in the shares and other securities of the Company as at the
date of this report.
The shares are held in the name of the Director except in the
case of:
• Peter Alexander: 72,871 shares are held by Peter
C Alexander & Aarati A Alexander as trustees for
The Peter C Alexander Revocable Trust
•
Eileen Doyle: 45,316 shares are held by Mr SE Doyle and
Dr EJ Doyle for the S&E Doyle Super Fund A/C
• Kathryn Fagg: 105,783 shares are held by Kathryn Fagg
and 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: 44,582 shares are held by Aventeos
Investments Limited on behalf of KRN Pty Limited as
trustee for the KRN Family Discretionary Trust
• Paul Rayner: 39,135 shares are held by Yarradale
Peter Alexander
Eileen Doyle
Kathryn Fagg
Mike Kane b
John Marlay
Karen Moses
Paul Rayner
Zlatko Todorcevski
Shares
73,871
47,313
107,345
1,298,697
39,310
45,582
169,835
50,000
Non-executive
Directors’
Share Plana
Investments Pty Limited and 128,749 shares are held by
Invia Custodian Pty Limited for and on behalf of Bigpar
Pty Ltd (the trustee of the PaulJul Super Fund), and
–
–
–
–
–
–
2,597
–
•
Zlatko Todorcevski: 50,000 shares are held by
TenTwentyFive Pty Ltd as trustee for Zaneis A/C.
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 FY2020.
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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(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
$1,236,000. These services consisted of:
Taxation compliance services in Australia
Advisory and assurance-related services in
Australia (including matters relating to USG
Boral and Midland Brick)
$367,000
$839,000
Taxation compliance services in jurisdictions
other than Australia
$30,000
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 58 of the
Annual Report and forms part of this report.
(19) Remuneration Report
The Remuneration Report is set out on pages 59–83 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
Zlatko Todorcevski
Director
Sydney, 28 August 2020
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Boral Limited Annual Report 2020
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 of Boral Limited for the financial year ended
30 June 2020 there have been:
(i) no contraventions of the auditor independence requirements as set out in the Corporations Act 2001 in relation to the audit; and
(ii) no contraventions of any applicable code of professional conduct in relation to the audit.
KPMG
Kenneth Reid
Partner
Sydney, 28 August 2020
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.
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2020 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 2020
Remuneration Report (the Report).
Priorities for the Committee over the past year have been driven by extraordinary and changing business circumstances.
Most notably the unprecedented situation that the COVID-19 pandemic has presented, as well as the devastating bushfires
in Australia, which peaked in January 2020. Other challenges have been more company-specific, including the discovery and
subsequent investigation into financial irregularities in Boral’s North American Windows business.
Recognising these events and the current challenging environment and earnings pressure, the Committee, Board and
Management made some firm decisions around remuneration and incentives, including:
•
•
•
•
•
•
•
•
foregoing FY2020 short-term incentives (STIs) at the start of the COVID-19 crisis and implementing salary freezes for the
remainder of FY2020, except in the case of role or responsibility changes
implementing salary freezes for FY2021, except in the case of role or responsibility changes
zero increases to non-executive Director (NED) fees in FY2021
suspending the existing STI plan for executives for FY2021, with short-term performance being managed through
agreed objectives; the approach may be reassessed if conditions and performance improve through the year
using a volume weighted average price (VWAP) over a 12 month period to 30 June 2020 in place of the five-day VWAP to
1 September, for calculating the number of rights for the FY2021 long-term incentive (LTI) grant, to reduce the impact of
share price volatility
exercising Board discretion to lapse unvested rights from the FY2018 deferred STIs awarded to executives, being those
unvested rights that correspond with the overstatement of Windows earnings
exercising Board discretion to lapse the former CEO’s LTI awards in full after the reporting period ended, and
in the context of the significant non-cash impairment announced on 24 August 2020, the Board considered the impact
of the impairment on executive remuneration outcomes, and the Board’s decisions are outlined on page 66.
The appointment of a new CEO and effectively managing succession is one of the most important roles of the Committee
and the Board. In February 2020, we announced that Mike Kane was expected to finish in 2020 as CEO & Managing Director
of Boral after more than seven years in the role. This was brought forward earlier than previously intended, and Mike’s
separation payments, as outlined in Section 2 of the Report, are consistent with the disclosed terms of his employment
contract and Boral’s equity plan rules.
On 15 June 2020, the Board announced the appointment of Zlatko Todorcevski as CEO & Managing Director, effective 1 July
2020. We are fortunate that Zlatko was able to start earlier than we had originally expected, and his appointment has been
well received by Boral’s shareholders and our people. The mandate for our new CEO is to ‘reset’ the business, including
finalising a review of Boral’s portfolio. The portfolio review, which is expected to be finalised by the end of October, will
define Boral’s future portfolio and operating model to unlock value and deliver improved business performance.
The remuneration structure for the new CEO includes a Fixed Annual Remuneration (FAR) component, of which a portion is
provided as a fixed grant of equity, and an LTI with performance hurdles based on a combination of measures around Total
Shareholder Returns (TSR) and Return on Funds Employed (ROFE). While there is no STI award opportunity for the CEO, with
the remuneration structure aligned to rewarding longer-term performance of Boral, short term objectives will be set with the
Board to maximise short-term opportunities while focusing on long-term value creation. The agreed short-term objectives
and performance outcomes will be disclosed in the FY2021 Remuneration Report.
It is important to us and our shareholders that there is good alignment between executive pay and shareholder value. We
continue to actively engage with our shareholders and their proxy advisors to maintain an understanding of shareholder
views and priorities, and to improve our remuneration practices and reporting. We are committed to remuneration
arrangements that take into account the expectations of our stakeholders and align with good practices in Australia.
Yours sincerely
John Marlay
Chairman, Remuneration & Nomination Committee
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Boral Limited Annual Report 2020
Contents
Section 1:
Section 2:
Section 3:
Section 4:
Section 5:
Section 6:
Section 7:
Section 8:
Who is covered by this Report
Our remuneration approach
FY2020 performance and actual pay received
Remuneration framework for FY2020
Remuneration governance
Non-executive Directors’ remuneration
Statutory remuneration disclosures
Glossary of key terms for the Remuneration Report
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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 2020 (FY2020). 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 FY2020.
Name
Position
Senior Executives
Mike Kane
Chief Executive Officer & Managing Director (CEO)
Wayne Manners
President & CEO, Boral Australia
Rosaline Ng
Group President Ventures & Chief Financial Officer (CFO)
Darren Schulz
Acting President & CEO, Boral North America (commenced as a KMP on 1 June 2020)
Former Senior Executives
Ross Harper
Group President, Operations (ceased as a KMP on 31 May 2020 and transitioned to a revised executive role)
David Mariner
President & CEO, Boral North America (ceased as a KMP on 31 May 2020)
Non-executive Directors
Kathryn Fagg
Chairman and non-executive Director
Peter Alexander
Non-executive Director
Eileen Doyle
John Marlay
Non-executive Director
Non-executive Director
Karen Moses
Non-executive Director
Paul Rayner
Non-executive Director
Section 2: Our remuneration approach
Priorities in FY2020
Our remuneration priorities in FY2020 were driven by our changing business circumstances, including responding effectively
to the impact of the COVID-19 pandemic on our people and operations. Our senior executives focused on:
•
•
•
•
•
delivering Zero Harm Today everyday
delivering strong cash flows, and maintaining liquidity and a prudent balance sheet
leveraging our foundations of a strong safety culture; effective crisis management and governance controls; leading
network of operations and integrated supply chain; and financial strength and liquidity
optimising ROFE through the cycle, never losing sight of our goal of delivering returns above the cost of capital, and
driving performance excellence and business improvement initiatives in a challenging operating environment.
Reshaping the executive team
We have reshaped our executive team:
Zlatko Todorcevski
On 15 June 2020, announced as incoming CEO & Managing Director from 1 July 2020. See page 66
for further details on his remuneration arrangements.
Mike Kane
Ross Harper
Wayne Manners
Darren Schulz
David Mariner
Ceased as CEO & Managing Director on 30 June 2020. See page 63 for further details on his leaving
arrangements.
Moved to a more focused role as Group President, HSE, Sustainability, Innovation & Operations
Excellence on 1 June 2020, ceasing as a KMP at the end of May 2020.
Moved reporting line to the CEO & Managing Director on 1 June 2020, taking on primary
accountability and responsibility for the performance of the Australian operation.
Stepped up as Acting President & CEO, Boral North America on 1 June 2020 from his previous role
as President, Boral Roofing North America.
Stepped down as President & CEO, Boral North America at the end of May 2020 and departed Boral
on 30 June 2020.
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Boral Limited Annual Report 2020
Section 2: Our remuneration approach (continued)
Responding to the COVID-19 pandemic
The health and safety of our people, customers and communities is the number one priority in our response to the COVID-19
pandemic. We also focused on the financial health of our businesses including maintaining strong liquidity and cash flows.
The remuneration actions taken in response to the economic impacts of the pandemic include the following.
Salaries and non-executive Director fees
Short- and long-term incentives
• Executive and employee salaries frozen for the remainder
• STI award opportunities forgone in FY2020
of FY2020
• The FY2021 STI award plan for Senior Executives and other
• Salary freeze in FY2021 for executives and employees,
with the next review of salaries to be in September 2021
executives was suspended, and may be reassessed if
conditions and performance improve through the year
• A freeze on non-executive Director fees in FY2021
For businesses more directly affected by slowdown or temporary closures, in consultation with our people, we amended
roster patterns, temporarily reduced working hours and temporarily stood down employees (also known as furloughing in
North America).
The support and assistance provided to our people included the following.
Leave
Flexible work arrangements
• Pandemic leave to provide one week of paid leave to
employees working on sites that are closed with minimum
notice through government mandate
• Remote and flexible work options available, particularly for
vulnerable workers e.g. those with compromised immune
systems or family members with serious health issues
• Access to accrued but untaken annual leave where
• Remote work protocols and guidelines to help our people
employees are working reduced hours or days
work safely and effectively
Benefits and support
Information and assistance
• Continued medical and health coverage for our furloughed
• Information on access to government support services, mental
employees in North America
health and employee assistance services
• Monitoring JobKeeper in Australia and other government grant
opportunities in the event that any parts of the business met
the threshold for assistance
• Information and wellbeing intranet sites to provide reference
material and to connect people working remotely
Boral’s share of wage subsidies through our joint ventures, together with minimal direct subsidies to our wholly owned
operations, was around $800,000 in FY2020.
For more information on our response to COVID-19, see pages 20-23 of the Annual Report.
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Executive remuneration
The Committee supports the Board to assess whether adjustments to remuneration policy are required to take into account
the changing nature of our business and the environment in which we operate, including the expectations of Boral’s
stakeholders and market practice. The Committee supported the Board in responding to the challenges of FY2020 by:
•
•
•
taking decisive action around people and remuneration
adopting remuneration arrangements that recognise current market- and COVID-related challenges, and
adjusting the approach to executive remuneration in response to our operating environment.
The Committee has continued to listen to shareholders and respond to feedback and concerns, which have focused on:
•
•
•
aligning executive remuneration rewards and outcomes with the experiences and expectations of shareholders
continuing to improve the clarity and transparency of remuneration disclosures, and
using an approach to STI and LTI plans that continues to recognise and achieve an appropriate balance between
executive and shareholder interests.
The following table sets out the Committee’s areas of focus and work in FY2020.
Issues and decision
Comments
FY2020 in review
COVID-19 pandemic
CEO retirement
Leaving arrangements were
consistent with disclosed
terms of the employment
contract and equity plan rules
disclosures.
After the reporting period
ended, the Board exercised its
discretion to lapse the retiring
CEO’s remaining unvested LTI
awards in full.
We took a range of remuneration actions in response to the COVID-19 pandemic that addressed
operational challenges and focused on the financial health of our businesses including
maintaining strong liquidity and cash flows. Refer to page 62 for information on actions taken.
Boral announced on 15 June 2020 that Mike Kane would stand down as CEO on 30 June 2020.
His leaving arrangements were consistent with the disclosed terms of his employment agreement
and equity plan rules disclosures. The Board has made one subsequent change that affects the
retiring CEO’s LTI awards.
Without the exercise of Board discretion, the 2018 and 2019 LTI awards would ordinarily be pro-
rated, with one-third of the 2018 award and two-thirds of the 2019 award lapsed. Reporting tables
have been prepared on this basis, consistent with the requirements of the accounting standards.
After the reporting period ended, however, the Board decided to lapse the retiring CEO’s LTI
awards in full. The finalised arrangements for the retiring CEO are shown below.
STI
No STI for FY2020
Unvested LTI grants
After the reporting period ended, the Board decided to lapse the
retiring CEO’s remaining LTI awards in full
Separation payment
Equivalent to 12 month Base Cash Salary (BCS) in line with his
employment agreement.
Reshaped Executive Team
We reshaped the executive team with changes to people and positions:
Ross Harper
Moved to a revised role of Group President, HSE, Sustainability, Innovation
& Operations Excellence, to focus on improving performance in those areas.
His remuneration was adjusted down by 17.6%, reflecting that his prior role as
Group President, Operations was a KMP role with broader responsibilities. He
ceased as a KMP on 31 May 2020.
Wayne Manners President & CEO, Boral Australia took on primary accountability and
responsibility for the performance of the Australian operation, with the change
in his reporting line from Group President, Operations to the CEO & Managing
Director.
Darren Schulz
Appointed Acting President & CEO, Boral North America on 1 June 2020,
stepping up from his previous role as President, Boral Roofing.
David Mariner
Finished employment on 30 June 2020 after stepping down from his role as
President & CEO, Boral North America on 31 May 2020. His remuneration on
departure was consistent with prior contract disclosures, with all unvested
deferred STI and LTI grants lapsed in full.
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Boral Limited Annual Report 2020
Section 2: Our remuneration approach (continued)
Issues and decision
Comments
FY2020 in review
Lapsing of unvested deferred
STI
Lapsing of a portion of
unvested equity to align with
restated underlying earnings
for FY2018, to ensure no unfair
or inappropriate benefit to
executives
In December 2019, Boral announced certain financial irregularities had been identified in the
North American Windows business, involving misreporting, including in relation to inventory
levels and costs associated with raw materials and labour at the Windows plants. Boral
responded with a comprehensive program of immediate and ongoing actions including:
• a privileged and confidential investigation by lawyers and forensic accountants was
completed in February 2020
• additional external audit and internal reviews, which provided confidence that the accounting
manipulations were limited to the Windows business only, and
• enacting organisational changes in Windows and Boral North America:
– terminating the employment of Windows finance managers involved in the coordination and
cover up of financial wrong-doing, with unvested deferred STI and LTI grants lapsed in full
– strengthening finance leadership in Boral North America with a new CFO appointed in
March 2020, and
– moving the President, Windows to a role focused on customer relationships and sales with
all unvested deferred STI and LTI grants lapsed in full.
Under Boral’s equity incentive plan rules, the Board exercised discretion to lapse the component
of unvested deferred STI rights that correspond with the overstatement of Windows earnings in
the relevant period, to ensure no unfair or inappropriate benefit is provided.
Retiring CEO remuneration
set in USD
The retiring CEO’s BCS is
paid in US dollars. He does
not benefit from any A$/US$
currency fluctuations.
To satisfy reporting
requirements, the
Remuneration Report shows
the CEO’s remuneration in
AUD.
The retiring CEO’s Base Cash Salary (BCS) is provided in US dollars, converted to Australian
dollars for reporting and accounting purposes, based on the Reserve Bank of Australia’s 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.
Actual BCS (USD)
Reportable accounting value (AUD)
% increase
US$
Exchange rate*
A$
1 July 2017
1 September 2018**
1 September 2019**
N/A
3.0%
2.0%
1,299,674
1,338,664
1,365,437
0.7735
0.7145
0.6703
1,680,251
1,873,568
2,037,054
* The A$/US$ exchange rate averaged over the 12 months for the reporting period to 30 June for 2018,
2019 and 2020 respectively.
** 1 September 2018 and 1 September 2019 were the effective dates of the salary increases.
In September 2019, the retiring CEO was awarded a 2.0% increase to his US$ BCS to
US$1,365,437. The exchange rate used to convert the CEO’s US$ BCS to A$ is 6.2% less than
the A$/US$ exchange rate used to convert his US$ BCS in FY2019.
The effect of this change in foreign exchange translation between the Australian dollar and the
US dollar is that it appears the retiring CEO’s BCS has increased by more than 2.0%. This is not
the case. The retiring CEO was paid in US dollars in the United States and receives no benefit
from changes in A$/US$ foreign exchange variations.
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Issues and decision
Comments
FY2020 in review
LTI performance hurdles
ROFE relative to WACC came
into effect from the FY2019
grant onwards
The Board previously reviewed whether ROFE relative to WACC (where WACC is the level of
return required to add investor value taking into account the risk associated with the investment)
remained an appropriate LTI performance hurdle.
The Board concluded that ROFE relative to WACC with the broader vesting range, continued to
incentivise executives to deliver returns exceeding WACC through market cycles, and remained
an appropriate measure aligned to the future needs of the business.
From FY2019, ROFE targets have been set relative to the weighted average cost of capital
(WACC) with the target vesting range broadened.
Share of EBIT (before significant items) from our JVs (rather than post-tax JV earnings) is included
in the pre-tax ROFE calculation.
See Section 4 for further details.
Culture, governance and
remuneration
To better understand the aspects of our culture that reinforce strong governance and
accountability, Boral conducted a Culture Survey in Australia and North America to assess
culture (values and beliefs), leadership, safety, governance and remuneration.
The results, to be available in FY2021, will provide a baseline for our businesses and the Board
against which to assess and measure culture.
Safety and remuneration
Managing safety well is a
fundamental part of everyone’s
role at Boral.
The Board recognises that in some organisations it is very important to have safety as a
component of remuneration. At Boral, safety is considered fundamentally important. Further,
there is a strong belief that safety should not be financially rewarded and therefore should not
be a component of remuneration incentives. This is an important and powerful aspect of Boral’s
culture, and after considering the cultural aspects and performance outcomes, the Board
remains of the view that this is the right approach for Boral.
Managing safety well is considered a fundamental part of everyone’s role 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 FY2020, 22 employees in Australia and North America had their employment terminated
because of a breach of safety standards and protocols, which included poor management
of safety. The combination of strengthened safety culture and performance management is
considered the right approach for Boral.
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Boral Limited Annual Report 2020
Section 2: Our remuneration approach (continued)
Issues and decision
Comments
Looking ahead to FY2021
CEO appointment
Zlatko Todorcevski was
appointed as CEO, effective
1 July 2020.
Zlatko Todorcevski was appointed CEO on 1 July 2020, and his early start date was well received.
His skills and experience align with the priority to reset our business and unlock value for
shareholders.
The CEO’s fixed remuneration with a portion provided as fixed equity, as well as his enhanced
LTIs, work together to recognise and reward the decisions and actions that need to be taken to
reset and reshape our business over the short and long term. The incoming CEO’s remuneration
will be provided as:
FAR
A$1,900,000
LTI (% of FAR under
face value approach)
230%
FAR is delivered as 92% in cash (A$1,750,000) and 8% (A$150,000) in the form of Boral equity.
The equity component of FAR is subject to a holding lock or equivalent until the incoming CEO
exceeds the minimum shareholding requirement (except where the sale of shares is required
to meet taxation obligations). See page 76 for information on Boral’s minimum shareholding
requirements.
Overall, 70% of the incoming CEO’s remuneration is provided as ‘at risk’ remuneration, with the
approach to the LTI grant for FY2021 explained in the “LTI erformance hurdles” section below.
The focus of the CEO in FY2021 will be to set a clear operational plan through the current
challenging conditions, complete the portfolio review, deliver an improved operating model and
capital structure, and set priorities for longer term value creation.
The Board will agree key performance objectives with the CEO for FY2021 against which short-
term performance will be managed and evaluated, with objectives and performance outcomes
disclosed in the FY2021 Remuneration Report.
Impact of impairment on
executive remuneration
outcomes
Boral’s typical approach has been to exclude the value of significant items (including
impairments), when determining performance. The Board retains its discretion to consider
different treatment on a case-by-case basis.
In the context of the non-cash impairment for FY2020, the Board determined the following:
• For the LTI awards “on foot”, being those granted in September 2017, 2018 and 2019, when
determining the Company’s ROFE performance, the calculation will be based on pre-
impairment funds employed.
• The Board considers this an appropriate approach for impairments. This approach means
that Management does not benefit from impairments that occur during an LTI performance
period, recognising their role as stewards of the business.
• Looking forward, new LTI awards are expected to be calculated on the basis of funds
employed after impairment.
• In determining the Company’s ROFE performance, the Board retains its discretion to make
adjustments where it considers it necessary or appropriate in order to accurately reflect the
ROFE outcomes and reward performance in a manner that is consistent with shareholder
expectations and the intent and purpose of the relevant ROFE target.
Allocation methodology for
FY2021 LTI grant
The VWAP period changed
from a five day period to
1 September, to a 12 month
period to 30 June 2020.
The allocation methodology for the FY2021 LTI grant was changed to a volume weighted
average price (VWAP) over a 12 month period to 30 June 2020, in place of the 5-day VWAP
to 1 September, to reduce the impact of share price volatility.
The allocation methodology for the fixed equity grant to the CEO will be on the same basis.
For the FY2021 grants, the VWAP of Boral shares on the ASX during the 12 month trading period
to 30 June 2020 is $3.8010.
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Looking ahead to FY2021
LTI performance hurdles
Performance metrics retained
one-third ROFE (relative
to WACC) and two-thirds
relative TSR for the CEO and
executives for the FY2021
grant.
The proposal for a strategic
transformation metric for
the CEO was held over until
FY2022.
On 15 June 2020, Boral announced the incoming CEO’s performance hurdles for the FY2021 LTI
grant were expected to be a combination of measures based on shareholder returns, return on
funds employed and strategic transformation.
The strategic transformation metric was to provide an opportunity for the CEO to receive long-
term rewards for strengthening the portfolio and unlocking value over the performance period. As
the strategic transformation metric should be firmly anchored in the strategy, it was considered
appropriate to hold over the strategic transformation metric until the planned portfolio review is
completed.
The performance hurdles for the CEO for the FY2021 LTI grant will focus on delivering improved
returns to shareholders, as a combination of ROFE (relative to WACC) and relative Total
Shareholder Returns (TSR).
The weighting of one-third ROFE (relative to WACC) and two-thirds relative TSR will be retained
for the CEO and executives for the FY2021 LTI grant. This continues to recognise the importance
of delivering an appropriate return on capital and improving shareholder returns over the
performance period.
The LTI is subject to a single performance test after three years, with any vested equity for the
CEO subject to a further 12 month holding lock or equivalent, except where the sale of shares is
required to meet tax obligations.
ROFE LTI performance hurdle
Decision to adjust the ROFE
vesting schedule for vesting
when ROFE exceeds WACC.
The ROFE performance hurdle is intended to reward achievement linked to improving the
Company’s ROFE performance through the cycle. In general, any ROFE performance that
exceeds the WACC over the long-term performance period is considered to be aligned to our aim
of creating sustained shareholder value.
On review of the existing vesting schedule, the Board determined that the ‘cliff’ of allowing
50% vesting at threshold could be better aligned with the overall aim of rewarding incremental
performance above WACC.
A new vesting schedule has been adopted for the FY2021 LTI grant as follows.
If the Company’s ROFE performance for FY2023 is:
Proportion vesting:
At or below WACC
Nil
Between WACC and WACC plus 1.0%
Vesting on a straight line basis
At WACC plus 1.0% (target)
75%
Between WACC plus 1.0% and WACC plus 2.0%
Vesting on a straight line basis
At or above WACC plus 2.0% (stretch)
100%
Property earnings
Going forward, the STI plan
will exclude property earnings
when assessing short-term
performance. The LTI plan will
reference average property
outcomes over a 3-year period
to reduce volatility.
The Property business unit was established in 2001 to optimise returns from property
transactions. Since that time, the Property business has on average contributed ~$35 million
EBIT per annum.
Following feedback from shareholders, the Board reviewed the appropriateness of continuing
to include property earnings in incentive plan calculations. The Board recognises that property
earnings can be lumpy from year to year. However property earnings are ongoing and
management has to work hard to deliver those earnings for our shareholders.
On the basis of this review, the Board has amended the approach to property earnings in
incentives. From FY2021, property earnings will be excluded from earnings calculations for STIs
for executives. For LTI purposes, it was considered appropriate to continue including property
earnings in the longer-term ROFE metric, with property earnings averaged over the 3-year
performance period.
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Section 3: FY2020 performance and actual pay received
Boral’s FY2020 results reflect a particularly challenging year. Boral Australia was impacted by a 19% decline in housing
starts and bushfire and flood-related events, resulting in significantly lower volumes and higher costs. This was quickly
followed by COVID-19 disruptions across all businesses, particularly in Boral North America and USG Boral. Boral took
decisive action by slowing production to reduce cash costs and manage inventories. This was in addition to a number
of mandated temporary closures. This adversely impacted earnings but cash generation was strong. While FY2020 STI
opportunities were foregone at the start of the COVID-19 crisis in an effort to reduce expenditure, no STIs would have been
received as FY2020 results were well below budget.
Financial performance
FY2016
FY20172
FY2018
FY2019
FY2020
Earnings per share1,3 (cents)
Dividends per share (cents)
Return on equity1 (%)
33.3
22.5
7.6
33.7
24.0
6.3
40.4
26.5
8.3
35.7
26.5
7.2
14.8
9.5
3.7
Boral share price
$9.00
$8.00
$7.00
$6.00
$5.00
$4.00
$3.00
$2.00
$1.00
$0.00
FY2016
FY2017
FY2018
FY2019
FY2020
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. This recognises 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 FY2020, Boral reported EBIT1 of $177 million, which was $242 million or 58% lower than the prior year. This reduction in
EBIT reflects lower earnings across the Group.
There were no STI awards made in FY2020.
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 FY2020), Boral’s STI has paid out at an average 60.7% of target. This includes four years where
no STI was paid to the CEO: FY2012, FY2013, FY2019 and FY2020.
Senior Executive historical STI as percentage of target outcomes4
Year
FY2011
FY2012
FY2013
FY2014
FY2015
FY2016
FY2017 FY20184
FY2019
FY2020 Average
(% of target)
36.4% 14.0%
6.9% 100.4% 126.7% 136.5% 103.7% 81.0%
1.1%
0.0% 60.7%
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 that occurred during November and
December 2016.
4. FY2018 STI outcomes have been adjusted downwards retrospectively in FY2020. This is to account for lapsing of the component of
deferred STI awards relating to the Windows matter, as outlined in the section ‘Lapsing of unvested deferred STI’ on page 64.
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Boral’s performance and LTI awards
Total Shareholder Returns performance in FY2020
Boral’s relative TSR performance declined in FY2020. Taking into account share price and dividends paid, Boral delivered a
TSR of negative 25.2% for shareholders between 1 July 2019 and 30 June 2020. This TSR ranked Boral at the 22nd percentile
of ASX 100 companies for FY2020.
Total Shareholder Returns performance over three years
Over the three year period from September 2016 to September 2019, Boral’s TSR of negative 4.3% was at the 18th percentile
of the Company’s TSR comparator group, resulting in the 2016 LTI grant lapsing in full.
TSR for Boral vs ASX 100 companies:
Sept 2016 to Sept 2019
1st Quartile
2nd Quartile
3rd Quartile
4th Quartile
-4.3%
BLD
200%
150%
100%
50%
0%
-50%
-100%
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
rewards to the achievement of improved ROFE performance and a long-term goal of ROFE exceeding the cost of capital
through the cycle.
Boral’s 8.1% ROFE in FY2019 was below the 12.0% to 12.5% vesting range for the 2016 LTI grant and none of the ROFE
tranche vested.
Boral’s ROFE performance was 4.0% in FY2020, as measured by EBIT1 return on average funds employed on a pre-
impairment basis. ROFE performance in FY2020 would be 4.3% on a post-impairment basis. The decline in ROFE from
previous years reflects lower earnings across the Group.
For the LTI awards “on foot” being those granted in September 2017, 2018 and 2019, when determining the Company’s ROFE
performance, the calculation will be based on pre-impairment funds employed. Looking forward, new LTI awards are expected
to be calculated on the basis of funds employed after impairment.
EBIT return on average funds employed (ROFE)1, %
9.1
9.2
8.6
8.1
FY2016
FY2017
FY2018
FY2019
FY2020
4.0
LTI
2016 LTI
Further details in Section 4
Vesting for the 2016 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 18th percentile of
the ASX 100 comparator group, below the vesting target. The ROFE target was not met. Based on
these outcomes, all awards lapsed.
2017 LTI
The FY2017 LTI grant will undergo a first and final test on 1 September 2020, with the grant
unlikely to vest.
1. ROFE for remuneration purposes is EBIT (excluding significant items) return on average funds employed. Funds employed is calculated as
the average of funds employed at the start and end of the year, except for FY2017, which was calculated on a monthly average funds
employed basis, recognising the impact of the Headwaters acquisition part way through the year.
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Section 3: FY2020 performance and actual pay received (continued)
Fixed annual remuneration (FAR) outcomes
The key remuneration outcomes for Boral’s Senior Executives in FY2020 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, and positioning
remuneration against the market.
In FY2020, the Board approved the following adjustments to Senior Executive FAR/BCS. Increases
reflect changes in our organisation, responsibilities and accountabilities and market benchmarking
undertaken against Boral comparators.
Changes effective from 1 September 2019:
• Mike Kane received an increase equivalent to 2.0% of BCS.
• David Mariner, President & CEO, Boral North America received a 3.0% increase to his BCS.
• Ros Ng, Group President Ventures & CFO did not receive a pay increase because she received
an in-year adjustment following a restructure of the executive team in FY2019.
Changes effective from 1 June 2020:
• Ross Harper’s FAR was adjusted down by 17.6% effective from 1 June 2020, to reflect the
change in accountability, scope and span of control arising from taking on a more focused
position as Group President, HSE, Sustainability, Innovation & Operations Excellence.
• Wayne Manners, President & CEO, Boral Australia, received no adjustment to his FAR on
1 September 2019. His FAR was adjusted by 17.1%, effective from 1 June 2020, to more
closely align his remuneration with the median of comparator company roles and to reflect the
substantive change in accountability, scope and span of control arising from changes in the
senior executive team.
• Darren Schulz, Acting President & CEO, North America, was provided with an increase of 24.0%
to his BCS to reflect the substantive change in accountability and responsibility in his new role.
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Actual remuneration for FY2020
The remuneration outcomes table below has been prepared to provide shareholders with a view of remuneration that was
actually paid to Senior Executives for FY2020 and is unaudited. 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.
FY2020 remuneration cash outcomes table
Cash payments and other benefits received
Vesting of prior year
“at risk” equity awards
A$’000s
Fixed
rema
STI
(cash)b
Super/
pension
payments
Other cash
allowances &
benefitsc
Other
non-
cashd
Contractual
separation
paymente
Total
payments
FBT
Vesting of STI
deferral earned
in 2017f
Vesting of
2016 LTI
grantg
Mike Kanea
2,008.5
Ross Harper1
Wayne Manners
David Marinera&2
Ros Ng
Darren Schulz3
755.9
684.5
767.1
971.8
51.2
US-Based Senior Executivesh
US$’000
Mike Kane
David Mariner
Darren Schulz
1,346.3
514.2
34.3
–
–
–
–
–
–
–
–
–
204.5
25.0
25.5
180.2
28.2
8.6
137.1
120.8
5.8
–
–
23.8
–
–
2.5
128.8
9.7
4.1
85.4
43.2
1.0
–
–
1.7
86.4
57.2
0.7
–
–
–
855.9
–
–
–
573.7
–
–
2.8
4.4
–
2,341.8
793.4
742.3
1,888.6
14.4
1,057.6
–
–
–
–
63.3
1,569.8
1,265.9
42.5
243.3
30.6
18.5
25.2
63.9
–
163.1
16.9
–
–
–
–
–
–
–
–
–
–
A portion of actual remuneration received in FY2020 relates to the vesting of deferred STI. 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 changed by negative 39% from September 2017 to September 2019. The following graph shows the
difference between grant and vesting value of the deferred STI award.
Deferred STI
$381
(61%)
-$240
(-39%)
Value at vesting date
Decreased value due to share price change
A $’000s
Ref
Item
Notes relating to the FY2020 remuneration cash outcomes table
a.
Fixed remuneration
Fixed remuneration is cash salary paid to the Senior Executive for their period as a KMP. For Mike Kane, the
total BCS for FY2020 is A$2,029,373 (US$1,360,288) being the sum of fixed remuneration of A$2,008,486
(US$1,346,288), and employee pension contributions of A$20,866 (US$14,000) reported in the Super/pension
payments column. Fixed remuneration for David Mariner is for the 11 month period to 31 May 2020.
b.
c.
d.
e.
f.
g.
h
STI (cash)
There was no STI earned by Senior Executives in FY2020.
Other cash
allowances & benefits
Other cash allowances and benefits, 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.
Other non-cash
Other non-cash is comprised of non-monetary benefits, including medical cover, 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.
Contractual
separation payment
Payment made on separation of employment, provided in accordance with terms of the employment
contract.
STI deferral
The value for earned deferred STI granted in September 2017 that vested on 1 September 2019, calculated
using the VWAP of Boral ordinary shares in the five trading days up to 1 September 2019, being $4.1416,
multiplied by the number of rights that vested.
LTI
LTI performance targets were not met for the 2016 LTI grant, which resulted in this award lapsing in full.
US-based Senior
Executives
Remuneration for US-based Senior Executives is converted from US dollars to Australian dollars for
reporting and accounting purposes based on the A$/US$ exchange rate, averaged over the 12 months to 30
June for the reporting period.
1. Ross Harper ceased as a KMP on 31 May 2020. Fixed remuneration is for 11 months to 31 May 2020.
2. David Mariner ceased as a KMP on 31 May 2020, ceasing employment on 30 June 2020. FAR is for the 11 months to 31 May 2020.
3. Darren Schulz commenced as a KMP on 1 June 2020.
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Boral Limited Annual Report 2020
Section 4: Remuneration framework for FY2020
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 FY2020, including details of Boral’s Remuneration Principles.
REMUNERATION STRATEGY
Align reward to business strategy and shareholder value creation
Attract and retain high-performing employees with market competitive and flexible reward
REMUNERATION PRINCIPLES
ALIGNED TO SHAREHOLDERS
Short- and long-term incentives
are based on performance
measures designed to drive
sustainable value creation for
shareholders
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 reflect
financial performance objectives
The strategy has guided the way remuneration has been set for FY2020, 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 and 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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Remuneration framework details
Remuneration strategy
FAR/BCS
Attract and retain high-calibre employees with a 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.
2020 outcomes
Description
Considerations in setting FAR/BCS are
• 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, increases were provided to two senior executives effective from 1 September 2019. The CEO
received a 2.0% adjustment to his BCS and the President & CEO, Boral North America received a 3.0% increase to his BCS.
No adjustment was made to the FAR of the Group President, Ventures & CFO.
On 1 June 2020, the FAR for the Group President, Operations was adjusted down by 17.6% to reflect the change in role to Group
President HSE, Sustainability, Innovation & Operations Excellence. The President & CEO, Boral Australia received no adjustment
to his FAR on 1 September 2019. However on 1 June 2020, his FAR was adjusted by 17.1% to align his remuneration closer to
the median of comparator companies and to reflect substantive change in accountability and responsibilities arising from senior
executive changes.
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.
Target and maximum STI opportunities as a percentage of
BCS for the retiring CEO and President & CEO, Boral North
America and FAR for other Senior Executives are outlined
below.
Position
Retiring CEO
Senior Executives
Target
110%
60%
Maximum
154%
100%
EBIT targets are considered to be commercial-in-confidence and
are therefore not disclosed in the interests of shareholders.
Boral used a single financial hurdle for STI awards in
FY2020, being EBIT (excluding significant items):
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 to 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.
• 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
that 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.
2020 outcomes
The CEO and all other Senior Executives received no STI payments for FY2020.
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Boral Limited Annual Report 2020
Section 4: Remuneration framework for FY2020 (continued)
Remuneration strategy
Description
LTI
LTI links long-term executive rewards with the sustained creation
of shareholder value through allocation of equity awards subject to
long-term performance conditions.
For FY2020, the retiring CEO and Senior Executives were
eligible to participate in the LTI at the following opportunity
levels.
TSR
Position
Maximum opportunity (face value)
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.
Retiring CEO
220% of Base Cash Salary
Senior Executives
100% of FAR/BCS
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. ROFE targets are set relative to the weighted average cost of
capital (WACC).
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 a three year performance period.
Since FY2019, the share of EBIT (before significant items) from
our joint ventures (JVs) (rather than post-tax JV earnings) has
been included in the pre-tax ROFE calculation, consistent with the
treatment for Boral’s wholly owned businesses.
The WACC and ROFE calculations are 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.
The FY2020 LTI awards have two performance hurdles:
Relative TSR
ROFE
Hurdle Relative TSR
measured against the
S&P/ASX 100 Index
EBIT in year of testing as
a percentage of average
funds employed
Portion Two-thirds
One-third
Period 1 September 2019 to
Year ending 30 June 2022
1 September 2022
The TSR vesting schedule to be applied for the FY2020 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 FY2020 LTI
grant is:
If the Company’s ROFE
performance for FY2022 is:
Proportion
vesting
Below WACC
At WACC (target)
0%
50%
Between WACC and WACC plus 2.0% Vesting on a
straight line basis
At or above WACC plus 2.0% (stretch) 100%
2020 outcomes
In September 2019, the 2016 LTI did not vest. TSR was at the 18th percentile, which was short of the minimum required for vesting
(50th percentile). Actual ROFE of 8.1% for FY2019 was below the 2016 LTI ROFE target for FY2019 of 12.0%.
LTI grants vesting in FY2022 onwards will be assessed using ROFE relative to WACC, adjusting for JV equity earnings. Boral’s
FY2020 WACC was ~8.9% when measured on a ROFE equivalent basis. This figure will be incorporated into the three year
average pre-tax WACC values that will be used to test the LTI grants in FY2022 and FY2023.
Boral’s ROFE performance adjusting for JV equity earnings for FY2020 was 4.5% on a pre-impairment basis, noting that the
ROFE component for the LTI’s “on foot” will be calculated on a pre-impairment basis.
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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 FY2020 is shown below, reflecting the remuneration mix should all
performance hurdles at maximum be met in full.
Retiring 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 FY2020 the Committee was
supported by the:
• Audit & Risk Committee in reviewing the calculation of ROFE relative to WACC, and reviewing financial results, and
• HSE 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 at: 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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Boral Limited Annual Report 2020
Section 5: Remuneration governance (continued)
Board discretion
The Board maintains discretion to adjust remuneration outcomes for Senior Executives to ensure outcomes appropriately
reflect Company performance and the shareholder experience over the relevant performance period.
Component Board discretion
STI
LTI
The Board retains discretion to adjust 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 by the Audit & Risk Committee and HSE 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.
The Board retains discretion to make LTI adjustments as considered
necessary to ensure rewards reflect performance in a manner that 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.
Determinations made in FY2020
As noted in Boral’s ASX
announcement on 10 February
2020, a thorough investigation into
financial irregularities identified in the
North American Windows business
found that finance personnel within
the Windows business manipulated
accounts and financial statements.
Based on these findings, Boral
terminated the employment of a
number of finance employees for
misconduct, with all their unvested
equity lapsing on termination.
The Board also exercised its
discretion to lapse:
• all unvested equity held by the
President, Windows, including
unvested LTI rights and Deferred
STI rights
• for all participating executives,
the component of unvested
deferred STI rights from FY2018
that relates to the Windows
earnings overstatement.
As outlined earlier in this Report,
after the reporting period ended,
the Board exercised its discretion to
lapse the former CEO’s remaining
unvested LTI awards in full.
Minimum shareholding requirements
To further align the interests of the Company’s Senior Executives with the interests of shareholders, the Board established
minimum shareholding requirements, effective from 1 July 2013, for the CEO and all other Senior Executives.
Senior Executives are required to accumulate a minimum shareholding in the Company over a period of up to five years from
the later of 1 July 2013 or their date of appointment as a KMP.
Position
CEO
Minimum shareholding Status
100% of FAR/BCS
As at 30 June 2020, Mike Kane exceeded the requirement
Senior Executives
50% of FAR/BCS
As at 30 June 2020, all Senior Executives were in compliance given time in role
The Company’s guidelines for non-executive Directors’ minimum shareholdings are set out in the Corporate Governance
Statement on page 52 of this Annual Report.
External advice on remuneration
The Committee seeks information and advice regarding remuneration directly from external remuneration consultants EY,
who are independent of the Company’s management.
During FY2020, 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.
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External advice on remuneration (continued)
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.
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’ FAR/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 will 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 FY2020 were as follows.
Fees (A$)
Board
Audit & Risk Committee
Remuneration & Nomination Committee
HSE Committee
2020
2019
Chair
474,900
43,100
32,400
32,400
Member
158,100
22,000
16,200
16,200
Chair
465,600
42,300
31,800
31,800
Member
155,000
21,600
15,900
15,900
The total annual non-executive Director remuneration for the current Board of six non-executive Directors for FY2020 was
$1,495,900 including superannuation. This was within the current aggregate fee limit of $2,000,000 per annum, which was
approved at the Company’s Annual General Meeting in November 2016.
A comprehensive review of the level of fees paid to Boral’s non-executive Directors was undertaken during the year and
included a review of market benchmarking information prepared by EY, Boral’s external remuneration consultant. The
review considered the elements of size and complexity of the business, time commitments and fees paid for non-executive
Directors of companies of a comparable size. As a result of the market review and considering the COVID-19 pandemic, the
Board decided not to increase non-executive Director fees from 1 July 2020.
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Boral Limited Annual Report 2020
Section 7: Statutory remuneration disclosures
The following Senior Executive remuneration table has been prepared in accordance with the accounting standards and
has been audited. The values in the table below align with the amounts expensed in Boral’s financial statements. Additional
information has been included for Mike Kane, David Mariner and Darren Schulz, who are paid in US dollars. The impact
of currency movements in FY2020 when their US dollar remuneration was converted to Australian dollars may create the
impression of significant increases in cash salary, which was not the case.
Senior Executive remuneration table
Short-term
Post-
employment
Separation
payments
Share-based
paymentsa
Other
Total
At risk remuneration
Short-
term
incentivec
Non-
monetary
benefitsd
Other cash
allowance &
benefitse
Cash
salaryb
Super /
Pension
Contractural
separation
paymentf
Deferred
equity
Rights
Long
service
leave
accrual
% of
remuneration
related to
Total
performance
% of
target STI
paid
A$’000s
Year
Senior Executives
Mike Kane
2020 2,008.5b
2019
1,842.8
Ross Harper1
2020
2019
Wayne Manners
2020
David Mariner2
Rosaline Ng
Darren Schulz3
2019
2020
2019
2020
2019
2020
2019
621.2
693.2
687.3
243.5
767.1
755.4
975.7
929.6
51.2
–
Total
2020
5,111.0
–
–
–
26.8
–
–
–
–
–
–
–
–
–
128.8
100.5
12.5
11.7
32.3
14.8
85.4
57.0
57.6
61.8
3.5
–
–
–
–
–
–
–
59.5
–
–
–
–
–
204.5
308.9
25.0
27.3
25.5
8.3
180.2
155.8
28.2
27.8
8.6
–
2,037.1 1,674.7
38.5
59.4 6,151.5
27.9% 0.0%
0.0 1,315.5 224.5
49.8 3,842.0
40.1% 0.0%
0.0
0.0
0.0
0.0
206.8
22.8
10.7
899.0
25.5% 0.0%
153.1
174.9
32.7
47.2
63.6 1,022.9
22.2% 6.6%
12.9
9.1
27.6
15.1
960.5
323.5
19.6% 0.0%
12.9% 0.0%
866.0 (358.4)
(7.9)
– 1,591.9
0.0% 0.0%
0.0
0.0
0.0
0.0
0.0
242.7
335.8
318.4
8.8
–
24.2
11.4
62.0
0.4
–
– 1,235.1
21.6% 0.0%
16.1 1,424.8
24.4% 0.0%
38.5 1,438.1
26.5% 0.0%
–
–
72.5
12.7% 0.0%
–
0.0% 0.0%
320.1
59.5
472.0
2,903.1 2,042.6
78.1 113.8 11,100.2
19.1% 0.0%
2019
4,464.5
26.8
245.8
US-Based Senior Executives4
US$’000s
Mike Kane
2020
1,346.3
David Mariner
Darren Schulz
2019
1,316.7
2020
2019
2020
2019
514.2
539.7
34.3
–
–
–
–
–
–
–
86.4
71.8
57.2
40.8
2.4
–
–
–
–
39.9
–
–
–
528.1
– 2,062.4
367.0 167.0 7,861.6
31.2% 1.3%
137.1
1,365.4 1,122.6
25.8
39.8 4,123.4
27.9% 0.0%
220.7
120.8
111.3
5.8
–
–
939.9 160.4
35.5 2,745.0
40.1% 0.0%
580.5 (240.3)
(5.3)
– 1,067.0
0.0% 0.0%
–
–
–
173.4
5.9
–
17.3
0.2
–
–
–
–
882.5
21.6% 0.0%
48.6
12.7% 0.0%
–
0.0% 0.0%
Please refer to the notes on the following page relating to the Senior Executive remuneration table.
1. 2020 remuneration for Ross Harper is from 1 July 2019 until he ceased as a KMP on 31 May 2020.
2. 2020 remuneration for David Mariner is from 1 July 2019 until he ceased as a KMP on 31 May 2020.
3. 2020 remuneration for Darren Schulz is from 1 June 2020 when he commenced as a KMP.
4. Remuneration is converted at the average exchange rates for the respective years, being $0.6703 for FY2020 and $0.7145 for FY2019.
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Senior Executive remuneration table (continued)
Ref
Item
Notes relating to the Senior Executive remuneration table
a.
Share-based
payments
The fair value of rights is calculated at the date of grant. Rights subject to the relative TSR hurdle are valued
using the Monte Carlo simulation analysis; rights subject to the ROFE hurdle are valued using the Black
Scholes methodology; and deferred STI rights are valued at face value.
The value of LTI awards are allocated evenly over the period of three years from the grant date, whereas
deferred STI rights are allocated evenly over the one year performance period plus the two year vesting
period. The value disclosed in the table is the portion of the fair value of the rights for each relevant
reporting period.
For David Mariner, his LTIs were lapsed when he ceased in his role. The negative number in the table
represents the lapsing of LTI awards over a series of relevant reporting periods.
For Mike Kane, the table shows the appropriate accounting treatment based on information available at
30 June 2020. It does not incorporate the Board’s subsequent decision to lapse the former CEO’s LTI
awards in full as this decision was made after 30 June 2020. As a result of the Board’s decision to lapse
all of the former CEO’s LTI awards, the amount of A$1,674,700 (US$1,122,600) included in the table
for accounting purposes is not paid or payable. The Board’s decision also extends to share based
payment remuneration associated with the unvested 2018 and 2019 LTI awards disclosed in the previous
remuneration reports which will also not be paid or payable.
Further details on the former CEO’s equity are provided in Section 2 CEO retirement, page 63.
Cash salary includes all fixed salary and accrued annual leave. Mike Kane’s total BCS for FY2020 is
A$2,029,373 (US$1,360,288), being the sum of fixed remuneration of A$2,008,486 (US$1,346,288) and
employee pension contributions of A$20,866 (US$14,000), which is reported in the Super/pension
payments column.
As noted in Section 2, the change in Mike Kane’s cash salary is the result of a change in the value of the
A$/US$ foreign exchange rate used to convert his US dollar BCS to Australian dollars. In FY2019, his cash
salary was converted based on A$/US$ exchange rate averaged over the 12 month period to 30 June 2019
of $0.7145. For FY2020, the rate used to convert his cash salary was $0.6703, or 6.2% less than the rate
applied in FY2019.
b.
Cash salary
c.
d.
e.
f.
Short-term
incentive
STI values for KMP represent 80% of total STI paid in cash, 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, vehicle costs and applicable
fringe benefits tax payable by the Company upon providing these benefits.
Other cash
allowances &
benefits
Contractual
separation
payment
Other cash allowances and benefits, 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.
Contractual separation payments for Mike Kane and David Mariner were provided in accordance with their
employment agreements with Mike Kane entitled to receive a separation payment equivalent to 12 months
BCS. These payments comply with the limits on termination benefits under the Corporations Act 2001.
80
Boral Limited Annual Report 2020
Section 7: Statutory remuneration disclosures (continued)
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 2019
balancesa
Granted during
the year as
remunerationb
Value of
grantc
Exercised/
vested during
the year
Value of rights
vestedd
Lapsed/
cancelled
during the
Balance
as at 30
yeare
June 2020
No.
No.
No.
$
1,015,136 2,652,889
No.
–
$
No.
No.
– (1,382,015) 1,265,933f
Mike Kane
LTI Rights 1,632,812
Deferred STI Rights
98,713
Ross Harper
LTI Rights
188,794
Deferred STI Rights
19,679
Wayne Manners
LTI Rights
122,270
Deferred STI Rights
11,886
David Mariner
LTI Rights
311,392
Deferred STI Rights
10,617
Rosaline Ng
LTI Rights
393,975
Deferred STI Rights
27,230
–
–
–
–
–
–
–
–
–
–
Darren Schulz
LTI Rights
Deferred STI Rights
–
–
108,818
4,274
–
–
(58,736)
243,261
(12,786)
27,191
205,235
536,348
–
–
(59,490)
334,539
1,617
6,697
(7,383)
30,577
(1,295)
12,618
169,017
441,698
–
–
(38,544)
252,743
–
–
(4,455)
18,451
(1,020)
6,411
193,884
506,684
–
–
(505,276)
–
–
(6,080)
25,181
(4,537)
–
–
241,453
630,997
–
–
(123,937)
511,491
–
–
–
–
–
–
(15,420)
63,863
(3,777)
8,033
–
–
–
–
–
108,818
(680)
3,594
Notes relating to the equity grants table are outlined below.
Ref
Item
Explanation
a.
b.
Other balances Rights held by Darren Schulz at the time of his appointment as a KMP on 1 June 2020.
Rights granted
during the year
as remuneration
All rights were granted to Senior Executives effective 1 September 2019.
c.
Value of grant
The fair market value of LTI Rights granted on 1 September 2019, calculated using a Monte Carlo
simulation analysis, is $2.13 per right for two-thirds of the grant relating to the TSR measure and $3.58 per
right for one-third of the grant relating to the ROFE hurdle. The fair market value of the Deferred STI Rights
is $4.1416 per right, reflecting a face value at time of grant calculated by taking the VWAP of Boral shares
on the ASX during the five day trading period up to but not including 1 September 2019.
d.
e.
f.
Value of vested
rights
Calculated per right as the market price of Boral shares on the date of vesting. No exercise price is payable
in respect of rights that vest.
Lapsed rights
Rights that lapsed during the year include rights granted to Senior Executives under the 2016 LTI grant
(100% lapsed). All rights held by David Mariner lapsed on cessation of employment on 30 June 2020.
The lapsing of unvested 2018 deferred STI rights relate to the Windows matter, as outlined in the section
‘Lapsing of unvested deferred STI’ on page 64.
Balance as at
30 June 2020
All remaining unvested LTI rights held by former CEO Mike Kane (being 1,265,933 rights) have been lapsed
in full subsequent to 30 June 2020 as outlined in Section 2 CEO retirement, on page 63.
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Senior Executive equity rights balances
The number of rights included in the balance at 30 June 2020 for the Senior Executives is set out below.
Year of grant
2017
2018
2019
Balance as at
30 June 2020
Senior Executives
Mike Kane1
LTI Rights
561,229
366,325
338,379
1,265,9331
Deferred STI Rights
–
Ross Harper
LTI Rights
64,689
Deferred STI Rights
–
Wayne Manners
LTI Rights
40,300
David Mariner
Deferred STI Rights
LTI Rights
Deferred STI Rights
–
–
–
27,191
64,615
11,001
43,426
6,411
–
–
–
205,235
1,617
169,017
–
–
–
Rosaline Ng
LTI Rights
134,767
135,271
241,453
Darren Schulz
Deferred STI Rights
LTI Rights
Deferred STI Rights
–
–
–
8,033
37,975
1,446
–
70,843
2,148
27,191
334,539
12,618
252,743
6,411
–
–
511,491
8,033
108,818
3,594
1. All remaining unvested LTI rights held by former CEO Mike Kane (being 1,265,933 rights) have been lapsed in full subsequent to
30 June 2020 as outlined in Section 2 CEO retirement, on page 63.
Non-executive Directors’ total remuneration
The remuneration of the non-executive Directors is set out in the following table.
2020
20191
A$’000s
Kathryn Fagg, Chairman
Peter Alexander
Eileen Doyle
John Marlay
Karen Moses
Paul Rayner
Total
Short-term
Board and
Committee
fees
Travel
allowances
Post-
employment
superannuation
453.9
174.3
194.1
197.7
187.8
183.7
–
15.0
–
–
–
–
21.0
–
18.4
9.0
8.5
17.5
Total
fees
474.9
189.3
212.5
206.7
196.3
201.2
Short-term
Board and
Committee
fees
Travel
allowances
Post-
employment
superannuation
445.1
142.4
190.3
180.3
175.8
180.2
–
5.0
–
–
–
–
20.5
–
18.0
17.1
16.6
17.0
Total
fees
465.6
147.4
208.3
197.4
192.4
197.2
1,391.5
15.0
74.4 1,480.9
1,314.1
5.0
89.2 1,408.3
1. 2019 fees for Peter Alexander are from his appointment date as a non-executive Director, effective 1 September 2018.
82
Boral Limited Annual Report 2020
Section 7: Statutory remuneration disclosures (continued)
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
Ross Harper
2020
2019
2020
2019
Wayne Manners
2020
David Mariner
Rosaline Ng
Darren Schulz
2019
2020
2019
2020
2019
2020
Non-executive Directors
Kathryn Fagg, Chairman
Peter Alexander
Eileen Doyle
John Marlay
Karen Moses
Paul Rayner
Loans
1,239,961
1,207,153
65,840
54,510
117,154
117,154
95,557
95,557
120,000
92,831
–
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
58,736
61,902
7,383
61,765
4,455
–
6,080
61,854
15,420
85,550
–
–
–
–
–
–
–
–
–
–
–
–
–
(29,094)
25,000
(50,435)
–
–
–
(61,854)
–
(58,381)
–
1,298,697
1,239,961
98,223
65,840
121,609
117,154
101,637
95,557
135,420
120,000
–
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
83,562
38,562
59,571
–
45,248
45,248
39,310
39,310
31,757
31,757
123,652
123,652
–
–
–
–
–
–
–
–
–
–
–
–
23,783
45,000
14,300
59,571
2,065
–
–
13,825
–
48,780
-
107,345
83,562
73,871
59,571
47,313
45,248
39,310
39,310
45,582
31,757
172,432
123,652
There were no loans made or outstanding to Senior Executives or non-executive Directors during FY2020.
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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, and 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
Committee
Comparator
companies
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.
The Remuneration & Nomination Committee.
Two comparator groups are used for market benchmarking:
• market capitalisation and revenue: S&P/ASX 200 (ASX 200) companies within 50% to 200% of Boral’s
market capitalisation and 50% to 200% of Boral’s revenue (ranges expanded to 33% to 300% where
sample sizes are small)
• market capitalisation, revenue and industry: ASX 200 companies within the market capitalisation and
revenue comparator group within the ‘Industrials’ or ‘Materials’ Global Industry Classification Standard
(GICS).
Face value of LTI
performance rights
The face value of LTI performance rights is determined from the VWAP of Boral shares on the ASX during the
five day trading period up to but not including 1 September. For the FY2021 LTI award, this methodology will
change to a 12 month VWAP to 30 June.
Fair market value
of LTI performance
rights
FAR
KMP
The fair market value of LTI performance rights is determined from the face value of a Boral share on
1 September, discounted for a number of factors that impact the value of a TSR tested right, such as the
possibility that the TSR performance hurdle will not be met. Other factors that are taken into account when
determining the discount from face value include the time to vesting, expected volatility of the share price
and the dividends expected to be paid in relation to the shares. This approach is in line with the methodology
used for valuing TSR tested rights for accounting purposes. The fair value is determined by an independent
valuer (being PwC).
Fixed Annual Remuneration (FAR) includes base salary, non-cash benefits such as provision of a vehicle
(including any fringe benefits tax), and superannuation contributions.
The Key Management Personnel of the Company. Defined as the people accountable for planning, directing
and controlling the affairs of the Company and its controlled entities. It includes each of the non-executive
Directors and the 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.
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.
ROFE
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.
The broader management group (who also participate in the various reward programs) are referred to as
‘executives’.
WACC
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.
84
Boral Limited Annual Report 2020
Financial Statements
Boral Limited and Controlled Entities
INCOME STATEMENT
STATEMENT OF COMPREHENSIVE INCOME
BALANCE SHEET
STATEMENT OF CHANGES IN EQUITY
STATEMENT OF CASH FLOWS
NOTES TO THE FINANCIAL STATEMENTS
Section 1: About this report
Section 2: Business performance
2.1 Segments
2.2 Profit for the period
2.3 Results of equity accounted investments
2.4 Dividends
2.5 Earnings per share
2.6 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
85
86
87
88
89
90
96
101
103
104
105
106
107
109
110
112
114
117
118
Section 4: Capital and financial structure
4.1 Interest bearing liabilities
4.2 Financial risk management
4.3 Issued capital
4.4 Reserves
Section 5: Taxation
5.1 Income tax expense
5.2 Deferred tax assets and liabilities
Section 6: Group structure
6.1 Discontinued operations
6.2 Equity accounted investments
6.3 Controlled entities
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
119
121
133
134
135
137
139
140
143
147
147
147
149
150
150
151
151
152
153
154
156
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 2.1 to the financial
statements and relate to income and expenses that
are associated with significant business restructuring,
impairment or individual transactions.
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Income Statement
Boral Limited and Controlled Entities
l
S
t
a
t
e
m
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n
t
s
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/(loss) before net interest expense and income tax
Interest income
Interest expense
Net interest expense
Profit/(loss) before income tax
Income tax (expense)/benefit
Profit/(loss) from continuing operations
Discontinued operations
Note
2.2
2.2
2.2
2.3
2.2
2.2
5.1
2020
$m
5,671.4
(3,965.0)
(996.5)
(478.8)
(5,440.3)
66.3
(1,322.9)
(42.1)
(1,067.6)
3.4
(129.8)
(126.4)
(1,194.0)
60.9
(1,133.1)
Restated1
2019
$m
5,738.4
(3,818.4)
(1,000.4)
(395.7)
(5,214.5)
36.5
(61.5)
(127.7)
371.2
2.3
(105.4)
(103.1)
268.1
(74.1)
194.0
Profit/(loss) from discontinued operations (net of income tax)
6.1
(5.5)
57.0
Net profit/(loss)
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.
(1,138.6)
251.0
2.5
2.5
2.5
2.5
(95.3c)
(95.3c)
(94.8c)
(94.8c)
21.4c
21.3c
16.5c
16.5c
The Income Statement should be read in conjunction with the accompanying notes, which form an integral part of the
financial statements.
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Boral Limited Annual Report 2020
Statement of Comprehensive Income
Boral Limited and Controlled Entities
For the year ended 30 June
Net profit/(loss)
Other comprehensive income
Note
2020
$m
Restated1
2019
$m
(1,138.6)
251.0
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/(loss)
1. Refer Note 1d for further details.
10.1
166.3
-
(8.9)
20.9
(1,116.5)
(10.8)
(15.9)
32.6
423.2
The Statement of Comprehensive Income should be read in conjunction with the accompanying notes, which form an
integral part of the financial statements.
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Balance Sheet
Boral Limited and Controlled Entities
As at 30 June
CURRENT ASSETS
Cash and cash equivalents
Receivables
Inventories
Financial assets
Current tax 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
Interest bearing liabilities
Financial liabilities
Current tax liabilities
Employee benefit liabilities
Provisions
Liabilities classified as held for sale
TOTAL CURRENT LIABILITIES
NON-CURRENT LIABILITIES
Interest bearing liabilities
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/(Accumulated deficit)
TOTAL EQUITY
1. Refer Note 1d for further details.
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Note
2.6
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
2020
$m
904.4
798.3
523.9
4.7
12.5
47.2
84.2
Restated1
2019
$m
207.2
875.1
662.5
3.8
-
39.6
-
2,375.2
1,788.2
24.9
11.2
1,209.7
55.7
3,117.0
2,223.2
145.5
39.6
6,826.8
9,202.0
728.8
106.0
13.7
4.4
119.7
63.1
10.3
27.8
11.4
1,292.0
41.6
2,880.4
3,372.8
78.7
27.2
7,731.9
9,520.1
842.1
339.7
23.8
29.0
118.7
49.5
-
1,046.0
1,402.8
3,378.0
26.6
14.1
43.4
152.5
6.3
3,620.9
4,666.9
4,535.1
4,376.4
356.9
(198.2)
4,535.1
2,060.8
-
43.1
46.1
118.6
16.3
2,284.9
3,687.7
5,832.4
4,265.1
331.0
1,236.3
5,832.4
The Balance Sheet should be read in conjunction with the accompanying notes, which form an integral part of the
financial statements.
88
Boral Limited Annual Report 2020
Statement of Changes in Equity
Boral Limited and Controlled Entities
Balance at 30 June 2019
4,265.1
331.0
1,236.3
5,832.4
Transition impact from implementation of AASB 16
-
-
(26.2)
(26.2)
Issued capital
$m
Restated1
Reserves
$m
Restated1
Retained
earnings
$m
Restated1
Total equity
$m
4,265.1
331.0
1,210.1
5,806.2
Balance at 1 July 2019
Net loss
Other comprehensive income
Translation of net assets of overseas entities
Translation of share of equity accounted other
comprehensive income
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/(loss)
Transactions with owners in their capacity as owners
-
-
-
-
-
-
-
-
(1,138.6)
(1,138.6)
91.4
(20.5)
(60.8)
(8.9)
20.9
22.1
-
(2.0)
-
5.8
-
-
-
-
-
91.4
(20.5)
(60.8)
(8.9)
20.9
(1,138.6)
(1,116.5)
-
-
111.3
(2.0)
(269.7)
(269.7)
-
5.8
Shares issued under the Dividend Reinvestment Plan
111.3
Share acquisition rights vested
Dividends paid
Share-based payments
-
-
-
Total transactions with owners in their capacity
as owners
Balance at 30 June 2020
111.3
4,376.4
3.8
356.9
(269.7)
(198.2)
(154.6)
4,535.1
Balance at 1 July 2018
Net profit
Other comprehensive income
Translation of net assets of overseas entities
Translation of share of equity accounted other
comprehensive income
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
156.8
1,301.8
5,723.7
-
-
-
-
-
-
-
-
-
-
-
-
-
251.0
251.0
252.5
6.3
(92.5)
(10.8)
(15.9)
32.6
-
-
-
-
-
-
252.5
6.3
(92.5)
(10.8)
(15.9)
32.6
172.2
251.0
423.2
(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
331.0
1,236.3
5,832.4
1. Refer Note 1d for further details.
The Statement of Changes in Equity should be read in conjunction with the accompanying notes, which form an integral part
of the financial statements.
Statement of Cash Flows
Boral Limited and Controlled Entities
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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, transaction 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 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
Repayment of lease principal
Proceeds from borrowings
Repayment of borrowings
Net cash provided by/(used in) financing activities
NET CHANGE IN CASH AND CASH EQUIVALENTS
Cash and cash equivalents at the beginning of the year
Note
2020
$m
2019
$m
6,194.5
(5,403.6)
6,243.3
(5,333.8)
2.6
2.6
2.4
790.9
26.3
3.1
(124.3)
(30.7)
(34.4)
630.9
(342.1)
(3.7)
-
-
27.3
13.1
(305.4)
(158.3)
(98.4)
2,266.3
(1,603.9)
405.7
731.2
207.2
(34.0)
904.4
909.5
55.0
1.9
(100.2)
(50.6)
(54.0)
761.6
(447.1)
(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
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
2.6
The Statement of Cash Flows should be read in conjunction with the accompanying notes, which form an integral part of the
financial statements.
90
Boral Limited Annual Report 2020
Notes to the Financial Statements
Boral Limited and Controlled Entities
Section 1: About this report
Statement of compliance
As at 30 June 2020, the Group has:
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
(Cth). 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 28 August 2020.
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 the Company’s Annual
Report for the financial year ended 30 June 2019, 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”.
The COVID-19 outbreak was declared a pandemic by the
World Health Organization in March 2020. The outbreak
had and continues to have a significant impact on global
economies as well as the global equity, debt and commodity
markets. As part of the Directors’ assessment of adopting
the going concern basis in preparing the financial report,
a range of scenarios have been prepared and reviewed.
The scenarios assessed the estimated potential impact
of varying levels of COVID-19 restrictions and regulations
and our proposed responses over the next 12-24 months.
In addition to the scenario analysis, the Group has also
taken proactive measures to manage liquidity and mitigate
risk during these uncertain times by stopping all non-
essential and non-committed capital expenditure, reducing
production levels across most of our plants in North America
as well as in some parts of Australia and refinanced the
Group’s debt that matured during the second half of the
current year as well as the debt that was due to mature in
July 2021.
•
•
•
•
over $900 million of cash and cash equivalents as
disclosed in Note 2.6;
over $750 million of undrawn facilities and no significant
debt maturities until November 2022 as disclosed in
Note 4.1;
positive cash inflow from operating activities of
$630.9 million as disclosed in the Statement of Cash
Flows; and
current assets of $2,375 million, which exceed current
liabilities of $1,046 million, by $1,329 million as disclosed
in the Balance Sheet.
On the basis of these reviews and actions, the Directors
consider it appropriate for the going concern basis to be
adopted in preparing the financial statements.
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
Inventories
Property, plant and equipment
Lease term assessment
Intangible assets
Carrying value assessment
Provisions
Income tax expense
Deferred tax assets
Equity accounted investments
Share-based payments
3.1
3.2
3.3
3.3
3.4
3.5
3.6
5.1
5.2
6.2
7.3
107
109
110
110
112
114
117
135
137
140
147
The most significant area of estimation and judgement for
the Group is the carrying value of its assets. This area has
remained a significant area of estimation and judgement
throughout the period, especially given the significant
uncertainty around the short- and long-term impacts of
COVID-19 on our businesses as well as the economies of the
jurisdictions in which we operate.
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.
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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.
Foreign operations
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
Average exchange rate
Assets and liabilities
Reporting date
Historical date
Materiality
Information is only being included in the financial statements
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.
Equity
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 statements 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 statements 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 statements, all intercompany
balances, transactions, and unrealised profits arising within
the Group, are eliminated in full.
B. Foreign currencies
Foreign currency transactions
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
Date fair value is
determined
Foreign exchange differences resulting from translation
of long-term borrowings and foreign currency forward
contracts, which are designated as hedges of the net
investment in overseas entities, 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 AASB interpretations that are
mandatory for the current reporting period and relevant to
the Group, which excluding the impact of AASB 16 Leases,
did not have a significant impact on the Group’s financial
statements.
The Group applied AASB 16 using the modified
retrospective approach, under which the cumulative effect of
initial application is recognised in retained earnings at 1 July
2019. Accordingly, the comparative information presented
for 2019 is not restated but presented as previously reported
under AASB 117 and related interpretations. The details of
the changes in accounting policies are disclosed below.
Additionally, the disclosure requirements in AASB 16 have
not been applied to comparative information.
Transition approach
Definition of a lease
Previously, the Group determined at contract inception
whether an arrangement was or contained a lease under
AASB Interpretation 4 Determining whether an Arrangement
contains a Lease. The Group now assesses whether a
contract is or contains a lease based on the definition of a
lease, as explained in the accounting policy below.
On transition to AASB 16, the Group elected to apply the
practical expedient to grandfather the assessment of which
transactions are leases. The Group applied AASB 16 only
to contracts that were previously identified as leases.
Contracts that were not identified as leases under AASB 117
and AASB Interpretation 4 were not reassessed for whether
there is a lease under AASB 16. Therefore, the definition of a
lease under AASB 16 was applied only to contracts entered
into or changed on or after 1 July 2019.
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Boral Limited Annual Report 2020
Section 1: About this report (continued)
C. Changes in accounting policies (continued)
As a lessee
As a lessee, the Group leases many assets including
property, production equipment and motor vehicles.
The Group previously classified leases as operating or
finance leases based on its assessment of whether the
lease transferred significantly all of the risks and rewards
incidental to ownership of the underlying asset to the Group.
Under AASB 16, the Group recognises right-of-use assets
and lease liabilities for most of these leases on the
Balance Sheet.
At commencement or on modification of a contract that
contains a lease component, the Group allocates the
consideration in the contract to each lease component on
the basis of its relative stand-alone price.
However, for leases of property the Group has elected not
to separate non-lease components but to account for lease
and associated non-lease components as a single
lease component.
i) Leases classified as operating leases under AASB 117
Previously, the Group classified property, production
equipment and motor vehicles leases as operating leases
under AASB 117. On transition, for these leases, lease
liabilities were measured at the present value of remaining
lease payments, discounted at the Group’s incremental
borrowing rate between 2.59% to 5.10% as at 1 July 2019.
Right-of-use assets are measured at either:
•
•
their carrying amount as if AASB 16 had been applied
since the commencement date, discounted using the
Group’s incremental borrowing rate at the date of initial
application; or
an amount equal to the lease liability, adjusted by the
amount of any prepaid or accrued lease payments.
The Group used a number of practical expedients when
applying AASB 16 to leases previously classified as
operating under AASB 117. In particular, the Group:
•
•
•
•
•
did not recognise right-of-use assets and liabilities for
leases for which the lease term ends within 12 months
of the date of initial application;
did not recognise right-of-use assets and liabilities for
leases of low-value assets (IT equipment and small
items of office furniture);
excluded initial direct costs in measuring right-of-use
assets at the date of initial application;
relied on previous assessments on whether the
leases are onerous as an alternative to performing an
impairment review;
used a single discount rate to a portfolio of leases with
reasonably similar characteristics; and
•
used hindsight in determining the lease term.
ii) Leases classified as finance leases under AASB 117
The Group leases a number of items of production
equipment. These leases were classified as finance leases
under AASB 117. For these finance leases, the carrying
amounts of the right-of-use asset and the lease liability at
1 July 2019 were determined at the carrying amounts of the
lease asset and lease liability under AASB 117 immediately
before that date.
Accounting policy applied from 1 July 2019
At inception of a contract, the Group assesses whether a
contract is, or contains, a lease. A contract is, or contains,
a lease if the contract conveys the right to control the use
of an identified asset for a period of time in exchange for
consideration. To assess whether a contract conveys the
right to control the use of an identified asset, the Group uses
the definition of a lease in AASB 16. This policy is applied to
contracts entered into, on or after 1 July 2019.
As a lessee
At commencement or on modification of a contract that
contains a lease component, the Group allocates the
consideration in the contract to each lease component on
the basis of its relative stand-alone prices. However, for the
leases of property the Group has elected not to separate
non-lease components but to account for the lease and non-
lease components as a single lease component.
The Group recognises a right-of-use asset and a lease
liability at the lease commencement date. The right-of-use
asset is initially measured at cost, which comprises the
initial amount of the lease liability adjusted for any lease
payments made at or before the commencement date, plus
an estimate of costs to dismantle and remove the underlying
asset or to restore the underlying asset or the site on which
it is located, less any lease incentives received.
The right-of-use asset is subsequently depreciated using the
straight-line method from the commencement date to the
end of the lease term, unless the lease transfers ownership
of the underlying asset to the Group by the end of the lease
term or the cost of the right-of-use asset reflects that the
Group will exercise a purchase option. In that case, the right-
of-use asset will be depreciated over the useful life of the
underlying asset, which is determined on the same basis as
those of property and equipment. In addition, the right-of-
use asset is periodically reduced by impairment losses, if
any, and adjusted for certain remeasurements of the
lease liability.
The lease liability is initially measured at the present value of
the lease payments that are not paid at the commencement
date, discounted using the interest rate implicit in the lease
or, if that rate cannot be readily determined, the Group’s
incremental borrowing rate. Generally, the Group uses its
incremental borrowing rate as the discount rate.
The Group determines its incremental borrowing rate by
obtaining interest rates from various external financing
sources and makes certain adjustments to reflect the term of
lease and type of asset leased.
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Lease payments included in the measurement of the lease liability comprise the following:
•
•
•
•
•
fixed payments, including in-substance fixed payments;
variable lease payments that depend on an index or a rate, initially measured using the index or rates as at the
commencement date;
amounts expected to be payable under a residual value guarantee;
lease payments in an optional renewal period if the Group is reasonably certain to exercise an extension option; and
the exercise price under a purchase option that the Group is reasonably certain to exercise.
The lease liability is measured at amortised cost using the effective interest method. It is remeasured when there is a change
in future lease payments arising from a change in an index or rate, if there is a change in the Group’s estimate of the amount
expected to be payable under a residual value guarantee, if the Group changes its assessment of whether it will exercise a
purchase, extension or termination option or if there is a revised in-substance fixed lease payment.
When the lease liability is remeasured in this way, a corresponding adjustment is made to the carrying amount of the right-
of-use asset, or is recorded in profit or loss if the carrying amount of the right-of-use asset has been reduced to zero.
The Group presents right-of-use assets in ‘property, plant and equipment’ and lease liabilities in ‘interest bearing liabilities’
in the Balance Sheet.
Short-term leases and lease of low-value assets
The Group has elected not to recognise right-of-use assets and lease liabilities for lease of low-value assets and short-term
leases, including IT equipment and small items of office furniture. The Group recognises the lease payments associated with
these leases as an expense on a straight-line basis over the lease term.
Accounting policy applicable prior to 1 July 2019
In the comparative period, as a lessee the Group classified leases that transferred substantially all of the risks and rewards
of ownership as finance leases. When this was the case, the leased assets were measured initially at an amount equal to the
lower of their fair value and the present value of the minimum lease payments. Minimum lease payments were the payments
over the lease term that the lessee was required to make, excluding any contingent rent. Subsequent to initial recognition,
the assets were accounted for in accordance with the accounting policy applicable to the asset.
Assets held under other leases were classified as operating leases and were not recognised in the Group’s Balance Sheet.
Payments made under operating leases were expensed on a straight line basis over the term of the lease. Lease incentives
received were recognised as part of the total lease expense, over the term of the lease.
Financial statement impacts
Impact on transition
On transition to AASB 16, the Group recognised additional right-of-use assets and additional lease liabilities, recognising the
difference in retained earnings. The impact on transition as at 1 July 2019 is summarised as below:
Increase/(decrease)
Property, plant and equipment
ROU assets
Investments accounted for using the equity method
Deferred tax assets/(liabilities)
Creditors
Provisions
Lease liabilities
Retained earnings
Assets
$m
Liabilities
$m
Equity
$m
(2.0)
386.4
(8.7)
5.3
(1.8)
(4.3)
33.0
380.3
381.0
407.2
(26.2)
(26.2)
94
Boral Limited Annual Report 2020
Section 1: About this report (continued)
C. Changes in accounting policies (continued)
Impact on transition (continued)
The reconciliation between lease commitments as at 30 June 2019 and the transition lease liability adjustment is presented
as follows:
Operating lease commitments disclosed as at 30 June 2019
less: short-term and low-value leases not recognised as a liability
add: lease extension options reasonably expected to be exercised
less: effect of discounting on payments included in the calculation of the lease liability
(excluding finance lease balances)
Operating lease commitments capitalised
add: finance lease liabilities recognised as at 30 June 2019
Lease liability recognised as at 1 July 2019
$m
463.4
(50.1)
45.5
(78.5)
380.3
6.1
386.4
Impacts for the period
As a result of the change in policy arising from the adoption of AASB 16, the Group has recognised a right-of-use asset of
$373.4 million and a lease liability of $383.1 million on the Balance Sheet as at 30 June 2020 and depreciation expense of
$98.8 million and interest expense of $16.5 million instead of rent expense for the period then ended. The leases payments
previously classified as operating cash outflows have been split with the principal payments of $98.4 million presented as a
financing outflow and the interest payments of $16.5 million presented as an operating outflow.
D. Comparative figures
During the first half of the current fiscal year, Boral identified certain financial irregularities in its North American Windows
business, involving misreporting in relation to inventory, payables and cost of sales.
Boral has restated the comparative figures to reflect the underlying results of the Group as well as the North American
segment. The impact on the affected financial statement line items is as follows:
Impact on the Balance Sheet and Boral North America segment assets and liabilities – increase/(decrease)
30 June 2019
Receivables
Inventories
Total Assets
Trade creditors
Provisions
Deferred tax liabilities
Total Liabilities
Retained earnings
Foreign currency translation reserve
Total Equity
1. Excludes impact of discontinued operations re-presentation.
Previously
reported
$m
877.4
683.8
9,543.7
832.6
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1,263.8
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5,858.9
Adjustment
$m
Restated1
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(2.3)
(21.3)
(23.6)
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(7.7)
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(27.5)
1.0
(26.5)
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662.5
9,520.1
842.1
49.5
43.1
3,687.7
1,236.3
299.5
5,832.4
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D. Comparative figures (continued)
Impact on the Balance Sheet and Boral North America segment assets and liabilities – increase/(decrease)
1 July 2018
Retained earnings
Foreign currency translation reserve
Total Equity
Previously
reported
$m
1,307.9
115.2
5,728.8
Impact on Income Statement and Boral North America segment results – increase/(decrease)
30 June 2019
Revenue
Cost of Sales
Selling and distribution expenses
Income tax (expense)/benefit
Profit/(loss) from continuing operations
1. Excludes impact of discontinued operations re-presentation.
Impact on Total earnings per share – increase/(decrease)
Basic earnings per share
Diluted earnings per share
Previously
reported
$m
5,800.6
(3,845.6)
(1,006.5)
(79.6)
214.6
Adjustment
$m
(6.1)
1.0
(5.1)
Adjustment
$m
(1.3)
(25.1)
(1.1)
6.1
(21.4)
Restated1
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1,301.8
116.2
5,723.7
Restated1
$m
5,799.3
(3,870.7)
(1,007.6)
(73.5)
193.2
(1.8c)
(1.8c)
The change did not have an impact on other comprehensive income for the period or the Group’s operating, investing or
financing cash flows.
Discontinued Operations
Certain comparative figures have been reclassified to discontinued operations, as a result of the expected sale of Midland
Brick. The impact on the affected financial statement line items is as follows. Refer to Note 6.1 for further details.
Impact of comparative figures adjustments on Income Statement – increase/(decrease)
30 June 2019
Revenue
Cost of Sales
Selling and distribution expenses
Administrative expenses
Income tax (expense)/benefit
Profit/(loss) from continuing operations
Profit/(loss) from discontinued operations (net of income tax)
Previously
reported
$m
Adjustment
Boral North
America
$m
Discontinued
operations
$m
5,800.6
(3,845.6)
(1,006.5)
(398.5)
(79.6)
214.6
57.8
(1.3)
(25.1)
(1.1)
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(21.4)
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(60.9)
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(0.6)
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(0.8)
Restated2
$m
5,738.4
(3,818.4)
(1,000.4)
(395.7)
(74.1)
194.0
57.0
2. Restated after adjustment due to financial irregularities in the North American Windows business and presentation of
discontinued operations.
E.
New accounting standards and interpretations not yet adopted
A number of new standards are effective for annual periods beginning after 1 July 2020 with early adoption permitted.
However, with the exception of AASB 2019-3 Amendments to Australian Accounting Standards – Interest Rate Benchmark
Reform, the Group has not early adopted the new or amended standards in preparing these financial statements.
96
Boral Limited Annual Report 2020
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 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
Corporate
Midland Brick (2019: Denver construction materials and US block).
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/(loss) before tax
Profit/(loss) before net interest expense and income tax from
reportable segments
Less: (Profit)/loss before net interest expense and income tax from
discontinued operations
Profit/(loss) before net interest expense and income tax from
continuing operations
Net interest expense from continuing operations
Profit/(loss) before tax from continuing operations
1. Refer Note 1d for further details.
Note
6.1
6.1
2.2
2020
$m
5,728.4
(57.0)
5,671.4
Restated1
2019
$m
5,861.4
(123.0)
5,738.4
(1,075.3)
439.4
7.7
(68.2)
(1,067.6)
(126.4)
(1,194.0)
371.2
(103.1)
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98
Boral Limited Annual Report 2020
Section 2: Business performance (continued)
2.1 Segments (continued)
(a) Reportable segments
Significant items ($m)
(i) Sale of business
(ii) Restructure costs
(iii) Integration costs
Integration costs
Asset write off – property, plant and equipment
(iv) Joint venture matters
(v) Asset impairment
Goodwill
Intangibles
Property, plant and equipment
Investments accounted for using the equity method
Gross
2020
Tax
2020
Net
2020
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2019
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(i) Sale of business
During the prior financial year, the Group sold the Denver Construction Materials business for cash proceeds of
$173.2 million, generating a profit before tax of $66.1 million, and the Block business for cash proceeds of $210.6 million,
generating a profit before tax of $3.5 million.
(ii) Restructure costs
In response to the downturn in current trading conditions and the expected further decline in trading conditions over the
short to medium term, the Group has recognised $36.2 million (2019: $25.7 million) of restructuring costs across Australia
and North America.
(iii) Integration costs
In the current year, predominantly in the first half, $9.5 million (2019: $32.8 million) of costs have been incurred on the
integration of the Headwaters business into the Boral North America business, which forms part of the integration costs of
US$90 million to US$100 million expected. The costs during the period predominantly relate to redundancies and closure
costs arising from the rationalisation of Stone plants.
(iv) Joint venture matters
FY2020 – During the current financial year, predominantly in the first half, the Group incurred $10.3 million of costs
($7.8 million incurred by Boral Limited), primarily legal and consulting, in conjunction with the announced change in
ownership and operating structure of the plasterboard businesses, as a result of Knauf’s acquisition of USG. In addition, in
response to current and expected declining trading conditions over the short to medium term, the joint venture implemented
further restructuring measures with $2.3 million recognised as Boral’s share of the cost of the program.
FY2019 – In the prior year, this includes $4.0 million of legal and consulting costs ($3.0 million incurred by Boral Limited)
related to negotiating and agreeing 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
FY2020 – The non-cash asset impairment charges relate to updated year-end valuation estimates of several assets and asset
groups across the Group primarily driven by forecast declines in the US and Australian housing markets as well as taking
into account the potential longer term impact of prevailing economic conditions. The impairments recognised relate to Boral
North America goodwill, the Windows cash generating unit (CGU), the Australian Building Products CGU, the Investment
in the Meridian Brick joint venture and the Western Region Construction Materials CGU. Refer to Note 3.5 and Note 6.2 for
further details.
FY2019 – In the prior year, 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.
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2.1 Segments (continued)
(b) Geographic location
In presenting information on a geographical basis, assets are based on the geographical location of the assets.
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NON-CURRENT ASSETS
Australia
Asia
North America
Other
Tax assets
Financial assets
2.2 Profit for the period
(a) Revenue
2020
$m
2019
$m
2,576.7
2,606.5
723.0
729.0
3,236.5
4,187.1
89.4
89.0
6,625.6
7,611.6
145.5
55.7
78.7
41.6
6,826.8
7,731.9
Sales revenue is revenue earned from the provision of products or services, net of returns, discounts and allowances.
Sale of goods
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.
Contracting businesses
Revenue from contracting businesses 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
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
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 that was sold. The revenue is measured at the
transaction price agreed under the contract.
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.
102
Boral Limited Annual Report 2020
Section 2: Business performance (continued)
2.2 Profit for the period (continued)
(a) Revenue (continued)
For the year ended 30 June
Revenue from continuing operations
Sale of goods
Rendering of services
Contracting business
Revenue from continuing operations
1. Refer Note 1d for further details.
(b) Other income and expenses
2020
$m
Restated1
2019
$m
5,229.6
5,281.3
68.8
373.0
75.1
382.0
5,671.4
5,738.4
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.
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 2.1.
For the year ended 30 June
Note
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
Other expenses from continuing operations
Short-term leases and leases of low-value assets expenses under
AASB 16
Operating lease expense under AASB 117
2020
$m
60.0
1.1
5.2
66.3
2.1
(1,322.9)
(1,322.9)
53.5
-
2019
$m
21.6
7.2
7.7
36.5
(61.5)
(61.5)
-
123.2
103
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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.
Interest expense also includes the unwinding of the lease liability discount in the current financial year as a result of the
adoption of AASB 16 Leases.
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:
Other parties (bank overdrafts, bank loans and other loans)1
Interest expense on capitalised leases
Unwinding of discount
Net interest expense from continuing operations
2020
$m
3.1
0.3
3.4
(108.1)
(16.5)
(5.2)
(129.8)
(126.4)
2019
$m
1.9
0.4
2.3
(101.2)
(0.4)
(3.8)
(105.4)
(103.1)
1. In 2020, interest of $3.4 million (2019: $4.2 million) was paid to other parties and capitalised in respect of qualifying assets.
The capitalisation rate used was 5.4% (2019: 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:
Note
2020
$m
2019
$m
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)
2,333.7
139.9
(53.9)
(7.5)
78.5
(163.0)
(84.5)
39.4
(81.5)
(42.1)
2,457.1
216.7
(65.5)
(3.8)
147.4
(401.6)
(254.2)
73.1
(200.8)
(127.7)
2.1
Further information regarding equity accounted investments is provided in Note 6.2.
104
Boral Limited Annual Report 2020
Section 2: Business performance (continued)
2.4 Dividends
2020
2019 final – ordinary
2020 interim – ordinary
Total
2019
2018 final – ordinary
2019 interim – ordinary
Total
Subsequent event
Amount per
share
Total amount
$m
Franked amount
per share
Date of payment
13.5 cents
9.5 cents
14.0 cents
13.0 cents
158.4
111.3
269.7
164.1
152.4
316.5
6.75 cents 1 October 2019
4.75 cents
15 April 2020
7.0 cents 2 October 2018
6.5 cents
15 March 2019
Since the end of the financial year, the Directors have decided that no final dividend would be paid for the financial year
ended 30 June 2020.
2020 final – ordinary
-
-
-
-
Dividend franking account
The balance of the franking account of Boral Limited as at 30 June 2020 is $1.5 million (2019: $19.3 million).
The franking account balance is $11.0 million deficit (2019: $33.0 million credit) after adjusting for franking credits/(debits)
that will arise from:
•
•
•
the payment/refund of the amount of the current tax liability/receivable;
the receipt of dividends recognised as receivables at year end; and
before taking into account the Directors decision around the payment of a final dividend and any associated
franking credits.
Dividend Reinvestment Plan
For the interim dividend payment on 15 April 2020, the Group received $111.3 million proceeds relating to 14,407,567 fully
paid ordinary shares issued to shareholders participating in the Dividend Reinvestment Plan (DRP), and 38,914,307 fully paid
ordinary shares issued under the DRP underwriting arrangement.
105
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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
2020
2019
1,194,951,891
1,172,331,924
3,944,754
3,699,914
1,198,896,645
1,176,031,838
Continuing
operations
Discontinued
operations
2020
$m
2020
$m
Total
2020
$m
Restated1
Continuing
operations
Discontinued
operations
Restated1 Restated1
2019
$m
2019
$m
Total
2019
$m
Earnings reconciliation
Net profit/(loss) excluding
significant items
Net significant items (refer Note 2.1)
Net profit/(loss)
Basic earnings per share
Diluted earnings per share
Basic earnings per share (excluding
significant items)
Diluted earnings per share (excluding
significant items)2
1. Refer Note 1d for further details.
2. Numbers may not add due to rounding.
182.8
(5.5)
177.3
(1,315.9)
(1,133.1)
(94.8c)
(94.8c)
-
(1,315.9)
(5.5)
(1,138.6)
(0.5c)
(0.5c)
(95.3c)
(95.3c)
419.5
(225.5)
194.0
16.5c
16.5c
(0.8)
418.7
57.8
(167.7)
57.0
251.0
4.9c
4.8c
21.4c
21.3c
15.3c
(0.5c)
14.8c
35.8c
(0.1c)
35.7c
15.2c
(0.5c)
14.8c
35.7c
(0.1c)
35.6c
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.
106
Boral Limited Annual Report 2020
Section 2: Business performance (continued)
2.6 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 0.35% (2019: 1.81%).
(ii) Reconciliation of net profit to net cash provided by operating activities:
Net profit/(loss)
Adjustments for non-cash items:
Depreciation and amortisation
Discount unwinding
Gain on sale of assets and businesses
Impairment of assets, businesses and restructuring costs
Share-based payment expense
Non-cash loss from equity accounted investments
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, transaction and integration costs:
During the year, the Group settled costs associated with:
Integration costs
Restructure and transaction costs
(iv) Changes in loans and borrowings arising from financing activities:
Balance at the beginning of the year
Proceeds from borrowings
Repayment of borrowings
Repayment of lease principal
Changes in fair values
Transferred to assets held for sale
Non-cash lease liabilities
Net foreign currency exchange differences and other
Balance at the end of the year
1. Refer Note 1d for further details.
2020
$m
Restated1
2019
$m
451.4
453.0
904.4
104.9
102.3
207.2
(1,138.6)
251.0
492.2
5.2
(5.6)
1,292.4
5.8
68.4
719.8
77.1
107.5
(144.0)
(2.1)
(93.8)
(33.6)
630.9
(6.8)
(27.6)
(34.4)
2,400.5
2,266.3
(1,603.9)
(98.4)
20.4
(2.0)
477.9
23.2
3,484.0
377.8
3.4
(91.2)
11.6
9.5
182.7
744.8
(0.5)
(40.0)
63.8
(58.3)
40.8
11.0
761.6
(30.3)
(23.7)
(54.0)
2,526.8
-
(272.6)
-
20.5
-
-
125.8
2,400.5
107
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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 credit loss calculation which considers the
past events, and exercises judgment 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
2020
$m
757.2
2.9
760.1
(13.0)
747.1
51.2
798.3
Restated1
2019
$m
855.2
2.0
857.2
(12.9)
844.3
30.8
875.1
Included in the following table is an age analysis of the Group’s trade receivables, along with impairment provisions against
these balances as at 30 June:
Gross
2020
$m
663.8
73.4
20.0
757.2
Impairment
2020
$m
(2.9)
(1.0)
(9.1)
Net
2020
$m
660.9
72.4
10.9
(13.0)
744.2
Restated1
Gross
2019
$m
Restated1
Impairment
2019
$m
Restated1
Net
2019
$m
709.7
120.6
24.9
855.2
(2.2)
(1.4)
(9.3)
(12.9)
707.5
119.2
15.6
842.3
Current
Overdue 0 – 60 days
Overdue > 60 days
Total
1. Refer Note 1d for further details.
108
Boral Limited Annual Report 2020
Section 3: Operating assets and liabilities (continued)
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
1. Refer Note 1d for further details.
Non-current
Loans to associated entities
Other receivables
2020
$m
Restated1
2019
$m
(12.9)
(14.5)
0.8
(1.0)
-
0.1
-
3.3
(2.2)
0.4
-
0.1
(13.0)
(12.9)
2020
$m
15.7
9.2
24.9
2019
$m
16.1
11.7
27.8
No amounts owing by associates or included in other receivables were past due as at 30 June 2020 (30 June 2019: nil).
109
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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.
Significant accounting judgements, estimates and assumptions
The Group has considered the net realisable value of inventories at reporting date. An inventory provision is recognised
where the realisable value from sale of inventory is estimated to be lower than the inventory’s carrying value. Inventory
provisions for different product categories are estimated based on various factors, including expected sales profile,
prevailing sales prices, seasonality and expected losses associated with slow-moving inventory items.
Current
Raw materials and consumable stores
Work in progress
Finished goods
Land development projects
Non-current
Land development projects
Land development projects comprises:
Cost of acquisition
Development costs capitalised
1. Refer Note 1d for further details.
2020
$m
156.9
44.0
321.5
1.5
523.9
Restated1
2019
$m
179.0
43.7
439.0
0.8
662.5
11.2
11.4
1.5
11.2
12.7
0.8
11.4
12.2
110
Boral Limited Annual Report 2020
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 the Group 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
2020
2019
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.
Leased assets
The Group’s operating leases with a term of more than 12 months, unless the underlying asset is of low value, are recognised
on the Balance Sheet as ‘ROU assets’, with the cost of the leases over time recognised as depreciation of the ROU asset.
The Group allocates the consideration in the contract to the lease and non-lease components based on their relative stand-
alone prices. However, for leases of real estate for which the Group is a lessee, it has elected not to separate lease and non-
lease components and instead accounts for these as a single lease component.
Right-of-use assets are generally depreciated over the shorter of the asset’s useful life and the lease term on a straight-
line basis. If the Group is reasonably certain to exercise a purchase option, the right-of-use asset is depreciated over the
underlying asset’s useful life.
Significant accounting judgements, estimates and assumptions
Some leases contain extension options exercisable by the Group up to one year before the end of the non-cancellable
contract period. The Group assesses at lease commencement date whether it is reasonably certain to exercise the
extension options. The Group reassesses whether it is reasonably certain to exercise the options if there is a significant
event or significant change in circumstances within its control.
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112
Boral Limited Annual Report 2020
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 (see Note 3.5).
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
(see Note 3.5).
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:
Trade names
Fly ash
contracts
Customer
relationships
Other
Estimated useful lives – years
2 to Indefinite
10 – 20
5 – 20
3 – 19
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 $98.1 million (2019: $131.1 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 and impairment
Total
Reconciliation of movements in goodwill
Balance at the beginning of the year
Acquisitions of entities or operations
Disposal of entities or operations
Impairment disclosed as significant items
Net foreign currency exchange differences
Balance at the end of the year
2020
$m
1,199.7
1,324.9
(301.4)
1,023.5
2,223.2
2019
$m
2,230.2
1,287.7
(145.1)
1,142.6
3,372.8
2,230.2
2,159.9
-
-
(1,068.7)
38.2
1,199.7
4.2
(44.1)
-
110.2
2,230.2
113
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t
s
3.4 Intangible assets (continued)
Reconciliation of movements in other intangible assets
As at 30 June 2020
Trade names
$m
Fly ash
contracts
$m
Customer
relationships
$m
Other
$m
Total
$m
Balance at the beginning of the year
145.5
468.0
509.5
19.6
1,142.6
Additions
Impairment disclosed as significant items
Amortisation expense
Net foreign currency exchange differences
-
(35.2)
(1.8)
4.8
-
-
(27.5)
9.0
3.7
(44.2)
(32.2)
7.6
-
-
(3.7)
0.4
3.7
(79.4)
(65.2)
21.8
Balance at the end of the year
113.3
449.5
444.4
16.3
1,023.5
At cost
Less: Accumulated amortisation
Balance at the end of the year
158.4
(45.1)
113.3
533.8
(84.3)
449.5
588.0
(143.6)
444.4
44.7
(28.4)
16.3
1,324.9
(301.4)
1,023.5
As at 30 June 2019
Trade names
$m
Fly ash
contracts
$m
Customer
relationships
$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
Other
$m
15.9
6.3
-
(3.0)
0.4
Total
$m
1,235.2
6.3
(95.9)
(63.9)
60.9
Balance at the end of the year
145.5
468.0
509.5
19.6
1,142.6
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
44.3
(24.7)
19.6
1,287.7
(145.1)
1,142.6
114
Boral Limited Annual Report 2020
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 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.
Management has incorporated consideration of the significant uncertainty of the short- and long-term impacts
of COVID-19 on our businesses and the economies in which they operate into the judgements and assumptions
considered to calculate recoverable amounts for non-financial assets in the current year.
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
1. Relates to multiple business units, which are not considered to be individually significant.
2020
$m
1,107.9
91.8
1,199.7
2019
$m
2,136.9
93.3
2,230.2
115
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3.5 Carrying value assessment (continued)
Impairment testing for cash generating units containing goodwill (continued)
(i) North America
The North American segment contains goodwill that primarily 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, covering a period of four years, determined by discounting the future
cash flows to be generated from the continuing use of the aggregated CGUs.
Key assumptions applied to the value in use model relate to:
Key assumption
Basis for determining value in use assigned to key assumption
Cash flow
Estimated future cash flows have been modeled taking into account:
• the uncertainty of the short- and long-term effects of the COVID-19 pandemic on the US economy;
• US housing starts with the model largely aligned to independent economists’ forecasts for the
discrete period and the average over the last 30 years, which is 1.3 million housing starts, for the
terminal year;
• other US construction segments including non-residential, repair and remodel activity and
infrastructure activity has been largely aligned to recent historical experience and independent
economists’ forecasts;
• fly ash availability based on forecast coal consumption across our contract base; and
• current and historical performance of the businesses.
Discount rate
The discount rate applied to pre-tax cash flows was 10.9% (2019: 10.1%). The Group has adjusted the
discount rate in the current year to reflect the increased market volatility and the uncertainties relating
to the impact and timing of the COVID-19 pandemic.
Terminal value
growth rate
The terminal growth rate used in the model was 2% (2019: 2.5%), which aligns with independent
economists’ forecasts and does not exceed the long-term average growth rates for the industries in
which the businesses operate.
The values assigned to each assumption represents management’s assessment of future performance of our businesses as
well as taking into account the significant uncertainty of the short- and long-term effects of the pandemic on the
US economy.
The carrying amount of the aggregated CGUs was determined to be higher than its recoverable amount of $3,262.8 million
and an impairment loss of $1,066.8 million was recognised. The impairment loss was fully allocated to goodwill and included
in Other Expenses in the Income Statement.
Following the impairment loss recognised, the aggregate recoverable value of the CGUs was equal to the carrying amount.
Therefore, any adverse movement in a key assumption would lead to further impairment, however, in light of the significant
uncertainty, the Group has prepared recoverable value sensitivities on each key assumption in isolation in the table below.
Key assumptions
Sensitivity
Cash flow
Discount rate
Terminal value growth rate
5% decrease in cash flow
50 basis point increase
20 basis point decrease
Financial impact
$m
(151.2)
(210.0)
(73.8)
116
Boral Limited Annual Report 2020
Section 3: Operating assets and liabilities (continued)
3.5 Carrying value assessment (continued)
Impairment testing for cash generating units containing goodwill (continued)
(ii) Construction Materials Western Region
Underperformance of the business in the current year, particularly the second half of FY2020, which was primarily driven
by lower construction activity, competitive pricing pressures and production curtailments resulting in lower fixed cost
recovery, and the potential short- and longer-term impact of prevailing economic conditions, triggered an assessment of the
recoverability of the carrying value of the CGU. A value in use methodology was used to determine the recoverable amount
of the CGU totalling $87 million, leading to an impairment loss of $67.1 million, with $1.9 million relating to goodwill and
$65.2 million relating to property, plant and equipment that was recorded and included in Other Expenses in the
Income Statement.
The key assumptions used in the model were a cash flow projection period of nine years, a pre-tax discount rate of 11.4%,
a long-term growth rate of 2.5% and regional construction activity aligned to future estimates prepared by reputable third
parties. These assumptions have been determined with reference to current and historical performance and taking into
account independent economists’ forecasts. As the individual assets have been written down to their recoverable value that
has been separately calculated, any adverse change in the value in use model assumptions in isolation or combination would
not impact the amount of impairment recognised.
Impairment testing for other cash generating units
(i) Building Products Australia (Timber and Roofing)
Underperformance of the businesses in the current year, particularly the second half of FY2020, which was primarily driven
by the significant downturn in the Australian housing market, particularly New South Wales, and the potential longer-term
impact of prevailing economic conditions and lower immigration, triggered an assessment of the recoverability of the
carrying value of the Building Products CGUs. In addition, the Timber business underperformance was amplified by the
bushfires in the second half of the current year, which impacted more than 50% of the forest under contract resulting in
a force majeure on both of our major supply contracts that may have long-term ramifications around log supply, mix and
quality. A value in use methodology was used to determine the recoverable amount of each CGU totalling $62 million for
Timber and $37.4 million for Roofing, leading to an impairment loss of $56.1 million relating to property, plant and equipment
that was recorded and included in Other Expenses in the Income Statement.
The key assumptions used in the model were a cash flow projection period of nine years, a pre-tax discount rate of 11.4%,
a long-term growth rate of 2.5% and housing forecasts aligned to future estimates prepared by reputable third parties.
These assumptions have been determined with reference to current and historical performance and taking into account
independent economists’ forecasts. As the individual assets have been written down to their recoverable value that has
been separately calculated, any adverse change in the value in use model assumptions in isolation or combination would not
impact the amount of impairment recognised.
(ii) Windows
Aligned to the key assumptions applied to the North America assessment, a value in use methodology was used to
determine the recoverable amount of the Windows CGU totalling $166.2 million, leading to an impairment loss of
$79.4 million relating to intangible assets that was recorded and included in Other Expenses in the Income Statement.
Following the impairment loss recognised, the recoverable value of the CGU is equal to the carrying value amount.
Therefore, any adverse movement in a key assumption would lead to further impairment.
117
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3.6 Provisions
A provision is recognised in the Balance Sheet when:
•
•
•
the Group 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; and
• 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, legal 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.
118
Boral Limited Annual Report 2020
Section 3: Operating assets and liabilities (continued)
3.6 Provisions (continued)
Rationalisation
and restructuring
$m
16.5
-
16.5
32.5
-
Restoration
and
environmental
rehabilitation
$m
Claims
$m
Other
$m
Total
$m
56.9
-
56.9
7.8
-
(24.8)
(10.9)
-
0.2
24.4
24.4
-
24.4
-
1.1
54.9
17.6
37.3
54.9
89.2
33.0
122.2
13.4
5.2
(6.9)
-
0.4
134.3
19.2
115.1
134.3
5.5
-
5.5
-
-
(3.3)
(0.2)
-
2.0
1.9
0.1
2.0
168.1
33.0
201.1
53.7
5.2
(45.9)
(0.2)
1.7
215.6
63.1
152.5
215.6
Rationalisation
and restructuring
Claims1
Restoration
and
environmental
rehabilitation
Other
Total1
$m
$m
$m
$m
$m
10.1
7.6
-
(1.7)
-
0.5
16.5
16.5
-
16.5
61.0
5.4
-
(21.6)
9.2
2.9
56.9
15.5
41.4
56.9
103.7
(13.3)
3.8
(8.5)
2.6
0.9
89.2
15.0
74.2
89.2
29.3
204.1
(3.9)
-
(8.3)
(11.8)
0.2
5.5
2.5
3.0
5.5
(4.2)
3.8
(40.1)
-
4.5
168.1
49.5
118.6
168.1
As at 30 June 2020
Reconciliations
Balance at the beginning of the year
Transition impact from implementation of AASB 16
Revised 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
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
1. Refer Note 1d for further details.
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 2020 is $26.8 million
(2019: $48.7 million) with the majority expected to be recognised as Revenue in the next financial year given the nature of
the projects.
119
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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 Interest bearing liabilities
Interest bearing liabilities include loans, borrowings and lease liabilities. 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. Borrowings are classified as currrent liabilities unless the Group has an
unconditional right to defer settlement of the liability for at least 12 months after the balance sheet date. See Note 1c for
accounting policies on lease liabilities.
Current
Loans – unsecured
Other loans
Lease liabilities
Non-current
Loans – unsecured
Other loans
Lease liabilities
Total
2020
$m
9.0
5.3
91.7
106.0
3,084.6
2.0
291.4
3,378.0
3,484.0
2019
$m
336.6
-
3.1
339.7
2,057.8
-
3.0
2,060.8
2,400.5
Term and debt repayment schedule
Terms and conditions of outstanding loans were as follows:
Effective
interest rate
2020
Calendar year
of maturity
Currency
30 June 2020
30 June 2019
Carrying
amount
$m
Fair value
$m
Carrying
amount
$m
Fair value
$m
Current
US senior notes – private placement
– unsecured
CHF notes – unsecured
Bank loans – unsecured
Other loans
Non-current
US senior notes – private placement
– unsecured
US senior notes – 144A/Reg S
– unsecured
Bank loans – unsecured
Other loans
Total
USD
CHF
GBP
USD
2.99%
2021
3.49% 2020-2021
-
-
9.0
5.3
14.3
-
-
9.0
5.3
14.3
108.6
219.0
9.0
-
336.6
112.9
223.3
9.0
-
345.2
USD
4.01% 2025-2030
1,011.3
1,223.8
708.1
808.2
USD
USD
USD
3.39% 2022-2028
2024
3.07%
2022
3.49%
1,396.1
677.2
2.0
3,086.6
1,600.7
677.2
2.0
3,503.7
1,349.7
-
-
2,057.8
1,486.6
-
-
2,294.8
3,100.9
3,518.0
2,394.4
2,640.0
120
Boral Limited Annual Report 2020
Section 4: Capital and financial structure (continued)
4.1 Interest bearing liabilities (continued)
US SENIOR NOTES – PRIVATE PLACEMENT – UNSECURED
Borrower
Boral Limited
Boral Limited
Boral Limited
Boral Industries Inc.
Boral Industries Inc.
Boral Industries Inc.
Boral Industries Inc.
Total
Notional amount
US$m
Issue date
Interest rate
Maturity date
AUD equivalent
$m
135.0
41.0
24.0
225.0
75.0
100.0
100.0
700.0
05/2015
05/2015
03/2015
04/2018
04/2018
05/2020
05/2020
4.01%
4.16%
4.31%
4.05%
2.44%
4.40%
4.58%
05/2025
05/2027
03/2030
04/2026
04/2026
05/2025
05/2027
193.4
58.6
34.2
326.3
108.8
145.0
145.0
1,011.3
US SENIOR NOTES – 144A/REG S – UNSECURED
Notional amount
US$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
656.3
739.8
1,396.1
Borrower
Boral Finance Pty Ltd
Boral Finance Pty Ltd
Total
BANK FACILITIES
Bilateral facilities
The Group entered into new committed two-year bilateral loan facilities totalling A$250 million and US$75 million on
28 May 2020, maturing in May 2022. The facilities were undrawn as at 30 June 2020. The Group also entered into new
committed bilateral loan facilities totalling US$740 million on 28 May 2020, maturing June 2024. The facilities were partially
drawn by US$467 million as at 30 June 2020. These facilities replaced the Company’s US$750 million debt facility that was
due to mature in July 2021.
US senior notes – private placement
The Group issued US$200 million of private placement senior notes in May 2020 with US$100 million maturing in 2025 and
US$100 million maturing in 2027. The proceeds were used to refinance the CHF150 million of Euro Medium Term Notes that
matured in February 2020 and the US$76.2 million of private placement senior notes that matured in April 2020.
Acquisition loan facility
The US$1 billion acquisition syndicated loan facility that was put in place for completing the transaction with Knauf, was
replaced by a US$400 million acquisition syndicated loan facility in December 2019. The Group allowed the facility to lapse
in March 2020 given that the regulatory approvals required to allow the transaction to complete would not be achieved by the
transaction’s sunset date.
Bank overdraft and other
The Group operates unsecured bank overdraft facility arrangements in Australia and the USA that have combined limits of
A$20.5 million (2019: A$20.2 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.
The Group has complied with the borrowing covenants throughout the year ended 30 June 2020.
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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.
122
Boral Limited Annual Report 2020
Section 4: Capital and financial structure (continued)
4.2 Financial risk management (continued)
Hedge accounting
The London Interbank Offer Rate (LIBOR) plays a critical role in the global financial markets as a reference rate to price
financial products such as corporate loans, derivative hedging transactions and various securities.
USD LIBOR is expected to be discontinued and replaced by an alternative benchmark rate by the end of December 2021 as
a result of the regulatory reform on benchmark rates.
The Group borrows in USD with interest payments referenced to USD LIBOR. The Group also holds interest rate swaps
and cross currency swaps for risk management purposes, which are designated in fair value hedge and cash flow hedge
relationships against the loans exposed directly or indirectly to USD LIBOR.
As at 30 June 2020, the notional value of the Group’s derivative hedging transactions exposed to USD LIBOR is
US$400 million.
The IBOR reform creates uncertainty as to when the replacement will occur and how replacement will impact the cash flows
of the relevant hedged items and hedging instruments. Such uncertainty may impact hedge accounting relationships, such
as the effectiveness assessment and the highly probable criteria.
The Group has elected to early adopt AASB 2019-3 Amendments to Australian Accounting Standards – Interest Rate
Benchmark Reform issued by AASB in October 2019. The amendments provide relief to all hedging relationships affected by
the reform.
The Group’s derivative hedging instruments are governed by the International Swaps and Derivatives Association’s (ISDA)
Master Agreement. The Group is monitoring the recent developments of ISDA and international regulators to assess the
impact of the new benchmark risk free rates on loans and derivative hedging transactions and is actively engaging with
lenders and derivative counterparties on application of relevant fall-back provisions.
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 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 million total credit exposure.
For information on the management of credit risk relating to trade and other receivables, see Note 3.1.
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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
2020
$m
Carrying
amount
2019
$m
18.6
804.6
904.4
33.1
18.1
887.1
207.2
34.8
1,760.7
1,147.2
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 Fair value
$m
$m
Contractual
cash flows
$m
6 months
or less
$m
6-12
months
$m
1-2 years
$m
2-5 years
$m
More than
5 years
$m
0.2
26.2
0.3
0.6
0.2
26.2
0.3
0.6
0.2
26.7
0.3
0.6
0.2
1.7
-
-
-
2.8
-
-
27.3
27.3
27.8
1.9
2.8
-
5.9
0.2
0.6
6.7
-
9.9
0.1
-
-
6.4
-
-
10.0
6.4
Carrying
amount Fair value
$m
$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
30 June 2020
Derivative financial assets
Forward exchange contracts1
Interest rate swaps2
Cross currency swaps2
Commodity swaps1
30 June 2019
Derivative financial assets
Forward exchange contracts1
Interest rate swaps2
Commodity swaps/options1
1. Designated as cash flow hedges.
2. Designated as fair value hedges.
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 to the sum of Total Debt plus Committed Undrawn Facilities > 1 year, is not to
exceed 20%; and
(c) Committed Undrawn Facilities plus cash exceeds A$500 million.
124
Boral Limited Annual Report 2020
Section 4: Capital and financial structure (continued)
4.2 Financial risk management (continued)
LIQUIDITY RISK (continued)
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
1,011.3
(1,249.4)
(13.7)
(19.9)
(39.8)
(264.7)
(911.3)
1,396.1
(1,739.9)
(16.5)
(24.8)
(49.5)
677.2
(677.2)
9.0
7.3
383.1
728.8
(9.0)
(7.3)
(445.5)
(728.8)
4,212.8
(4,857.1)
0.7
14.0
25.6
40.3
(0.7)
(14.0)
(33.7)
(48.4)
-
(9.0)
-
(49.4)
(728.8)
(817.4)
(0.7)
(7.0)
(0.5)
(8.2)
-
-
(5.3)
(49.3)
-
(761.8)
(677.2)
-
-
(887.3)
-
-
-
-
-
(2.0)
(85.0)
(129.0)
(132.8)
-
-
-
(99.3)
(176.3)
(1,832.7)
(1,931.4)
-
(4.6)
(0.9)
(5.5)
-
(2.3)
(2.5)
(4.8)
-
(0.1)
(20.6)
(20.7)
-
-
(9.2)
(9.2)
4,253.1
(4,905.5)
(825.6)
(104.8)
(181.1)
(1,853.4)
(1,940.6)
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
816.7
219.0
(1,011.5)
(11.0)
(126.5)
(27.7)
(83.5)
(762.8)
(222.3)
-
(222.3)
-
-
-
1,349.7
(1,758.3)
(16.2)
(24.3)
(48.6)
(767.9)
(901.3)
9.0
6.1
(9.0)
(6.5)
(9.0)
(1.6)
832.6
(832.6)
(832.6)
-
(1.7)
-
-
(2.0)
-
-
(1.2)
-
-
-
-
3,233.1
(3,840.2)
(870.4)
(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)
30 June 2020
Non-derivative financial liabilities
US senior notes – private placement –
unsecured
US senior notes – 144A/Reg S –
unsecured
Bank loans – unsecured
Bank loans – unsecured
Other loans
Lease liabilities
Trade creditors
Derivative financial liabilities
Forward exchange contracts1
Commodity swaps1
Cross currency swaps1
30 June 2019
Non-derivative financial liabilities
US senior notes – private placement –
unsecured
CHF notes – unsecured
US senior notes – 144A/Reg S –
unsecured
Bank loans – unsecured
Lease liabilities
Trade creditors
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.
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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$0.5 million must be 100% hedged at the time of
capital expenditure approval.
(c) Net investments, including net intercompany loans, in overseas domiciled investments are hedged, where regulatory
conditions and available hedge instruments permit.
The Group uses forward exchange contracts to hedge foreign exchange risk. Most of the forward exchange contracts have
maturities of less than one year. Where necessary and in accordance with policy compliance, forward exchange contracts
can be rolled over at maturity.
(i) Translation risk
Foreign currency translation risk is the risk that upon consolidation for financial reporting the value of the Group’s investment
in foreign domiciled entities will fluctuate due to changes in foreign currency rates.
The Group uses foreign currency denominated borrowings and cross currency swaps to hedge the Group’s net investment
in overseas domiciled assets. The related exchange gains/losses on foreign currency movements are taken to the Foreign
Currency Translation Reserve.
The table below shows the Group’s net exposure to translation risk. The Group’s investment in foreign operations is partially
offset against foreign currency borrowings, reducing the Group’s overall exposure to translation risk. Amounts below are
calculated based on notional amounts:
Currency
30 June 2020
Balance sheet
USD
CAD
Notional A$ equivalent ($m)2
Euro
GBP
Multi1
Net investment in overseas domiciled entities
2.398.2
Foreign currency borrowings
(1,087.6)
1,310.6
61.3
-
61.3
1.8
-
1.8
6.5
(9.0)
(2.5)
723.0
-
723.0
Currency
30 June 2019
Balance sheet
USD
CAD
Notional A$ equivalent ($m)2
Euro
GBP
Multi1
Net investment in overseas domiciled entities
4,100.4
62.6
Foreign currency borrowings
Cash
(1,880.6)
21.7
-
-
2,241.5
62.6
1.8
-
2.2
4.0
6.8
(9.0)
0.1
(2.1)
729.0
-
-
729.0
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.
126
Boral Limited Annual Report 2020
Section 4: Capital and financial structure (continued)
4.2 Financial risk management (continued)
FOREIGN CURRENCY RISK (continued)
(ii) Transaction risk
Foreign currency transaction risk is the risk that the value of financial commitments, recognised monetary assets or liabilities
or cash flows will fluctuate due to changes in foreign currency rates.
The Group’s foreign currency transaction risk is managed through the use of forward exchange contract derivatives. A
forward exchange contract is an agreement between two parties to exchange two currencies at a given exchange rate at
some point in the future with the aim of mitigating foreign currency transaction risk.
Based on notional amounts, the forward exchange contracts taken out to hedge foreign exchange transactional risk at
balance date were as follows:
Notional amount AUD1
Average exchange rate
2020
$m
2019
$m
2020
2019
US dollars
Buy USD/sell AUD – One year or less
64.4
104.9
0.6863
0.7110
Euros
Buy EUR/sell AUD – One year or less
9.1
20.1
0.6070
0.6115
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.
The unhedged foreign currency payables and receivables were $7.2 million at 30 June 2020 (2019: nil). The related exchange
gains/losses on foreign currency movements are taken to the Income Statement.
Sensitivity
At 30 June 2020, 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 $11.2 million
in 2020 (2019: $0.4 million) and equity would have increased/decreased respectively by around equivalent A$211.2 million
(2019: equivalent A$191.5 million).
The following significant exchange rates applied during the year:
USD
Euro
GBP
CAD
Average rate
Reporting date spot rate
2020
2019
2020
2019
0.6703
0.6059
0.5315
0.9000
0.7145
0.6267
0.5526
0.9450
0.6896
0.6142
0.5570
0.9372
0.7018
0.6170
0.5527
0.9183
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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 eight 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.
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:
2020
2019
Carrying amount Notional amount5 Carrying amount Notional amount5
$m
2020
2019
$m
$m
$m
Fixed rate instruments
US senior notes – private placement – unsecured
CHF notes – unsecured4
US senior notes – 144A/Reg S – unsecured1
Other loans
Lease liabilities
Variable rate instruments
Bank loans – unsecured
Bank loans – unsecured
US senior notes – private placement – unsecured
Pay variable interest rate derivatives
Interest rate swap pay floating US$ LIBOR2
Cross currency swap pay floating A$ BBSW3
Other interest rate derivatives
Cross currency swap pay fixed US$/
receive fixed CHF4
902.5
-
1,396.1
7.3
383.1
2,689.0
9.0
677.2
108.8
795.0
906.3
-
1,377.6
7.3
383.1
2,674.3
9.0
677.2
108.8
795.0
3,484.0
3,469.3
709.8
219.0
1,349.7
-
6.1
714.2
219.1
1,353.7
-
6.1
2,284.6
2,293.1
9.0
-
106.9
115.9
2,400.5
9.0
-
106.9
115.9
2,409.0
526.9
-
526.9
(26.2)
25.3
(0.9)
290.0
602.4
892.4
(5.9)
-
(5.9)
-
-
21.1
219.1
1. US$300 million (equivalent A$451.7 million) fixed rate notes due November 2022 and US$100 million (equivalent A$150.7 million) fixed rate
due May 2028 have been swapped to AUD floating rate via interest rate swaps and cross currency swaps.
2. US$200 million (equivalent A$290 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 in October 2017.
3. US$200 million fixed rate notes due November 2022 and May 2028, which were previously swapped to USD floating rate via interest rate
swaps, have been swapped to AUD floating rate (equivalent A$301.3 million) and US$200 million fixed rate notes due November 2022 and
May 2028 have been swapped to AUD floating rate (equivalent A$301.1 million) via cross currency swaps in May 2020.
4. In the prior year, CHF150 million (equivalent A$219 million) fixed rate notes were swapped to USD floating rate via cross currency swaps
and interest rate swaps. The borrowing was repaid in February 2020, at which time the cross currency swaps and interest rate swaps
also matured.
5. The notional amount shows the principal face value for each instrument.
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Section 4: Capital and financial structure (continued)
4.2 Financial risk management (continued)
INTEREST RATE RISK (continued)
The ineffective portion of the hedges transferred to the Income Statement was a $0.2 million gain in 2020 due to the unwind
of credit and execution charge cost of hedge on the interest rate swaps and cross currency swaps (2019: $0.2 million loss).
Sensitivity
At 30 June 2020, 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$0.8 million higher/lower (2019: A$0.9 million) and the change in equity
would have been A$3.4 million (2019: A$1.6 million) mainly as a result of a higher/lower interest cost applying to interest
rate derivatives.
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
Newcastle Coal
Electricity
2020
Notional $A
equivalent1
$m
2020
Fair value/
Carrying amount
$m
2019
Notional $A
equivalent1
$m
2019
Fair value/
Carrying amount
$m
41.8
6.3
30.9
(7.8)
(0.4)
(5.2)
17.8
4.1
14.7
(0.6)
(0.6)
2.4
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. There was no ineffective portion of the hedges transferred to the Income Statement in 2020.
The $1.0 million loss in 2019 is due to amortisation of the premium paid on options.
Sensitivity
At 30 June 2020, 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 have been unchanged (2019: unchanged) and the change in equity
would have been $6.0 million (2019: $4.0 million).
129
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4.2 Financial risk management (continued)
FAIR VALUE
The fair value of all financial instruments approximates their 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
Interest rate swaps
Cash, deposits, loans and
receivables, payables and
short‑term borrowings
Long‑term borrowings
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.
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
130
Boral Limited Annual Report 2020
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 2020 plus an adequate
credit spread to discount financial instruments. The interest rates used are as follows:
Derivatives
Loans and borrowings
Leases
THE FAIR VALUE HIERARCHY
2020
% pa
2019
% pa
1.28 – 3.66
3.25 – 4.76
2.44 – 4.58
2.25 – 7.22
1.70 – 7.22
2.73 – 6.89
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:
Level 1
Level 2
Assets
Equity securities
Derivative financial assets
Total assets
Liabilities
Derivative financial liabilities
Total liabilities
2020
$m
33.1
-
33.1
-
-
2019
$m
34.8
-
34.8
-
-
2020
$m
-
27.3
27.3
40.3
40.3
2019
$m
-
10.6
10.6
23.8
23.8
The Group does not have financial instruments that have been valued at Level 3.
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4.3 Issued capital
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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.
2020
$m
2019
$m
Issued and paid up capital
1,225,653,798 (2019: 1,172,331,924) ordinary shares, fully paid
4,376.4
4,265.1
Movements in ordinary issued capital
Balance at the beginning of the year
14,407,567 shares issued under the Dividend Reinvestment Plan
38,914,307 shares issued under the Dividend Reinvestment Plan
underwriting agreement
Balance at the end of the year
4,265.1
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134
Boral Limited Annual Report 2020
Section 4: Capital and financial structure (continued)
4.4 Reserves
Foreign currency translation reserve (FCTR)
Exchange differences arising on translation of foreign operations are recognised in FCTR, together with foreign exchange
differences from the translation of liabilities that hedge the Group’s net investment in a foreign operation. Gains or losses
accumulated in equity are recognised in the Income Statement when a foreign operation is disposed.
Balance at the beginning of the year
Net gain on translation of assets and liabilities of overseas entities
Translation of share of equity accounted other comprehensive income
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 $18.2 million (2019: $27.8 million)
Balance at the end of the year
Hedging reserve
2020
$m
299.5
91.4
(20.5)
Restated1
2019
$m
116.2
252.5
6.3
-
(10.8)
(42.6)
327.8
(64.7)
299.5
The hedging reserve records the portion of the gain or loss on a hedging instrument in a cash flow hedge that is determined to
be an effective hedge relationship.
Balance at the beginning of the year
Transferred to the Income Statement
Transferred to initial carrying amount of hedged item
Loss taken directly to equity
Tax benefit
Balance at the end of the year
(5.8)
(1.5)
0.1
(7.5)
2.7
(12.0)
Share-based payments reserve
The share-based payments reserve is used to recognise the fair value of options and rights recognised as an expense.
5.3
(7.1)
(0.4)
(8.4)
4.8
(5.8)
35.3
9.5
(7.5)
37.3
37.3
5.8
(2.0)
41.1
356.9
331.0
Balance at the beginning of the year
Option/rights expense
Share acquisition rights vested
Balance at the end of the year
Total Reserves
1. Refer Note 1d for further details.
135
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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 primarily subject to income taxes in Australia and North America. In determining the amounts 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 amounts of other tax losses and temporary differences not yet recognised.
136
Boral Limited Annual Report 2020
Section 5: Taxation (continued)
5.1 Income tax expense (continued)
For the year ended 30 June
Note
(i) Income tax expense
Current income tax expense
Deferred income tax expense/(benefit)
Changes in estimate from prior years
Income tax expense/(benefit) attributable to profit
(ii) Reconciliation of income tax expense/(benefit) to prima facie tax
Income tax expense on profit:
– at Australian tax rate 30%
– adjustment for difference between Australian and overseas tax rates
Income tax (benefit)/expense on pre-tax profit at standard rates
Tax effect of amounts that 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
Other items
Income tax (benefit)/expense on profit
Changes in estimate from prior years
Income tax (benefit)/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/(benefit) from discontinued operations
Income tax benefit excluding significant items
Income tax expense relating to significant items
(iii) Tax amounts recognised directly in equity
The following deferred tax amounts were charged/(credited) directly to
equity during the year in respect of:
Net exchange differences taken to equity
Fair value adjustment on cash flow hedges
Recognised in comprehensive income
1. Refer Note 1d for further details.
2.1
2.1
6.1
2020
$m
9.1
(69.7)
(2.5)
(63.1)
(360.5)
48.1
(312.4)
(17.2)
(8.6)
275.3
(0.6)
2.9
(60.6)
(2.5)
(63.1)
27.6
(88.5)
(60.9)
(2.2)
-
(2.2)
(63.1)
(18.2)
(2.7)
(20.9)
Restated1
2019
$m
52.7
26.8
5.8
85.3
100.8
0.6
101.4
(30.3)
(22.3)
38.5
(2.3)
(5.5)
79.5
5.8
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110.9
(36.8)
74.1
(0.6)
11.8
11.2
85.3
(27.8)
(4.8)
(32.6)
137
i
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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.
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
2020
$m
145.5
(14.1)
131.4
Restated1
2019
$m
78.7
(43.1)
35.6
The potential deferred tax asset has not been taken into account in respect of
tax losses where recovery is not probable
50.8
56.9
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
Expiry date
Australia
Germany
United Kingdom2
No restriction
No restriction
No restriction
United States of America
30 June 2029 – 30 June 2037
1. Refer Note 1d for further details.
2. Unrecognised capital losses.
2020
$m
12.0
42.2
41.8
102.4
2019
$m
-
44.5
42.1
137.0
138
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Section 5: Taxation (continued)
5.2 Deferred tax assets and liabilities (continued)
Movement in temporary differences during the year
Balance at
the beginning
of the year
$m
Transition
impact from
implementation
of AASB16
$m
Recognised
in income
$m
Recognised
in equity
$m
Other
movements
$m
Balance at
the end
of the year
$m
2.0
2.8
18.2
(77.5)
(211.6)
15.8
(1.7)
80.6
(28.9)
33.0
202.9
35.6
-
-
-
(34.7)
-
-
36.9
3.8
1.1
-
-
7.1
(0.8)
(1.9)
(15.5)
40.0
36.1
(12.4)
4.2
(4.0)
12.9
(3.5)
14.6
69.7
-
-
2.7
-
-
-
-
-
-
18.2
-
20.9
-
-
-
(0.7)
(4.7)
-
-
0.3
-
-
3.2
(1.9)
1.2
0.9
5.4
(72.9)
(180.2)
3.4
39.4
80.7
(14.9)
47.7
220.7
131.4
Balance at
the beginning
of the year1
$m
Transition
impact from
implementation
of AASB 16
$m
Recognised
in income
$m
Recognised
in equity
$m
Other
movements
$m
Balance at
the end
of the year1
$m
2.2
1.3
11.1
(79.7)
(258.4)
13.6
(1.9)
109.4
(12.9)
7.8
239.2
31.7
-
-
-
-
-
-
-
-
-
-
-
-
(0.2)
1.5
2.3
2.6
61.6
2.2
0.2
(30.0)
(16.1)
(2.6)
(48.3)
(26.8)
-
-
4.8
-
-
-
-
-
-
27.8
-
32.6
-
-
-
(0.4)
(14.8)
-
-
1.2
0.1
12.0
(1.9)
2.0
2.8
18.2
(77.5)
(211.6)
15.8
(1.7)
80.6
(28.9)
33.0
202.9
35.6
As at 30 June 2020
Receivables
Inventories
Other financial instruments
Property, plant and equipment
Intangible assets
Payables
Interest bearing liabilities
Provisions
Other
Unrealised foreign exchange
Tax losses carried forward
As at 30 June 2019
Receivables
Inventories
Other financial instruments
Property, plant and equipment
Intangible assets
Payables
Interest bearing liabilities
Provisions
Other
Unrealised foreign exchange
Tax losses carried forward
1. Refer Note 1d for further details.
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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 announced the divestment of its Midland Brick business in Western Australia with
expected completion during the next financial year.
The earnings in the current and comparative periods for this business have been reclassified to “Discontinued Operations”
in the Income Statement, and are summarised below. The comparatives include the discontinued operations relating to the
Concrete and Quarries business in Denver, Colorado and the US Block business.
Restated1
2019
$m
2020
$m
Note
Results of discontinued operations
Revenue
Expenses
Trading loss before significant items, net interest expense and income tax
Net profit on sale of discontinued operations
Profit/(loss) before net interest expense and income tax
Net interest expense
Profit/(loss) before income tax
Income tax benefit/(expense)
Net profit/(loss)
Cash flows from discontinued operations
Net cash (used in)/provided by operating activities
Net cash provided by investing activities
Net cash used in financing activities
Net cash provided by discontinued operations
Assets and liabilities classified as held for sale
Receivables
Inventories
Property, plant and equipment
Other assets
Assets classified as held for sale
Trade creditors
Interest bearing liabilities
Employee benefit liabilities
Provisions
Liabilities classified as held for sale
Net assets
1. Refer Note 1d for further details.
2.1
5.1
123.0
(124.4)
(1.4)
69.6
68.2
-
68.2
(11.2)
57.0
5.0
371.0
-
376.0
57.0
(64.7)
(7.7)
-
(7.7)
-
(7.7)
2.2
(5.5)
(0.2)
8.6
(1.3)
7.1
2020
$m
7.1
43.8
32.8
0.5
84.2
(4.9)
(1.5)
(3.7)
(0.2)
(10.3)
73.9
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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.
OWNERSHIP INTEREST
INVESTMENT
CARRYING AMOUNT
Principal
activity
Country of
incorporation date
Balance
2020
%
2019
%
2020
$m
2019
$m
Name
Details of equity accounted
investments
Bitumen Importers Australia Pty Ltd
Flyash Australia Pty Ltd
Highland Pine Products Pty Ltd
Meridian Brick1
Bitumen
importer
Fly ash
collection
Timber
Bricks
Australia
30-Jun
Australia
Australia
31-Dec
30-Jun
USA/Canada 30-Jun
Penrith Lakes Development
Corporation Ltd
Property
development Australia
South East Asphalt Pty Ltd
Asphalt
Australia
Sunstate Cement Ltd
Cement
manufacturer Australia
USG Boral Building Products2
Plasterboard
Australia/
Singapore
US Tile LLC3
TOTAL
Roof tiles
USA
30-Jun
30-Jun
30-Jun
30-Jun
31-Dec
50
50
50
50
40
50
50
50
-
50
50
50
50
40
50
50
50
50
11.9
6.8
2.1
-
3.1
-
154.0
228.6
-
1.5
-
1.3
5.4
11.1
1,034.8
1,041.1
-
-
1,209.7
1,292.0
1. The Group has a 50% interest in the joint ventures in the USA (Meridian Brick LLC) and Canada (Meridian Brick Canada Ltd).
2. The Group has a 50% interest in the Gypsum joint ventures in Australia (USG Boral Building Products Pty Ltd) and Asia (USG Boral
Building Products Pte Ltd).
3. US Tile LLC was deregistered in July 2019.
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6.2 Equity accounted investments (continued)
Note
2020
$m
2019
$m
Movements in carrying value of equity accounted investments
Balance at the beginning of the year
Transition impact from implementation of AASB 16
Share of equity accounted income
Significant items
Dividends received
Results recognised against losses previously taken to non-current receivables
2.1
Share of movement in currency reserve
Net foreign currency exchange differences
Balance at the end of the year
1,292.0
1,411.3
(8.7)
39.4
(81.5)
(26.3)
0.4
(20.5)
14.9
-
73.1
(200.8)
(55.0)
(2.3)
6.3
59.4
1,209.7
1,292.0
Summarised Income Statement at 100%
Revenue
Profit before income tax
Income tax expense
Non-controlling interest
USG Boral
Building Products
Other
Total
Note
2020
$m
2019
$m
20201
$m
20192
$m
2020
$m
2019
$m
1,474.0 1,605.5
859.7
851.6
2,333.7 2,457.1
102.5
167.8
37.4
48.9
139.9
216.7
(45.0)
(50.6)
(8.9)
(14.9)
(53.9)
(65.5)
(7.5)
(3.8)
-
-
(7.5)
(3.8)
Net profit before significant items
50.0
113.4
28.5
34.0
78.5
147.4
Significant items net of tax
Net profit/(loss)
The Group’s share based on % ownership:
(9.6)
(10.4)
(153.4)
(391.2)
(163.0)
(401.6)
40.4
103.0
(124.9)
(357.2)
(84.5)
(254.2)
Net profit before significant items
25.0
56.7
14.4
16.4
39.4
73.1
Significant items net of tax
Net profit/(loss)
2.1
(4.8)
(5.2)
(76.7)
(195.6)
(81.5)
(200.8)
20.2
51.5
(62.3)
(179.2)
(42.1)
(127.7)
Income Statement items of equity accounted
investments at 100%
Depreciation and amortisation
Net interest expense
(110.2)
(83.6)
(4.5)
(0.4)
1. As the investment in the Meridian Brick CGU was written down to its value in use in the prior year, the forecast deterioration in US housing
starts and the uncertain long-term impacts of COVID-19 on the US economy 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 $76.7 million. The key assumptions used in the model were a post-tax discount rate of 10.5%, a
long-term growth rate of 2% and housing starts aligned to future estimates prepared by reputable third parties for the discrete period and
to the last thirty-year average for the terminal year. 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.
2. Underperformance of the business in FY2019, 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
Other
Total
2020
$m
2019
$m
2020
$m
2019
$m
2020
$m
2019
$m
565.4
591.2
218.4
283.0
783.8
874.2
1,940.2 1,901.0
489.8
526.1
2,430.0 2,427.1
2,505.6 2,492.2
708.2
809.1
3,213.8 3,301.3
(195.1)
(223.2)
(126.4)
(166.9)
(321.5)
(390.1)
(114.4)
(71.5)
(232.1)
(140.5)
(346.5)
(212.0)
(309.5)
(294.7)
(358.5)
(307.4)
(668.0)
(602.1)
(126.5)
(115.3)
-
-
(126.5)
(115.3)
2,069.6 2,082.2
349.7
501.7
2,419.3 2,583.9
The Group’s share of net assets based on % ownership
1,034.8 1,041.1
174.9
250.9
1,209.7 1,292.0
Balance Sheet items of equity accounted investments at 100%
Cash and cash equivalents
Current financial liabilities
Non-current financial liabilities
183.0
89.9
(40.9)
(17.5)
(14.8)
(12.9)
Statement of Comprehensive Income at 100%
Net profit
Other comprehensive income
Items that may be reclassified subsequently to
Income Statement:
Net exchange differences from translation of foreign
operations taken to equity
Total comprehensive income/(loss)
The Group’s share of total comprehensive income/(loss)
based on % ownership
USG Boral Building Products
2020
$m
2019
$m
40.4
103.0
(41.0)
(0.6)
12.6
115.6
(0.3)
57.8
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6.3 Controlled entities
The consolidated financial statements include Boral Limited (parent entity) and the following wholly owned subsidiaries,
unless stated otherwise, in the table below.
Country of
incorporation
Beneficial ownership by
Group
2020
%
Group
2019
%
Boral Limited
Boral Cement Limited >*
Barnu Pty Ltd*
Boral Building Materials Pty Ltd >*
Boral International Pty Ltd >*
Boral Concrete (1992) Ltd
Eldorado Stone Philippines, Inc.
Piedras Headwaters, S. de R.L. de C.V.
Boral USA <
Boral Construction Materials LLC
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
Evonik Headwaters LLP **
Boral Building Products Inc.
Headwaters Building Products Inc.
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.
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
Australia
Australia
Australia
Australia
Australia
Thailand
Philippines
Mexico
USA
USA
USA
USA
USA
USA
USA
USA
USA
USA
UK
USA
USA
USA
USA
USA
USA
USA
USA
USA
USA
USA
USA
USA
USA
USA
USA
USA
USA
Canada
USA
USA
USA
USA
USA
USA
USA
100
100
100
100
100
100
100
100
100
100
-
100
100
100
-
-
100
-
100
100
100
100
-
-
-
-
-
100
100
-
100
100
100
-
100
100
-
100
67
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
50
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
67
100
100
100
100
100
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Boral Limited Annual Report 2020
Section 6: Group structure (continued)
6.3 Controlled entities (continued)
Beneficial ownership by
Country of
incorporation
Group
2020
%
Group
2019
%
Boral Lifetile Inc.
Boral Roofing de Mexico, S. de R.L. de C.V.
Boral Roofing LLC
Gerard Roof Products, LLC
Metrotile Manufacturing, LLC
Boral Concrete Tile Inc.
Tile Service Company LLC
USA
Mexico
USA
USA
USA
USA
USA
E.U.M. Tejas De Concreto Servicios, S. de R.L. de C.V. Mexico
Boral (UK) Ltd
Tapco Europe Limited
Boral Investments BV
Boral Industrie GmbH
Boral Klinker GmbH
Boral Mecklenburger Ziegel GmbH
Boral Canada Ltd
Boral Investments Pty Ltd >*
Boral Construction Materials Ltd >*
Boral Resources (WA) Ltd >*
Boral Contracting Pty Ltd*
Boral Construction Related Businesses Pty Ltd >*
Boral Resources (Vic) Pty Ltd >*
Bayview Quarries Pty Ltd*
Boral Resources (Qld) Pty Ltd >*
Allen’s Asphalt Pty Ltd >*
Q-Crete Premix Pty Ltd >*
Boral Resources (NSW) Pty Ltd >*
Dunmore Sand & Soil Pty Ltd*
Boral Recycling Pty Ltd >*
De Martin & Gasparini Pty Ltd >*
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 >*
UK
UK
Netherlands
Germany
Germany
Germany
Canada
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
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6.3 Controlled entities (continued)
Boral Transport Ltd >*
Boral Corporate Services Pty Ltd
Bitupave Ltd >*
Boral Resources (Country) Pty Ltd >*
Pour Concrete Supply 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 >*
Beneficial ownership by
Country of
incorporation
Group
2020
%
Group
2019
%
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
> Granted relief by the Australian Securities and Investments Commission (ASIC) 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.
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Section 6: Group structure (continued)
6.3 Controlled entities (continued)
The following controlled entities were disposed of or deregistered during the financial year ended 30 June 2020:
Entities disposed:
McCanne Ditch and Reservoir Company
Entities deregistered:
Headwaters Resources Limited
Headwaters Services, LLC
Evonik Headwaters LLP
Global Climate Reserve Corporation
Boral CM Services LLC
Headwaters Incorporated
Quarry Stone, LLC
merged into Boral Resources LLC
merged into Boral Industries Inc.
merged into Headwaters Stone LLC
Eldorado Stone Operations, LLC
merged into Eldorado Stone LLC
Chihuahua Stone, LLC
merged into Eldorado Stone LLC
Stonecraft Manufacturing, LLC
merged into Eldorado Stone LLC
Eldorado Stone LLC
merged into Boral Stone Products LLC
The following controlled entities had name changes during the financial year ended 30 June 2020:
Name changes during the financial period:
Boral Concrete Contracting Pty Ltd
to
Pour Concrete Supply Pty Ltd
Date of disposal
Jan 2020
Date of deregistration
Dec 2019
Dec 2019
Jan 2020
Jun 2020
Dec 2019
Jun 2020
Jun 2020
Jun 2020
Jun 2020
Jun 2020
Jun 2020
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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.
Employee liabilities
Current
Non-current
2020
$m
119.7
43.4
163.1
2019
$m
118.7
46.1
164.8
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 $52.3 million (2019: $53.0 million).
7.3 Share-based payments
2020
$m
2019
$m
1,333.7
1,305.5
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, the 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.
148
Boral Limited Annual Report 2020
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 $2.13 per right, while SARs with a Return on Funds Employed (ROFE) target were valued at $3.58
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
2020
$4.25
0.67%
5.74%
25%
2019
$7.00
1.99%
4.50%
25%
In addition, SARs were issued during the year for Deferred Short-Term Incentives (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 $4.14 per right, being the volume weighted average price traded on the ASX over the five trading
days up to 1 September 2019.
Further details of the terms and conditions of the issue of rights are contained in the Remuneration Report.
Set out below are summaries of share acquisition rights granted under the plans.
Rights
Grant date Expiry date
Exercise
price
Balance at
beginning of
the year
Issued during
the year
Cancelled
during the
year
Vested and
exercised
during the
year
Balance at
end of the
year
Number
Number
Number
Number
Number
Consolidated - 2020
TSR
ROFE
TSR
ROFE
1/9/2016
1/9/2019
1/9/2016
1/9/2019
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
TSR
ROFE
1/9/2019
1/9/2022
1/9/2019
1/9/2022
Deferred STI
1/9/2019
1/9/2021
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
1,496,877
748,410
1,771,294
885,642
480,523
1,884,334
942,166
477,673
-
-
-
-
-
-
-
-
(418,252)
(209,130)
(113,676)
-
-
-
3,397,339
(697,025)
1,698,665
(348,512)
26,005
-
(1,496,877)
(748,410)
(215,339)
(107,670)
-
-
-
-
-
-
1,555,955
777,972
(11,119)
(469,404)
-
-
-
-
-
-
-
1,466,082
733,036
363,997
2,700,314
1,350,153
26,005
8,686,919
5,122,009
(4,366,010)
(469,404)
8,973,514
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Share Acquisition Rights (SAR) (continued)
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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
During the year ended 30 June 2020, the Group recognised an expense of $5.8 million (2019: $9.5 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.
Short-term employee benefits
Post-employment benefits
Separation payments
Share-based payments
Long-term employee benefits
2020
$’000
6,897.1
546.4
2,903.1
2,120.7
113.8
2019
$’000
6,967.6
622.1
-
2,717.7
180.3
12,581.1
10,487.7
150
Boral Limited Annual Report 2020
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
A contingent liability is a possible obligation arising from past events and whose existence will be confirmed only by
occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Group. A
contingent liability may also be a present obligation arising from past events that is not recognised on the basis that an
outflow of economic resources to settle the obligation is not viewed as probable, or the amount of the obligation cannot be
reliably measured.
When the Group has a present obligation, an outflow of economic resources is assessed as probable and the Group can
reliably measure the obligation, a provision is recognised.
The Group presently has litigation, tax and other claims, for which the timing of resolution and the potential economic
outflow are uncertain.
Bank guarantees
The Group has granted indemnities to banks to cover bank guarantees give on behalf of controlled entities to a maximum
exposure of $43.2 million (2019: $42.4 million).
Environmental contingent liabilities
The Group’s activities have historically involved the extraction of resources from the natural environment as well as the
handling of materials that could contaminate the natural environment. As a consequence of these activities, the Group has
incurred and may continue to incur environmental costs associated with closure, remediation, aftercare and monitoring.
Provisions have been recognised for sites where obligations are known to exist and the cost can be reliably measured.
However, additional environmental costs may be incurred due to factors outside of the Group’s control such as changes in
the laws and regulations that govern land use and environmental protection across the various jurisdictions in which
we operate.
Shareholder class action
During 2020, Boral Limited was served with three shareholder class action proceedings filed in the Federal Court by Quinn
Emanuel, Maurice Blackburn, and Phi Finney McDonald. The proceedings allege disclosure breaches in relation to financial
irregularities in Boral’s North American Windows business. The Federal Court is yet to determine how to manage the
multiplicity of claims and has indicated it will not do so until the High Court rules on relevant legal principles on multiplicity
in another case unrelated to Boral (Wigmans v AMP). It is not possible to determine the ultimate impact, if any, of the
proceedings on Boral. Boral continues to vigorously defend the proceedings.
8.2 Subsequent events
Zlatko Todorcevski has been appointed as Chief Executive Officer (CEO) and Managing Director of Boral Limited, effective
1 July 2020.
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8.3 Commitments
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.
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
151
2020
$m
2019
$m
21.6
19.5
2020
$m
2019
$m
-
-
-
-
106.7
222.2
134.5
463.4
Lease commitments disclosed as non-cancellable operating leases under AASB 117 have been recorded as lease liabilities
from 1 July 2019, with the exception of short-term and low-value leases. Refer to Note 1c for details of the Group’s transition
to AASB 16 Leases. Refer to Note 4.2 for the maturity profile of the Group’s lease liabilities.
The comparative information was prepared and reported under AASB 117 Leases.
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 overseas firms – due diligence and advisory
KPMG overseas firms – taxation services
2020
$’000
1,594
1,564
156
3,314
367
813
26
-
30
1,236
4,550
2019
$’000
1,465
1,189
102
2,756
402
178
20
615
210
1,425
4,181
152
Boral Limited Annual Report 2020
Section 8: Other notes (continued)
8.5 Related party disclosures
Controlled entities
Interests held in controlled entities are set out in Note 6.3.
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.
Sale of goods and services
Associates
Purchase of goods and services
Associates
Others
Associates
Loan receivable
Loan payable
2020
$m
2019
$m
89.9
109.3
101.8
125.8
18.6
1.9
18.1
1.8
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.
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BORAL LIMITED
2020
$m
(379.4)
0.9
(378.5)
4,232.8
1,394.4
5,627.2
801.9
297.1
1,099.0
4,528.2
4,376.4
41.1
110.7
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
4,528.2
5,061.3
8.6 Parent entity disclosures
For the year ended 30 June
RESULT OF THE PARENT ENTITY
Profit/(loss) after tax
Other comprehensive income after tax
Total comprehensive income/(loss) 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
Parent entity contingencies
Bank guarantees
The Company has granted indemnities to banks to cover bank guarantees given on behalf of controlled entities to a
maximum exposure of $16.7 million (2019: $42.2 million).
Shareholder class action
During 2020, Boral Limited was served with three shareholder class action proceedings filed in the Federal Court by Quinn
Emanuel, Maurice Blackburn, and Phi Finney McDonald. The proceedings allege disclosure breaches in relation to financial
irregularities in Boral’s North American Windows business. The Federal Court is yet to determine how to manage the
multiplicity of claims and has indicated it will not do so until the High Court rules on relevant legal principles on multiplicity
in another case unrelated to Boral (Wigmans v AMP). It is not possible to determine the ultimate impact, if any, of the
proceedings on Boral. Boral continues to vigorously defend the proceedings.
154
Boral Limited Annual Report 2020
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 6.3.
The following consolidated Statement of Comprehensive Income and Balance Sheet comprises Boral Limited and its
controlled entities which are party to the Deed of Cross Guarantee, after eliminating all transactions between parties to
the Deed.
During the current year, the Group announced the divestment of its Midland Brick business in Western Australia with
expected completion during the next financial year. The earnings in the current and comparative periods for this business
have been reclassified to “Discontinued Operations” in the Statement of Comprehensive income below.
STATEMENT OF COMPREHENSIVE INCOME
Revenue
Profit/(loss) before income tax expense
Income tax benefit/(expense)
Profit/(loss) from continuing operations
Discontinued operations
2020
$m
2019
$m
3,392.7
(950.2)
43.8
(906.4)
3,511.1
577.2
(52.5)
524.7
Profit/(loss) from discontinued operations (net of income tax)
(5.5)
(0.8)
Net profit/(loss)
(911.9)
523.9
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/(loss)
Reconciliation of movements in retained earnings
Balance at the beginning of the year
Transition impact from implementation of AASB 16 (2019: AASB 15)
Net profit/(loss)
Dividends paid
Balance at the end of the year
(19.5)
(8.9)
2.7
25.9
(15.9)
4.8
(937.6)
538.7
1,319.1
1,113.1
(12.3)
(911.9)
(269.7)
125.2
(1.4)
523.9
(316.5)
1,319.1
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2020
$m
2019
$m
291.3
448.5
366.6
4.7
12.5
32.2
84.2
95.0
853.6
396.6
3.8
-
29.5
-
1,240.0
1,378.5
16.5
11.2
1,055.7
2,752.0
2,124.6
74.3
145.5
18.3
6,198.1
7,438.1
719.8
60.5
13.7
-
105.2
45.2
10.3
954.7
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
1,778.9
1,630.7
26.6
9.5
87.7
6.4
1,909.1
2,863.8
4,574.3
4,376.4
72.7
125.2
4,574.3
-
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
8.7 Deed of cross guarantee (continued)
BALANCE SHEET
CURRENT ASSETS
Cash and cash equivalents
Receivables
Inventories
Financial assets
Current tax 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
Payables
Interest bearing liabilities
Financial liabilities
Current tax liabilities
Employee benefit liabilities
Provisions
Liabilities classified as held for sale
TOTAL CURRENT LIABILITIES
NON-CURRENT LIABILITIES
Interest bearing liabilities
Financial liabilities
Employee benefit liabilities
Provisions
Other liabilities
TOTAL NON-CURRENT LIABILITIES
TOTAL LIABILITIES
NET ASSETS
EQUITY
Issued capital
Reserves
Retained earnings
TOTAL EQUITY
156
Boral Limited Annual Report 2020
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 84 to 155 and the Remuneration Report
in the Directors’ Report, set out on pages 59 to 83, 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 2020 and of its performance
for the financial year ended on that date; and
(ii) complying with Australian Accounting Standards and the Corporations Regulations 2001;
(b)
there are reasonable grounds to believe that the Group will be able to pay its debts as and when they
become due and payable.
There are reasonable grounds to believe that Boral Limited and the controlled entities identified in Note 6.3 will be
able to meet any obligations or liabilities to which they are or may become subject by virtue of the Deed of Cross
Guarantee between Boral Limited and those controlled entities pursuant to ASIC 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 2020.
The Directors draw attention to Note 1 to the consolidated financial statements, which includes a statement of
compliance with International Financial Reporting Standards.
2.
3.
4.
Signed in accordance with a resolution of the Directors:
Kathryn Fagg
Chairman
Zlatko Todorcevski
CEO & Managing Director
Sydney, 28 August 2020
157
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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 2020 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 2020;
•
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 Boral North America goodwill;
• Carrying value of the investment in USG Boral JV and Meridian Brick JV; and
• Availability and recoverability of US Federal 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.
158
Boral Limited Annual Report 2020
Carrying value of Boral North America goodwill ($1.1 billion)
Refer to note 3.5 of the Financial Report
The Key Audit Matter
The carrying value of goodwill in relation to Boral North
America and the impairment charge recognised in the year 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 impact of the uncertainty caused by the disruptive
effects of the COVID-19 pandemic creating an additional
layer of complexity to the audit of those forward
looking estimates;
the size of the goodwill balance, representing a significant
portion of Boral’s net assets; and
the recognition of the impairment charge of
$1,066.8 million against Boral North America goodwill
during the year, increasing our audit effort in this key
audit area.
The Group uses complex models to perform their
recoverability assessment. The models use a range of
external and internal sources as inputs and we focus on
those significant forward-looking assumptions 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 coupled by the
significantly higher estimation uncertainty continuing from
the business disruption impact of the COVID-19 global
pandemic. This impacted the Group through a reduction
in the demand for new houses in the United States. These
conditions increase the possibility of goodwill impairment,
plus the risk of inaccurate forecasts;
the impact of operational and structural considerations –
during the year the Group identified financial irregularities
in the Boral North America Windows business that
negatively impacted assumptions around sustainable
forecast profit margins and cash flows for that part of the
Boral North America business;
discount 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; and
terminal value – the terminal value depends on the
economic drivers of each business unit. The Group’s
modelling is sensitive to changes in terminal value
assumptions, which drives additional audit effort to
consider the appropriateness of these assumptions.
We involved valuation specialists to supplement our senior
audit team members in assessing this Key Audit Matter.
How the matter was addressed in our audit
Our procedures included, amongst others:
•
•
•
•
•
•
•
considering the Group’s determination of their CGUs
based on our understanding of the operations of the
Group’s business, how independent cash inflows were
generated, against the requirements of the
accounting standards;
assessing the integrity of the value in use models
used, including the accuracy of the underlying
calculation formulas;
assessing the consistency of the forecast operating
cash flows contained in the value in use models
with external market data on housing starts, repair &
remodel and fly ash tons. We considered the impact
of historical accuracy of the external market data and
the past performance of the Group versus previous
forecasts as an indicator of risk in future forecasts;
inquired with management and those charged with
governance to understand changes in the Group’s
plans resulting from COVID-19, and potential further
impacts to the Group over the period of the model;
considering the sensitivity of the models by varying
key assumptions, such as forecast growth rates, profit
margins, terminal growth rates and discount rates,
within a reasonably possible range, to identify those
assumptions at higher risk of bias or inconsistency
in application;
assessing terminal value assumptions by comparing
them to long term market forecast data;
assessing the impact of the financial irregularities
in Windows on the assumptions in the Windows
CGU forecasts. We also considered any potential
consequences on other CGUs within
Boral North America;
•
recalculating the impairment charge against the
recorded amount disclosed; 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
CGU and the industry it operates in;
compare the Boral North America’s long term
growth rate assumptions against publicly available
long term economic forecasts specific to the
United States.
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Carrying value of the investment in USG Boral JV ($1,035 million) and Meridian Brick JV ($154 million)
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 decline in market demand and the business
disruptions in the Australian and overseas markets
as governments respond to COVID-19 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
the Group recorded an impairment charge of $76.7m
against the investment in the Meridian Brick JV during the
year, increasing our audit effort in this key audit area.
We focused on the following significant inputs to the
recoverability assessment:
•
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key assumptions relating to forecast market demand
and average selling prices in Australia, Asia, and North
America; and
discount rates applied to forecast cash flows as well
as the assumptions underlying the forecast growth and
terminal growth rates.
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
businesses, and the industries and economic environment in
which they operate.
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,
profit margins and market shares by:
–
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–
–
comparing key assumptions to actual
historical data;
comparing forecasts of market demand for
building products against published analyst views;
performing sensitivity analysis by varying key
assumptions, such as housing starts, discount
rates, terminal growth rates, profit margin and
market share within a reasonably possible range.
We did this to identify business units at higher risk
of impairment and to focus our further procedures;
comparing key underlying data in valuation
models to approved budgets and forecasts; and
assessing historical forecasting accuracy as an
indication of risk in future forecasts.
•
•
•
•
working with valuation specialists, we assessed the
valuation approach against the accounting
standards requirements;
comparing the discounted cash flow methodology to
industry practice, and assumptions regarding discount
rates, forecast growth rates and terminal growth rates
to externally sourced market data of industry analysts;
considering any impairment recognised within the JV’s
business units and assessing the accounting treatment
at Group level; and
recalculating the impairment charge and comparing it
to the recorded amount disclosed.
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Availability and recoverability of US Federal tax loss asset ($150 million)
Refer to note 5.2 of the Financial Report
The Key Audit Matter
The availability and recoverability of the US Federal 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 via generation of taxable
income, which are inherently subjective.
US Federal 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 Federal tax
losses and the US Federal restrictions on utilisation over
the forecast period.
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:
•
•
•
•
involving our US taxation specialists, examining 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
Federal tax losses with reference to the timing of
forecast future taxable income against US Federal
restrictions on utilisation;
challenging Boral’s key assumptions in forecasting
taxable income by:
–
–
–
comparing key assumptions to historical
actual data;
comparing key assumptions to forecasts data
utilised in the Boral North America impairment
model; and
assessing the tax adjustments to the forecast pre-
tax income by comparing them to the historical
tax data and considering the impact of the US
tax law.
•
performing sensitivity analysis on the key assumptions
of forecast taxable income.
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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 and Company’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 and Company 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 the 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: https://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 2020, 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.
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Our responsibilities
We have audited the Remuneration Report included in pages 59 to 83 of the Directors’ Report for the year ended
30 June 2020.
Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with
Australian Auditing Standards.
KPMG
Kenneth Reid
Partner
Sydney, 28 August 2020
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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 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
The Board has determined not to pay a final dividend for
FY2020 given the significant uncertainty in the economic
outlook and on the basis that Boral’s interim dividend of
9.5 cents per share paid on 15 April 2020 represents ~63%
of full year earnings. This payout ratio is in line with Boral’s
dividend policy to pay 50% to 70% of earnings before
significant items, subject to the Company’s
financial position.
Dividend Reinvestment Plan
Boral’s Dividend Reinvestment Plan (DRP) was reactivated in
February 2020. For additional information on the DRP please
visit Boral’s website.
Dividend payments
Boral uses 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.
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Annual report mailing list
Shareholders (whether issuer- or broker-sponsored) not
wishing to receive the Annual Report should advise the
share registry in writing so that their 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.
Change of address
Issuer-sponsored shareholders 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. Change of Address application forms 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
• October/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.
Share sale facility
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.
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 2020
Substantial shareholders
Seven Group Holdings Limited, by notice of change of
interest of substantial holder dated 14 July 2020, advised
that it and its associates were entitled to 199,905,206
ordinary shares.
Perpetual Limited, by notice of change of interest of initial
substantial holder dated 13 August 2020, advised that it and
its associates were entitled to 80,142,074 ordinary shares.
The Vanguard Group, Inc., by notice of change of interest of
substantial holder dated 19 March 2020, advised that it and
its associates were entitled to 70,609,200 ordinary shares.
Rights granted under the Equity Incentive Plan
As at 20 August 2020, Boral Limited had the following
unquoted rights under its Equity Incentive Plan:
•
•
389,131 rights in regard to deferred STI, of which the
number of holders was 220.
8,583,512 rights in regard to LTI awards, of which the
number of holders was 86.
Rights do not give the holder an entitlement to be issued
Boral Limited shares, and do not confer any voting rights
on the holder, unless and until those rights vest (subject to
performance hurdles) and are converted into shares.
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Share information as at 20 August 2020 (continued)
Distribution schedule of shareholders as at 20 August 2020
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)
Voting rights – ordinary shares
Number of
shareholders
% of ordinary
shares
29,355
35,006
9,257
6,194
206
80,018
2,573
1.19
7.16
5.51
10.87
75.28
100
0.01
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.
On-market acquisitions for employee incentive schemes during the financial year ended 30 June 2020
469,404 Boral Limited ordinary shares were purchased on market to satisfy entitlements under Boral’s employee incentive
schemes at an average price per share of $4.2870.
Twenty largest shareholders as at 20 August 2020
Ordinary shares
% of ordinary shares
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
NETWORK INVESTMENT HOLDINGS PTY LTD
J P MORGAN NOMINEES AUSTRALIA LIMITED
CITICORP NOMINEES PTY LIMITED
NATIONAL NOMINEES LIMITED
BNP PARIBAS NOMS PTY LTD
ARGO INVESTMENTS LIMITED
PACIFIC CUSTODIANS PTY LIMITED
EQUITAS NOMINEES PTY LIMITED
NAVIGATOR AUSTRALIA LTD
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