Martin Brydon MD of Adelaide Brighton

Martin Brydon


Martin Brydon


Adelaide Brighton (ASX:ABC)

Market Cap (AUD)
Last Trade (AUD)
  • 1. About

    Adelaide Brighton Ltd is one of Australia’s leading integrated construction materials and lime producers. The Company supplies a range of products to the building, construction, infrastructure and mineral processing markets throughout the country. Its principal activities include the production, importation, distribution and marketing of clinker, cement, industrial lime, premixed concrete, construction aggregates and concrete products.  The Company has approximately 1,400 employees and operations in every state and territory of Australia.[1]

    2. Business model

    The Company operates the following divisions:[2]



    Revenue ($’M)

    % of Revenue

    % of Profit (before Int. & Tax)

    Profit drivers[3]

    Cement, Lime, Concrete and Aggregates




    Continued strong east coast demand and return to growth in South Australia. Import costs increased $7M before tax while margin improvement was supported by significant cost savings in energy, maintenance and transport. Increases in the alumina price was positve for expansion. Sales volumes of concrete and aggregates were strong in NSW, VIC and QLD

    Concrete Products




    Revenue was slightly higher due to stronger residential and commercial sales and CPI selling price rises.  Earnings increased 20% on FY15 with margins higher on prices and operational efficiency






    3. Strategy

    Key strategies include:[4]


    Cost reduction and operational improvement across the business

    • Best practice operational performance
    • Import strategy to maximise asset utilisation
    • Focus on energy usage and procurement


    Grow the lime business to supply the resources sector

    • Unique resource and cost position
    • Long term customer contracts and growth
    • Continuous improvement to maintain cost leadership


    Focused and relevant vertical integration

    • Operational performance to realise long term value
    • Targeting strategic aggregates positions
    • Strong emphasis on shareholder value creation  

    4. Markets

    The Company operates in markets including:[5]


    Industry (Australia)

    Industry Revenue

    Growth Rate (annual 12-17)

    Ready-Mixed Concrete Manufacturing

    $5 billion (2016)


    Concrete Product Manufacturing

    $2 billion (2016)


    Cement and Lime Manufacturing

    $3 billion (2017)


    5. Competition

    Major competitors include:[6]


    • Boral Limited (ASX:BLD)
    • Fletcher Building Limited (Australia) (ASX:FBU)
    • CSR Limited (ASX:CSR)


    6. History


    Established in 1882, Adelaide Brighton is now an S&P/ASX 100 company



    William Shearing and William Lewis erected an experimental Cement plant



    Over the following decade, The S.A. Portland Cement Company flourished, growing in size and in stature



    As a result of this direct competition, the S.A. Portland Cement Company took steps to increase production by refitting much of its plant, and increasing the number of employees to 104



    S.A. Portland Cement Company had only made two types of cement, ‘normal’ and ‘high early strength’, the later having been introduced in 1929



    3 weeks of intense movement on the Stock Exchange, ‘Adelaide’ announced that it had secured more than 75% of the ‘Brighton’ shares  



    Adelaide Brighton Ltd has agreed to acquire  55% of the concrete masonry products company C&M Brick Pty Ltd (C&M) and 100% of the Rocla Pavers and Masonry (RPM) business of Rocla Pty Ltd



    Acquired the concrete products company Hanson Building Products Pty Ltd



    Acquired af 30% Stake in AALBORG Portland Malaysia SDN. BHD



    Adelaide Brighton has entered into a contract with major alumina producer for the continued long term supply of 100% of their lime requirement in Western Australia



    Renewal of Major South Australian Cement contract

    Acquired Direct Mix Concrete and Southern Quarries (“DMC”)

    Completed downstream acquisition in South Australia and Queensland and renewal of long term cement supply agreement

    Adelaide Brighton announced potential change to its South Australian cement supply arrangements



    Adelaide Brighton advised that it has executed an agreement securing ongoing supply to a major cement customer in Western Australia for term of three years until 31 December 2017

    Adelaide Brighton concluded two land sales



    Acquisition of Central Pre-Mix Concrete and Quarry Completed

    7. Team

    Board of Directors[8]


    Leslie Hosking – Chairman

    Martin Brydon – Managing Director and CEO

    Raymond Barro – Director

    Graeme Pettigrew – Director

    Ken Scott-Mackenzie – Director

    Arlene Tansey – Director

    Zlatko Todorcevski – Director

    Vanessa Guthrie – Non-Executive Directors (Appointment effective from 8 February 2018)[9]

    Geoff Tarrant – Non-Executive Directors (Appointment effective from 8 February 2018)[10]


    Management Team


    Martin Brydon – Managing Director and CEO

    Michael Kelly – Chief Financial Officer

    George Agriogiannis – Executive General Manager, Concrete and Aggregates

    Andrew Dell – Executive General Manager, Concrete Products

    Brad Lemmon – Executive General Manager, Cement and Lime

    Michael Miller – Executive General Manager, Marketing and International Trade

    Marcus Clayton – General Counsel and Company Secretary

    Dimity Smith – Executive General Manager, Human Resources and Health Safety and Environment

    read more

    8. Financials

    2017 Half Year Results Presentation


    Financial Year 2015/16 (ended 31 December):[11]



    Revenue ($’M)

    % Change

    Profit (before Int. & Tax) ($’M)

    % Change

    Cement, Lime, Concrete and Aggregates





    Concrete Products















    9. Risk

    Major risks include:[12]


    Investment risk – the risk that investment returns will be lower than assumed and the Company will need to increase contributions to offset this shortfall.


    Salary growth risk – the risk that wages and salaries (on which future benefit amounts will be based) will rise more rapidly than assumed, increasing defined benefit amounts and thereby requiring additional employer contributions.        


    Legislative risk – the risk that legislative changes could be made which increase the cost of providing the defined benefits.           


    Market risk

    Foreign exchange risk

    The Group’s activities, through its importation of cement, clinker, slag and equipment, expose it to foreign exchange risk arising from various currency exposures, primarily with respect to the US Dollar and the Japanese Yen.

    Foreign exchange risk arises from commitments and highly probable transactions, and recognised assets and liabilities that are denominated in a currency that is not the entity’s functional currency.


    Electricity price risk

    The Group’s electricity purchases include market based pricing mechanisms, exposing cash flows to future movements in the underlying price of electricity in certain markets. Electricity price risk is assessed on the basis of forward projections of the Group’s electricity demand and forecast market pricing to calculate a Value At Risk (VAR) measure. Hedging the price risk is considered when the VAR outweighs the cost of risk mitigation alternatives.

    The Group considers and utilises where effective, futures electricity price caps (Caps) to manage this risk exposure. Caps are available for the relevant markets that the Group has price risk, matching the underlying price exposure of the Group. Ineffectiveness of the hedge arises from differences in the quantity of actual electricity purchases compared to the nominal quantity of the hedging instrument.


    Interest rate risk

    The Group’s main interest rate risk arises from bank borrowings with variable rates which expose the Group to interest rate risk. Due to the historically low levels of gearing, Group policy is to take on debt facilities on a one to five year term with fixed bank lending margins associated with each term. Cash advances to meet short and medium term borrowing requirements are drawn down against the debt facilities on periods up to 90 days, at a variable lending rate comprising the fixed bank margin applied to the daily bank bill swap rate effective at the date of each cash advance. During both 2016 and 2015, the Group’s borrowings at variable rates were denominated in Australian Dollars.


    Credit risk

    Credit risk is managed on a Group basis using delegated authority limits. Credit risk arises from cash and cash equivalents, derivative financial instruments and deposits with banks and financial institutions, as well as credit exposures to customers, including outstanding receivables and committed transactions, and financial guarantees. Financial guarantees are only provided in exceptional circumstances and are subject to approval in accordance with the Board approved delegated authorities.

    For banks and financial institutions, only independently rated parties with investment grade rating are accepted. Derivative counterparties and cash transactions are limited to high credit quality institutions.

    For trading credit risk, the Group assesses the credit quality of the customer, taking into account its financial position, past experience, external credit agency reports and credit references. Individual customer risk limits are set based on internal approvals in accordance with delegated authority limits set by the Board. The compliance with credit limits by credit approved customers is regularly monitored by line credit management. Sales to non-account customers are settled either in cash, major credit cards or electronic funds transfer, mitigating credit risk. In relation to a small number of customers with uncertain credit history, the Group has taken out personal guarantees in order to cover credit exposures. From the 1st of August 2016 the group commenced using credit insurance for selected accounts with a credit limit exceeding $0.25 million. The maximum liability insured is capped at $14 million.

    The Group has no significant concentration of credit risk. As at 31 December 2016, the Group held no collateral over outstanding debts. Consequently, the maximum exposure to credit risk represents the carrying value of receivables and derivatives.


    Liquidity risk

    The ultimate responsibility for liquidity risk management rests with the Board which has established an appropriate risk management framework for the management of the Group’s short, medium and long term funding and liquidity management requirements. The Group’s Corporate Treasury Function manages liquidity risk by maintaining adequate reserves, banking facilities and reserve borrowing facilities by continuously monitoring forecast and actual cash flows and matching the maturity profiles of financial assets and liabilities. Included below is a statement of credit standby facilities that the Group has at its disposal to further reduce liquidity risk.


    1. ^
    2. ^ Annual Report 2016, P. 97, 98
    3. ^ Investor Presentation 2016, P. 10-13
    4. ^ Investor Presentation 2016, P. 22
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    11. ^ Annual Report 2016, P. 97, 98
    12. ^ Annual Report 2016, P. 81, 86-88