Boral — CEDA Presentation October 2002
29 slides from Boral's conference presentation, October 2002
Slide 1: Reflections on the Boral Demerger
Reflections on the Boral Demerger CEDA Presentation by Rod Pearse CEO Boral Limited Sydney Reflections on the Boral Demerger October 2002
Slide 2: Presentation Overview
Presentation Overview • Background to Boral Demerger • Strategy Review – Three Options • Demerger Rationale • Demerger Process • Demerger Outcomes • Lessons Learned Reflections on the Boral Demerger Slide 2
Slide 3: Boral's growth in the eighties and nineties
Boral’s growth in the eighties and nineties BORAL LIMITED FINANCIAL HISTORY (Year End June) $5,000 $1,000 Sales Revenue Sales Revenue (A$ million) $4,000 $800 EBIT (A$ million) $3,000 $600 $2,000 $400 EBIT $1,000 $200 $0 $0 1970 1972 1973 1974 1975 1976 1978 1979 1980 1981 1982 1985 1986 1987 1988 1
Slide 4: Boral underwent transformational change from early 1994
Boral underwent transformational change from early 1994 BORAL LIMITED HISTORY (1994 TO 1999) New CEO “World leader in building and construction materials Industry and a major Purpose force in energy in Australia and the Pacific” (1994 Annual Report) “Competitive Advantage, Customer Service, Strategy
Slide 5: Boral lost favour in the financial markets
Boral lost favour in the financial markets BORAL SHARE PRICE (BOR ASX code) $4.00 $3.60 $3.20 $2.80 $2.40 $2.00 Dec-91 Dec-92 Dec-93 Dec-94 Dec-99 Dec-89 Dec-90 Dec-95 Dec-96 Dec-97 Dec-98 Jun-91 Jun-92 Jun-93 Jun-94 Jun-95 Jun-96 Jun-97 Jun-89 Jun-90 Jun-98 Jun-99 Reflections on the Boral Demerger
Slide 6: Strategy Review - Three options considered
Strategy Review - Three options considered OPTION DESCRIPTION PROS CONS Status Quo Existing structure * Little disruption • Different businesses and strategies * No transaction costs • Strategic Plan Outcomes • Financial markets Pure Energy Play * Remove conglomerate discount * Uncertain sale proces
Slide 7: On August 16, 1999 the Board decided to proceed with the Demerger
On August 16, 1999 the Board decided to proceed with the Demerger Demerger Rationale: “Improve shareholder returns by: • Re-rating of the Energy business to Industry peers • Creating a more streamlined and focused BCM business • Implement a more extensive operational improvement program • Implement
Slide 8: The Demerger timetable was "fast tracked"
The Demerger timetable was “fast tracked” DEMERGER TIMETABLE Period of Intense Activity 21 17 February 1 February 2000 26 January 2000 16 August 20 October 1999 November 2000 1999 1999 Creation Announcement Complete Accounting Shareholders Listing of Of New Boral Day Explanatory Separation Decide/ N
Slide 9: Six phases of transition
Six phases of transition Execute Project EVA Demerge Energy from Building & Construction businesses Restructure CMG, Reorganise Senior Management and BBP, S&E & Asia Reduce Overhead costs Initiate step-change Operational Improvement improvements Assess Strategic Plans & Visit operations, assess Mana
Slide 10: The "New Boral" entity was created in two months
The “New Boral” entity was created in two months New Boral Strategic Financial Values/ Strategy Structure Intent Objectives Culture “Focused Strong resource Beat WACC Leadership 7 Member Board Value Driven & market positions Beat Competition Respect Flatter Structure Building Materials Co. Perform &
Slide 11: A range of complex issues had to be resolved while running the business
A range of complex issues had to be resolved while running the business in a pre-GST construction “boom” Demerger Transaction Issues: • Legal Entity Restructuring • Debt Allocation • Debt Restructuring • Capital Gains Tax • Information Memorandum • Due Diligence • Financial Projections • Investigati
Slide 12: Boral's Strategic Intent and Financial Objectives
Boral’s Strategic Intent “Boral intends to be a value-driven, focused building and construction materials supplier operating in Australia and increasingly offshore” CEO (Elect), October 1999 Financial Objectives 1. Exceed the weighted average cost of capital (WACC) on a sustainable basis through the
Slide 13: New Boral share price "underperformed" initially
New Boral share price “underperformed” initially Drivers: - Exposure to Australian market downturn - Margin Pressure RELATIVE CLOSING PRICES*/INDICES - High gearing AUD/Share - Unproven management - Growth momentum 1.3 - 3rd ranked Building Material Company - “Old Economy” stocks Selling pressure fr
Slide 14: Three years on - Delivering against "perform & grow" strategy
Three years on - Delivering against “perform & grow” strategy Operational Improved Improvement Achieved 3% pa compressible cost reduction operating plus $75M cost step change (Crucial Years) Selling, general margins & admin Property Value $25m pa EBIT from QEU Add Focused Divestment $400M Divestment
Slide 15: Margins are improving
Margins are improving EBITDA/Sales EBIT/Sales 16% 10% 14% 8% 12% 10% 6% 8% 6% 4% 4% 2% 2% 0% 0% FY1999 FY2000 FY2001 FY2002 FY2001 FY1997 FY1998 FY1997 FY1998 FY1999 FY2000 FY2002 Results for reported building and construction materials businesses each year Reflections on the Boral Demerger Slide 15
Slide 16: Tight capital management has resulted in a strong balance sheet
Tight capital management has resulted in a strong balance sheet and capacity to grow CAPITAL MANAGEMENT HISTORY 90% $180 Capital Expenditure (A$M) Net Debt/Equity 80% $150 Net Debt / Equity (%) 70% $120 Growth Capex Target Gearing Range 60% $90 50% $60 SIB 40% Capex $30 30% $0 June 1999 Dec 1999 Jun
Slide 17: Over $400m has been invested in growth in Australia and offshore
Over $400m has been invested in growth in Australia and offshore Australia GROWTH SINCE DEMERGER Concrite, Alsafe & Go-Crete Concrete Acquisitions, Transfield Asphalt, Australia Marulan lime upgrade, Compton Park Quarry, Oberon Softwood JV, Koolkhan upgrade, Stud & Track Asia Plasterboard JV (incl.
Slide 18: Growth Projects are performing
Growth Projects are performing Asia USA Denver Seoul Kansas City Shanghai Corona Phoenix City Augusta Chongqing Guadalajara SGI Australia Rocla Indonesia Organic Growth Go-Crete Enfield Asphalt Acquisition Oberon JV Stud 'n' Track Marulan Concrite Deer Park Alsafe Waurn Ponds Reflections on the Bora
Slide 19: A more focussed and value adding business portfolio
A more focussed and value adding business portfolio A$m Services FX Acquisitions Translation 4,200 & Eng. (Alsafe, Concrite & Europe Siam Plasterboard) Working 4,100 Capital/Other Ceramics / NZ 4,000 Woodchip 3,900 Window Lineals Growth Capital 3,800 Expenditure (Marulan Kiln, 3,700 Koolkhan Timber
Slide 20: Boral's Perform & Grow Strategy has delivered strong returns for shareholders
Boral’s Perform & Grow Strategy has delivered strong returns for shareholders • Earnings per share growth of 9% p.a. since Demerger • Dividend up 5% to 19 cents (now 75% franked) • New Boral share price up 84% since Demerger • TSR of 33% p.a. $5.00 New Boral versus ASX100 Index $4.00 Boral’s Share P
Slide 21: Total shareholder return versus ASX100 companies
Toll 109.9% Aurion Gold 78.5% Foodland 63.8% Billabong 61.8% Woolworths 59.9% Normandy 56.3% Macquarie Infrastructure 56.1% Origin 56% Leighton 52.1% Wesfarmers 51.2% Perpetual Trustee Patrick Corp 1*MarCalculation: ANZ Coca Cola 00 to 28 June Santos Amcor End 02 1st CSR St George Bank Price Corpora
Slide 22: New Boral and Origin Energy have regained favour in the financial markets
New Boral and Origin Energy have regained favour in the financial markets BORAL SHARE PRICE (BOR ASX code; ORG & BLD Combined Share Price/2) $4.50 BLD $4.00 Combined $3.50 $3.00 BOR ORG $2.50 $2.00 $1.50 $1.00 Dec-89 Dec-93 Dec-94 Dec-97 Dec-98 Dec-90 Dec-91 Dec-92 Dec-95 Dec-96 Dec-99 Dec-00 Dec-01
Slide 23: Boral Demerger - Lessons Learned
Boral Demerger - Lessons Learned • Effective Board • Good Advisors • Strong Project Management • Speed is of the essence • Two credible new entities • Strong succession planning • Delivery against promises • Reasonable luck Reflections on the Boral Demerger Slide 23
Slide 24: Reflections on the Boral Demerger
Reflections on the Boral Demerger Reflections on the Boral Demerger
Slide 25: Boral's strategy is to perform & grow around its leading reserve and market positions
“Boral’s strategy is to perform & grow around its leading reserve and market positions” CEO Elect Oct.’99 ASIA Plasterboard* Indonesia #1 Malaysia #1 China (east) #1 Korea #1 USA Thailand #1 The Philippines #1 Bricks #1 Indonesia concrete #1 Clay Roof tiles #1 Concrete Roof tiles* #1 Fly ash #2 AUST
Slide 26: The Demerger has added significant value to shareholders
The Demerger has added significant value to shareholders NEW BORAL & ORIGIN ENERGY SHARE PRICE (BLD ASX code) $4.5 $4.0 BLD BOR $3.5 ORG $3.0 $2.5 $2.0 $1.5 $1.0 Feb01 Jul-01 Aug00 Nov00 Mar-02 Oct-01 May00 Feb00 May01 Jun-02 Reflections on the Boral Demerger Dec-01
Slide 27: Boral has undergone significant change
Boral has undergone significant change BORAL LIMITED FINANCIAL HISTORY (Year End June) $600 30% EBIT $500 25% EBIT/Total Assets (%) EBIT (A$ million) $400 20% $300 15% EBIT/ Total Assets $200 10% $100 John Schubert 5% Appointed $0 0% 1970 1971 1972 1973 1974 1976 1977 1978 1979 1980 1983 1984 1985 1
Slide 28: Financial History of Boral
Financial History of Boral BORAL LIMITED FINANCIAL HISTORY (Year End June) $8,000 Boral (Ex Energy) 20% EBIT/Total Assets (%) $6,000 15% EBIT (A$ million) Energy EBIT/Total Assets (%) $4,000 10% Boral Total Assets $2,000 5% Energy Assets $0 0% 1971 1972 1977 1978 1983 1984 1985 1990 1991 1996 1970 1
Slide 29: Financial History of Boral
Financial History of Boral BORAL LIMITED FINANCIAL HISTORY (Year End June) $5,000 $1,000 Sales Revenue Sales Revenue (A$ million) $4,000 $800 EBIT (A$ million) $3,000 $600 $2,000 $400 EBIT $1,000 Energy Sales $200 Energy EBIT $0 $0 1970 1972 1973 1974 1975 1976 1978 1979 1980 1981 1982 1985 1986 198