Boral (ASX:BLD)

Mike Kane
Market Cap (AUD): 6.32B
Sector: Materials
Last Trade (AUD): 5.34 -0.05 (-0.93%)
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1. About

Boral is an international building product and construction materials group with three strong divisions: the high-performing, well-positioned materials business of Boral Australia; the fast-growing USG Boral interior linings joint venture in Asia, Australia and the Middle East; and Boral North America, a scaled and growing building products and fly ash business.

FY2017 marked the fifth year of a transformational journey for Boral, which culminated in the US$2.6 B acquisition of Headwaters Incorporated in the USA.

2. Business model


The Group operates in following divisions:[1]



Revenue ($M)

% of Revenue

% of Profit before (Exc Equity Accounted Income)

Profit drivers[2]

Boral Australia




Driven by a higher Concrete, Concrete Placing and Asphalt contribution from continued acceleration of infrastructure project work and growth in non-residential construction. Overall, average selling price (ASP) was higher across most businesses, with the exception of Quarries, which was impacted by an adverse product mix shift, and WA Bricks, where conditions remain challenging. Boral benefited from exceptionally dry weather on the east coast in Q1, compared to extremely wet weather in the prior year. Q2 and Q3 were impacted by rainfall in South East Queensland, while Q4 saw drier weather patterns, particularly on the east coast. .  

USG Boral




Revenue increased 7% to $1,575 mn in the underlying business, with continued adoption of premium Sheetrock products and technical board primarily in Australia, Korea, China, and Thailand. While prices increased in some key markets, inflationary cost pressures in other markets including Thailand, Indonesia, and Vietnam, together with increased competition (especially in Indonesia) and one-off costs saw margins contract. Overall board volumes increased 3% and technical board, which represents 20% of volumes, grew by 20%. Plasterboard volume growth was evident in Australia and China, and strong price gains were achieved in Korea and China.

Boral North America




Revenue of US$1,656 mn was flat on the prior year due to the inclusion of four months of Bricks revenue in the first half of FY2017 prior to the formation of Meridian Brick JV. Excluding Bricks, revenue was up 6%.

Discontinued Operations










3. Strategy


Key strategies include:[3]


  • Consistently applying best practice (including operational and commercial excellence)
  • Drawing on Boral’s strength of geographic diversification
  • Building a portfolio of businesses with a balance of traditional and innovative products
  • Growing through innovation and, where it makes sense, through M&A opportunities

4. Markets


The Group operates in the following industries:[4]



Industry Revenue 2018

Growth Rate (annual 14-19)

Cement and Lime Manufacturing (Australia)

$3 billion

1.5% (annual 13-18)

Ready-Mixed Concrete Manufacturing (Australia)

$6 billion


Concrete Product Manufacturing (Australia)

$3 billion


5. Competition


Major competitors Include:[5]


  • CSR Limited (ASX:CSR)
  • Lafargeholcim Ltd (VTX:LHN)
  • Forterra Brick, LLC

6. History



The first Australian-owned bitumen and oil refinery was officially opened



Operations commenced



Officially adopted the name Boral. Bought BHP's road-surfacing operations in New South Wales



Acquired brickworks, quarry and concrete operations in Melbourne and brickworks and concrete product operations in Sydney and Brisbane. A new company, Boral Basic Industries Limited, was formed to take over the activities of all the group's companies operating in quarrying, sand, pre-mixed concrete and in bituminous road surfacing and bituminous products in all states



Acquired 55 percent of California Tile Inc



The ironworks were sold



Commissioned Indonesia's first plasterboard production facility. Purchased Malaysia's only plasterboard producer - Wembley Gypsum Producers Sdn Bhd



Listed on ASX



Boral Lafarge Plasterboard JV completes Siam Gypsum Acquisition



Acquired Concrete



Sold its US Chemical Admixture Business. Acquired Largest Independent Brick Distributor in USA



Acquired Hansons Concrete & Quarry business in Thailand. Acquired Concrete Quarry & Concrete Masonry Businesses in Denver, Colorado



Acquired David & Herbert and Fennings Hardwood Timber Operations. Lafarge Boral Plasterboard JV in Asia and invests in Vietnam



Sold land at Gel operations to Brickworks Limited  



Sold Precast Pan Estates development known as Quarrywest to Dexus Property Group (DEXUS)



Sold Greystanes Greystanes NSW to DB RREEF



USG Boral will launch its new super-strong, lightweight cove cornice in Australia and New Zealand in January 2016



North American Bricks Joint Venture



Boral completed acquisition of Headwaters Inc.



Signed new Donnybrook agreements with Mirvac

Agreed to sell US Concrete & Quarries business

7. Team


Board of Directors[7]


Kathryn Fagg – Non-Executive Chairman

Mike Kane – Chief Executive Officer & Managing Director

Catherine Brenner – Non-Executive Director

Dr. Eileen Doyle – Non-Executive Director

John Marlay – Non-Executive Director

Karen Moses – Non-Executive Director

Paul Rayner – Non-Executive Director

Peter C Alexander – Non-Executive Director


Management Team


Mike Kane – Chief Executive Officer & Managing Director

Joe Goss – Divisional Managing Director, Boral Construction Materials & Cement

Ross Harper – Executive General Manager, Boral Cement

Frederic de Rougemont – Divisional Managing Director, Boral Gypsum

David Mariner – Executive General Manager, Boral Building Products

Joel Charlton – Executive General Manager, Innovation and Group President, Windows

Rosaline (Ros) Ng – Chief Financial Officer

Tim Ryan – Group Strategy and M&A Director

Kylie FitzGerald – Group Communications and Investor Relations Director

Dominic Millgate – Company Secretary

Damien Sullivan – Group General Counsel

Linda Coates – Group Human Resources Director

Michael Wilson – Group Health, Safety, and Environment Director

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8. Financials


2018 Full Year Results Presentation


Financial Year 2017/18 (ended 30 June):[8]



Revenue ($M)

% Change

Profit/(loss) before interest and income tax expense ($M)

% Change

Boral Australia





USG Boral





Boral North America





Discontinued Operations















9. Risk


Major risks include:[9]


Industry and market risks

As Boral operates mainly in residential, non-residential and infrastructure construction markets, its financial performance is closely tied to the performance of those markets. The housing, industrial, commercial and infrastructure construction markets are cyclical and affected by various factors beyond the Group’s control, including:

  • Geopolitical effects and the performance of national economies in the countries in which Boral operates
  • Monetary policies in the countries in which Boral operates (such as a change in interest rates)
  • The allocation and timing of government funding for public infrastructure and other building programs
  • The level of demand for building products and construction materials and services generally
  • The availability and cost of labour, raw materials, and transport services, as well as the price and availability of fuel and energy.


Competition Risks

Boral operates in competitive markets, against domestic suppliers and in some cases, imported product suppliers. The competitive environment can be significantly affected by local market forces, such as new market entrants, production capacity utilisation, economic conditions, and product demand. Such competition may lead to product price volatility risk. Boral has in place various strategies to manage these risks, including the commercial excellence and customer centricity program, seeking to sustain and improve margins by reducing costs, optimising capacity in line with projected demand, and increasing the size and share of our higher-margin businesses. We are also exploring options for future technology innovation in order to diversify our product range and develop new products in our core markets.


Health, Safety and Environment Risks

Boral is subject to a broad range of health, safety and environmental laws, regulations, and standards in the jurisdictions in which it operates, which could give rise to losses and liabilities. Due to the operating scale of the construction and building materials industry, there is a risk of incidents occurring that may cause injury to Boral’s staff or contractors or damage to the environment.


Business Interruption Risks

Due to the high fixed-cost nature of the construction and building materials industry, interruptions in production capabilities and lower capacity utilisation at key manufacturing and processing facilities may have an adverse effect on the productivity and results of the Group’s operations. The Group’s manufacturing processes and related services are dependent upon the critical plant, which may occasionally be out of service or damaged as a result of unanticipated failures, incidents or force majeure events.


Foreign Exchange Risks

Boral has significant operations in Australia, the USA, and Asia and is also dependent on imported products and supply of plant and equipment. The Group is therefore exposed to the macroeconomic conditions in those regions and to movements in various foreign currencies (in particular, to movements in the Australian and US dollar exchange rates). As part of its approach to managing these risks, Boral’s US net assets are closely matched with its US dollar-denominated debt in order to hedge against fluctuations in the US dollar. The Group also utilises forward exchange contracts for material product and equipment supply in order to manage against short- to medium-term currency fluctuations.


Credit Risk

Credit risk is the risk of loss if a counterparty fails to fulfill 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.


Liquidity Risk

Liquidity risk is the risk that the Company has insufficient funds to meet its financial obligations when they fall due. It is also associated with planning for unforeseen events or business disruptions that may cause pressure on liquidity.

The Group manages liquidity risk by ensuring that:

(a) Boral has a well-spread debt facility maturity profile with a target of exceeding 3.5 years

(b) Current debt less cash deposits are not to exceed 20% of the sum of Total Debt plus Committed

Undrawn Facilities > 1 year

(c) Committed Undrawn Facilities plus cash exceeds A$500 million


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.

(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.


Interest Rate Risk

Interest rate risk is the risk that the Group is impacted by significant changes in interest rates. Borrowings issued at or swapped to floating rates expose the Group to interest rate risk. Interest rate swaps and cross currency swaps have been transacted to assist with achieving an appropriate mix of fixed and floating interest rate borrowings. All interest rate derivative instruments mature progressively over the next six years, with the duration applicable to the interest rate and cross currency swaps consistent with maturities applicable to the underlying borrowings. The Group adopts a policy that ensures a minimum of 35% and a maximum of 75% of its long-term borrowings are fixed interest rate borrowings. The use of interest rate derivative instruments provides the Group with the flexibility to raise term borrowings at fixed or variable interest rates where subsequently these borrowings can be converted to either variable or fixed rates of interest.


Commodity Price Risk  

Commodity price risk is the risk that the Group is exposed to fluctuations in commodity prices from the purchase of diesel, natural gas, electricity, and coal purchases under variable price contract arrangements. The Group uses commodity swaps to hedge these exposures.

The Group’s policy is to hedge a minimum of 50% of purchases of diesel for the Australian business, for a period of six months. Other global commodity exposures may be hedged at the discretion of the Group. The maximum hedging levels are:

  • 75% for Year 1 (months 1 to 12)
  • 50% for Year 2 (months 13 to 24)