Adelaide Brighton Ltd 2014 Annual Report - AnnualReports.com

Adelaide Brighton Ltd 2014 Annual Report - AnnualReports.com

Adelaide Brighton Ltd 2014 Annual Report Company profile Adelaide Brighton is a leading integrated construction materials and lime producer which su...

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Adelaide Brighton Ltd 2014 Annual Report

Company profile Adelaide Brighton is a leading integrated construction materials and lime producer which supplies a range of products into building, construction, infrastructure and mineral processing markets throughout Australia. The Company’s principal activities include the production, importation, distribution and marketing of clinker, cement, industrial lime, premixed concrete, construction aggregates and concrete products. Adelaide Brighton originated in 1882 and is now an S&P/ASX100 company with 1,400 employees and operations in all Australian states and territories. Cement Adelaide Brighton is the second largest supplier of cement and clinker products in Australia with major production facilities and market leading positions in the resource rich states of South Australia and Western Australia. It is also market leader in the Northern Territory. In addition to domestic production, the Company is the largest importer of cement, clinker and slag into Australia with an unmatched supply network that enables efficient access to every mainland capital city market. This network includes significant distribution joint ventures in Victoria and Queensland. Lime Adelaide Brighton is the largest producer of lime in Australia, with production assets in Western Australia, South Australia and Northern Territory. Lime is an important product for the mineral processing industry in resource rich markets, particularly for the production of alumina and gold, of which Australia is a leading producer. Concrete and Aggregates Adelaide Brighton has a growing presence in the premixed concrete and aggregates industry extending from South Australia, through Victoria and New South Wales to south east and northern Queensland. It has strategic aggregates reserves west of Sydney in regional New South Wales, south east Queensland, South Australia and regional Victoria through its wholly owned and joint venture operations. Concrete Products Adelaide Brighton holds the leading position in the Australian concrete products market, with operations in Queensland, New South Wales, Victoria, Tasmania and South Australia. Joint ventures and associates Adelaide Brighton has a number of significant investments in joint ventures and associates in construction materials production and distribution. These include major cement distribution joint ventures in Queensland (Sunstate Cement), Victoria (Independent Cement and Lime) and New South Wales; regional concrete and aggregates positions in Victoria, Queensland and New South Wales; and a 30% investment in a Malaysian white cement and clinker producer (Aalborg Portland Malaysia), which supplies the Australian market. Sustainability Adelaide Brighton’s commitment to sustainable development is demonstrated through a range of actions implemented across a balanced program of initiatives. Adelaide Brighton believes that setting and achieving sustainability objectives throughout the organisation assists long term competitive business performance.

FRONT COVER: SOUTHERN QUARRIES NORTHERN PIT AND SECONDARY CRUSHING PLANT AT SELLICKS HILL QUARRY

1

Performance summary

2

Chairman’s Report

4

Chief Executive Officer’s Report

8

Finance Report

10

Map of operations

11

Review of operations

12

Cement and Lime

14

Concrete and Aggregates

16

Concrete Products

18

Joint ventures

19

Sustainability

20

Sustainability Report

25

People, health and safety

27

Corporate governance statement

34

Diversity report

36

Directors

37

Financial statements index

38

Directors’ report

45

Remuneration report introductory letter

46

Remuneration report contents

47

Remuneration report

62

Income statement

63

Statement of comprehensive income

64

Balance sheet

65

Statement of changes in equity

66

Statement of cash flows

67

Notes to the consolidated financial statements

107

Directors’ declaration

107

Auditor’s independence declaration

108

Independent audit report

109

Financial history

110

Information for shareholders

Performance summary

Underlying EBIT1

Revenue

245.2m

1,337.8m

$

$

8.9%

2013: $1,228.0

Underlying ROFE2

Underlying NPAT1 Attributable to members

17.5%

166.5m

$

8.5%

2013: $153.4

0.3ppts

2013: 17.2%

Basic EPS

Final ordinary dividend

26.9c

9.5c 13.5%

2013: 23.7c

1

8.5%

2013: $226.0m

5.6%

2013: 9.0c

Underlying results have been adjusted for significant items. An explanation of the adjustments and NPAT reconciliation to statutory results is provided on page 42.

2

Return on funds emplyed = underlying EBIT/average monthly funds employed.

C/SHARE

DIVIDENDS

%

RETURN

GEARING:

ON FUNDS

NET DEBT

EMPLOYED

%

TO EQUITY

CASH FLOW FROM $M

OPERATIONS

INTEREST COVER TIMES

25

25

50

250

25

20

20

40

200

20

15

15

30

150

15

10

10

20

100

10

5

5

10

50

5

0

0 10 11 12 13 14

0 10 11 12 * 13 14

0 10 11 12 * 13 14

INTERIM FINAL SPECIAL

* In line with changes to accounting policies effective 1 January 2013, comparative numbers for 2012 have been restated

A D EL A ID E BRIGHTON LTD ANNUAL R EPOR T 2014

1

EBITDA BASIS

0 10 11 12 * 13 14

10 11 12* 13 14

Chairman’s Report

In 2014 Adelaide Brighton recorded strong growth in sales and earnings and continued to reward shareholders through higher dividends. The Company increased net profit after tax (NPAT) by 14.3% over 2013, to a record $172.7 million. We also reported record revenue of $1,337.8 million, 8.9% higher than the previous corresponding period (pcp).

Year in review

LES HOSKING CHAIRMAN

NET PROFIT $M

AFTER TAX

200

160

This very pleasing result was based on increased volumes in most divisions and markets, price increases and savings from operational efficiencies. Volumes and revenue increased in our cement division on the back of healthy demand from residential and resources projects in Western Australia, the Northern Territory, New South Wales and Queensland. South Australian demand was subdued while Victorian demand eased. Lime volumes reduced in the first half of 2014 due to a decline in demand from gold miners and the suspension of operations at a major customer in the Northern Territory, which resumed production in the second half of the year. The Concrete Products Division achieved very strong earnings growth after much hard work to optimise this business. Adelaide Brighton declared a fully franked final dividend of 9.5 cents per share, 0.5 cents higher than the pcp, which made for a full year dividend of 17 cents a share, also fully franked.

120

80

40

0 10 11 12 * 13 14

The Group’s balance sheet remains strong, aided by healthy cash flows in 2014, which enabled us to keep gearing at a lower than expected ratio of 31.7%.

* In line with changes to accounting policies effective 1 January 2013, comparative numbers for 2012 have been restated

A D E L A I D E B R I G H TON LT D ANNU A L REP OR T 2 014

Strategy In 2014 Adelaide Brighton made important strides in furthering its long term growth strategy, which is reflected in the strength of our financial results and shareholder returns. This strategy has three complementary elements: operational improvement, increasing vertical integration through value accretive acquisitions and development of the highly efficient lime business.

2

Our operational improvement program has vastly enhanced our competitive position in the last decade, substantially reducing costs and streamlining the business, and enabling us to compete more effectively in our key markets. In the past three years alone we have saved $50 million through this program. Our acquisition strategy continues to strengthen our vertically integrated business model, enabling us to participate throughout the entire value chain, from the raw material stage through to finished products in buildings and infrastructure projects. We spent $172 million in 2014 securing highly valuable and strategic aggregate and concrete businesses in South Australia and Queensland which will deliver synergies and enhance future earnings. Organic growth and growth through profitable acquisitions remain important strategies for increasing shareholder value and we will continue to seek out opportunities in a measured and low risk manner. Adelaide Brighton also continues to be a leading, low cost supplier of lime to the resources sector. We have very strong, long term supply relationships in the alumina sector and are well positioned to take advantage of the next upswing in the non alumina sector. We have made a significant investment in the past two years to improve production capacity and environmental performance in our lime business. The upgrade of our lime kilns in Munster, Western Australia, has led to an increase in our production capacity by 250,000 tonnes per annum in 2014.

($ million)

2014

Revenue

2013

1,337.8 1,228.0

1

Includes impairment charge of $2.0 million.

2

Net finance cost is the net of finance costs shown gross in the Income Statement with

Depreciation, amortisation and impairments (75.0)1 (70.6) Earnings before interest and tax Net finance cost2

247.5 222.7 (15.0) (14.1)

Profit before tax Tax expense

232.5 (59.9)

208.6 (57.5)

Net profit after tax Non-controlling interests

172.6 0.1

151.1 -

Net profit attributable to members Return on funds employed3 (%) Basic earnings per share (‘EPS’) (cents) Dividends per share - fully franked (cents) Net debt5 ($ million) Net debt/equity (%)

172.7 17.7 26.9 17.0 359.8 31.7

151.1 17.0 23.7 19.54 248.0 23.4

interest income included in revenue. 3

Return on funds employed = EBIT/average monthly funds employed.

4

Includes special dividend of 3.0 cents per share in 2013.

5

Net debt is calculated as total borrowings less cash and cash equivalents.

Leadership

Board and governance

In May 2014 Martin Brydon, a long term serving executive of the Company, was promoted to the position of Chief Executive Officer (CEO) following the retirement of Managing Director, Mark Chellew. Martin has brought more than 30 years industry experience to the role, including nine years as Executive General Manager of the Group’s Cement and Lime business.

The Board is committed to conducting business ethically and in accordance with high standards of corporate governance. Adelaide Brighton believes its policies and practices are consistent in all substantial respects with good corporate governance practice in Australia appropriate for the circumstances of the Company, including the ASX Corporate Governance Council’s Principles and Recommendations (2nd Edition).

The transition of leadership responsibilities has been smooth. Martin has taken the reins of the business firmly while continuing to implement our proven strategy. He is supported in this by an experienced and talented senior management team. Safety performance We put the safety and health of our employees and contractors at the forefront of everything we do. The Company is committed to achieving a safe, productive and healthy work environment through the continued enhancement of our safety standards and systems and through cultural change. In 2014 we recorded a lost time injury frequency rate (LTIFR) of 1.8, reflective of a sound safety culture across the business. We are also ensuring this safety culture is embedded in our recently acquired businesses.

The Company has reviewed and refreshed its Code of Conduct, Board Charter and Relationship with Management, Independence of Directors, Group Delegated Authorities and the Health, Safety and Environment Policy. It continues to review its corporate governance practices, including to take into account the ASX Corporate Governance Council’s Principles and Recommendations (3rd Edition). Sustainability and the environment Adelaide Brighton understands the importance of operating its business sustainably, working with its employees, supply chain, customers and local communities in a manner that is consistent with this objective. During 2014, Adelaide Brighton worked on consolidating the benefits from our sustainability efforts. Following the completion of the investment in dust filters at the Munster site, 2014 represents the first full year that the environmental benefits have been achieved.

A D E L A I D E BRIGHT ON LT D ANNU A L REP OR T 2014

3

In addition to the benefits from this investment, further work on the site has been undertaken in the areas of odour and noise. Similar initiatives are underway at other sites and further details are contained in our Sustainability Report. The Company believes that a proactive approach to sustainability, working with our local communities, government and regulatory bodies optimises outcomes for both our stakeholders and Adelaide Brighton. With this in mind, the Company continually challenges its performance in order to achieve improved results. Risk management Adelaide Brighton’s risk management framework is a key factor in sustaining the Group’s ongoing performance. The Board’s Audit, Risk and Compliance Committee oversees the Company’s risk management framework, encapsulating financial, operating, regulatory and environmental risks. These risks are reviewed and mitigation strategies modified on a regular basis to ensure that changes in risk are managed appropriately. In conclusion On behalf of your Directors, I acknowledge the hard work and commitment of the executive management team and all employees over the last year during what has been challenging market conditions. I also thank our customers, shareholders and joint venture partners for their continuing loyalty and support.

Chief Executive Officer’s Report

Record earnings before interest and tax (EBIT) and net profit after tax (NPAT) assisted by earnings growth in cement, concrete and aggregates, and concrete products.

Performance

MARTIN BRYDON CHIEF EXECUTIVE OFFICER

It is a pleasure to be able to tell you in my first Annual Report as Chief Executive Officer that Adelaide Brighton has delivered record earnings for shareholders and made important strategic achievements that enhance our ability to grow earnings into the future. Demand conditions across our businesses were generally favourable in 2014 and these combined with a significant contribution from operational improvement to grow earnings. We saw a recovery in residential demand for our products, particularly in New South Wales and Queensland, and ongoing strength in resource sector demand in Western Australia and the Northern Territory. Revenue increased 8.9% to a record $1,337.8 million and NPAT increased 14.3% to $172.7 million, also a record result. Underlying NPAT of $166.5 million was 8.5% higher than the underlying figure in 2013. Reported earnings before interest and tax increased 11.1% to a record $247.5 million on an EBIT margin of 18.5%. Earnings before tax were aided by net significant items of $2.3 million. Excluding these items underlying EBIT increased 8.5% to $245.2 million. Our underlying EBIT margin was stable overall at 18.3% on the expanded revenue base. Return on funds employed increased slightly to 17.5%. One-off items and the acceleration of income tax payments caused operating cash flow to decline to $194.0 million in 2014. However, despite these items, cash flow was ahead of expectations in the second half.

A D E L A I D E B R I G H TON LT D ANNU A L REP OR T 2 014

4

Due to strong second half cash flow our net debt increased by less than was expected at the time of the major acquisitions announced in August 2014. Net debt to equity gearing of 31.7% ended the year well within the target range of 25% to 45%. Cement and clinker sales volume increased 3% supported by continued demand from projects in the resources sector in Western Australia and the Northern Territory, and a residential recovery in New South Wales and Queensland. Activity in the non-residential building sector remained subdued. Cement volume declined slightly in South Australia and Victoria. Higher volume, lower costs and improved prices led to increased earnings in cement and clinker, concrete and aggregates, and concrete products. The recovery in earnings in concrete products is particularly encouraging given the significant effort that has been put into improving this business in the last few years. The recent concrete and aggregates acquisitions in South Australia and Queensland contributed to revenue in line with expectations. Excluding these acquisitions, concrete and aggregates volumes were up, led by the stronger residential market. Lime sales volume declined approximately 7% affected by the downturn in the gold sector and a production suspension by a major customer in the first half, impacting revenue and EBIT, although the business improved in the second half of the year.

HY-TEC MELBOURNE SUPPLIED APPROXIMATELY 25,000M 3 OF SPECIAL CONCRETE MIX FOR ‘ PRIMA TOWER’ - A 72 LEVEL APARTMENT TOWER IN SOUTHBANK, MELBOURNE

DE A NNU A L REP OR T 2014 ADELAID E BRIGHT ON LT D ANNU

5

Corporate restructure

4.0m

Operational improvement remained a key focus of management in 2014 with corporate restructuring, rationalisation of operations, energy efficiency and other initiatives adding $19.7 million to EBIT. The contribution from our joint ventures was lower overall with improvement in the Queensland operations offset by a lower contribution from the Victorian business. Strategy

>

>

>

Adelaide Brighton continues its successful long term strategy of growing shareholder value through three key areas: Cost reduction and continuous improvement across the Company; Growth in the lime business to supply the resources sector in Western Australia, South Australia and Northern Territory; and Focused and relevant vertical integration into downstream concrete, aggregates and concrete products businesses. During 2014, the Group delivered on a significant number of initiatives in line with its long term strategy. Operational improvement During the first half, a group wide review of operational, human resources, information technology and administration functions was undertaken. This resulted in restructuring costs of $5.4 million for the year. Pre-tax benefits from the corporate restructure were $4.0 million in 2014 and are anticipated to be $2.0 million in 2015. In line with the strategy to grow shareholder returns through improving efficiency and leveraging an industry leading import capability, Adelaide Brighton largely ceased the production of clinker at Munster, Western Australia, in December 2014.

A D E L A I D E B R I G H TON LT D ANNU A L REP OR T 2 014

Energy efficiency programs

4.9m

$

$

2015: $2.0m further benefits

2015: continued focus

The capacity rationalisation delivered EBIT improvements of $5.0 million in 2014 and a further $5.0 million is expected in 2015.

Efficiency gains partially offset the impact of lower volumes and increased energy costs during 2014. Despite a decline in lime volumes in 2014 following the 2013 closure of some gold mines, the long term prospects for lime demand remain strong.

Adelaide Brighton has an ongoing focus on the management of its power and fuel costs. Benefits of $4.9 million were delivered in 2014 through the increased use of alternative fuels, electricity demand management, fuel switching and plant efficiency. Further benefits of $5.8 million were delivered through a variety of other measures, including transport efficiencies, raw materials sourcing and a range of procurement initiatives. Import strategy underpins competitive supply into key markets Following the rationalisation of clinker manufacture at Munster, Adelaide Brighton’s imports of cementitious products, including clinker, cement and blast furnace slag, increased to more than two million tonnes in 2014, which represents approximately 20% of Australian industry demand. Since the mid 1990s, the growth of import capacity to replace ageing, less efficient domestic manufacturing has been a key element of Adelaide Brighton’s strategy to secure its long term position in the Australian market and grow value for shareholders. The use of imported materials allows Adelaide Brighton to supply customers with competitively priced product into a range of markets where demand exceeds the Company’s manufacturing capacity. Efficient lime operations with strong competitive position Following the completion of major upgrades to both Munster (Western Australia) lime kilns in 2013, improvements in production capacity, efficiency and environmental performance of the kilns have been realised.

6

While the threat of imports remained, the falling Australian dollar increases the cost of imported product. Concrete and Aggregates acquisitions in South Australia and Queensland Adelaide Brighton continues to make progress on its downstream strategic plan. The Group now produces more than 1.5 million cubic metres per annum of premix concrete and more than 6 million tonnes per annum of aggregates. The footprint of this business now reaches from South Australia through Victoria and New South Wales, to south east and northern Queensland. In 2014, Adelaide Brighton acquired BM Webb Construction Materials in Queensland, and Penrice Quarry & Minerals and Direct Mix/Southern Quarries in South Australia at an overall enterprise value of $172 million. These acquisitions are consistent with the strategy of focused and relevant vertical integration. The assets acquired include strategic quarrying operations producing approximately 2 million tonnes per annum of aggregates. The acquired businesses also produce more than 250,000 cubic metres of concrete annually, securing a significant volume of the Company’s cement sales in the South Australian market. Integration of the acquisitions, including the information systems, has been completed on an accelerated time frame delivering synergy benefits in logistics operations, procurement and back office functions. The estimated $4.4 million synergies per annum are expected to be realised in 2015.

Munster rationalisation EBIT benefit

Other initiatives

$

$

2015: $5.0m additional

2015: ongoing focus

5.0m

Earnings from the acquisitions were in line with expectations for the period to 31 December 2014. Strategic attractions of Sydney aggregates Adelaide Brighton has a significant investment in aggregates in the Sydney market through its Austen Quarry at Hartley, New South Wales. Aggregates earnings increased in 2014 in New South Wales supported by a recovery in the Sydney construction materials market.The Sydney market is transitioning to aggregate sources supplied from outside the metropolitan area, following the exhaustion of reserves at existing competitor quarries. Due to this structural change it is expected that Sydney aggregate prices will increase above the CPI rate in the short to medium term. Land sales releasing capital Adelaide Brighton has a land portfolio that is expected to release a total of $130 million in cash in the medium to long term. The Group is actively engaged in preparing these properties for sale to maximise value. The program has delivered approximately $16 million in revenue since the beginning of 2013, including a sale that contributed $9 million in cash and $1 million profit before tax in 2014. Outlook The outlook for Adelaide Brighton remains positive. Sales volume of cement and clinker in 2015 is expected to be similar to or greater than 2014. Demonstrating the benefits of a vertically integrated business, reduced cement sales from January 2015 to a major customer in South Australia are expected to be offset by:

A D E L A I D E BRIGHT ON LT D ANNU A L REP OR T 2014

5.8m

Sales of other cementitious products to that customer; > Increased sales in Western Australia; and > Improved demand in Victoria, New South Wales and Queensland. >

Lime sales volume in 2015 is anticipated to be similar to, or slightly higher than 2014 and average realised prices are likely to increase. The threat of small scale lime imports in Western Australia and the Northern Territory remains, however the weaker Australian dollar is likely to reduce the competitiveness of imports relative to Adelaide Brighton’s low cost operations. Price increases have already been announced for March and April 2015 in cement, clinker, concrete, aggregates, and concrete products. Price increases achieved in 2015 are expected to exceed those achieved last year. A number of factors are supportive of higher prices including strengthening demand and capacity utilisation and the weakening Australian dollar, which increases the cost of import substitutes. Aggregate prices are anticipated to increase significantly above CPI, particularly in Sydney where average delivered costs have increased significantly as the industry moves to supply from further afield as traditional sources have depleted. First half 2015 imports have been fully hedged, however, the deterioration in the Australian dollar will increase the direct cost of imported materials for Adelaide Brighton. Assuming the Australian dollar remains at around Yen90 and USD0.75, costs are expected to increase by approximately $7 million in a full year, prior to their mitigation through price increases. Gas related fuel costs in South Australia are now expected to increase by $2 million pre-tax in 2015.

7

There are a number of benefits which will flow through to 2015: > The unwinding of the carbon tax to benefit circa $3 million compared to 2014; > Potential transport cost savings of $4 million from lower fuel costs assuming current oil prices and exchange rate; > Further Munster rationalisation benefits of $5 million; and > Full year benefits from the 2014 corporate rationalisation of $2 million. Our people This past year has been a challenging and rewarding one for our Company. We have performed well and strengthened the foundations for future growth in earnings and rewards for shareholders. I would like to thank the senior management team and all employees of Adelaide Brighton for their dedication and skill. Our success is built on years of hard work and incremental improvement. I am particularly grateful for the support I have received from the Board since commencing as Chief Executive Officer in May 2014. I am proud to be leading this 132 year old Company and its people and believe we have a positive future ahead of us.

Finance Report

In 2014 Adelaide Brighton enjoyed healthy growth in revenue, earnings before interest and tax (E BIT) and net profit after tax attributable to members (NPAT). Revenue increased 8.9% to $1,337.8 million. N PAT increased 14.3% to a record $172.7 million. EBIT grew by 11.1% to $247.5 million.

Sales and profits

M ICHAEL KELLY CHIEF FINANCIAL OFFICER

Sales growth was achieved on rising volumes and prices in cement, clinker, concrete, aggregates and concrete products. Earnings declined in lime due to lower sales volumes. Input costs continued to increase but this was largely offset by excellent outcomes from operational improvement programs. Contribution from joint ventures and associate entities declined due to difficult markets affecting Independent Cement and Lime (ICL) in Victoria, offset by a better contribution from Sunstate Cement in Queensland. Competitive pressures in Victoria inhibited price increases by ICL to recover rising costs. Underlying NPAT increased 8.5% to $166.5 million and underlying EBIT also rose by 8.5% to $245.2 million. ‘Underlying’ measures of profit exclude significant items of revenue and expenses in order to highlight the underlying financial performance across reporting periods. The items excluded from underlying measures in 2014 contributed a net gain of $6.2 million after tax and $2.3 million before tax: > Rationalisation of clinker production at the Munster site > Corporate restructuring costs > Acquisition costs > Gain on acquisition from fair value accounting > Successful litigation outcome. Interest costs increased only marginally on higher debt related to acquisitions. This was due to the combination of lower borrowing margins and underlying interest rates.

A D E L A I D E B R I G H TON LT D ANNU A L REP OR T 2 014

8

Net profit was assisted by a lower effective tax rate due to the non-taxable accounting gain. Excluding this item, the effective tax rate was 27.9%. Adelaide Brighton’s underlying average tax rate approximates the Australian corporate rate of 30%. Equity accounted after tax earnings from joint ventures and associate entities reported in the Group results reduces the reported tax rate to the range of 27% to 28% in most years. EBIT margin Group underlying EBIT margin was stable at 18.3% compared with 18.4% in 2013. EBIT margins remained healthy on a revenue base in 2014 that was significantly larger than the prior year. In the wholly owned operations, EBIT margins improved in cement and clinker, concrete and aggregates and concrete products, supported by volume and price growth in these businesses. Margins in lime declined due to a 7% reduction in volume and a lower average price as the mix shifted away from higher priced non-alumina sector volume, although margins stabilised in the second half of the year. The contribution from the equity accounted joint ventures declined $2.5 million due largely to weakness in our joint venture, Independent Cement and Lime Pty Ltd, in the challenging Victorian market. The devaluation of the Australian Dollar against Adelaide Brighton’s major trading currencies of the US Dollar and the Japanese Yen reduced import profitability by approximately $5 million in 2014 compared to 2013.

REVENUE AND NET PROFIT $M

EARNINGS $BN

C/SHARE

180

1500

30

100

170

1200

24

90

160

900

18

80

150

600

12

70

140

300

6

60

0

0

AFTER TAX

PER SHARE

%

*In line with changes

PAYOUT RATIO

to accounting policies effective 1 January 2013, comparative numbers for 2012 have been restated

130 10 11 12 * 13 14

50 10 11 12* 13 14

10 11 12* 13 14

NPAT

ORDINARY DIVIDEND

REVENUE

SPECIAL DIVIDEND

Operational improvement programs delivered benefits of $19.7 million in 2014. Key initiatives were a corporate restructure, the Munster clinker rationalisation and energy efficiency programs. Shareholder returns A final ordinary dividend of 9.5 cents per share (fully franked) was declared, an increase of 0.5 cents per share on the 2013 final ordinary dividend. Fully franked dividends totalled 17.0 cents per share in 2014 compared to 19.5 cents in 2013, which included a special dividend of 3.0 cents per share.

Cash flow and debt Cash flow was ahead of expectations in the second half and, as such, gearing finished the year lower than anticipated. While operating cash flow declined by $33.3 million to $194.0 million in 2014, this was largely due to non-recurring items from an acceleration of the income tax payments system and carbon tax related payments. Development capital expenditure of $174.4 million in 2014 included $155.6 million in acquisitions in concrete and aggregates in north Queensland and South Australia.

Underlying return on funds employed improved from 17.2% to 17.5% in 2014. Adelaide Brighton’s returns continue to exceed the cost of capital.

Excluding acquisitions, capital expenditure totalled $60.4 million in 2014, a decline of $6.5 million from 2013 following the completion of organic growth projects.

Adelaide Brighton has maintained strong total shareholder return (capital appreciation plus dividends) over the last decade compared to its peer group, which has supported S&P/ASX 100 Index inclusion since 2012.

One of the benefits of the rationalisation and improvement program is the release of surplus land assets. Adelaide Brighton has a land portfolio that is expected to release a total of $130 million in cash in the medium to long term.

The Dividend Reinvestment Plan has been suspended given better than expected cash flow and gearing outcomes since the major acquisitions were completed in 2014.

The Group is actively engaged in preparing these properties for sale to maximise value. The program has delivered approximately $16 million in revenue since the beginning of 2013, including a sale that contributed $9 million in cash and $1 million profit before tax in 2014. Due to strong second half cash flow, net debt increased by a lower than expected $111.8 million to $359.8 million. Net debt to equity gearing of 31.7% at year end was well within the targeted range of 25% to 45%. The Company refinanced debt facilities during 2014, increasing the term and lowering borrowing margins. Total facilities were increased by $40 million to $540 million with the following maturity profile: January 2018

January 2019

$330 million

$210 million

To maximise shareholder returns, Adelaide Brighton seeks to ensure the balance sheet is efficiently utilised while retaining the flexibility to fund the long term growth strategy as opportunities are identified.

REVENUE BY

REVENUE BY

REVENUE BY

STATE

SEGMENT

PRODUCT GROUP

WESTERN AUSTRALIA

NON-RESIDENTIAL

CEMENT

VICTORIA

RESIDENTIAL

LIME

NEW SOUTH WALES

ENGINEERING

CONCRETE PRODUCTS

SOUTH AUSTRALIA

MINING

CONCRETE AND

QUEENSLAND

AGGREGATES

OTHER

A D E L A I D E BRIGHT ON LT D ANNU A L REP OR T 2014

9

Map of operations

Cement Lime Concrete and aggregates Concrete products

A D E L A I D E B R I G H TON LT D ANNU A L REP OR T 2 014

10

Review of operations

Market position

Market position

#

#

Lime producer in the minerals processing industry

Cement and clinker importer with unmatched channels to market

Market position

Market position

#

#

Market share in concrete products

Cement and clinker supplier to the Australian construction industry

1

1

1

2

Market position

4

#

Market share in concrete and aggregates

A D E L A I D E BRIGHT ON LT D ANNU A L REP OR T ADELAI 2014 DE BR I GHTON LTD ANNUAL R EPOR T 2014

11

Cement and Lime

Cement and clinker sales, which represent more than half of Adelaide Brighton’s annual revenue, were 3% higher in 2014 than in the prior year. Supported by higher volumes and margins, the cement and clinker business delivered solid earnings growth, despite increases in energy costs and the impact of production issues in the first half.

Sales volumes of lime declined in the Western Australia gold market, impacting revenue and margin. However, margins and volumes stabilised in the second half. MICHAEL MILLER REGIONAL EXECUTIVE GENERAL MANAGER CEMENT AND LIME SA/NSW

BRAD LEMMON REGIONAL EXECUTIVE GENERAL MANAGER CEMENT AND LIME WA/NT

Cement and clinker Sales revenue rose in all mainland states and territories except in Victoria, where construction demand weakened, and in South Australia, where cement sales declined slightly because of lower sales of back fill binder to the mining sector. The construction market was stable, with an increase in residential activity offsetting lower sales to major projects. While average cement and clinker selling prices increased by more than CPI, energy costs also increased and production issues at the Birkenhead (South Australia) plant adversely affected first half earnings. However, production rationalisation and operational improvements made a significant contribution to margins and earnings in the year and the repeal of the carbon tax from July 2014 augmented second half earnings and will deliver further benefits in 2015. Production Leveraging off our leading import capability, rationalisation of clinker production at Munster (Western Australia) began in early 2014 and largely ceased at the end of 2014. This rationalisation yielded cost savings of $5 million in 2014 with further savings expected in 2015.

A D E L A I D E B R I G H TON LT D ANNU A L REP OR T 2 014

12

The $60 million investment to upgrade and expand cement milling capacity at Birkenhead (South Australia) delivered incremental benefits of $1.1 million in 2014 in addition to the $8.0 million received in 2013. Total returns on the project in 2014 at $9.1 million (pre-tax) represent a return on funds employed of 15.3%, which exceeds the cost of capital. Cement supply contracts In March 2014, Adelaide Brighton announced the expected loss of supply of approximately 120,000 tonnes of cement per annum to a major South Australian customer. In line with guidance, this did not impact 2014 volumes. As a result of Adelaide Brighton’s capability to supply innovative alternative cementitious products, an agreement has now been reached with that customer to supply up to approximately 25% of their ongoing requirements for cementitious materials in South Australia. This new agreement is effective from 1 January 2015. In Western Australia, a new contract was secured with the same major customer to supply at least 50% of their required volume in that State until the end of 2017, with a 12 month notice period. In July 2014, Adelaide Brighton secured a contract with a major independent customer in South Australia and, in December, agreed a one year supply contract with another major customer in the same market. These agreements and the integrated operations underpin the utilisation at the efficient Birkenhead cement works.

CEMENT MILLED ‘000 TONNES

(INC. IMPOR TED CLINKER)

‘000 TONNES

3500

1500

2800

1200

2100

900

1400

600

700

300

LIME PRODUCTION

0

0

10 11 12 13 14

10 11 12 13 14

Imports and currency issues

Lime

Adelaide Brighton is Australia’s largest importer of cement and clinker, and supplies competitively priced product into all major Australian markets. Imported cementitious products, which include clinker, cement and blast furnace slag, increased to circa two million tonnes in 2014, representing approximately 20% of the Australian market. However, the devaluation of the Australian dollar against Adelaide Brighton’s major trading currencies of the US Dollar and the Japanese Yen reduced import profitability by approximately $5 million in 2014 compared to the prior year.

While demand for lime in the alumina sector was consistent in 2014, national sales of lime declined approximately 7% compared with the prior year. This was due primarily to a significant reduction in demand from the non-alumina sector in Western Australia, where a number of gold mines closed in 2013. Disruption to a customer’s operations in the Northern Territory in the first half also adversely affected lime sales. However, average lime selling prices increased last year, albeit at slightly less than CPI, despite the reduction in sales to the higher priced gold sector.

Impact of acquisitions The acquisition of the BM Webb Construction Materials business, including its cement import operations, has expanded the Group’s cement distribution footprint into north Queensland. Cement supply has been switched to a major domestic supplier.

Lower sales of lime overall impeded fixed cost recovery, compressing full year margins and earnings.

THE ADELAIDE BRIGHTON CEMENT BIRKENHEAD PLANT SUPPLIED 3,500 TONNES OF GENERAL PURPOSE CEMENT FOR THE RIVERBANK BRIDGE ACROSS THE RIVER TORRENS INONADELAIDE A D E L A I D E BRIGHT LT D ANNU A L REP OR T

2014

13

Contract prices to a major alumina customer in Western Australia increased in June 2014. This major contract price reset, combined with stabilisation of demand, led to an improvement in margins in the second half of 2014 versus the second half of 2013. With expanded production capacity and better environmental performance following recent upgrades, the lime production assets are very well positioned to capitalise on ongoing strength in alumina sector demand and any recovery in the non-alumina resources sector.

Concrete and Aggregates

Sales volumes of concrete and aggregates continued to grow in 2014, underpinned by stronger residential demand in New South Wales and Queensland and volumes from acquisitions. The Pacific Highway upgrade, pull-through demand from concrete operations and the benefits of successful acquisitions combined to improve aggregate sales and margins.

GEORGE AGRIOGIANNIS EXECUTIVE GENERAL MANAGER CONCRETE AND AGGREGATES

Just two years ago the Concrete and Aggregates Division was classed as an emerging force in the industry but today, following significant growth by acquisition, it is the fourth largest Australian producer in its sector. In 2014 the division contributed almost 25% of total Adelaide Brighton Group revenue. Higher sales volumes, price increases (particularly in New South Wales) and cost reductions from operational improvements combined to enhance the profitability of the division in 2014. Following the acquisition last year of downstream businesses in Queensland (BM Webb Construction Materials) and in South Australia (Penrice Quarry & Mineral and Direct Mix/Southern Quarries), the Division now produces more than 1.5 million cubic metres of premix concrete and more than 6 million tonnes of aggregates annually. The assets acquired include strategic quarrying operations producing approximately 2 million tonnes of aggregates and 250,000 cubic metres of concrete each year, thus securing a significant volume of the Group’s cement sales in the South Australian market. As a result of the acquisitions, the operational footprint of the Division now extends from South Australia, through Victoria and New South Wales to south east and northern Queensland.

A D E L A I D E B R I G H TON LT D ANNU A L REP OR T 2 014

14

The acquisitions were consistent with Adelaide Brighton’s vertical integration strategy and, following full and rapid integration of logistics, procurement, accounting, IT and administration functions, it is expected that synergistic benefits of $4.4 million will be realised during 2015. The total cost of the acquisitions was $172 million (on an enterprise value basis). Adelaide Brighton maintains a significant investment in aggregates in the Sydney market through the Austen Quarry at Hartley, New South Wales. Aggregates earnings increased in that State in 2014, supported by a recovery in the Sydney construction materials market. The New South Wales aggregates market is transitioning to sources supplied from outside the Sydney metropolitan area, following the depletion of reserves at competitor quarries. This structural change, leading to higher average delivered costs, will facilitate price increases significantly above CPI in the short to medium term. Adelaide Brighton expects price rises in concrete and aggregates in 2015 to be greater than in previous years and earnings are expected to exceed the results achieved last year.

DIRECT MIX PREMIX CONCRETE BATCH PLANT AT SELLICKS HILL IN SOUTH AUSTRALIA

ANNU A D E L A I D E BRIGHT ON LT D A NNU A L REP OR T 2014

15

Concrete Products

The Concrete Products division saw a very strong lift in earnings in 2014 as it enjoyed the fruits of years of hard work to make this business more efficient and responsive to the needs of the market.

Adbri Masonry is Australia’s largest manufacturer of concrete masonry products, servicing key eastern seaboard residential and commercial markets. STEVE ROGERS EXECUTIVE GENERAL MANAGER CONCRETE

Operational improvements combined with a strong increase in revenue lifted Concrete Products EBIT 190% to $6.1 million in 2014.

PRODUCTS

Sales revenue increased by 10.5% on higher demand across most regions and prices increased slightly above the rate of CPI. Demand from the residential sector was strong and activity in the commercial sector also improved. In 2014, restructuring and operational improvements delivered cost savings while maintaining our ability to participate in the market recovery. This included the mothballing of excess capacity and a simplified organisational structure. These changes are part of a strategic program that began several years ago and that we expect will continue to realise further benefits in 2015 and beyond. In 2014 we completed the upgrade of our production plant at Stapylton in Queensland. The installation of a latest generation HESS masonry machine has lowered production costs and, with its fast product change over times, improves production flexibility to meet customer demand.

A D E L A I D E B R I G H TON LT D ANNU A L REP OR T 2 014

16

Production tolling on behalf of other distributors has also been an important factor in improving earnings, enabling us to offer our innovative products cost effectively in new markets. We have also licensed a range of our products overseas, in New Zealand and South Africa. New products and new methods of installation, such as our Versaloc technology, have opened up valuable new markets. Versaloc, a dry-stack walling system, opened opportunities in the residential and multistorey dwelling market, for example, and our automated process for laying pavers has made their use viable in large scale applications such as ports and truck yards. The trend of growth in higher end masonry products continues, with the business focused on development of value added products that match consumer demand for quality products of distinction. Integrated into this product development is the use of alternative raw materials to improve the sustainability outcomes of our operations.

A SELECTION OF ADBRI MASONRY A D E L A I D E BRIGHT ON LT D A NNU A L REP OR T 2014 ANNU

17

CONCRETE PRODUCTS

Joint Ventures

Adelaide Brighton’s Joint Ventures in conjunction with our own operations, provide an unmatched network for the efficient supply and distribution of products across Australia.

Sunstate Cement Limited (50%)

Mawson Group (50%)

Burrell Mining Services (50%)

Sunstate Cement Limited (Sunstate) is a joint venture between Adelaide Brighton and Boral. A leading supplier to Queensland’s construction industry, Sunstate has a cement milling, storage and distribution facility at Fisherman Islands, Port of Brisbane. Clinker is supplied to Sunstate via seaborne shipments from the Adelaide Brighton Angaston plant and imports from Asia.

Mawson Group (Mawsons) is a joint venture between Adelaide Brighton and BA Mawson Pty Ltd. Mawsons is the largest premixed concrete and quarry operator in northern regional Victoria. Mawsons also operates in southern regional New South Wales where it holds leading market positions.

Burrell Mining Services is an unincorporated joint venture between Adelaide Brighton and Burrell Mining Products. With operations in New South Wales and Queensland, Burrell Mining Services manufactures a range of concrete products exclusively for the coal mining industry.

Earnings from Mawsons have more than doubled since the 2007 acquisition of the 50% interest. Following a stronger second half, the 2014 EBIT contribution of $3.0 million was in line with 2013.

Earnings from Burrell declined as a result of the moderation in coal mining activity in New South Wales and Queensland during the year which led to lower demand for Burrell’s products.

Batesford Quarry (50%)

Aalborg Portland Malaysia Sdn. Bhd. (30%)

Sunstate’s contribution to Group EBIT increased from $6.7 million in 2013 to $8.1 million in 2014. Although the south east Queensland market remains competitive, improved demand in the region led to higher sales volume, margins and earnings in 2014. Independent Cement and Lime Pty Ltd (50%) Independent Cement and Lime Pty Ltd (ICL), a joint venture between Adelaide Brighton and Barro Group Pty Ltd, is a specialist supplier of cement and cement blended products throughout Victoria and New South Wales and is the exclusive distributor of cement for Adelaide Brighton and any related body corporate in these states.

Batesford Quarry is an unincorporated joint venture between Adelaide Brighton, E&P Partners and Geelong Lime Pty Ltd. Batesford Quarry, situated at Fyansford Quarry near Geelong in Victoria, undertakes quarrying and manufacturing, marketing and distribution of various limestone and quarry products. Batesford Quarry experienced a modest decline in sales volumes from 2013, which was offset by improved pricing and operations performance, resulting in stable earnings.

ICL’s earnings declined in 2014 due to lower volume, rising input costs, and limited opportunity to recover those cost increases. Volume increased in New South Wales through the year, demand for slag-based products remained resilient and Victorian demand strengthened late in the second half. Despite this, contribution to EBIT was down from $13.1 million in 2013 to $9.2 million in 2014.

A D E L A I D E B R I G H TON LT D ANNU A L REP OR T 2 014

18

Aalborg Portland Malaysia Sdn. Bhd. (APM) is a joint venture between Cementir (70%) and Adelaide Brighton. APM manufactures and sells white cement and clinker. It sells products to the domestic Malaysian market and exports to markets throughout southeast Asia and Australia. Equity accounted earnings from APM were similar to the prior year and in line with expectations. The US$18.6 million capacity expansion was completed on budget in the second half of 2014. While demand for product was strong, the benefit from the capacity expansion was not available until late in the year. Shipment of white clinker to Adelaide Brighton’s operations in Western Australia commenced late in 2014.

Sustainability Sustainability is about managing our business to ensure success for the long term.Our commitment to sustainability is built on sound business strategy that supports continuous improvement in the social, environmental and economic performance of the Company.We do this by continually analysing our activities and considering the needs of all stakeholders to identify key opportunities for improvement and sustainable development. A D E L A I D E BRIGHT ON LT D ANNU A L REP OR T ADELAI 2014 DE BR I GHTON LTD ANNUAL R EPOR T 2014

19

Sustainability Report

This Sustainability Report should be read in conjunction with other sections of this Annual Report and its financial statements. The Directors’ Report, Corporate Governance Statement and reports on Remuneration and People, Health and Safety all contain information relevant to the sustainability performance of the Group.

The Adelaide Brighton Group includes Adelaide Brighton Limited and the entities it controls (the Group). This report excludes information about the Group’s joint ventures as their operations are not material to our sustainability reporting. While the Group’s financial year ends on 31 December, most government sustainability-related reporting requires information to be provided for the year to 30 June. So that statistical and graphical data provided in this Sustainability Report can be compared with other publicly available information, the information in the report relates to the year ended 30 June 2014, unless otherwise indicated. In developing this report, the following have been taken into account: > The Global Reporting Initiative G4 Sustainability Reporting Guidelines. > ESG Reporting Guide for Australian Companies prepared by the Australian Council of Superannuation Investors and the Financial Services Council. > The Cement Sustainability Initiative of the World Business Council for Sustainable Development. > Relevant industry practice. > The definitions and boundaries in the National Greenhouse and Energy Reporting Act, in relation to the reporting of energy use and greenhouse gas emissions. The Chief Executive Officer, under direction from the Board, implements the Company’s sustainability framework and approves the Group’s key performance indicators and the scope of this report. The key performance indicators listed below have been assessed to be material to the Group’s sustainability performance.

A D E L A I D E B R I G H TON LT D ANNU A L REP OR T 2 014

Key performance indicator

Discussion in Annual Report

Alternative fuels and energy consumption

Page 21

Alternative raw materials

Page 21

Carbon emissions

Page 22

Energy by source

Page 21

Participation of women in the Company

Page 35 - Diversity Report

Restricted duties injury frequency rate

Page 24

Lost time injury frequency rate

Page 24

Employment by geography

Page 26

Employment by employment status

Page 26

Employment by contract type

Page 26

Employee turnover by age group

Page 24

Employee turnover by gender

Page 24

Employee turnover by geography

Page 26

% of employees on EBAs vs staff

Page 26

Other reports

Discussion in Annual Report

Coverage of organisation’s defined benefit plan obligations Direct economic value added (sales, costs, employee compensation, retained earnings) Monetary value of fines and total number of non-monetary sanctions for non-compliance with laws and regulations For further information about the sustainability report email [email protected] or telephone 08 8223 8005.

20

Page 86 - 88 - Note 20 Page 62 - Income Statement Page 76 - Note 3 and 4 Page 43 - Directors’ Report Environmental Performance

‘000t

ALTERNATIVE %

FUELS ENERGY

ENERGY BY SOURCE TERAJOULES

LIQUID FUELS COAL

1200

10

18

600

900

8

16

500

600

6

14

400

300

4

12

300

2

10

0

09 10 11 12 13 14

INDUSTRIAL WASTE

INDUSTRIAL WASTE

WASTE OIL

WASTE OIL

% ALTERNATIVE FUELS

ELECTRICITY

OF TOTAL ENERGY

The carbon tax has been replaced by the Direct Action Plan Emissions Reduction Fund. The aim of this fund is to provide incentives for businesses to adopt new practices and technologies that reduce emissions. The Government will then purchase those reductions at the least cost. Adelaide Brighton intends to thoroughly investigate all the Group’s activities to find ways to participate in this new scheme.

% SCM 1 SUBSTITUTION GHG SAVING 1

By-products of industrial processes - slag from the steel manufacturing industry and fly ash from coal fired power stations

Throughout the year Adelaide Brighton worked towards reducing its total greenhouse gas emissions from all business units. As shown by the graph on page 22 the Company reduced overall emissions by 10%. This reduction was attributed to the rationalisation of clinker production at the Munster site, greater energy efficiency, use of lower emission fuels and use of alternative raw materials. Initiatives in fuel and raw material use remain central to our continued efforts to reduce greenhouse gas emissions.

Benefits include increased resources efficiency, minimisation of the use of nonrenewable natural resources, reduction in waste being sent to landfill and reduction of our emissions footprint. We use a variety of alternative fuels in our processes, primarily recycled demolition and construction timber, waste oil and carbon powder. In addition, we utilise slag and fly ash as alternative raw materials in our production processes. The following specific projects were undertaken during the year.

Co-processing

Construction and demolition timber used as an alternative fuel at Birkenhead

Co-processing is a term used to describe the use of alternative fuels and alternative raw materials in the production process. This continues to be a focus for the Company and provides significant benefits not only for our business, but for the industry and the natural environment.

SOURCE OF GREENHOUSE GAS EMISSION IN A CEMENT PLANT

50% OF GREENHOUSE GAS EMISSION OCCUR AS THE RAW MEAL IS HEATED AND CARBON DIOXIDE IS DRIVEN OFF IN ORDER TO FORM THE NECESSARY CHEMICAL CONVERSION OF LIMESTONE TO CALCIUM OXIDE: CaCO3 > CaO + CO2. AS LONG AS CEMENT MAKING RELIES ON THE CALCINATION OF LIMESTONE,THESE EMISSIONS WILL BE IMPOSSIBLE TO AVOID. 35% OF GREENHOUSE GAS EMISSIONS OCCUR AS A RESULT OF BURNING FUELS (COAL,GAS AND DIESEL) TO CREATE THERMAL ENERGY 15% IS PRODUCED AS A RESULT OF THE INDIRECT EMISSIONS RESULTING FROM THE USE OF ELECTRICITY. CEMENT GRINDING IS THE LARGEST SINGLE ELECTRICITY USER IN THE CEMENT PLANT. RAW MEAL GRINDING AND MOVING MATERIAL AROUND THE PLANT ARE OTHER SIGNIFICANT SOURCES OF ELECTRICITY USE. Source: Cement Industry Federation

A D E L A I D E BRIGHT ON LT D ANNU A L REP OR T 2014

200

09 10 11 12 13 14 DEMOLITION MATERIAL

The Australian Government’s mechanism for carbon pricing, known as the carbon tax, was introduced on 1 July 2012 and repealed effective 1 July 2014. To satisfy our final liability under the carbon tax scheme, the Group chose to meet its obligations through the purchase of Australian Carbon Credit Units. Units amounting to five per cent of our emissions, the maximum allowable under the scheme, were sourced from native forest protection projects in two areas of NSW. The balance of the units were acquired from the Clean Energy Regulator.

SAVING

SUBSTITUTION

DEMOLITION MATERIAL

Carbon emissions

GHG

RAW MATERIALS

%

CONSUMPTION

NATURAL GAS

Sustainable principles and practises, innovation and continuous improvement in environmental performance are a natural part of business at Adelaide Brighton and help to ensure the Company’s long term success in a changing world. We are aware that our operations are fuelled by natural resources from the environment in which we live and we are always respectful of the local communities we operate in close proximity to. The business adheres to strict licensing and mandatory reporting conditions but, just as importantly, continually undertakes voluntary measures to ensure the natural environment and local communities we operate within are not adversely affected by our activities.

ALTERNATIVE

21

The use of construction and demolition timber displaces the use of natural gas in the kiln and reduces our emissions footprint. As a result of major improvements made to the fuel firing process at the Birkenhead plant in the previous year, the volume of construction and demolition fuel used increased during 2014. A second firing facility at the site is planned to facilitate a further increase in the use of this alternative fuel in future years.   Slag dryer installed at Port Kembla Commissioning and installation of a slag dryer during the year at the Port Kembla site in New South Wales will increase the use of alternative raw materials. The increased use of slag will reduce the site’s clinker usage, which will reduce its overall emissions footprint.

‘000 TONNES

CARBON EMISSIONS

4000

3600

3200

2800

2400 09 10 11 12 13 14

BIRKENHEAD PLANT WETLAND EXPANSION NEW PLANTINGS HAVE DOUBLED THE SIZE OF THE WETLANDS TO OVER 1.6 HECTARES

22

‘000

MAINS WATER MEGALITRES

USAGE

TONNES

800

160

600

120

400

80

200

40

0

PROCESS WASTE TO LANDFILL

0 09 10 11 12 13 14

09 10 11 12 13 14

CEMENT AND LIME

CEMENT AND LIME

CONCRETE AND AGGREGATES

CONCRETE AND AGGREGATES

CONCRETE PRODUCTS

CONCRETE PRODUCTS

Angaston waste oil

Installation of solar power

Waste oil became a major source of energy for the Angaston plant in South Australia following successful trials during 2013. In excess of 1.9 million litres of this alternative fuel was consumed during 2014. The increased use of this waste product reduced the amount of natural gas the plant required. The ongoing use of this alternative fuel is dependent on continued access to a reliable supply.

In a trial to reduce power consumption, a solar power plant was installed at our Penrose Quarry in New South Wales. The outcome of this project is being monitored to evaluate the suitability of expanding the use of solar power to other quarries as a replacement for generators and for use in concrete plants.

Improvement initiatives As well as using alternative fuels and raw materials to improve our production processes, there are many other projects occurring at our sites which help our overall sustainability performance, on both a large and small scale. Reduction of the Munster plant carbon footprint The rationalisation of the plant’s operations was announced during the year and involved moving to an import model to replace domestic production of clinker used in the manufacture of cement. The Munster clinker kilns used inefficient wet process technology with a large carbon footprint. The replacement imported product is manufactured by producers with more advanced, efficient equipment.

A D E L A I D E BRIGHT ON LT D ANNU A L REP OR T 2014

Dust reduction initiatives Fugitive dust at sites across the business is monitored and reduction initiatives actioned where appropriate. During the year, a foam suppression system was installed at Birkenhead in South Australia. This system has reduced fugitive dust loads generated during tipping and unloading (by front end loaders and trucks) of materials into the raw materials feed system. The patented dust suppression solution is used to essentially ‘weigh down’ dust particles, preventing them from becoming airborne. Any dust captured in the foam will fall back into the hopper and into the materials delivery system. Recognition of improvement initiatives The $46 million investment in bag house filter systems for Kilns 5 and 6 at Munster was recognised with the Environmental Innovation Award from the Cement, Concrete and Aggregate Association. This award recognises excellence in developing and implementing an innovative solution to an identified environmental issue or process that has positive environmental outcomes. The installation of the two state-of-the-art systems has resulted in a dramatic reduction in particulate emissions.

23

Annual mandatory reporting In addition to site based reporting under operating licences, the Group has reported under three national environmental schemes: > In October 2014, Adelaide Brighton reported under the National Greenhouse and Energy Reporting (NGER) scheme for the sixth year. This includes reporting of greenhouse gas emissions, energy consumption and energy production data from all business units, as well as data required for the carbon tax scheme. Due to the size of the Group, independent certification of the reported carbon tax data was required and the Company again received an unqualified audit opinion on this data. Reporting of NGER information has not been impacted by the repeal of the carbon tax. > The National Pollutant Inventory reports emissions at a site level where certain thresholds are reached at the site. This is made publically available, which improves transparency regarding the impact of site operations on communities. Reports for the 12 months to June 2014 were submitted to the regulators, with public release of the data expected in early 2015. > The Energy Efficiency Opportunities program encouraged large energy users to identify, evaluate and implement energy saving opportunities. The program was repealed effective June 2014 and there are no further reporting requirements. Despite the repeal of the program, Adelaide Brighton continues to investigate potential energy efficiency opportunities as part of day-to-day business operations.

Re-use of cement and lime kiln dust

Munster rehabilitation

Cement kiln dust (CKD) and lime kiln dust (LKD) both waste products of cement and lime production, have traditionally been disposed of in our quarries. Efforts to re-use these products have been under investigation for a number of years, either by incorporating them into our processes or finding other industries which have a use for them.

Over two hectares of new rehabilitation works occurred within the quarry at Munster during 2014, with more than five hectares now rehabilitated. In total, over 17,000 trees, with all species planted being native to the local area. The site is on track to being a seed collection point for other rehabilitation activities that are being undertaken in the local community.

Birkenhead CKD re-use project

Munster LKD Project In a joint effort with the Curtin University PhD program, the Company is investigating the use of LKD in the road and construction industry. Successful identification of uses for the material would reduce the quantity of material being disposed of in landfill each year. Landcare and rehabilitation Looking after the land on which our businesses operate and on which they are dependant is an area of constant focus for Adelaide Brighton. Rehabilitation and revegetation of areas used for quarrying activities is ongoing. Birkenhead Wetlands The expansion of the wetlands at the Birkenhead plant was completed during 2014. Thousands of native plants were planted and previously planted reeds have now established themselves in the ponds. The expansion project has doubled the size of the wetlands to over 1.6 hectares.

EMPLOYEE TURNOVER BY AGE GROUP

100

75

50

25

In addition to our corporate partnerships we directly assist a broad range of organisations and community groups with selective and considered support, including education groups, health facilities and organisations which provide assistance to those in need. In 2014 our support included assistance to the following: > Ear Science Institute Australia - researching causes of and treatments for ear, hearing and balance disorders > Camp Quality > South Australian Indigenous Law Student Mentoring Program to support indigenous law students during study and to facilitate transition as graduates to legal practice > Sydney Children’s Hospital Foundation children’s therapist in the Outpatients and Emergency Departments > Variety, the Children’s Charity - benefitting sick, disabled and disadvantaged children (also supported through Adelaide Brighton’s workplace giving program) > Undergraduate Scholarship in the School of Engineering at the University of Wollongong - targeted towards a female as part of our long term strategy to encourage a higher proportion of women into engineering in industry > University of Adelaide Engineering Scholarship > Barossa Council - support for Barossa Aquatic Centre > City of Port Adelaide Enfield Community Christmas parade > Indigenous scholarship for secondary schooling program.

6

4

2

0 09 10 11 12 13 14 CEMENT AND LIME CONCRETE AND AGGREGATES CONCRETE PRODUCTS TOTAL ABL

RESTRICTED DUTIES INJURY FREQUENCY

FREQUENCY RATE

40

30

20

10

0 09 10 11 12 13 14 CEMENT AND LIME CONCRETE AND AGGREGATES CONCRETE PRODUCTS TOTAL ABL

EMPLOYEE TURNOVER %

BY GENDER

100

80

60

0 MALE

FEMALE

CONTINUERS TURNOVER

70+

66-70

61-65

56-60

51-55

FREQUENCY RATE

8

20

24

46-50

LOST TIME INJURY FREQUENCY

40

A D E L A I D E B R I G H TON LT D ANNU A L REP OR T 2 014

41-45

36-40

< 20

31-35

0

Adelaide Brighton is committed to positive engagement, consultation and openness with local communities.

26-30

Community support

21-25

The Birkenhead site began a project in 2013 to implement the use of CKD into all cement mills, diverting it from landfill. The project commenced by converting cement mill 1 to accept CKD and continued into 2014 with conversion of cement mill 6. Following these successful projects, work is underway in 2015 to expand the use of CKD to cement mill 7. The re-use of CKD in cement products not only reduces the amount going to landfill but directly displaces the volume of clinker required for production of cement, saving on non-renewable resources and reducing the carbon footprint of the site.

% TURNOVER

People, health and safety

Adelaide Brighton employs a diverse workforce of around 1400 people across about 90 locations throughout Australia. At Adelaide Brighton our commitment to health and safety is an essential and integral part of the way we do business.

> >

>

>

>

>

Our employee Code of Conduct is based on the key values that guide and define how business is conducted and provides a set of guiding principles to help us make the right decision every time. They key values underpinning the Code of Conduct are: We act with fairness, honest and integrity; We provide a safe and healthy work environment for all employees; We are aware of and abide by laws and regulations; We maintain the highest standards of professional behaviour; We identify and manage conflicts of interest responsibly; and We strive to be a good corporate citizen, and to achieve community respect (by individually and collectively contributing to the well being of shareholders, customers, the economy and the community). Safety and health During 2014 our Health, Safety and Environment Policy was revised to align with our current vision and safety culture. Our goal of “Safe, Sustainable Production” is core to how we work and conduct our business. We continually work on improving our safety systems and safety culture.

>

Focus areas in 2014 included: Safety strategy workshops led by the Chief Executive Office and senior management team to review safety performance and protocols and develop a safety vision for 2015 -2018 with actions and leadership behaviours to achieve a mature safety system and culture.

A D E L A I D E BRIGHT ON LT D ANNU A L REP OR T 2014

>

>

A Safety Leadership Workshop Program, aimed at helping employees understand their role in shaping safety culture, was completed with the delivery of the program to approximately 300 employees within our Concrete Products Division. Implementation of Adelaide Brighton’s safety practices within the concrete and aggregate business acquisitions in South Australia and Queensland. In 2014 we recoded a lost time injury frequency rate of 1.8 (1.7 in 2013) and restricted duty injury frequency rate of 17.8, an increase from 11.7 in the previous year. The increase in the restricted duty injury frequency rate is attributable to our strong focus on early intervention injury management approach. This practice ensures that even minor injuries are treated by a doctor as soon as is possible. While the negative outcome of this can be an increase in short duration restricted duty injuries, the positive outcomes are a reduction in injury severity, duration and most importantly a demonstrated “we care for our people” attitude. Developing a diverse workforce Adelaide Brighton recognises the need to continually build a diverse and capable workforce to meet the needs of our business. We are committed to the promotion of diversity within our organisation, and recognise that removing barriers to diversity enables us to attract and retain the best people with the appropriate skills to contribute to the continuing success of our business. We have continued our focus on expanding gender diversity in our business and the industry through the sponsorship of the Women in Engineering program at Wollongong University and an Undergraduate Engineering Scholarship for female engineers.

25

In addition, we have also provided a four year scholarship to enable an indigenous student to successfully complete high school, providing them with more choices for their future career. Our focus on indigenous diversity has included active participation in the South Australian Indigenous Law Student Mentoring program. Our workforce profile shows that the average age of our workforce is 46 with an average tenure of nine years. With such a stable and experienced workforce, we have introduced a strong focus on mentoring and succession planning to support knowledge transfer and development of skills. Mentoring and coaching supplement our core training regime, which ensures job appropriate skills are developed, as well as overall leadership capability. Our student vacation program employs undergraduate student engineers typically for a period of two to three months. During this time students are assigned a business related project that is operationally important as well as meeting the requirements of their degree. The students are supervised and mentored during their placement. Our overall aim is to make working with the team at Adelaide Brighton their preference when they complete their studies. Adelaide Brighton is an active participant in the Australia Brick and Blocklaying Training Foundation, which supports the skills development of apprentices in the industry ensuring future skilled labour supply.

EMPLOYMENT BY

EMPLOYMENT BY

% EMPLOYEES

EMPLOYMENT STATUS

CONTRACT TYPE

ON EBA vs STAFF

PAR T TIME

PERMANENT

EBA

FULL TIME

FIXED TERM

STAFF

CASUAL

EMPLOYEE TURNOVER

EMPLOYMENT

BY GEOGRAPHY

BY GEOGRAPHY

WESTERN AUSTRALIA

SOUTH AUSTRALIA

QUEENSLAND

NEW SOUTH WALES

NEW SOUTH WALES

WESTERN AUSTRALIA

SOUTH AUSTRALIA

QUEENSLAND

VICTORI A

VICTORIA

NOR THERN TERRITORY

NOR THERN TERRITORY

TASMANIA

TASMANIA

ROBERT CHANGWO, LIME PROCESS ENGINEER AT THE MUNSTER A D E L A I D E B R I G HPLANT TON LT D ANNU A L

REP OR T 2 014

26

Corporate Governance Statement

The Board is committed to conducting the Company’s business ethically and in accordance with high standards of corporate governance. To this end, the Board (together with the Company’s management) regularly reviews the Company’s policies, practices and other arrangements governing and guiding the conduct of the Company and those acting on its behalf.

MARCUS CLAYTON GENERAL COUNSEL AND COMPANY SECRETARY

This statement provides an outline of the main corporate governance practices that the Company had in place during the past financial year. The Board believes that the Company’s policies and practices are consistent in all substantial respects with good corporate governance practice in Australia appropriate for the circumstances of the Company, including the ASX Corporate Governance Council Principles and Recommendations (2nd edition). ASX Corporate Governance Council Principles and Recommendations (ASX Principles) The following table summarises how the Company complies with the ASX Principles (as applicable to the Company for the 2014 financial year), and provides reference to where the specific recommendations are dealt with in this statement:

ASX Principle/Recommendation

Compliance

Reference

Principle 1

Lay solid foundations for management and oversight

1.1

Establish the functions reserved to the Board and those reserved to management

3

Section 1.1

1.2

Disclose the process for evaluating the performance of senior executives

3

Section 1.2.3

1.3

Provide the information indicated in the Guide to reporting on Principle 1

3

Principle 2

Structure the Board to add value

2.1

A majority of the Board should be independent Directors

3

Section 1.2.1

2.2

The chair should be an independent Director

3

Section 1.2

2.3

The roles of chair and chief executive officer should not be exercised by the same individual

3

Section 1.2

2.4

The Board should establish a nomination committee

3

Section 2.1

2.5

Disclose the process for evaluating the performance of the Board, its committees and individual Directors

3

Section 1.2.3

2.6

Provide the information indicated in the Guide to reporting on Principle 2

3

Principle 3

Promote ethical and responsible decision-making

3.1

Establish a code of conduct and disclose the code or a summary of the code

3.2

Establish a diversity policy and disclose the policy or a summary of that policy. The policy should include requirements for the Board to establish measurable objectives for achieving gender diversity and for the Board to assess annually both the objectives and progress in achieving them. 3

Section 1.2.6 and pages 34, 35

3.3

Disclose the measurable objectives for achieving gender diversity set by the Board in accordance with the diversity policy and progress towards them.

3

Pages 34, 35

3.4 Disclose the proportion of women employees in the whole organisation, women in senior executive positions and women on the Board.

3

Page 35

3.5 Provide the information indicated in the Guide to reporting on Principle 3

3

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27

3

Section 4.1



ASX Principle/Recommendation

Compliance

Principle 4

Safeguard integrity in financial reporting

4.1

The Board should establish an audit committee

3

Section 2.1

4.2

The audit committee should be structured so that it: 3 > consists only of non-executive Directors > consists of a majority of independent Directors > is chaired by an independent chair, who is not chair of the Board, and > has at least three members

Section 2.1

4.3

The audit committee should have a formal charter

Section 2

3

4.4 Provide the information indicated in the Guide to reporting on Principle 4 Principle 5

3

Make timely and balanced disclosure

5.1 Establish written policies and procedures designed to ensure compliance with ASX Listing Rule disclosure requirements and to ensure accountability at a senior executive level for that compliance and disclose those policies or a summary of those policies

3

5.2 Provide the information indicated in the Guide to reporting on Principle 5

3

Principle 6

1

Reference

Section 5.1

Respect the rights of shareholders

6.1 Design a communications policy for promoting effective communication with shareholders and encouraging their participation at general meetings and disclose their policy or a summary of that policy

3

6.2 Provide the information indicated in the Guide to reporting on Principle 6

3

Section 5.2

Principle 7

Recognise and manage risk

7.1

Establish policies for the oversight and management of material business risks and disclose a summary of those policies

3

Section 3.1

7.2

The Board should require management to design and implement the risk management and internal control system to manage the Company’s material business risks and report to it on whether those risks are being managed effectively. The Board should disclose that management has reported to it as to the effectiveness of the Company’s management of its material business risks

3

Section 3.1

7.3 The Board should disclose whether it has received assurance from the chief executive officer and the chief financial officer that the declaration provided in accordance with section 295A of the Corporations Act is founded on a sound system of risk management and internal control and that the system is operating effectively in all material respects in relation to financial reporting risks

3

Section 3.1

7.4 Provide the information indicated in the Guide to reporting on Principle 7

3

Principle 8

Remunerate fairly and responsibly

8.1

The Board should establish a remuneration committee

3

Section 2.1

8.2

The remuneration committee should be structured so that it: > consists of a majority of independent Directors > is chaired by an independent chair, and > has at least three members

3

Section 2.1

8.3

Clearly distinguish the structure of non-executive Directors’ remuneration from that of executive Directors and senior executives

3

Section 2.1

8.4

Provide the information indicated in the Guide to reporting on Principle 8

3

The Board lays solid foundations for management and oversight

1.1 Role of the Board The role of the Board of Directors is to protect and optimise the performance of the Group and, accordingly, the Board takes accountability for reviewing and approving strategic direction, establishing policy, overseeing the financial position and monitoring the business and affairs of the Group on behalf of shareholders.

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The Board operates in accordance with the general principles set out in its charter, which is available from the corporate governance section of the Company’s website at www.adbri.com.au. In accordance with the provisions of the Company’s constitution, the Board has delegated a number of powers to Board committees (see section 2), and responsibility for the day-to-day management of the Company’s business affairs and development and implementation of the Company’s strategy to the Chief Executive Officer (CEO).

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The Board and CEO are supported by senior management who report to the CEO. The respective roles and responsibilities of the Board and management are outlined further in the Board charter.

The Board has also reserved for itself the following specific responsibilities: Strategy and monitoring

Monitoring the business and affairs/relations with management

Risk management, compliance and internal controls

Input into and approval of management’s development of corporate strategy, including setting performance objectives and approving operating budgets.

Selecting, appointing and evaluating from time to time the performance of, determining the remuneration of, and planning for the successor of, the CEO.

Reviewing, guiding and monitoring systems of risk management and internal control and ethical and legal compliance.

Monitoring and reviewing corporate performance and implementation of strategy and policy.

Reviewing procedures for appointment of senior management, monitoring performance and reviewing executive development activities. This includes ratifying the appointment and the removal of the Chief Financial Officer, the Company Secretary and all the Company’s senior executives who report to the CEO. Approval of the Company’s capital structure and gearing targets. Approval of specified matters exceeding delegated authority levels, including major capital expenditure and major acquisitions and divestitures.

Monitoring and reviewing processes aimed at ensuring integrity of financial and other reporting, and providing assurance to approve the Group’s financial reports. Monitoring and reviewing policies and processes in place relating to occupational health and safety, compliance with laws, and the maintenance of high ethical standards. Input into and approval of the Company’s policy in relation to, and monitoring implementation of, sustainable resource use and the impact of the Company’s operations on the environment, community and stakeholders.

1.2 The Board is structured to add value The Board ensures that its members have the time and commitment to devote to the role > Prior to appointment, Directors provide details of other commitments and acknowledge that they will have adequate time to meet expectations. > Directors to consult with the Chairman before accepting outside appointments. > Letter of appointment sets out Director’s term of appointment, powers, expectations and rights and obligations.

Board keeps informed of regulatory and industry developments to challenge status quo and strengthen knowledge base (see 1.2.4) > Directors expected to participate in ongoing education/development. > Directors keep themselves informed and up to date, of their own initiative, with general developments relevant to the role of a non-executive Director in an S&P/ASX100 company.

Board and Director performance is regularly evaluated to facilitate continuous improvement (see 1.2.3) > Board, Committee and individual Director performance reviewed annually. > Directors to undergo a performance appraisal before standing for re-election. > One third of the non-executive Directors retire (and are eligible for re-election) at each AGM.

The Board is committed to a majority of independent views being brought to bear in decision-making (see 1.2.1) > Directors expected to bring independent views and judgment to discussions. > Majority of Board members are independent. > Board has adopted Financial Services Council Blue Book definition of director independence.

The Board is structured to add value and Board decision-making is enhanced through education and support > Broad mix of skills, diversity and experience reflecting the character of the Group’s business to best guide, review and challenge management. > Independent Chairman leads the Board, facilitates constructive decision-making, and manages Board/management relationship. > To maintain independent oversight, roles of Chairman and CEO are undertaken by different individuals.

Board members have access to management and independent advice to assist in discharge of their duties > Access to senior executives and to any further information required to make informed decisions. > Right to seek independent professional advice at the Company’s expense to assist in effective discharge of duties.

Comprehensive induction processes equip Directors to perform in their role > Comprehensive induction process upon appointment. > Obligation on new Directors to familiarise themselves with Company’s practices through induction process or by making enquiries of the Chairman, the Company Secretary or management.

A D E L A I D E BRIGHT ON LT D ANNU A L REP OR T 2014

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Conflicts are managed (see 1.2.2) > Actual and perceived conflicts considered

and managed on an ongoing basis. > Protocols around disclosure, and

procedures around management of potential conflicts have been adopted.

1.2.1 Directors’ independence

the relevant Director to participate in Board 1.2.4 Director induction, training and ongoing discussion and decision-making in relation to education The Board reviews, at least annually, the the issue. Where there was a real potential independence of Directors. In general, All newly appointed Directors are provided for a conflict of interest, information was not Directors are considered independent where with an induction, which includes information provided to the Director, and, in accordance they are free of any interest and any business relevant to their new role, attendances at key with the Corporations Act 2001, the Director or other relationship which could, or could sites and introductions to key staff, which did not participate in, or vote at, the meeting reasonably be perceived, to interfere materially is provided or coordinated by the CEO, the where the matter was considered. with the Director’s ability to act in the best Chief Financial Officer and the Company interests of the Company. An assessment will Secretary. This induction includes briefings on 1.2.3 Performance evaluation be made on a case-by-case basis of whether the Company’s business, strategy, financial, the Director’s ability to act in the best interests The Board reviews its performance annually, operational and risk management matters of the Company has been materially impaired. as well as the performance of individual and factors relevant to the sectors and Committees and individual Directors environments in which the Company operates. In ensuring that the Board comprises Directors (including the performance of the Chairman with a broad range of skills and experience Ongoing Director education is provided as Chairman of the Board). reflecting the character of the Group’s throughout the year. The Board and its business, the Board may from time to time For the 2014 financial year, a performance Committees are provided with updates and appoint Directors who are not considered to evaluation was led internally by the Chairman information from both management and be independent. It is, however, the Board’s to assess the performance of individual external experts on various topics relevant policy that it should comprise a majority Directors, the Board as a whole, various to the Company’s circumstances. The Board of independent Directors to ensure that aspects of the Board committees such as is informed by expertise from within the independent oversight is maintained. their performance, membership, roles and Company on matters such as energy supply charters, and the Board’s and Directors’ arrangements and business and product Having regard to the guidelines of interaction with management. development. independence adopted by the Board, the Directors are of the view that Mr R D Barro As part of this comprehensive review of 1.2.5 Board and CEO succession planning is the only non-executive Director who is the Board’s performance, processes and The Board regularly reviews the size and not considered “independent”, by virtue of operations, the Chairman facilitates individual composition of the Board to ensure the his position as the Managing Director and a discussions with each Director which also appropriate skills, perspective and expertise shareholder of Barro Group Pty Ltd (which reviews their individual performance. The are represented. has a 50% interest in the joint venture, discussions also included a peer review of Independent Cement & Lime Pty Ltd (ICL), and the Board Chairman’s performance by During 2014, the Board led by the Chairman is a substantial shareholder in the Company). the other Directors. and the Chairman of the Nomination, ICL has an ongoing trading relationship with Remuneration and Governance Committee, The Chairman reports to the Board the Barro Group of companies. reviewed the Board’s composition, and utilised concerning the performance evaluation a Board skills matrix in doing this (details of The Board has also considered the length process and the findings of these reviews. the Board skills matrix will be disclosed when of service of each Director on the Board As a result of recommendations arising the Company adopts the 3rd edition of the and concluded that no Director has been a from the internal Board review, initiatives ASX Principles). The Board is satisfied that Director of the Company for such a period that are introduced to ensure the continued its present composition is appropriate for the their independence may be compromised. effectiveness of the Board’s performance and circumstances of the Company. It recognises Details of each Director’s period of office is to enable its sustained focus on key issues that consideration of Board renewal is an set out on page 36 of this report. for the Company. The implementation of ongoing process, and accordingly the Board’s these initiatives is overseen by the Chairman. composition will continue to be monitored 1.2.2 Conflicts of interest Executives and managers are also subject and reviewed during 2015. Determinations regarding independence to an annual performance review in which The Board’s long term management do not change any Director’s obligations in performance is measured against agreed succession plan for the CEO was managing any conflict of interest. Directors business objectives. The performance of implemented during 2014, leading to Martin have a continuing obligation to avoid any the CEO is assessed by the Board against Brydon assuming the Chief Executive Officer action, position or interest which conflicts objectives related to the Company’s strategy, role upon Mark Chellew’s retirement following (or may be perceived to conflict) with their business plans and the financial and other the Annual General Meeting in May 2014, position as a Director of the Company. performance of the business. ensuring a smooth transition of leadership In particular, the Board is cognisant of For the 2014 financial year, the performance responsibilities within the Company. Mr Barro’s interest in Barro Group Pty Ltd. of the CEO and the CEO’s achievement of The Nomination, Remuneration and During the year, in order to avoid actual and/ the agreed objectives was reviewed by the Governance Committee and the Board also or perceived conflicts of interest in Board Chairman, the Nomination, Remuneration reviewed the succession plans for the senior decision-making, Board procedures were and Governance Committee and the Board. management team during the year, to followed such that where the possibility of a The performance of the Company’s senior ensure that appropriate plans have been material conflict arose, the Board considered executives during 2014 was reviewed by the implemented for the mid to long term. the nature and extent of the potential conflict CEO, the Nomination, Remuneration and and whether it would be appropriate for Governance Committee and the Board.

A D E L A I D E B R I G H TON LT D ANNU A L REP OR T 2 014

30

1.2.6 Diversity The Board, having adopted a Diversity Policy for the Group in 2011, established measurable diversity objectives (which are reviewed and assessed annually) to enhance gender and other diversity across the organisation. Further information about the Group’s diversity objectives and progress achieved (in accordance with the ASX Corporate Governance Council Principles and Recommendations) is set out on pages 34 to 35. The Group’s overarching Diversity Policy will be reviewed during 2015.

Roles and responsibilities >

>

2 Composition and responsibilities of Board Committees

> > > >

>

To assist the Board in fulfilling its responsibilities, the Board has established a number of committees with responsibility for particular areas: Audit, Risk and Compliance Committee; Nomination, Remuneration and Governance Committee; Safety, Health and Environment Committee; and Independent Directors’ Committee. Each committee has a specific charter or constitution. The charters for the Audit, Risk and Compliance Committee and the Nomination, Remuneration and Governance Committee are available on the corporate governance section of the Company’s website at www.adbri.com.au. The Board periodically reviews each Board committee’s charter, role and responsibilities. Details on the number of meetings held by the Board and its Committees during 2014, and attendance by Board members, can be found on page 43 of this report. Information on the relevant skills, experience and expertise of each Director can also be found on page 36 of this report.

2.1 Key standing committees - Audit, Risk and Compliance and Nomination, Remuneration and Governance The composition and responsibilities of the Audit, Risk and Compliance and Nomination, Remuneration and Governance Committees are set out in the following table.

A D EL A ID E BRIGHT ON LT D ANNUAL REPOR T 2014

>

>

Composition

Audit, Risk and Compliance Committee

Nomination, Remuneration and Governance Committee

The Audit, Risk and Compliance Committee: assists the Board in relation to the reporting of financial information, the appropriate application and amendment of accounting policies, the appointment, independence and remuneration of the external auditor, and performance of the internal audit function (including independence, effectiveness and appropriate coordination with external auditors). provides a forum for communication between the Board, management and both the internal and external auditors. reviews and reports to the Board on the effectiveness of the Company’s ongoing risk management program and policies and procedures. reviews and reports to the Board regarding the appropriateness of the Company’s compliance procedures. provides a conduit to the Board for external advice on audit, risk management and compliance matters.

The Nomination, Remuneration and Governance Committee: assists and advises the Board on matters relating to the appointment, remuneration and processes for review of the performance of the nonexecutive Directors, the CEO and other senior executives, and best practice corporate governance appropriate to the circumstances of the Company. oversees the implementation of the Company’s short term and long term incentive arrangements, including reviewing performance targets for senior executives, reviewing recommendations from the CEO on senior executives’ participation in short and long term incentive schemes, making relevant awards and assessing the extent to which performance conditions are satisfied. reviews management and Board succession planning and assesses the appropriate mix of skills, experience and expertise required on the Board. oversees the implementation of diversity measures to facilitate the achievement of the Company’s diversity objectives.

Composition requirements include:

>

>

>

>

Composition requirements include:

> there must be a minimum of three

> there must be a minimum of three

independent non-executive Directors on the Committee. > the Chair must be an independent non-executive Director who is not Chairman of the Board. > Committee members shall, between them, have sufficient accounting and financial knowledge to allow them to discharge their duties and actively challenge information presented by management, internal and external auditors.

independent non-executive Directors on the Committee. > each Committee member is expected to be familiar with the legal and regulatory disclosure requirements in relation to remuneration and have adequate knowledge of executive remuneration issues, including executive retention and termination policies, and short term and long term incentive arrangements.

Membership as at 31 December 2014

GF Pettigrew (Chairman) LV Hosking AM Tansey

AM Tansey (Chairman) LV Hosking GF Pettigrew KB Scott-Mackenzie

Consultation

Members of management may attend meetings of the Committee at the invitation of the Committee Chairman. It is practice of the Committee that the CEO, the Chief Financial Officer and the Company Secretary attend all Committee meetings. The Group Risk Manager generally attends meetings of the Committee when non-financial risk management matters are considered. In fulfilling its responsibilities, the Committee has rights of access to management and to internal and external auditors in the absence of management and may seek explanations and additional information. It is the practice of the Committee to meet with the Company’s external auditors, without any member of management present.

It is practice of the Committee, on occasions when relevant, to invite other Directors to attend Committee meetings. Additionally, two Committee meetings in 2014 were held concurrently with Board meetings. Members of management, particularly the CEO, the General Manager HR, the Chief Financial Officer or the Company Secretary, may also attend meetings of the Committee at the invitation of the Committee Chairman, whenever particular matters arise that require management participation, such as reviewing senior executive performance, succession planning or the CEO’s recommendations to the Committee. The Committee obtains external advice from independent remuneration consultants in determining the Company’s remuneration practices and executive service agreements where considered appropriate.

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2.2 Other Board committees 2.2.1 Safety Health and Environment Committee The members of the Safety, Health and Environment Committee (SH&E Committee) during 2014 were KB Scott-Mackenzie (Chairman), GF Pettigrew, and RD Barro. The Committee has a broad role in reviewing general and specific occupational health and safety and environmental matters across the Group.

Committee meetings are also attended by the CEO and the Company’s General Manager-HSE, Chief Financial Officer and its General Counsel.

The members of the Committee during 2014 were LV Hosking (Chairman), GF Pettigrew and KB Scott-Mackenzie. There was no requirement for this Committee to meeting during 2014.

2.2.3 Independent Directors’ Committee The role of the Independent Directors’ Committee is to investigate and consider corporate proposals made to the Company. The Committee comprises Directors who do not have any conflict of interest concerning the matters considered by the Committee.

3 The Board recognises and manages risk and safeguards the integrity of financial reporting 3.1 Framework The Board has approved the following framework within which the Company discharges its risk management function:

Leading culture of compliance and ensuring that risk management practices are appropriate and effective in the context of the Company’s business objectives Oversight: The Board, through the Audit, Risk and Compliance Committee, is responsible for reviewing and guiding the Company’s risk management policies and compliance and control systems. These policies and systems provide for management to identify and manage both financial and non-financial risks to the Company’s businesses. The Board, through the Committee, regularly reviews the effectiveness of the Company’s risk management system and management of identified business risks. Purpose: The Company’s risk management framework is designed to ensure strategic, operational, legal, reputation and financial risks are identifieid, assessed, effectively and efficiently managed and monitored to enable achievement of the Company’s business objectives.

Internal controls framework

Financial risk The CEO and Chief Financial Officer have made the following certifications to the Board: > That the Company’s financial reports present a true and fair view, in all material respects, of the financial position and performance of the Company and the consolidated entity and are in accordance with accounting standards in all material respects; > That the Company has a sound system of risk management and internal control which implements the policies adopted by the Board and forms the basis for the statement given above; and > That the Company’s risk management and internal control system to the extent it relates to financial reporting, is operating efficiently in all material respects.

> A robust control environment is fundamental to the effectiveness of

the Company’s risk management framework. Delegations of authority and Board and management accountability is clearly demarcated. > All Directors, executives and employees are required to adhere to the Code of Conduct (described below) and the Board actively promotes a culture of quality and integrity. > Accounting, financial reporting and internal control policies and procedures designed to manage business risks (both financial and non-financial) have been established at the Board and executive management levels. These are designed to safeguard the assets and interest of the Company, and ensure the integrity of financial reporting. The Board nonetheless acknowledges that it has ultimate responsibility for the accuracy and approval of the Group’s financial reports. The Board acknowledges that it is also responsible for the overall internal control framework, and to assist in discharging this responsibility, the Board has instigated an internal control framework that can be described as follows:

Financial reporting

Non-financial risk Management regularly reports to the Board, including through reports to the Audit, Risk and Compliance Committee, on strategic and operational issues, including an assessment of the material business risks facing the Company and the effectiveness of the system and policies in place to manage those risks.

Operating unit controls

> Comprehensive budgeting system with

> Financial controls and procedures

an annual budget reviewed and approved by the Board. > Monthly actual results are reported against budget and revised forecasts for the year are prepared regularly. > Procedures to ensure that price sensitive information is reported to the ASX in a timely manner (see section 5 below).

including information systems controls are in operation throughout the consolidated entity. > Operating units confirm compliance with these procedures to the Board annually.

Internal audit > Assists the Board in ensuring

compliance with internal controls. > The Audit, Risk and Compliance Committee

Investment appraisal Clearly defined guidelines for capital expenditure e.g. annual budgets, detailed appraisal and review procedures, and levels of delegated authority where businesses are being acquired or divested.

A D E L A I D E B R IGHT ON LT D ANNU A L REP OR T 2 014

reviews and approves the selection and engagement of internal auditors, the internal audit program to be conducted, and the scope of the work to be performed. > Internal auditors provide the Committee with comments and recommendations about the identification of areas perceived to be of a greater level of risk than others, and any areas requiring particular scrutiny. > The Committee receives and reviews the reports of the internal auditors.

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Functional specialty reporting The Group has identified a number of key areas which are subject to regular reporting to the Board, such as safety and environment, risk management, taxation, finance and administration.

Delegated authorities and restrictions Comprehensive procedure which provides a framework that enables employees to operate and act within clearly defined and communicated parameters.

3.2 Audit Services The Company and Audit, Risk and Compliance Committee policy is to appoint external auditors who clearly demonstrate quality and independence. The performance of the external auditor is considered annually. PricewaterhouseCoopers remains the external auditor of the Company for the Group’s financial report for the year ended 31 December 2014. The Board has adopted a policy in relation to the provision of non-audit services by the Company’s external auditor. It is based on the principle that work that may detract from the external auditor’s independence and impartiality (or that may be perceived as doing so) should not be carried out by the external auditor. Details and the break down of fees for non-audit services and an analysis of fees paid or payable to external auditors are provided in Note 29 to the Financial Statements. 4 The Board is committed to promoting ethical and responsible decision-making 4.1 Code of conduct and whistleblower program

> > > >

> > >

The Company is committed to upholding the highest ethical standards of corporate behaviour. A Code of Conduct has been adopted, which requires that all Directors, senior management and employees act with the utmost integrity and honesty. It aims to further strengthen the Company’s ethical climate by promoting practices that foster the Company’s key values of: Acting with fairness, honesty and integrity; Providing a safe and healthy work environment for all employees; Being aware of and abiding by laws and regulations; Individually and collectively contributing to the wellbeing of shareholders, customers, the economy and the community; Maintaining the highest standards of professional behaviour; Avoiding or managing conflicts of interest; and Striving to be a good corporate citizen, and to achieve community respect. The Code of Conduct is publicly available on the Company’s website at www.adbri.com.au. The Code of Conduct was reviewed during the year to ensure that it remains relevant to the Company’s values and practices. The outcomes from this review are currently being considered by the Company.

A D E L A ID E BRIGHT ON LT D ANNU A L REP OR T 2014

The Company has also adopted policies requiring compliance with (among others) occupational health and safety, environmental, privacy, diversity, equal employment opportunity, harassment, fair treatment, and competition and consumer law. The Company monitors the effectiveness of these policies. Employees are encouraged to attend training or seminars presented by the Company, or external service providers, to ensure that they remain up-to-date with relevant industry and regulatory developments. The Code requires all officers, employees, contractors, agents or people associated with the Company to report any potential breaches to the Company Secretary under the whistleblower program. This may be done anonymously. 4.2 Shareholdings of Directors and employees

The Company’s Continuous Disclosure Policy is available on the Company’s website at www.adbri.com.au and sets out guidelines and processes to be followed in order to ensure that the Company’s continuous disclosure obligations are met. Material information must not be selectively disclosed prior to being announced to the ASX. These policies and procedures are supplemented by the Shareholder Communications Policy (also published on the Company’s website) which includes arrangements the Company has in place to promote communication with shareholders and encourage effective participation at general meetings. The Company Secretary has been nominated as the person responsible for communicating with the ASX. This role includes responsibility for ensuring compliance with the continuous disclosure requirements and overseeing and coordinating (with the Group Corporate Affairs Adviser) information disclosure to the ASX, analysts, brokers, shareholders, the media and the public.

The Board has a policy that in general, Directors and Officers may not buy or sell Adelaide Brighton Ltd shares except during 5.2 Communication with shareholders periods (known as ‘Trading Windows’) provided that prior approval is obtained. The Company’s website contains copies The Trading Windows cover the period of of annual reports, financial accounts, one month following the annual and half year presentations, media releases and other results announcements in addition to the investor relations publications. All relevant period from the release of the Company’s announcements made to the market, and annual report until one month after the annual any related information, are also posted on general meeting. The policy also defines the Company’s website. Shareholders can certain periods where trading is not permitted elect to receive communications from the under any circumstances (known as ‘Blackout Company by electronic means. Shareholders Periods’), which cover the two months can communicate with the share registry preceding lodgement of half year and annual and the Company by electronic means. results announcements, in addition to any instance when a Director is trading for shortThe Board encourages full participation of term gain. In all cases, Directors and Officers shareholders at the Annual General Meeting are prohibited from trading in securities when in order to promote a high level of they are in possession of “inside information”. accountability and discussion of the Group’s strategy and goals. The Board also has a policy that prohibits executives from hedging (or otherwise locking The external auditor will attend the Annual in a profit over) unvested securities issued General Meeting and be available to answer under the Company’s Share Plans. shareholder questions about the conduct of the audit and the preparation and The Company’s Share Trading Policy and the content of the auditors’ report. Award/Share Hedging Policy are available on the Company’s website at www.adbri.com.au. 5 The Board is committed to timely and balanced disclosure and respects the rights of shareholders 5.1 Continuous disclosure The Company is committed to providing relevant and timely information to its shareholders and to the broader market, in accordance with its obligations under the Corporations Act 2001 and the ASX continuous disclosure regime.

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Diversity Report

Adelaide Brighton is committed to the promotion of diversity within our organisation, and recognises that removing barriers to diversity enables us to attract and retain the best people with the appropriate skills to contribute to the continuing success of our business. Our Diversity Policy outlines five core objectives which form the foundations of our approach to diversity and upon which we measure our performance in this area. An overview of these objectives, and our progress towards achieving these objectives for the 2014 financial year, are set out below. Objectives

Diversity measures to facilitate achievement of objectives

Progress

To promote a culture of diversity (which includes gender, skills, experience, and cultural background)

Leadership programs targeted at our female management and frontline employees focusing on their strengths and contribution to the broader workplace to be rolled out across the organisation.

Leadership programs and coaching continue to be available for female employees. In 2014, we implemented a broader program aimed at our managers and supervisors.

Company-wide training in workplace policies (including diversity, bullying and harassment, Equal Employment Opportunity).

Employee inductions include information on Company policies such as equal employment opportunity and bullying. Introduced assessable compliance training for management.

To ensure that recruitment and selection processes are based on merit

To provide talent management and development opportunities for all employees

The Board and Nomination, Remuneration and Governance Committee review Adelaide Brighton’s diversity achievements relative to the industry structure in which the Company operates.

In 2014, the Board and then Nomination and Remuneration Committee discussed the Company’s diversity measures and the need to develop a positive workplace culture.

Internal review of Adelaide Brighton’s recruitment practices and systems to ensure that employment decisions are made without regard to factors that are not applicable to the inherent requirements of a position and that unconscious gender bias does not influence outcomes.

Recruitment mentoring training continues across the business with a view to eliminate any unconscious bias that may occur. 16% of all new hires in 2014 were female.

Ongoing talent recognition and in-house leadership programs for employees.

Various development programs provided for recognised employees and tailored to individual needs ranging from external training and education, mentoring and/or specific on the job training.

Sponsor or encourage professional networking, coaching and mentoring programs to give female employees the opportunity to connect with other professionals.

Where identified, these programs continue to be supported across the organisation.

Sponsor MBA or post-graduate studies for high potential female employees.

Adelaide Brighton supports external study and development for high potential employees.

In recognition of the low numbers of females entering into engineering and manufacturing vocations: > implement programs designed to engage female graduate engineers; > offer undergraduate scholarship opportunities and sponsor vacation work programs to engage female students who are entering tertiary education to consider engineering as a career option; and > strive for gender balance in the recruitment of graduates each year. Support the creation of employment opportunities for Indigenous and Torres Strait Islanders.

Selection of recruitment agencies employed by Adelaide Brighton is based on their commitment to providing diverse candidate pools.

Continued sponsorship of the Women in Engineering program at the University of Wollongong in 2014 that provides both a financial benefit and work placement opportunity. The Company has attended career expos at the University of Adelaide and sponsored Engineering awards at University of Wollongong.

Support and participation in the South Australian Indigenous Law Student Mentoring Program. Support for a scholarship for aboriginal students to complete Year 12 High School at Prince Alfred College.

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Objectives

Diversity measures to facilitate achievement of objectives

Progress

To reward and remunerate fairly

Adelaide Brighton has a policy to provide equal pay for equal work.

The gender pay parity review was completed in 2014 as part of Adelaide Brighton’s annual remuneration review processes.

As part of the annual salary review process, Adelaide Brighton undertakes a review of pay parity. Pay parity is also considered at the time of hiring new employees, to eliminate potential gaps in pay arising from hiring decisions. To provide flexible work practices

Adelaide Brighton seeks to provide suitable working arrangements for employees returning from maternity leave.

As per previous years, 100% of the women who commenced and finished maternity leave in 2014 have returned to work in either a full or part time capacity.

Flexible working arrangements are available to all employees under our flexible work policy, to recognise that employees may have different domestic responsibilities throughout their career. This includes opportunities to work part time and from home or a remote location. We also offer 12 weeks’ paid parental leave for the primary carer. Formal review of all part time work arrangements to ensure roles are appropriate to maintain career development.

Adelaide Brighton is committed to the regular review of its objectives to ensure that these continue to be appropriate and relevant. This commitment includes the completion of the workplace profile report as required by the Workplace Gender Equality Act 2012. A copy of the workplace profile report is available in the investor relations section of our website at www.adbri.com.au/ investorinformation.html. The Board is committed to build upon the achievements to date and reinforce the continued efforts in promoting and cultivating a culture of diversity and inclusiveness. The proportion of women across Adelaide Brighton’s workforce is reflective of the generally low level of female representation in the building, manufacturing and construction materials industries in which we operate. We recognise that the available pool of female candidates in engineering roles relevant to our business operations is limited, and this impacts our ability to increase the number of female new hires in the short term. In an effort to make our Company (and industry) more attractive to women, we have focused on measures designed to increase the proportion of female graduates and to support the leadership development of female employees who are recognised as having future potential.

A D E L A I D E BRIGHT ON LT D ANNU A L REP OR T 2014

We believe that, over time, our diversity objectives and measures will achieve an improvement in the level of female representation across the organisation. Going forward increasing focus on expanding opportunities for indigenous Australian will form part of the Company’s diversity objectives. The following table shows the proportional representation of women employees at various levels within the Adelaide Brighton Group (as at 31 December 2014): Male

Female

20%

4

1

Senior executives

0%

6

0

Senior managers (direct reports to senior executives)

16%

31

6

Total workforce

12%

1245

164

Board

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In 2014, following the retirement of the Managing Director and appointment of a new CEO position, a management restructure occurred which resulted in there no longer being female representation among the senior executives. This is expected to be addressed in 2015. A copy of Adelaide Brighton’s Diversity Policy is available in the corporate governance section of Adelaide Brighton’s website.

Directors

Les Hosking Age 70

Experience Independent non-executive Director since June 2003. Extensive experience in commercial and financial matters with 16 years experience as Chief Executive of the Sydney Futures Exchange and former Chief Executive Officer of Axiss Australia, and Managing Director of National Electricity Market Management Company (NEMMCO). Director, AGL Energy Limited (appointed November 2008) and Australian Energy Market Operator Limited (appointed July 2009 and retired 6 November 2014) and Chairman, Carbon Market Institute Limited (appointed October 2010 and retired 27 November 2014). Special responsibilities Appointed Chairman 17 May 2012. Member, Audit, Risk and Compliance Committee; Nomination, Remuneration and Governance Committee; and Independent Directors’ Committee.

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Raymond Barro

Graeme Pettigrew

Ken Scott-Mackenzie

Arlene Tansey

BBus, CPA, FGIA, FCIS

FIPA, FAIM, FAICD

BE(Mining), Dip Law

FAICD, MBA, JD, BBA

Age 53

Age 66

Age 64

Age 57

Experience Non-executive Director since August 2008. Over 24 years experience in the premixed concrete and construction materials industry. Managing Director of Barro Group Pty Ltd.

Experience Independent non-executive Director since August 2004. Extensive experience in the building materials industry and former Chief Executive Officer of CSR Building Products and broad management experience gained in South East Asia and the United Kingdom through former positions as Managing Director of Chubb Australia Limited and Wormald Security Australia Pty Ltd. Director, Capral Ltd (appointed June 2010) and Holocentric Pty Ltd (appointed 18 September 2012 and retired 19 August 2014). Former Director, Bisalloy Steel Group Ltd (formerly Atlas Group Holdings Ltd) (appointed April 2006 and resigned 30 September 2013), Knauf Plasterboard Pty Limited (formerly Lafarge Plasterboard Pty Ltd) (appointed June 2005 and resigned November 2012).

Experience Independent non-executive Director since July 2010. Mining Engineer with over 40 years experience in infrastructure, construction and mining services gained in Australia and Africa, as well as extensive experience in financial, legal and commercial aspects of projects. Chairman, Linking Melbourne Authority (appointed May 2013). Former Chairman, Macmahon Holdings Limited (appointed Chairman in November 2009 and a Director in May 2009 and retired 21 March 2014) and former Chairman, Murchison Metals Ltd (appointed Director in May 2011 and Chairman in July 2011. Resigned November 2012).

Experience Independent non-executive Director since April 2011. Extensive experience as a senior executive in business and the financial services industry gained in Australia and the United States with a background in investment banking and securities law. Director, Primary Health Care (appointed August 2012), Lend Lease Funds Management Limited (appointed October 2010), Lend Lease Real Estate Investments Limited (appointed October 2010), Hunter Phillip Japan Limited (appointed March 2013), Urbanise.com Limited (appointed 27 June 2014) and Australian Research Alliance for Children and Youth Limited (appointed September 2013). External member of Infrastructure New South Wales (appointed June 2014). Former Director, Pacific Brands Limited (appointed March 2010 and retired October 2013) and Police Citizens Youth Clubs NSW Ltd (appointed June 2004 and retired in July 2012). External Member, Serco Asia Pacific Advisory Board.

Special responsibilities Member, Safety, Health and Environment Committee.

Special responsibilities Chairman, Audit, Risk and Compliance Committee. Member, Nomination, Remuneration and Governance Committee; Safety, Health and Environment Committee; and Independent Directors’ Committee.

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Special responsibilities Chairman, Safety, Health and Environment Committee; Member, Nomination, Remuneration and Governance Committee; and Independent Directors’ Committee.

Special responsibilities Chairman, Nomination, Remuneration and Governance Committee; and Member, Audit, Risk and Compliance Committee.

Financial statements Directors’ report........................................................................................................... 38 Remuneration report introductory letter................................................................. 45 Remuneration report contents.................................................................................. 46 Remuneration report................................................................................................... 47 Income statement........................................................................................................ 62 Statement of comprehensive income...................................................................... 63 Balance sheet............................................................................................................... 64 Statement of changes in equity................................................................................ 65 Statement of cash flows............................................................................................. 66 Notes 1 Summary of significant accounting policies.............................................................. 67 2 Critical accounting estimates and assumptions....................................................... 75 3 Revenue and other income....................................................................................... 76 4 Expenses................................................................................................................... 76 5 Income tax expense.................................................................................................. 77 6 Cash and cash equivalents....................................................................................... 78 7 Trade and other receivables...................................................................................... 78 8 Inventories................................................................................................................. 79 9 Assets classified as held for sale.............................................................................. 79 10 Joint arrangements and associate............................................................................ 80 11 Property, plant and equipment.................................................................................. 81 12 Deferred tax assets................................................................................................... 82 13 Intangible assets........................................................................................................ 82 14 Carbon asset and liability...........................................................................................83 15 Trade and other payables.......................................................................................... 84 16 Borrowings................................................................................................................ 84 17 Provisions.................................................................................................................. 85 18 Other liabilites............................................................................................................ 85 19 Deferred tax liabilities................................................................................................ 85 20 Retirement benefit obligations................................................................................... 86 21 Contributed equity..................................................................................................... 89 22 Reserves and retained earnings................................................................................ 90 23 Dividends................................................................................................................... 91 24 Financial risk management........................................................................................ 91 25 Fair value measurements.......................................................................................... 94 26 Contingencies............................................................................................................ 94 27 Commitments for expenditure................................................................................... 94 28 Share-based payment plans..................................................................................... 95 29 Remuneration of auditors.......................................................................................... 96 30 Related parties.......................................................................................................... 97 31 Subsidiaries and transactions with non-controlling interests.................................... 99 32 Deed of cross guarantee......................................................................................... 100 33 Reconciliation of profit after income tax to net cash inflow from operating activities. 102 34 Earnings per share................................................................................................... 102 35 Events occurring after the balance sheet date........................................................ 103 36 Segment reporting................................................................................................... 103 37 Parent entity financial information........................................................................... 105 38 Business combinations........................................................................................... 105 Directors’ declaration............................................................................................... 107 Auditor’s independence declaration...................................................................... 107 Independent audit report......................................................................................... 108 Financial history......................................................................................................... 109 Information for shareholders....................................................................................110

ADELAIDE BRIGHTON LTD ANNUAL REPORT 2014

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Directors’ report

Directors’ report

Statutory Results

The Directors present their report on the consolidated entity (the Group) consisting of Adelaide Brighton Ltd (the Company) and the entities it controlled at the end of, or during, the year ended 31 December 2014.

($ Million)

Directors The Directors of the Company, at any time during or since the end of the financial year and up to the date of this report, are: LV Hosking RD Barro GF Pettigrew KB Scott-Mackenzie AM Tansey MP Chellew (retired 21 May 2014) Principal activities During the year the principal activities of the Group consisted of the manufacture and distribution of cement and cementitious products, lime, premixed concrete, aggregates, sand and concrete products.

2014

2013

Revenue 1,337.8 1,228.0 Depreciation, amortisation and impairments

(75.0 )

Earnings before interest and tax (“EBIT”) Net finance cost

247.5 222.7 (15.0 ) (14.1 )

Profit before tax Income tax expense

232.5 208.6 (59.9 ) (57.5 )

(70.6 )

Net profit after tax 172.6 151.1 Attributable to: Members of Adelaide Brighton Ltd (“NPAT”) 172.7 151.1 Non-controlling interests (0.1 ) Basic earnings per share (cents) Ordinary dividends per share (cents) Special dividend per share (cents) Franking (%) Net debt ($ million) Net debt/equity (%)

26.9 23.7 17.0 16.5 - 3.0 100% 100% 359.8 248.0 31.7 23.4

2014 net profit after tax attributable to members of the Company increased 14.3% compared to the prior year to $172.7 million. The results were impacted by a number of significant items. The table below sets out the underlying financial results for the year ended 31 December 2014 which have adjusted for the significant items. An explanation of the significant items and reconciliation to statutory results is provided on page 42.

Review of operations A summary of the financial results for the year ended 31 December 2014 is set out below:

Underlying Results ($ Million)

2014

2013

Revenue 1,337.8 1,228.0 Underlying depreciation and amortisation

(73.0 )

(70.6 )

Underlying earnings before interest and tax (“Underlying EBIT”) Net finance cost

245.2 (15.0 )

226.0 (14.1 )

Underlying profit before tax Underlying income tax expense

230.2 211.9 (63.8 ) (58.5 )

Underlying net profit after tax 166.4 153.4 Attributable to: Members of Adelaide Brighton Ltd (“Underlying NPAT”) 166.5 153.4 Non-controlling interests (0.1 ) Underlying basic earnings per share (cents)

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26.0 24.0

Underlying net profit after tax attributable to EBIT margins increased as improved volumes members of the Company (Underlying NPAT) and higher than inflation increases to selling of $166.5 million was $13.1 million (8.5%) prices offset higher energy costs and the higher than 2013. Revenue of $1,337.8 million impact of production issues in the first half at increased by 8.9% due to the contribution the Birkenhead (South Australia) plant. The from recent acquisitions, continued demand repeal of the carbon tax from 1 July 2014, from the resources sector in Western Australia rationalisation of clinker production and and the Northern Territory, a recovery in operational improvements assisted residential construction in the eastern states earnings in the period. and higher pricing, particularly for cement and Rationalisation of clinker production at lime. Revenue growth was partially offset by the Munster facility began in early 2014. weaker demand for cement in South Australia Production of clinker largely ceased in the first and Victoria, and a slight decline in lime quarter of 2014, with manufacture of specialty volumes. products continuing until December 2014. Underlying earnings before interest and The rationalisation delivered cost savings tax (Underlying EBIT) increased by 8.5% to of $5 million in 2014, with further savings $245.2 million, resulting in an Underlying anticipated in 2015. EBIT margin (Underlying EBIT divided by The rationalisation of clinker manufacture revenue) of 18.3% compared to 18.4% at Munster led to an increase in Adelaide in 2013. The decline in Underlying EBIT Brighton’s importation of cementitious margin was the result of contributions from material to over two million tonnes in 2014, lower margin businesses acquired in 2014 representing approximately 20% of the as part of the strategy to focus on vertical Australian market. Adelaide Brighton is integration. On a heritage basis, where the Australia’s largest importer of cement and impact of acquisitions is removed, Underlying clinker and has an unmatched network of EBIT margins were stable. Higher cement, import terminals that provide cost competitive concrete, aggregates and concrete products access to all mainland capital city markets volumes, combined with improved pricing and regional north west Western Australia. across most markets and products, offset the impact of input cost pressures, particularly The devaluation of the Australian Dollar energy, and a reduction in contribution from against Adelaide Brighton’s major trading joint ventures. Operational improvement currencies of the US Dollar and Japanese initiatives delivered $19.7 million in benefits Yen reduced profitability of imports by in the year, including $5.0 million from the approximately $5 million in 2014 compared rationalisation of clinker manufacture at the to 2013. Munster, Western Australia, site. The $60 million investment to upgrade the Underlying profit before tax increased 8.6% Birkenhead plant delivered further incremental to $230.2 million. Net finance cost increased benefits of $1.1 million in 2014 over and by 6.4% to $15.0 million due to higher above the $8.0 million of benefits delivered borrowing levels. in 2013. Total returns on the project in 2014 of $9.1 million represent a return on funds Cement employed of 15.3%, which exceeds the Cement and clinker sales volumes increased cost of capital. by 3% in 2014. Demand from the residential sector in New South Wales and Queensland, In July 2014, Adelaide Brighton secured a and resource projects in the Northern Territory contract with a major independent customer and Western Australia offset a decline in in South Australia and, in December 2014, general construction in Victoria and softer a contract with another major customer demand for back fill binder in the South in the same market for 12 months. These Australian mining sector. A reduction in agreements and the integrated operations demand from projects in the South Australian underpin the utilisation of the efficient market was offset by an improvement in the Birkenhead cement works. residential sector. In March 2014 Adelaide Lime Brighton announced the expected loss of Lime sales volumes declined by approximately supply of approximately 120,000 tonnes 7% in 2014. Demand from the non-alumina of cement per annum to a major South sector was lower due to gold mine closures in Australian customer. In line with guidance, 2013 and a disruption at a Northern Territory this did not impact 2014 volumes. customer in the first half of the year.

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Contracted prices to a major alumina customer in Western Australia increased in June 2014. Average lime selling prices increased at slightly less than inflation despite the sharp decline in sales to the higher priced gold sector. Nonetheless, lower volumes impeded fixed cost recovery, compressing full year margins and earnings for lime. Concrete and Aggregates Recent acquisitions and stronger residential demand in New South Wales and Queensland lifted concrete and aggregate volumes in 2014. Excluding acquisitions, volumes increased which were led by the stronger residential market. Demand for aggregate was assisted by the Pacific Highway upgrade and pull through demand from concrete operations. Prices remained under pressure in some markets, particularly Victoria and south east Queensland. However meaningful price increases were realised in New South Wales for both concrete and aggregates. Full integration of the Webb, Penrice Quarry & Mineral and Direct Mix / Southern Quarries acquisitions was completed during 2014. The integration encompassed governance, management, back office functions, accounting, information systems, and health, safety and environment processes. Realisation of synergies from the acquisitions is well progressed. Overall the financial benefit from these acquisitions was in line with initial expectations. Concrete Products Higher volumes and prices lifted Concrete Products sales revenue by 10.5% in 2014. Price growth was slightly ahead of inflation. Sales volumes increased due to an improvement in demand across the majority of regions and an increase in toll production on behalf of other distributors. Demand from the residential sector was strong and activity in the commercial sector also improved. Mothballing of excess capacity and simplifying the organisation structure delivered significant cost savings while maintaining flexibility to participate in the market recovery. Operational improvements, together with stronger revenue, combined to lift Concrete Products EBIT 190% to $6.1m in 2014.

Joint Arrangements and Associate Independent Cement and Lime’s (ICL) earnings declined in 2014 due to lower volume, rising input costs and limited opportunity to recover those cost increases. Volumes increased in New South Wales through the year, demand for slag-based products remained resilient and Victorian demand strengthened in the second half. Despite this, contribution to EBIT was down from $13.1 million in 2013 to $9.1 million in 2014. Sunstate Cement’s contribution to EBIT increased from $6.7 million in 2013 to $8.1 million in 2014. Although the south east Queensland market remains competitive, improved demand in the region led to higher sales volume, margins and earnings in 2014.

1. Cost reduction and continuous improvement Operational improvement Operational improvement programs delivered benefits of $19.7 million in 2014. Key initiatives were a corporate restructure, Munster clinker rationalisation and energy efficiency programs. > Corporate restructure delivers savings of $4.0 million During the first half, a group wide review of operational, human resources, information technology and administration functions was undertaken. This resulted in restructuring costs of $5.4 million for the year. Pre-tax benefits from the corporate restructure were $4.0 million in 2014.

Import strategy underpins competitive supply into key markets Following the rationalisation of clinker manufacture at Munster, Adelaide Brighton’s imports of cementitious products, including clinker, cement and blast furnace slag, increased to more than two million tonnes in 2014, which represents approximately 20% of Australian industry demand. Since the mid-1990s, the growth of import capacity to replace ageing, less efficient domestic manufacturing has been a key element of Adelaide Brighton’s strategy to secure its long term position in the Australian market and grow value for shareholders. The use of imported materials allows Adelaide Brighton to supply customers with competitively priced product into a range of markets where demand exceeds the Company’s manufacturing capacity.

> Munster clinker rationalisation delivers Earnings from the Mawsons Group have more savings of $5.0 million than doubled since the acquisition of a 50% In line with the strategy to grow shareholder interest in 2007. Following a stronger second Today the Company is Australia’s largest returns through improving efficiency and half, the 2014 EBIT contribution of $3.0 million importer of cementitious materials (cement, leveraging an industry leading import was in line with 2013. clinker and blast furnace slag) and has an capability, Adelaide Brighton ceased the unmatched network of import terminals Equity accounted earnings from Aalborg production of all clinker at Munster, Western that provide highly competitive access to Portland Malaysia Sdn. Bhd. (APM) were Australia, in December 2014. all mainland capital city markets as well as similar to the prior year and in line with The capacity rationalisation delivered EBIT regional north Western Australia and north expectations. The US$18.6 million capacity improvements of $5.0 million in 2014. Results Queensland. expansion was completed on budget in for 2014 include redundancy costs of the second half of 2014. While demand for Adelaide Brighton’s industry leading import $5.6 million, related to the reduction of 42 full product was strong, the benefit from the scale delivers supply chain efficiencies time equivalent positions at Munster, and an capacity expansion was not available until in procurement, transport, storage and impairment charge of $2.0 million relating to late in the year. Shipment of white clinker to distribution. The strategy is supported by plant and equipment associated with clinker Adelaide Brighton’s operations in Western unique long term agreements with two production at the site. Australia commenced in late 2014. Japanese suppliers for grey clinker; Aalborg > Energy efficiency programs benefit of Portland Malaysia (30% owned by Adelaide Strategic Developments $4.9 million Brighton) for white clinker; and a major Adelaide Brighton continues its successful Japanese trading house for the supply of long term strategy of growing shareholder Adelaide Brighton has an ongoing focus on granulated blast furnace slag. value through three key areas: the management of its power and fuel costs. Benefits of $4.9 million were delivered in Given limited clinker capacity expansion 1. Cost reduction and continuous improvement 2014 through the increased use of alternative by the Australian industry in the last two across the Company; fuels, electricity demand management, fuel decades, cement and clinker demand growth 2. Growth in the lime business to supply the switching and plant efficiency. has been largely met by increased imports. resources sector in WA, SA and NT; and Imports are now estimated to represent more > Other initiatives $5.8 million than 50% of the Australian market for cement 3. Focused and relevant vertical integration Further benefits of $5.8 million were delivered and clinker and as such domestic prices can into downstream aggregates, concrete and through a variety of other initiatives, including be influenced by import costs. concrete products businesses. transport efficiencies, raw materials sourcing Land sales releasing capital During 2014, the Group delivered on a and a range of procurement initiatives. One of the benefits of the rationalisation significant number of initiatives in line with its and improvement program is the release of long term strategy. surplus land assets. The Group is actively engaged in preparing these properties for sale to maximise value. The program has delivered approximately $16 million in revenue since the beginning of 2013, including a sale that contributed $9 million in cash and $1 million profit before tax in 2014.

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2. Lime growth Following the completion of major upgrades to both Munster (Western Australia) kilns in 2013, improvements in production capacity, efficiency and environmental performance of the kilns have been realised.

To maximise shareholder returns, Adelaide Brighton seeks to ensure the balance sheet is Cash flow efficiently utilised while retaining the flexibility Operating cash flow declined by $33.3 million to fund the long term growth strategy as to $194.0 million in 2014. The decline was opportunities are identified. largely due to non-recurring items from an acceleration of the income tax payments The Company refinanced debt facilities during system and carbon tax related payments. 2014, increasing the term and lowering Excluding these items, cash flow was borrowing margins. Total facilities were ahead of expectations in the second half. increased by $40 million to $540 million with Operational results

Efficiency gains partially offset the impact of lower volumes and increased energy costs during 2014. Despite a decline in lime the following maturity profile: volumes in 2014, following the 2013 closure Income tax paid increased $23.2 million primarily due to: of some gold mines, the long term prospects Facility expiry date Jan 2018 Jan 2019 for lime demand remain strong. > The Federal Government’s introduction of Facility value $330 million $210 million monthly tax instalments (previously quarterly), 3. Downstream integration - Concrete and added $11 million to payments in 2014. Aggregates Income statement Payments will revert to normal levels in 2015; Other income increased by $21.4 million Acquisitions in South Australia and to $26.1 million in 2014 primarily due to > The timing of payments related to the carbon Queensland the recognition of a gain of $17.8 million as tax which increased income tax payments in In 2014, Adelaide Brighton acquired BM a result of the fair value accounting of an 2014 by $6 million. This will reverse in 2015 Webb Construction Materials in Queensland, acquisition and the receipt of $4.7 million following the repeal of the carbon tax; and Penrice Quarry & Minerals and Direct Mix relating to the settlement of a legal claim with / Southern Quarries in South Australia at an > Tax instalments related to revenue from the an equipment supplier. overall enterprise value of $172 million. These 2014 acquisitions of $1.5 million; and acquisitions are consistent with the strategy of Despite higher borrowings following the major focused and relevant vertical integration. The > Increased tax instalments due to higher acquisitions, net finance costs increased only 2014 earnings. overall year one acquisition multiple is modestly to $15.0 million in 2014. Interest 7.8 times EBITDA after synergies. costs benefited from lower borrowing margins Excluding acquisitions, capital expenditure on the new facilities and lower underlying totalled $60.4 million in 2014, a decline The assets acquired include strategic interest rates. Capitalised interest was lower of $6.5 million from 2013 following the quarrying operations producing approximately due to the completion of major capital completion of organic growth projects. Cash 2 million tonnes per annum of aggregates. expenditure projects. proceeds from asset sales of $13.6 million The acquired businesses also produce more primarily related to the sale of land in north than 250,000 cubic metres of concrete Tax expense of $59.9 million, an increase of Queensland. The profit impact of these annually, securing a significant volume of $2.4 million in 2014, represents an effective sales was circa $1 million. the Company’s cement sales in the South tax rate of 25.8% (2013 - 27.6%). The lower Australian market.

tax rate was largely due to a $17.8 million Balance sheet non-taxable gain on fair value accounting. The balance sheet was impacted by Integration of the acquisitions, including the Adjusting for the impact of this item, the acquisitions in 2014, increasing asset and information systems, has been completed on effective tax rate of 27.9% was within the liability balances compared to 2013. an accelerated time frame delivering synergy expected range of 27% to 28%. benefits in logistics operations, procurement Excluding acquisitions, working capital and back office functions. Earnings from the An actuarial loss of $1.2 million related to increased by $12.8 million or 6.0% which was acquisitions were in line with expectations for the defined benefit liability was recognised less than revenue growth in 2014. Inventory the period to December 2014. through other comprehensive income and trade debtors increased $13.9 million and compared to an actuarial gain of $7.6 million $9.5 million respectively, while trade and other Strategic attractions of Sydney aggregates in 2013. The current year loss was primarily payables increased $4.7 million. Outstanding Adelaide Brighton has a significant investment due to the reduction in discount rate used to debtor days averaged 44.3 days compared in aggregates in the Sydney market through calculate the defined superannuation benefit to 47.6 days in 2013. Payments for the now its Austen Quarry at Hartley, New South liability, which partially reversed the position repealed carbon tax increased $14.3 million Wales. Aggregates earnings increased in from 2013 where the discount rate increased. in 2014. 2014 in New South Wales supported by a recovery in the Sydney construction materials market. Emerging Concrete and Aggregates position Adelaide Brighton continues to make progress on its downstream strategic plan. The Group now produces more than 1.5 million cubic metres per annum of premix concrete and more than 6 million tonnes per annum of aggregates. The footprint of this business now reaches from South Australia through Victoria and New South Wales, to south east and northern Queensland.

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Due to strong second half cash flow net debt increased a lower than expected $111.8 million to $359.8 million. Net debt to equity gearing of 31.7% at year end was well within the targeted range of 25% to 45%.

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  Reconciliation of Underlying Profit “Underlying” measures of profit exclude significant items of revenue and expenses, such as the costs related to restructuring, rationalisation and acquisitions, in order to highlight the underlying financial performance of the business across reporting periods.

The following table reconciles underlying earnings’ measures to statutory results. Year ended 31 December ($ Million)

2014

> Sales of other cementitious products to that customer; 2013

> Increased sales in Western Australia; and

Profit Profit Profit Profit > Improved demand in Victoria, New South before Income after before Income after Wales and Queensland. tax tax tax tax tax tax Lime sales volume is anticipated to be similar Statutory profit 232.5 (59.9) 172.6 208.6 (57.5 ) 151.1 to or slightly higher than 2014 and average Rationalisation of clinker production 7.6 (2.3) 5.3 - - realised prices are likely to increase. The Corporate restructuring costs 5.4 (1.6) 3.8 3.3 (1.0 ) 2.3 threat of small scale lime imports in Western Acquisition expenses 6.2 (1.1) 5.1 - - Australia and the Northern Territory remains, Gain on bargain purchase (17.8) - (17.8) - - however the weaker Australian dollar is likely Claim settlement (3.7) 1.1 (2.6) - - to reduce the competitiveness of imports Underlying profit 230.2 (63.8) 166.4 211.9 (58.5 ) 153.4 relative to Adelaide Brighton’s low cost operations. Dividends paid or declared by the > Rationalisation of clinker production Company The Group announced the rationalisation of clinker production at the Munster site in During the 2014 financial year, the following February 2014. As part of the rationalisation, a dividends were paid: number of employees were made redundant > A final dividend in respect of the year ended at a cost of $5.6 million. In addition, assets 31 December 2013 of 12.0 cents per share not required following the cessation of clinker (fully franked) was paid on 15 April 2014. manufacture at the site were considered This dividend totalled $76,614,803; and impaired and an impairment charge of $2.0 million was recognised. > An interim dividend in respect of the year ended 31 December 2014 of 7.5 cents per > Corporate restructuring costs share (fully franked) was paid on 20 October Redundancies and one-off employment 2014. This dividend totalled $48,040,159. costs were $5.4 million for the year which

Price increases have been announced for March and April 2015 in cement, clinker, aggregates, concrete and concrete products. Price increases achieved in 2015 are expected to exceed those achieved last year. A number of factors are supportive of higher prices including strengthening demand and capacity utilisation and the weakening Australian dollar, which increases the cost of import substitutes.

First half 2015 imports have been fully hedged, however, the deterioration in the Australian dollar will increase the direct cost included the retirement of the previous Since the end of the financial year the of imported materials for Adelaide Brighton. Managing Director and restructuring across Directors have approved the payment of a Assuming the Australian dollar remains at the Company. Savings, in the form of reduced final ordinary dividend of 9.5 cents per share around Yen90 and USD0.75, costs are costs, were realised during the year. (fully franked). The final dividend is to be paid expected to increase by approximately on 16 April 2015. > Acquisition expenses $7 million in a full year, prior to any off-set The costs associated with acquisitions, through price increases. Gas costs in South State of affairs including stamp duty, legal and other Australia are now expected to increase by consulting costs, fluctuate with transaction $2 million pre-tax in 2015. Other than set out in the Review of activity. External costs relating to acquisitions Operations, no significant changes occurred There are a number of items which are and potential acquisitions recognised as an in the state of affairs of the Group during the anticipated to support EBIT: expense in the income statement totalled financial year. $6.2 million during the year. > The repeal of the carbon tax to benefit circa $3 million compared to 2014; Events subsequent to the end of the > Acquisition fair value gain financial year A gain of $17.8 million relating to acquisition > Potential transport costs savings of fair value accounting has been recognised as $4 million from lower fuel costs; As at the date of this report, no matter or other income in the income statement. circumstance has arisen since 31 December > Further Munster rationalisation benefits of 2014 that has significantly affected, or may > Claim settlement $5 million; and significantly affect the Group’s operations, the Adelaide Brighton settled a long standing > Full year benefits from the 2014 corporate results of those operations, or the Group’s litigation claim and received a payment of rationalisation of $2 million. state of affairs in future financial years. $4.7 million in the year, which has been recognised as other income. The settlement amount, less legal costs of $1.0 million, is included in the significant items.

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Adelaide Brighton has a land portfolio that is expected to release a total of $130 million in cash in the medium to long term. The Group is actively engaged in preparing these In 2015, Adelaide Brighton anticipates sales properties for sale to maximise value. volumes of cement and clinker to be similar to or greater than 2014. Reduced cement sales from January 2015 to a major customer in South Australia are expected to be offset by: Likely developments and expected results of operations

42

Directors’ meetings The Sydney market is transitioning to aggregate sources supplied from outside the The number of Directors’ meetings and meetings of committees of Directors held during the metropolitan area, following the reserves at financial year and the number of meetings attended by each Director is as follows: existing competitor quarries being exhausted. Audit, Risk Nomination, Due to the structural change it is expected and Remuneration Independent that Sydney aggregate prices will increase Board Compliance and Governance Directors’ SH&E well above CPI in the short to medium Director Meetings Committee Committee Committee Committee term. Adelaide Brighton’s Austen Quarry is expected to benefit from growth in prices and A H A H A H A H A H demand, which could increase annual EBIT LV Hosking 10 10 4 4 5 5 0 0 by $8 million to $10 million over the next RD Barro 10 10 2 2 three to five years. GF Pettigrew 10 10 4 4 5 5 0 0 2 2 1 1 KB Scott-Mackenzie 1191 10 4 5 0 0 2 2 Environmental performance AM Tansey 10 10 4 4 5 5 The Group is subject to various MP Chellew2 4 4 0 0 Commonwealth, State and Territory laws A Number of meetings attended. concerning the environmental performance of H Number of meetings held during period of office. 1 Apology - on leave overseas. Adelaide Brighton’s operations. 2 MP Chellew retirement effective from the conclusion of the Company’s AGM on 21 May 2014.

Environmental performance is monitored by site and business division, and information about the Group’s performance is reported to and reviewed by the Group’s senior management, the Board’s Safety, Health & Environment Committee, and the Board.

articulars of the Company’s corporate governance practices, including the roles of each Board P Committee are set out on pages 27 to 33 of this report. Director profiles

Director and executive remuneration

Information relating to Directors’qualifications, Details of the Company’s remuneration experience and special responsibilities are set policies and the nature and amount of The Group’s major operations have ongoing out on page 36 of the Annual Report. the remuneration of the Directors and dialogue with the relevant authorities certain senior executives are set out in the responsible for monitoring or regulating the Directors’ interests Remuneration Report on pages 47 to 61 of environmental impact of Group operations. this report. As part of this, Group entities respond as The relevant interest of each Director in the required to requests, including requests for share capital of the Company at the date of Company Secretaries information and site inspections. this report is as follows: The Company’s principal Company Secretary During 2014, seven minor matters concerning Ordinary shares is Marcus Clayton, who has been employed environmental performance were raised LV Hosking 4,851 by the Company in the two separate offices with regulatory authorities. Four of these RD Barro 217,869,876 of General Counsel and Company Secretary concerned the minor escape or spillage GF Pettigrew 7,739 since 24 February 2003. He is a legal of materials, two related to blasting, and KB Scott-Mackenzie 5,000 practitioner admitted in South Australia with one related to noise. All of these minor AM Tansey 10,000 27 years experience. incidents were quickly addressed and, where applicable, reviews were undertaken to Full details of the interests in share capital of Two other employees of the Company also minimise the risk of recurrence. Directors of the Company are set out in the hold the office of Company Secretary to No fines or penalties were incurred arising from the Group’s environmental performance, and no prosecutions for breach of environmental requirements were commenced against any Group entity in 2014.

Remuneration Report on pages 47 to 61 of this report.

In 2011, the WA Department of Environment Regulation commenced a prosecution against Cockburn Cement Ltd (“Cockburn”) alleging non-compliance with Cockburn’s environmental licence and alleging breaches of the Environment Protection Act 1986 (WA), arising from the conduct of a contractor at Munster in 2010. The prosecution discontinued one of the two charges in December 2013. During May 2014 a trial was held at the Magistrates Court in Perth, and all the charges brought were dismissed and Cockburn was fully acquitted.

A D E L A I D E BRIGHT ON LT D AND IT S CONT ROLLED ENTI TI ES F O R T H E Y EA R END ED 3 1 D ECEM BER 2 0 1 4

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assist with secretarial duties should the principal Company Secretary be absent: the Company’s Chief Financial Officer, Michael Kelly, a Certified Practising Accountant who has been a Company Secretary since 23 November 2010 and the Group’s Corporate Affairs Adviser, Luba Alexander, who has been a Company Secretary since 22 March 2001.

Indemnification and insurance of officers Proceedings on behalf of the Company

Rounding off

Rule 9 of the Company’s constitution provides No person has applied for leave of the that the Company indemnifies each person Court to bring proceedings on behalf of the who is or who has been an “officer” of the Company or to intervene in any proceedings Company on a full indemnity basis and to the to which the Company is a party for the full extent permitted by law, against liabilities purpose of taking responsibility on behalf incurred by that person in their capacity as an of the Company for all or any part of those officer of the Company or of a related body proceedings. The Company was not a party corporate. to any such proceedings during the year.

The Company is of a kind referred to in ASIC Class Order 98/100 relating to the “rounding off” of amounts in the Directors’ report. In accordance with that Class Order, amounts in the financial report and Directors’ report have been rounded off to the nearest one hundred thousand dollars, unless otherwise stated.

Rule 9.1 of the constitution defines “officers” to mean:

Shares under option Non-audit services

The Company may decide to employ the > Each person who is or has been a Director, auditor on assignments additional to their alternate Director or executive officer of the statutory audit duties where the auditor’s Company or of a related body corporate of experience and expertise with the Company the Company who in that capacity is or was a and the Group are important. nominee of the Company; and Details of the amounts paid or payable to > Such other officers or former officers of the PricewaterhouseCoopers for audit and nonCompany or of its related bodies corporate as audit services provided during the year are set the Directors in each case determine. out in Note 29 to the Financial Statements on Additionally the Company has entered into page 96 of this report. Deeds of Access, Indemnity and Insurance The Board of Directors has considered the with all Directors of the Company and its position and, in accordance with the advice wholly owned subsidiaries. These deeds received from the Audit, Risk and Compliance provide for indemnification on a full indemnity Committee, is satisfied that the provision of basis and to the full extent permitted by law the non-audit services is compatible with against all losses or liabilities incurred by the the general standard of independence for person as an officer of the relevant company. auditors imposed by the Corporations Act The indemnity is a continuing obligation and 2001. The Directors are satisfied that the is enforceable by an officer even if he or she provision of non-audit services by the auditor, has ceased to be an officer of the relevant as set in Note 29, did not compromise the company or its related bodies corporate. auditor’s independence requirements of The Company was not liable during 2014 the Corporations Act 2001 for the following under such indemnities. reasons: Rule 9.5 of the constitution provides that the Company may purchase and maintain insurance or pay or agree to pay a premium for insurance for “officers” (as defined in the constitution) against liabilities incurred by the officer in his or her capacity as an officer of the Company or of a related body corporate, including liability for negligence or for reasonable costs and expenses incurred in defending proceedings, whether civil or criminal. During the year the Company paid the premiums in respect of Directors’ and Officers’ Liability Insurance to cover the Directors and Secretaries of the Company and its subsidiaries, and the General Managers of each of the divisions of the Group, for the period 1 May 2014 to 30 April 2015. Due to confidentiality obligations under that policy, the premium payable and further details in respect of the nature of the liabilities insured against cannot be disclosed.

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> All non-audit services have been reviewed by the Audit, Risk and Compliance Committee to ensure they do not impact the impartiality and objectivity of the auditor; and > None of the services undermine the general principles relating to auditor independence as set out in APES 110 Code of Ethics for Professional Accountants. Auditor’s independence declaration A copy of the auditor’s independence declaration as required under section 307C of the Corporations Act 2001 is set out on page 107.

44

The details of shares under option at the date of this report are set out in Note 28. Registered Office The registered office of the Company is Level 1, 157 Grenfell Street, Adelaide, South Australia 5000. Dated 12 March 2015 Signed in accordance with a resolution of the Directors

LV Hosking Chairman

Level 1 157 Grenfell Street Adelaide SA 5000 GPO Box 2155 Adelaide SA 5001

Level 1 157 Grenfell Street Adelaide SA 5000 GPO Box 2155 Adelaide SA 5001

Telephone (08) 8223 8000

International +618 8223 8000

International +618 8223 8000

Facsimile (08) 8215 0030

Facsimile (08) 8215 0030

www.adbri.com.au

www.adbri.com.au

Adelaide Brighton Ltd Ad e laid e B rig h to n LtdACN 007 596 018Ad e laid e B rig h to n Ltd ACN 007 596 018

Dear Shareholder

Telephone (08) 8223 8000

ACN 007 596 018

Dear Shareholder

On behalf of the Board, I am pleased to introduce On behalf by way of the of this Board, letterI am the pleased 2014 Remuneration to introduce by Report way of Adelaide this letterBrighton. the 2014 Remuneration Report of Adelaide Brighton. Dear Shareholder The remuneration policies of Adelaide Brighton Thecontinue remuneration to focus policies on retaining of Adelaide a strong Brighton management continueteam to focus andon rewarding retainingthat a strong team management in team and rewarding that team in a way that is consistent with creating shareholder a wayvalue. that isInconsistent that regard with I am creating pleased shareholder to presentvalue. the results In thatforregard 2014 Iwhich am pleased are to present the results for 2014 which are relevant to, and consistent with those remuneration relevant policies. to, and consistent with those remuneration policies.management team and rewarding that team in a way that is The remuneration policies of Adelaide Brighton continue to focus on retaining a strong

On behalf of the Board, I am pleased to introduce by way of this letter the 2014 Remuneration Report of Adelaide Brighton.

Inconsistent 2014, Adelaide to perform In 2014, wellInAdelaide with Company Brighton continued posting record to to perform revenue wellofthe with $1,337.8 the Company million. Atposting thewhich same record time of $1,337.8 At thewith samethose time withBrighton creatingcontinued shareholder value. thattheregard I am pleased present results for 2014 arerevenue relevant to, and million. consistent reported earningspolicies. before interest and tax (EBIT) reported rose earnings 11.1% tobefore $247.5interest million,and andtax reported (EBIT)net rose profit 11.1% aftertotax $247.5 (NPAT) million, increased and reported net profit after tax (NPAT) increased remuneration 14.3% to $172.7 million, both records for the14.3% Company. to $172.7 million, both records for the Company.

In Adelaide Brighton continued tolong perform wellmeasurement with the Company record revenue of $1,337.8 million. At2013) the Adelaide same time reported Over2014, the four year measurement period of the Over the term fourincentive year (January 2010 period to December ofposting the long2013) term incentive Adelaide (January Brighton delivered 2010 to December Brighton delivered earnings beforeReturn interest andoftax (EBIT) rose 11.1%price toReturn $247.5 and strong reported net profit after tax (NPAT) increased 14.3% toin$172.7 million, Total Shareholder (TSR) 75.2%, including Total Shareholder share growth(TSR) ofmillion, 40.8%. of 75.2%, This including performance share priceingrowth shareholder of 40.8%. returns This strong performance shareholder returns resulted in half offor thethe longCompany. term incentive Award resulted vesting in half associated of the long withterm the incentive TSR. However, Award notwithstanding vesting associated continued with theimprovement TSR. However, notwithstanding continued improvement both records in earnings per share (EPS) over this period,inthe earnings rate of per growth share achieved (EPS) over was this just period, below the thethreshold rate of growth level required achievedfor was vesting just below of the threshold level required for vesting of

Over fourAward year under measurement period the term incentive (January to December 2013)in Adelaide Brighton delivered Total Shareholder any partthe of the the EPS performance any of part condition of long the Award and therefore under thehalf EPS of the performance long2010 term condition incentive and Award therefore tested half 2014 of the long term incentive Award tested in 2014 subject the EPS condition lapsed subject (and togrowth the cannot EPSbe performance re-tested). condition lapsed (and cannotinbeshareholder re-tested). returns resulted in half of the long term Returnto(TSR) of performance 75.2%, including share price of 40.8%. This strong performance Adelaide Brighton’s Adelaide profit Brighton’s before financial tax (PBT) performance growth of more resulted thanin10%. profit This before mettaxGroup (PBT)and of more 10%.(EPS) This met and incentive Award financial vesting performance associated resulted with thein TSR. However, notwithstanding continued improvement ingrowth earnings perthan share overGroup this period, the Divisional STI financial targets. In its annual Divisional assessment STIoffinancial STI’s thetargets. Board In may its adjust annualfor assessment exceptional, of abnormal STI’s the Board or extraordinary may adjust for exceptional, abnormal or extraordinary rate of growth achieved was just below the threshold level required for vesting of any part of the Award under the EPS performance condition and items which affected results for the year. In 2014 itemsthis which process affected resulted resultsin for downward the year.adjustments In 2014 thistoprocess the PBTresulted for STIinpurposes downward for adjustments the to the PBT for STI purposes for the therefore halfDivision. of the long term set incentive Award tested innon-financial 2014 subject thethe EPS performance condition lapsed cannot KMP be re-tested). Group and one The Board relevant Group andand challenging one Division. The Board targets setto relevant for and individual challenging KMP innon-financial 2014. Performance targets for(and the individual in 2014. Performance against these non-financial targets was assessed against impacting these non-financial individual KMP targets outcomes. was assessed The overall impacting result individual was shortKMP term outcomes. incentives The overall result was short term incentives

Adelaide Brighton’s financial performance resulted in profit before tax (PBT) growth of more than 10%. This met Group and Divisional Short Term for KMP vested in the range of 86.9% to 89.8% for KMP of their vested potential in themaximum, range of 86.9% down from to 89.8% the previous of their potential year. I would maximum, also point down outfrom thatthe previous year. I would also point out that Incentive (STI) financial targets. In its toannual assessment STIs the adjust foryear. exceptional, abnormal or for extraordinary no short term incentive payment was made nothe short former termManaging incentive of payment Director, Mark was Board made Chellew, tomay the forformer the 2014 Managing Director, Mark Chellew, the 2014 year.items which affected results the year.itsInresponsibility 2014 this process in downward adjustments to the PBT for STI for theBrighton’s Group and one Division. The Board set The Boardforrecognises to maintain The resulted Board shareholder recognises confidence its responsibility in Adelaide to maintain Brighton’s shareholder leadership confidence andpurposes remuneration in Adelaide leadership and remuneration practices, implement new practices aspractices, appropriate to the implement Group’snew circumstances, practices asstrategy appropriate and for direction. the (KMP) Group’s The Board remains strategy and direction. Thenon-financial Board remains relevant and andtochallenging non-financial targets and forfor the individual Key Management Personnel incircumstances, 2014. Performance against these focused delivering sustainable valueindividual for our focused shareholders on delivering and aligning sustainable theoverall Group’s value for executive our shareholders and aligning framework the to Group’s thisKMP executive to to this targetsonwas assessed impacting KMP outcomes. The result wasremuneration short term incentives for vestedremuneration in the rangeframework of 86.9% objective. objective. 89.8% of their potential maximum, down from the previous year. I would also point out that no short term incentive payment was made to the former As part of that process in 2014 the Board revised As part some of that KMP process serviceinagreements 2014 the Board (where revised required) sometoKMP provide service for aagreements new form of(where required) to provide for a new form of Managing Director, Chellew, forexecutive 2014 year. and executive contract. The Mark key goal of this was tothe align executives contract. The shareholders. key goal of thisIt was provides to align for:executives and shareholders. It provides for: The Board responsibility maintain shareholder confidence in Adelaide Brighton’s leadership and remuneration practices, and to • Boardrecognises discretion for its short term and long • toterm Board incentive discretion arrangements; for short term and long term incentive arrangements; •implement Termination on six months’ notice by•either Termination payment on circumstances, sixinmonths’ lieu by the notice Company); by either party payment The in lieuBoard by theremains Company); new practices as appropriate forparty the (or Group’s strategy and (or direction. focused on delivering sustainable •value for Immediate termination byand the aligning Company • the for cause; Immediateexecutive terminationremuneration by the Company for cause; to this objective. our shareholders Group’s framework •

Post employment restraint of up to six • months; Post employment restraint of up to six months;



Other provisions commonly found in •contemporary Other provisions executive commonly service agreements. found in contemporary executive service agreements.

As of that of process in 2014 thetoBoard revised some KMP service agreements (where required) to providewith forany a new formreporting of executive contract. • part Clawback incentives paid due the • executive’s Clawback material of incentives non-compliance paid due with to the anyexecutive’s financial reporting material requirement, non-compliance financial requirement, or misconduct, breach misconduct, of duty; including and It provides fraud, dishonesty, The key goal of thisincluding was to fraud, align dishonesty, executivesoror and shareholders. for: or breach of duty; and > Board discretion for short term and long term incentive arrangements;

The Board is currently conducting a holistic review The Board of theis Group’s currentlyremuneration conducting astructure holistic review over the of the nextGroup’s 12 months. remuneration In 2016, we structure will over the next 12 months. In 2016, we will

> Termination on six months’ notice by consider either (or payment in lieu the Company); consider implementing the deferral of a portion of theparty implementing STI consistent the withdeferral claw back ofby a provisions, portion of the andSTI assess consistent any further with claw changes back provisions, and assess any further changes resulting from that review. resulting from that review. > Immediate termination by the Company for cause;

Succession planning continues to be a key priority Succession for theplanning Board, including continuesdeveloping to be a keyinternal prioritycandidates for the Board, as well including as reviewing developing and internal candidates as well as reviewing and

> Post employment of up to six months; assessing appropriate restraint external candidates. This assessing process appropriate led to the external promotion candidates. of Martin Brydon This process (a longled term to the serving promotion executive of Martin of theBrydon (a long term serving executive of the Company) to of theincentives position of CEO Company) 2014. The to transition the material position of of leadership CEO fromresponsibilities 21 May with 2014.any has Thebeen transition smooth of leadership and the Company responsibilities been smoothincluding and the Company > Clawback paid from due21 toMay the executive’s non-compliance financial reporting requirement, orhas misconduct, fraud, has continued to deliver shareholder value. has continued to deliver shareholder value. dishonesty, or breach of duty; and

The Directors recognise that Board renewal The is anDirectors ongoing process. recogniseDuring that Board 2014,renewal Directors is an reviewed ongoing theprocess. Board’sDuring composition 2014, utilising Directors reviewed the Board’s composition utilising

> Other in contemporary service agreements. a Board provisions skills matrix.commonly The Board’s found composition a Board will continue skills matrix. toexecutive be monitored The Board’s and composition reviewed during will continue 2015. to be monitored and reviewed during 2015.

DuringBoard 2014, the Board hasconducting been focusedaon During driving2014, alignment theof Board of KMP has with been long focused term shareholder on driving alignment value, resulting of KMP change long term shareholder value, in change to The is currently holistic review the Group’s remuneration structure over theinwith next 12to months. In 2016, weresulting will consider remuneration practices as outlined above. remuneration practices as outlined above. implementing the deferral of a portion of the STI consistent with claw back provisions, and assess any further changes resulting from that review. The Board is pleased to present the 2014 Remuneration The Board isReport pleasedtotoshareholders. present the 2014 Remuneration Report to shareholders.

Succession planning continues to be a key priority for the Board, including developing internal candidates as well as reviewing and assessing appropriate external candidates. This process led to the promotion of Martin Brydon (a long term serving executive of the Company) to the position of CEO from 21 May 2014. The transition of leadership responsibilities has been smooth and the Company has continued to deliver shareholder value. The is an ongoing process. During 2014, Directors reviewed the Board’s composition utilising a Board skills ArleneDirectors Tansey recognise that Board renewal Arlene Tansey Chairman of Nomination, Remuneration Chairman Governance of Nomination, Remuneration andduring Governance matrix. The Board’s composition willand continue to be Committee monitored and reviewed 2015.Committee During 2014, the Board has been focused on driving alignment of KMP with long term shareholder value, resulting in change to remuneration practices as outlined above. The Board is pleased to present the 2014 Remuneration Report to shareholders.

Arlene Tansey Chairman of Nomination, Remuneration and Governance Committee

A D E L A I D E BRIGHT ON LT D AND IT S CONT ROLLED ENTI TI ES F O R T H E Y EA R END ED 3 1 D ECEM BER 2 0 1 4

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Remuneration report contents



................................................................................................................................... Page

1

Remuneration summary.............................................................................................. 47

1.1

Financial highlights for the 2014 financial year................................................................. 47

1.2

Long term financial highlights.......................................................................................... 47

1.3

Strategy highlights.......................................................................................................... 48

1.4

Remuneration highlights for 2014................................................................................... 48

1.5

Changes during the 2014 financial year.......................................................................... 49

1.6

Looking forward.............................................................................................................. 50

2

Executive remuneration framework........................................................................... 50

2.1

Key management personnel........................................................................................... 50

2.2

Remuneration framework................................................................................................ 50

3

Company performance and remuneration outcomes for 2014............................... 52

3.1

Overview of Company performance................................................................................ 52

3.2

Linking remuneration to Company performance.............................................................. 53

3.2.1

Short Term Incentive - key performance outcomes......................................................... 53

3.2.2

Short Term Incentive - actual outcomes.......................................................................... 54

3.2.3

Long Term Incentive - key performance outcomes.......................................................... 54

3.2.4

Long Term Incentive - actual outcomes........................................................................... 55

4

Remuneration governance......................................................................................... 55

4.1

Responsibility for setting remuneration............................................................................ 55

4.2

Remuneration policy....................................................................................................... 56

5

Executive remuneration.............................................................................................. 56

5.1

Fixed annual remuneration.............................................................................................. 56

5.2

At-risk remuneration - Short Term Incentive.................................................................... 56

5.3

At-risk remuneration - Long Term Incentive..................................................................... 57

6

Executive Service Agreements................................................................................... 59

7

Non-executive Directors’ fees.................................................................................... 59

7.1

Policy and approach to setting fees................................................................................ 59

8

Key Management Personnel disclosure tables........................................................ 60

8.1

Non-executive Directors’ statutory remuneration............................................................. 60

8.2

Executive statutory remuneration.................................................................................... 61

8.3

Equity holdings of Key Management Personnel............................................................... 61

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Remuneration report

2014 reported Group PBT was 112% of As can be seen in the graph below Adelaide budget, while underlying Group PBT was Brighton‘s EBIT performance compares 111% of budget. Taking into account a favourably to its listed peers. range of considerations, including budget COMPARABLES EARNINGS assumptions and management initiatives, the EBIT (UNDERLYING) Board adjusted Group PBT and one Division’s INDEX (2009 = 100) financial outcomes used for STI purposes 150 downwards to $223.5 million, which was 140 130 108% of budget. 120

1.2 Long term financial highlights

110 100

170

25

150

20

140

15

These results have been driven by the implementation of a clear strategic plan delivering:

130

10

> Improved construction materials volumes.

110

> Increased pricing for construction materials and lime.

100

> Earnings before interest and tax (EBIT) was up $24.8 million, or 11.1% on 2013.

> Tight control of costs, with:

- Operational improvement programs delivering a benefit of $19.7 million in 2014.



- Major initiatives including rationalisation of the Western Australian cement operations and a corporate restructuring program.

Source: Adelaide Brighton

160

> Revenue increased by $110 million, up 8.9% on 2013.

120

2009

2010

2011

REPORTED

F O R T H E Y EA R END ED 3 1 D ECEM BER 2 0 1 4

2012

2013

2014

2014

2013

2012

EBIT MARGIN (UNDERLYING)

5

0 2009

2010

2011

2012

2013

2014

ABC CSR (BUILDING PRODUCTS DIVISION) BORAL (CONSTRUCTION MATERIALS AUSTRALIA)

UNDERLYING

> Successful completion of a major acquisition program in South Australia and north Queensland.

A D E L A I D E BRIGHT ON LT D AND IT S CONT ROLLED ENTI TI ES

2011

COMPARABLES EARNINGS %

Source: Company reports

> Net profit after tax (NPAT) increased by $21.6 million or 14.3% on 2013.

2010

2009

Adelaide Brighton has delivered 7.0% 90 compound annual growth in reported NPAT 80 70 Section 1 - Remuneration Summary over the last five years. Through our strategy 60 of operational improvement, downstream 1.1 Financial highlights for the 2014 financial 50 investment and growth in the lime business, 40 year Adelaide Brighton has managed to increase 30 The Directors are pleased to present Adelaide profitability over this period delivering value Brighton Ltd’s strong financial performance to shareholders in what has been challenging ABC CSR (BUILDING PRODUCTS DIVISION) for 2014, with the Company posting record market conditions. BORAL (CONSTRUCTION MATERIALS AUSTRALIA) revenue, earnings before interest and NET PROFIT AFTER TAX tax (EBIT) and profit before tax (PBT). In The Company has also maintained its leading $m (REPORTED VS UNDERLYING) summary: EBIT margin %. 180

Source: Company reports

The Directors of Adelaide Brighton Limited (the Company) present the Remuneration Report (Report) for the Company and the Group for the financial year ended 31 December 2014. The Report outlines the remuneration arrangements in place for the Key Management Personnel (KMP) of the Company and is prepared in accordance with section 300A of the Corporations Act 2001. This Report, which forms part of the Directors’ Report, has been audited by PricewaterhouseCoopers.

47

Over this period, Adelaide Brighton’s total return to shareholders has outperformed the Comparator Group1 and as can be seen in the graph below, outperformed the ASX200 Accumulation Index. 1 Comparator Group is the companies in the S&P/ASX200 Accumulation Index, excluding all GICS financial companies and selected resources companies TOTAL SHAREHOLDER RETURNS %

(SHARE PRICE + DIVIDEND REINVESTED) & S&P/ASX200 ACCUMULATION INDEX RETURNS

100

80

60

Source: ASX/First Advisers Pty Ltd

40

20

0

ABC

Dec 14

Oct 14

Jul 14

Apr 14

Jan 14

Oct 13

Jul 13

Apr 13

Jan 13

Oct 12

Jul 12

Apr 12

Jan 12

Oct 11

Jul 11

Apr 11

Jan 11

Oct 10

Jul 10

Apr 10

Jan 10

-20

S&P/ASX200 ACCUM

1.3 Strategy highlights

and acquisitive growth. The acquisitions have strengthened our position in the South Australian market and have given the Company an important position for cement distribution in north Queensland. During the year, management has been focused on the integration of these acquisitions. The Company is now realising synergy benefits ahead of initial expectations through successful back office integration including governance, safety, health and environment, procurement and information systems.

Adelaide Brighton is focused on delivering long term shareholder value. During 2014, management undertook a range of initiatives that delivered cost savings of $19.7 million. These initiatives included a restructure of its Western Australian cement operations and its corporate functions. These two initiatives delivered benefits of $9.0 million in 2014, and are expected to deliver further incremental savings of $7.0 million in 2015 (total benefits of $16.0 million). Management also secured long term contracts for the supply of essential 1.4 Remuneration highlights for 2014 business inputs of raw materials and energy; The Company’s success growing profit over successfully delivered capital expenditure an extended period has been achieved by projects within budget and renewed supply a long term stable management team. This contracts with major customers on was exemplified by the internal promotion favourable terms. of Martin Brydon to the position of Chief Adelaide Brighton has a consistent approach Executive Officer (CEO), succeeding long term of investing for operational improvement Managing Director and CEO Mark Chellew, and growth while returning surplus capital, and various internal promotions made as a a strategy which has supported strong consequence of Martin Brydon’s promotion. total shareholder returns for more than a Our Company has continued to perform well decade. The acquisition of three construction in challenging market conditions, with our materials businesses during 2014 in South NPAT growing strongly in 2014. Australia and Queensland for $172 million Our remuneration policies focus on rewarding (on an enterprise value basis) is consistent achievement and stabilising our management with our strategy of downstream investment team through long term incentives which are and strengthens our capacity for organic consistent with shareholders’ returns.

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An overview of the key 2014 remuneration related matters is set out below:

1.5 Changes during the 2014 financial year

Executive remuneration The CEO’s fixed remuneration was set at $1.3 million per annum upon his appointment to that role during the 2014 financial year. This was materially lower than for the previous long serving CEO.

The overall structure and philosophy of Adelaide Brighton’s approach to remuneration remained consistent throughout 2014.

Short term incentive outcomes

Martin Brydon replaced the Company’s long Following annual remuneration reviews concluded in late 2013, serving Managing Director and CEO Mark some senior executives received a 2% increase over 2013 fixed Chellew at the Company’s Annual General remuneration, to address internal relativities and reflecting the fact Meeting on 21 May 2014. As disclosed in that fixed remuneration for these executives was originally set a last year’s Remuneration Report, the Board little below market while the executives gained experience in their reviewed the terms of employment for the current roles. Fixed remuneration for other senior executives for the CEO at the time of his appointment and 2014 financial year were held at the same level as 2013. Martin Brydon has been employed as the The annual short term incentive for the CEO and Chief Financial Company’s CEO on terms embodying best Officer (CFO) is split 80% Group financial target and 20% nonpractice, which superseded and replaced financial targets. his previous executive service agreement (as Executive General Manager, Cement and For executives other than the CEO and CFO the split is 60% Group Lime). financial target, 20% Divisional financial target and 20% nonfinancial targets. 2014 Reported Group PBT was 112% of budget, while Underlying Group PBT was 111% of budget. The Board adjusted the PBT used for STI purposes downwards to $223.5 million, which was 108% of budget.

The Company has also taken the opportunity to ensure that all KMP have now transitioned to a new form of executive service agreement, removing older style termination benefit arrangements and replacing them with > the impact of acquisitions which were unbudgeted were excluded provisions that provide alignment between (fair value gain and acquisition earnings less transaction costs); and executives and shareholders by more closely linking the rewards which accrue to > restructuring charges, net of benefits derived during the year were senior executives to the creation of value for excluded. shareholders. A new form of executive service The same approach was taken to the Divisional Financial targets. agreement will be used for all new senior Overall this resulted in the Divisional financial target being met at executive appointments. It provides for: 100%. > Board discretion for short term and long Non-financial targets for the CEO and Executives were met at term incentive arrangements; between 73% and 83%. > Termination on six months’ notice by either During 2014, Tranche 3 of the 2010 Awards was tested for earliest party (or payment in lieu by the Company); exercise in May 2014. These Awards vested at 50%: > Immediate termination by the Company > While operating conditions remained challenging, the senior for cause; executive team was effective in delivering Total Shareholder Return > Post employment restraint of up to six of 75.2% over the measurement period. months (paid); > The Total Shareholder Return component (representing 50% of the long term incentive) fully vested with the Total Shareholder Return > Clawback of incentives paid due to the executive’s material non-compliance with of 75.2% which was at the 81st percentile of the Comparator any financial reporting requirement, or Group. misconduct, including fraud, dishonesty, or > The Earnings Per Share (EPS) component (representing 50% of breach of duty; and the long term incentive) did not vest as the EPS target was not met. This is despite continued growth in EPS over the performance > Other provisions commonly found in contemporary executive service agreements. period and notwithstanding challenging trading conditions that The Board considered items individually taking account of a range of matters, including budget assumptions and management initiatives, making the following adjustments:

Long term incentive outcomes - Total Shareholder Return of 75.2% over the measurement period (2010 - 2013)

resulted in some competitors suffering declines in earnings. Non-executive Director There were no increases in Board or Committee fees in financial year 2014. remuneration

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Martin Brydon’s smooth succession to CEO is indicative of the inherent value of a long standing senior executive team at Adelaide Brighton.

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Our senior executives’ remuneration levels were benchmarked during the year, and generally sit around the median percentile of similar roles within comparable companies in the ASX 51-150. Actual salaries at any time may reflect individual experience and knowledge and so may deviate from the median percentile. The Board again considered the Company’s LTI arrangements in 2014. While the four year performance period and Total Shareholder Return (TSR) and EPS targets continued as the current structure of the LTI for the 2014 financial year, the level of participation in the LTI was reduced for all senior executives.

Section 2 - Executive remuneration framework 2.1 Key Management Personnel (KMP) The KMP of Adelaide Brighton comprises all Directors and those Executives who have authority and responsibility for the planning, directing and controlling of the activities of the Group. In this Report, ‘Executives’ refers to members of the Group executive team identified as KMP. The KMP detailed in this report are: Table 1 Name

Role

Executives M Brydon(1) Chief Executive Officer (CEO) M Kelly Chief Financial Officer (CFO) G Agriogiannis Executive General Manager, Concrete and Aggregates SB Rogers Executive General Manager, Concrete Products Former Managing Director (MD) and CEO 1.6 Looking forward MP Chellew(2) Former MD and CEO The Board is alert to the need to keep up with Directors shareholder and community expectations LV Hosking Non-executive Chairman concerning executive remuneration, and to GF Pettigrew Non-executive Director implement new practices as appropriate for KB Scott-Mackenzie Non-executive Director the Group’s circumstances, strategy and AM Tansey Non-executive Director direction. In the interests of ensuring that our RD Barro Non-executive Director senior executive remuneration and incentive (1) Deputy CEO until 21 May 2014, Executive General Manager, Cement and Lime until 1 February 2014 arrangements are fit for purpose and reflect (2) MD and CEO until 21 May 2014 the Company’s future plans and strategies, rather than implementing change on an ad hoc basis, the Board has resolved to conduct 2.2 Remuneration framework a holistic review of our senior executive pay levels, pay mix, short term incentives and long term incentives over the next 12 months. Any changes that are determined appropriate as a result of this review will be introduced in the 2016 financial year, including, as we have previously foreshadowed to the market, deferring a component of the Group’s short term incentive. The governance of remuneration outcomes remains a key focus of the Board and the Nomination, Remuneration and Governance (NRG) Committee, and we regularly review our policies to ensure that remuneration for our executives continues to be aligned with Company performance and that it appropriately motivates, rewards and retains our senior executive team in the context of the broader community sentiment regarding executive pay.

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Our executive remuneration framework consists of the following components: > Fixed annual remuneration > An annual short term incentive > A long term incentive Adelaide Brighton’s mix of fixed and at risk components for the Executives disclosed in this Report, as a percentage of potential maximum total annual remuneration for the 2014 financial year, is as follows:

CHIEF EXECUTIVE OFFICER

KMP

39% - FIXED REMUNERATION

41% - FIXED REMUNERATION

39% - AT RISK PAY - ANNUAL INCENTIVE (STI)

33% - AT RISK PAY - ANNUAL INCENTIVE (STI)

22% - AT RISK PAY - LONG TERM INCENTIVE (LTI)

26% - AT RISK PAY - LONG TERM INCENTIVE (LTI)

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The diagram below provides a summary of our remuneration framework, and illustrates the way in which each element of remuneration has been structured to support our Group business objectives and to align with the generation of shareholder wealth. Component

Performance measure

FIXED ANNUAL REMUNERATION (FAR) Salary and other benefits (including statutory superannuation)

Considerations:

+ ANNUAL SHORT TERM INCENTIVE (STI) Cash for target performance

> Long term individual performance > Role, responsibility and potential > Benchmarked to competitive market rate

Financial targets - using Profit Before Tax (PBT) as financial measure CEO and CFO - 80% relating to Group performance against budget Division Executive General Managers 60% relating to Group performance and 20% relating to Divisional performance against budget

+ LONG TERM INCENTIVE (LTI) Rights to receive fully paid ordinary shares

Non-financial targets (20%) relating to personal performance

Earnings Per Share (EPS) (50%) and Total Shareholder Return (TSR) (50%) Measured over a four year performance period

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> Remuneration set at competitive levels in the market to attract, retain and engage key talent > Motivate to achieve outstanding performance

> Alignment to Group budget through PBT > Non-financial targets drive leadership performance and behaviours consistent with achieving the Group’s short and long term objectives and commitments including safety, strategic plans, individual business profit targets and other specific personal or non-financial performance objectives which align the interest of Company executives and shareholders

> Ensure strong link with the creation of long term shareholder value to encourage the achievement of growth of the Company’s business > EPS was chosen as a performance hurdle as it: - Links executive reward to a fundamental indicator of financial performance; and - Links directly to the Group’s long term objectives of maintaining and improving earnings > TSR was chosen because it: - Ensures alignment between comparative shareholder return and reward for the executive; and - Provides a relative, external market performance measure having regard to a peer group of companies (ASX200 with exclusions) with which the Group competes for capital, customers and talent

= TOTAL REMUNERATION

Strategic objective/performance link

The total remuneration mix is designed to attract, retain and motivate a highly capable executive team, encourage and drive leadership performance that reinforces the Group’s short and long term strategic objectives and provides a common interest between executives and shareholders by linking the rewards that accrue to executives to the creation of value for shareholders

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Section 3 - Company performance and remuneration outcomes for 2014 3.1 Overview of Company performance As can be seen from the table below, the key profit measures for 2014 versus 2013 show an improvement of between 7% and 14% (depending on the metric), on revenue growth of 9%. This represents a record year for Adelaide Brighton in respect to all metrics including revenue, EBIT, PBT and NPAT, both on a reported and underlying profit basis. Table 2

2013 2013 2014 2014 Reported Underlying Reported Underlying Reported Underlying vs LY vs LY $m $m $m $m % %

Revenue

1,228.0 1,228.0 1,337.8 1,337.8

9%

9%

EBITDA

293.3 296.6 322.5 318.2 10%

7%

EBIT

222.7 226.0 247.5 245.2 11%

8%

PBT

208.6 211.9 232.5 230.2 11%

9%

NPAT

151.1 153.4 172.6 166.4 14%

8%

Adelaide Brighton has performed well against the S&P/ASX200 Accumulation Index delivering total shareholder return of 75.2% against the Comparator Group over the measurement period of the long term incentive tested in 2014 (Tranche 3 of the 2010 Award). As per the graph below this shareholder value has been delivered through a combination of share price growth and dividends. ABC SHAREHOLDER RETURNS - SHARE PRICE GROWTH AND TSR (JAN 2010 to DEC 2014) Index = 100 190 180 170 160 150 140

Source: ASX/First Advisers Pty Ltd

130 120 110 100 90

ABC SHARE PRICE GROWTH ABC TSR (SHARE PRICE GROWTH + DIVS REINVESTED)

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Dec 14

Jul 14

Oct 14

Apr 14

Jan 14

Oct 13

Jul 13

Apr 13

Jan 13

Oct 12

Jul 12

Apr 12

Jan 12

Oct 11

Jul 11

Apr 11

Jan 11

Oct 10

Jul 10

Apr 10

Jan 10

80

The table below provides an overall view of the Company’s financial performance and operating cash flow over the past six financial years to 31 December 2014. Table 3 - Shareholders’ wealth improvement from year 2009 to year 2014 Financial year ended 31 December Closing share price ($) as at 31 December Total dividends per share (cash)

2009*

2010*

2011*

2012

2013

2014

2.75

3.30

2.89

3.12

3.67

3.57

13.55 21.5 16.55 16.55 19.5 17.05 (2)

Franked dividends

(1)

100%5 100%5 100%5 100%5 100%5 100%5

Operating cash flow

$188.1m $188.5m $151.3m $186.9m $227.3m $194.0m

Earnings per share (cents)

20.45 23.95 23.35 24.05 23.75 26.95

(1) Includes 3.0 cent special dividend (2) Includes 5.0 cent special dividend *Comparative information for these years has not been restated to reflect changes to accounting policies. Refer Note 42 to the 2013 Financial Statements.

3.2 Linking remuneration to Company performance This section explains how the Group’s performance has driven Short Term Incentive and Long Term Incentive outcomes for our Executives during 2014. Strong Company performance across key indicators is reflected in the remuneration outcomes during the year. 3.2.1 Short Term Incentive - key performance outcomes Performance measure

Outcome

Financial

The annual short term incentive for the CEO and Chief Financial Officer (CFO) is split 80% Group financial target and 20% non-financial targets.



For executives other than the CEO and CFO the split is 60% Group financial target, 20% Divisional financial target and 20% non-financial targets.



The adjusted Group PBT for STI purposes was approximately 108% of budget, while divisional PBTs exceeded 110% of budget. This resulted in the financial target being met at 100.0%.

Non-financial

Non-financial targets (being the remaining 20% of the potential STI opportunity) for the Executives were met at between 73% and 83% during 2014.



Examples of personal non-financial target objectives achieved by the CEO and Executives during 2014 included:



> Development and execution of Adelaide Brighton’s strategic plan.



> Acquiring targeted concrete and aggregates businesses within value parameters. Successful integration of these businesses into ABL systems and delivery of synergies.



> Successful restructure of the Munster cement operations: incorporating workforce downsizing without disruption; obtaining relevant Government approvals; securing long term port access for imports.



> Successful completion of Malaysian joint venture kiln upgrade and transition of Western Australian operations to import of specialty off-white clinker from Malaysia.



> Successful commissioning of capacity expansion projects within budget.



> Renegotiation of long term business critical and strategic supply contracts on favourable terms.



> Securing strategic supply contracts with major customers on favourable terms.



A number of these objectives and projects contributed to the Group’s performance in 2014 and will reinforce future performance.

Overall STI outcomes

Overall, the achievement of the Financial and Non-financial Targets resulted in the STI opportunity being awarded at 86.9% to 89.8% of the potential STI.

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3.2.2 Short Term Incentive - actual outcomes The short term incentive payments shown in the table below reflect the performance achieved and amounts payable for Executives for the 2014 financial year. Table 4 For the financial year ended 31 December 2014

3.2.3 Long Term Incentive - key performance outcomes During 2014, Tranche 3 of the 2010 Awards was tested for earliest exercise in May 2014 and vested at 50%:

Maximum % of the % of the STI Maximum potential STI maximum STI maximum potential STI Actual STI opportunity opportunity opportunity opportunity payment as % of FAR achieved not achieved(1) $(1) $(2)

Executives M Brydon M Kelly G Agriogiannis S B Rogers

100 80 80 80

86.9 87.5 87.8 89.8

13.1 1,255,147 1,091,041 12.5 553,186 484,178 12.2 386,808 339,594 10.2 383,853 344,677

Former MD & CEO MP Chellew(3)

100 - 100 671,701 -

> The Total Shareholder Return component fully vested with the Company achieving a Total Shareholder Return of 75.2% being the 81st percentile of the Comparator Group. > The average EPS growth over the 2009 to 2013 financial period was 4.2% which was less than the minimum EPS target of 5.2% (2.5% + CPI). Therefore, the EPS component did not vest. This is despite continued growth in EPS over the performance period and notwithstanding challenging trading conditions that resulted in some competitors suffering declines in earnings.

(1) Where the actual STI payment is less than the maximum potential, the difference is forfeited and does not become payable in subsequent years.

The chart below illustrates Adelaide Brighton’s Total Shareholder Return over the measurement period for Tranche 3 of the 2010 Award. The Total Shareholder Return of 75.2% resulted from share price growth and payment of ordinary and special dividends totalling 70.0 cents fully franked over the period.

(2) The 2014 STI was determined in conjunction with the finalisation of 2014 results and paid in February 2015. (3) No short term incentive payment was made to Mr Chellew for the 2014 year.

ABC SHAREHOLDER RETURNS - SHARE PRICE GROWTH AND TSR (JAN 2010 to DEC 2013) Index = 100 180

170

160

150 Dividends = 34.4%

140

ABC

130

TSR Share price

120

growth = 40.8%

110

100

90

Dec 13

Oct 13

Jul 13

Apr 13

Jan 13

Oct 12

Jul 12

Apr 12

Jan 12

Oct 11

Jul 11

Apr 11

Jan 11

Oct 10

Jul 10

Apr 10

Jan 10

80

ABC SHARE PRICE GROWTH ABC TSR (SHARE PRICE GROWTH + DIVIDENDS REINVESTED) Source: ASX/First Advisers Pty Ltd

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= 75.2%

3.2.4 Long Term Incentive - actual outcomes Details of the movement in Awards held by Executives during the 2014 financial year are set out below. Table 5

For the financial year ended 31 Dec 2014

Number held at 1 Jan 2014

Number granted during the year(1)

Number exercised/ vested during the year

Number lapsed/ forfeited during the year(3)

Number held at 31 Dec 2014

Value of Awards at grant date(4) $

Value per share at the date of exercise(5) $

Value at lapse date(6) $

1,032,040 763,897 427,628 425,355

354,223 131,890 65,873 65,370

120,000(2) 100,000(2) 65,000(2) 65,000(2)

120,000 100,000 65,000 65,000

1,146,263 695,787 363,501 360,725

665,941 247,953 123,843 125,184

3.55 3.89 3.89 3.34

3.90 3.90 3.90 3.90

2,847,568

-

1,498,466(7)

1,349,102

N/A

-

3.80

3.80

Executives M Brydon M Kelly G Agriogiannis SB Rogers Former MD & CEO MP Chellew

(1) This represents the maximum number of Awards granted in 2014 that may vest to each Executive. As the Awards granted in 2014 only vest on satisfaction of performance conditions which are to be tested in future financial periods, none of the Awards as set out above vested or were forfeited during the year. At the end of the applicable performance period, any Awards that have not vested will expire. (2) These Awards which were exercisable during 2014 were in fact exercised, being Tranche 3 of the 2010 Awards. The number of Awards that vested during the period and exercisable at 31 December 2014 is nil. The number of Awards that vested but not yet exercisable at 31 December 2014 is nil. (3) This includes the portion of Tranche 3 of the 2010 Awards that reached the end of its performance period on 31 December 2013 that did not meet the performance conditions and was forfeited. (4) Fair value of Awards granted during 2014 as at grant date. (5) The value per share at the date of exercise is the Volume Weighted Closing Price which is the average of the closing price and number of Adelaide Brighton Limited shares traded on the Australian Securities Exchange for the five trading days before the exercise date, but not including the day of exercise. The aggregate value of Awards that vested during the year is $6,968,355 based on the Volume Weighted Closing Price. (6) The value at lapse date of Awards that were granted as part of remuneration and that lapse during the year because a vesting condition was not satisfied. The value is determined at the time of lapsing, but assuming the condition was satisfied. (7) All Awards that remained outstanding under the Plan as at Mr Chellew’s retirement date of 21 May 2014 vested on a pro-rated basis. This included 728,324 Awards comprising Tranche 1 of the 2012 grant, 728,324 Awards comprising Tranche 2 of the 2012 grant and 670,920 Awards comprising the 2013 grant. The total number of Awards that vested during the year and which were exercisable by Mr Chellew also included Tranche 3 of the 2010 grant.

Section 4 - Remuneration governance 4.1 Responsibility for setting remuneration Our governance framework for determining executive remuneration is outlined below: BOARD

CONSULTATION WITH SHAREHOLDERS AND OTHER STAKEHOLDERS

The Board approves: > The overall remuneration policy > Non-executive Director remuneration and senior executive remuneration; and > The remuneration of the CEO, including his participation in the short term and long term incentive schemes

NOMINATION, REMUNERATION AND GOVERNANCE (NRG) COMMITTEE The NRG Committee is delegated responsibility by the Board to review and make recommendations on: > The remuneration policies and framework for the Group > Non-executive Director remuneration > Remuneration for senior executives and > Executive incentive arrangements

MANAGEMENT Provides information relevant to remuneration decisions and makes recommendations to the NRG Committee Obtains remuneration information from external advisors to assist the NRG Committee (i.e. factual information, legal advice, accounting advice, tax advice)

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REMUNERATION CONSULTANTS AND OTHER EXTERNAL ADVISORS > Provide independent advice, information and recommendations relevant to remuneration decisions > In performing its duties and making recommendations to the Board, the Chairman of the NRG Committee seeks independent advice from external advisers on various remuneration related matters > Any advice or recommendations provided by external advisers are used to assist the Board - they do not substitute for the Board and NRG Committee process

Details on the composition of the NRG Committee are set out on page 31 of this Annual Report. The NRG Committee’s Charter is available on the Corporate Governance section of the Company’s website at www.adbri.com.au.

motivate and retain a highly capable executive team and each individual’s remuneration is set with reference to the degree of individual performance, role, responsibility and future potential within the Group and in the context of the broader community sentiment regarding executive pay.

individual, his or her future potential within the Group and market practice. The Company’s stated approach is also to set fixed remuneration levels at relatively modest levels compared to peers for executives who are new to their roles and to then progressively increase remuneration based on individual performance in that role.

From time to time during the financial year ended 31 December 2014, the Company > Drive leadership performance and behaviours engaged external consultants to provide that reinforce the Group’s short and long term Fixed remuneration is reviewed annually insights on remuneration trends, regulatory strategic and operational objectives having regard to relevant factors including and governance updates and market data in performance, market conditions (both > Provide a common interest between relation to the remuneration of non-executive generally and in the markets in which the executives and shareholders by linking the Directors, the CEO and other executives. No Group operates), growth and comparable rewards that accrue to executives to the remuneration recommendations as defined in roles within peer companies and similar roles creation of long term value for shareholders section 9B of the Corporations Act 2001 were across a Comparator Group comprising those obtained during the financial year ended > Have regard to market practice and market companies in the ASX 51-150. Section 1.4 31 December 2014. conditions; and details the changes for Executives arising from the review of fixed remuneration by the 4.2 Remuneration policy > Provide transparency and clarity on what Board and NRG Committee for the 2014 is paid, to whom and on what basis The Company’s remuneration strategy and financial year. remuneration has been paid. policy are set by the Board and overseen 5.2 At-risk remuneration - Short Term Incentive by the NRG Committee. The Board ensures Section 5 - Executive remuneration remuneration policies are clearly aligned Adelaide Brighton’s STI is the Company’s with the Group strategy, which is focused 5.1 Fixed annual remuneration at risk short term incentive component of on maintaining and growing long term the remuneration mix for senior executives, The amount of fixed remuneration for an shareholder value. including Executives. individual executive (expressed as a total In determining executive remuneration, the amount of salary and other benefits, including A summary of the key features of the 2014 Board has adopted a policy that aims to: superannuation contributions) is set with STI is as follows: regard to the size and nature of an executive’s > Be competitive in the markets in which the role, the long term performance of an Group operates in order to attract, reward, Form and purpose of the STI Who participates in the STI?

Participation in the STI is generally offered to the CEO and senior executives who are able to have a direct impact on the Group’s performance against the relevant performance hurdles.

Why does the Board consider the STI an appropriate incentive?

The STI is designed to put a meaningful proportion of senior executives’ remuneration at risk, to be delivered on the achievement of performance targets linked to the Group’s annual business objectives, ensuring senior executives create sustainable value for shareholders.

Does the STI comprise a deferred component?

The Board has determined that it would be appropriate to introduce a deferred component to the STI for the 2016 STI (see section 1.6).



The NRG Committee has considered this in the context of Adelaide Brighton’s current remuneration framework, including the long term incentive which is subject to a four year performance period. On the basis that, at any time, senior executives have at least four years’ worth of LTI opportunity subject to share price fluctuations, the Committee considers that senior executives’ interests are sufficiently aligned to those of our shareholders.

Performance conditions When and how are the STI performance conditions set?

The performance criteria are set by the Board and agreed with the executive, in general, by the end of February in each year.



In approving Financial Targets under the STI, the Board considers a number of factors, including the industry in which we operate and the extraneous factors including market conditions that impact our financial performance and those of our competitors. These include the dynamics of the construction and resources industries, exchange rates and energy considerations.



Our management team has responded well to external pressures over recent years, and has generated positive return for longer term shareholders in a challenging environment with the Company outperforming our industry competitors. Accordingly, the Board strongly believes that our STI targets need to be set in this context in order to continue to attract and motivate a highly capable senior executive team who can drive the continued delivery of strong results for shareholders over the longer term.

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Reward opportunity What level of reward can be earned under the STI?

The maximum STI opportunities able to be earned are expressed as a percentage of fixed remuneration:



Potential - % of fixed remuneration



Financial

Non-financial

Total

Other Other Other % of PBT achieved CEO Executives CEO Executives CEO Executives

Below 95%

0% 0% 20% 16% 20% 16%



95% - 100%

40% - 48% 32% - 38%

20%

16%

60% - 68% 48% - 54%



100% - 105%

48% - 60% 38% - 48%

20%

16%

68% - 80% 54% - 64%



105% - 110 %

60% - 80% 48% - 64%

20%

16%

80% - 100% 64% - 80%

Governance How is performance against the performance conditions assessed?

All performance conditions under the STI are clearly defined and measurable. In respect of the Financial Targets, the Board compares the actual PBT earned against the budgeted PBT for the year, and assesses the degree to which the Group met these targets. The Board may adjust for exceptional, abnormal or extraordinary factors which may have affected the Group’s performance during the year.



In assessing the 2014 STI, the Board adjusted the PBT used for STI purposes to a level that was lower than both reported and underlying PBT. The Board considered items individually taking account of a range of matters, including budget assumptions and management initiatives.



The Board also considers the NRG Committee’s assessment of the CEO’s performance against the agreed non-financial targets, and that of the senior executives (based on the recommendation of the CEO).

When is performance against the performance conditions determined and the cash award paid?

Assessment of performance against the performance hurdles for the relevant year is determined at the February meeting of the NRG Committee and the Board, in conjunction with finalisation of the Group’s full year results, and is normally paid to the executive following release of the Company’s full year results in February.

5.3 At-risk remuneration - Long Term Incentive The Company makes annual grants of Awards under the Executive Performance Share Plan (Plan) to all senior executives who are eligible to participate. A summary of the key features of the Plan as it applies to the 2014 LTI Award is as follows: Driving performance Who participates and how does the Plan drive performance and align participants’ interests with shareholders?

The LTI is offered to senior executives whose behaviour and performance have a direct impact on the Group’s long term performance. Its purpose is to focus executives on the Group’s long term business strategy to create and protect shareholder value over a four year performance period, thus aligning executives’ interests more closely with shareholders.

Vesting, performance conditions and reward opportunity What is the vesting / performance period?

The 2014 Awards will be tested and become exercisable to the extent of any vesting from 1 May 2018.

What happens on the exercise of Awards?

Shares are delivered to the executive on the exercise of the Awards. Awards are granted at no cost to the executive and no amount is payable by the executive on the exercise of the Awards.



Any unexercised 2014 Awards will expire on 30 September 2018.

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How is the TSR performance condition measured and what amount can be earned?

The Company’s TSR performance must equal or exceed the growth in the returns of the median companies of the S&P / ASX 200 Accumulation Index (XJO Al), excluding all GICS Financial companies and selected resources companies over the period from 31 December 2013 to 31 December 2017.



The 2014 Awards vest progressively in accordance with the following scale:



TSR growth relative percentile ranking



Below 50% Nil 50% 50% Between 50% and 75% Pro rata 75% or above 100%

How is the EPS performance condition calculated and what amount can be earned?

The EPS performance hurdle requires the compound annual growth in EPS of the Company over the relevant performance period to equal or exceed 5% per annum before any Awards will vest.



Awards under the 2014 Award are to vest progressively in accordance with the following scale:



Compound annual growth in EPS

% of Awards subject to EPS hurdle to vest



Below 5% per annum 5% per annum Between 5% and 10% per annum 10% per annum or above

Nil 50% Pro rata 100%

Is re-testing permitted?

No. Re-testing of either of the performance conditions applicable to a tranche of Awards is not permitted.

% of Awards subject to TSR hurdle to vest

Structure of Awards What are the participation levels in the 2014 The Executives participated in the 2014 Awards at the following levels: Awards for Executives? Target Maximum (% of fixed remuneration) (% of fixed remuneration)

M Brydon M Kelly G Agriogiannis and SB Rogers

50% 35% 25%

100% 70% 50%



Participation levels were reviewed during 2013 and have been reduced for all senior executives for the 2014 Award.

Governance Is there ability to ‘claw back’ in appropriate circumstances?

Yes. The rules of the Plan have, for some time, provided the Board with a broad ability to claw back Awards on offer to an executive and to make adjustments to any unvested Awards, if considered appropriate.



The Board continues to review these arrangements in light of contemporary practice and is considering the need for an additional formal Clawback Policy (in addition to the provisions of the Plan Rules).

What other conditions apply to the Awards?

An executive’s entitlement to shares under an Award may also be adjusted to take account of capital reconstructions and bonus issues.



The rules of the Plan contain a restriction on removing the ‘at-risk’ aspect of the instruments granted to executives. Plan participants may not enter into any transaction designed to remove the ‘at-risk’ aspect of an instrument before it becomes exercisable (eg. hedging the Awards).



Until the Awards vest, executives have no legal or beneficial interest in Adelaide Brighton Ltd shares, no entitlement to receive dividends and no voting rights in relation to any securities granted under the 2014 Award, or any of the other Awards.



Any shares allocated to the executive following exercise of an Award may only be dealt with in accordance with the Company’s Share Trading Policy and subject to the generally applicable insider trading prohibitions.

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Cessation of employment or a change of control What happens to Awards that are not yet exercisable on cessation of employment?

If an Executive resigns or is terminated for cause, the Awards in respect of any tranche that is not exercisable will generally be forfeited.



The rules of the Plan provide that in other circumstances, and at the discretion of the Board, a pro rata number of Awards, reflecting the part of the LTI earned or accrued up to termination, may become exercisable either at the time of termination of employment or at the end of the original performance period applicable to a tranche.

How would a change of control of the Group impact on LTI entitlements?

In the event of a takeover bid (or other transaction likely to result in a change in control of the Company), an executive will only be allowed to exercise his or her Awards to the extent determined by the Board as provided under the rules of the Plan.

Section 6 - Executive Service Agreements The remuneration and other terms of employment for Executives are set out in formal employment contracts referred to as Service Agreements. All Service Agreements are for an unlimited duration and details of Executives’ entitlements on termination are set out below. All Service Agreements may be terminated immediately for serious misconduct, in which case Executives are not entitled to any payment on termination other than remuneration and leave entitlements up to the date of termination. As discussed in section 1.5 above, all Executives have now been transitioned to the new general form of Service Agreement embodying best current practice. Table 6 Name

Notice periods

Separation payments(1)

M Brydon

6 months’ notice by either party (or payment in lieu)

6 months fixed annual remuneration where the Company terminates on notice.

M Kelly

3 months’ notice by either party (or payment in lieu)

12 months fixed annual remuneration where the Company terminates on notice.(2)

G Agriogiannis

3 months’ notice by either party (or payment in lieu)

9 months fixed annual remuneration where the Company terminates on notice.

SB Rogers

6 months’ notice by either party (or payment in lieu)

6 months fixed annual remuneration where the Company terminates on notice.

(1) In the case of resignation, no separate payment is made to the Executive (only amounts due and payable up to the date of ceasing employment including accrued leave entitlements and unpaid salary). (2) No separation payment will exceed the limit under the Corporations Act 2001.

On termination of employment for any reason, the CEO and other Executives are prohibited from engaging in any activity that would compete with the Group for a period of six months in order to protect the Group’s business interests. In the event of resignation, at the option of the Company, Mr Brydon, Mr Kelly and Mr Rogers may be paid a monthly amount equivalent to the Executive’s monthly fixed remuneration at the time of termination during the period of restraint to support the enforceability of the restraint. Section 7 - Non-executive Directors’ fees 7.1 Policy and approach to setting fees Overview of policy

Non-executive Directors receive a base fee in relation to their service as a Director of the Board, and an additional fee for membership of, or for chairing a committee.



The Chairman, taking into account the greater time commitment required, receives a higher fee but does not receive any additional payment for service on the respective committees.



The total amount of fees paid to non-executive Directors is determined by the Board on the recommendation of its NRG Committee within the maximum aggregate amount approved by shareholders. The remuneration of the non-executive Directors consists of Directors’ fees, committee fees and superannuation contributions. These fees are not linked to the performance of the Group in order to maintain the independence and impartiality of the non-executive Directors.



In setting fee levels, the NRG Committee takes into account:



> Independent professional advice;



> Fees paid by comparable companies;



> The general time commitment and responsibilities involved; and



> The level of remuneration necessary to attract and retain Directors of a suitable calibre.

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Aggregate fees approved by shareholders

Total fees, including committee fees, were set within the maximum aggregate amount of $1,300,000 per annum approved at the 2013 Annual General Meeting.

Base fees for 2014

As set out in the 2013 Remuneration Report, following a review of the fees paid to non-executive Directors, the Chairman’s annual fee (at his request) has been reduced by 12.5% in the 2014 year (previously $354,756). The base fee for non-executive Directors remains at the same level as for 2013.



Base fees (Board)



Non-executive Chairman 310,500 Non-executive Director 103,500



Committee fees



Audit, Risk and Compliance Committee Nomination, Remuneration and Governance Committee Safety, Health and Environment Committee



(1) The Chairman of the Board receives no additional fee for Committee work.



In accordance with the Company’s constitution, Directors are also permitted to be paid additional fees for special duties or exertions. Such fees may or may not be included in the aggregate amount approved by shareholders, as determined by the Directors. No such fees were paid during the year.



Directors are also entitled to be reimbursed for all business related expenses, including travel, as may be incurred in the discharge of their duties.

$

$

(1)

Section 8 - Key Management Personnel disclosure tables 8.1 Non-executive Directors’ statutory remuneration Details of non-executive Directors’ remuneration are set out in the following table: Table 7 Post-employment Fees and allowances benefits Directors’ Committee fees Non-executive base fees (incl. (incl. Superannuation Director Year superannuation) superannuation) Total contributions(1)

$

$

$

$

LV Hosking(2) (Chairman) RD Barro GF Pettigrew KB Scott-Mackenzie AM Tansey(3)

2014 2013 2014 2013 2014 2013 2014 2013 2014 2013

310,500 354,746 103,500 103,500 103,500 103,500 103,500 103,500 103,500 103,500

- 310,500 - 354,746 10,350 113,850 10,350 113,850 49,163 152,663 49,163 152,663 29,498 132,998 29,498 132,998 38,813 142,313 45,506 149,006

23,449 23,449 9,758 9,520 13,878 13,878 11,400 11,121 12,198 12,463

Total non-executive Directors’ remuneration

2014 2013

724,500 768,746

127,824 852,324 134,517 903,263

70,683 70,431

(1) Superannuation contributions are made on behalf of non-executive Directors which satisfy the Group’s obligations under applicable Superannuation Guarantee Charge legislation. (2) Following a review of the fees paid to non-executive Directors, the Chairman’s annual fee (at his request) was reduced by 12.5% in 2014. (3) Ms Tansey’s fees have reduced for 2014 as the Corporate Governance Committee (of which she was Chairman) has been dissolved.

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Committee chair

Committee member

24,840 24,840 15,525

13,973 13,973 10,350

8.2 Executive statutory remuneration Table 8 Share based payment Short term employee benefits Post employment benefits expense(3) % of Super- remuneration STI Other annuation Termination Long term consisting FAR payment(1) benefits benefits(2) benefits incentive Total of Awards(4)





Executives

Year $ $ $ $ $ $ $ %

M Brydon

2014 1,243,194 1,091,041 166,667(5) 27,823 2013 935,078 752,619 - 17,122

- 270,053 2,798,778 - 217,527 1,922,346

10 11

M Kelly

2014 663,566 484,178 2013 652,925 532,036

- 27,917 - 25,000

- 179,279 1,354,940 - 170,157 1,380,118

13 12

G Agriogiannis

2014 463,510 339,594 2013 454,030 371,640

- 20,000 - 20,000

- 99,828 922,932 - 155,049 1,000,719

11 15

SB Rogers

2014 454,816 344,677 100,000(6) 25,000 2013 445,408 368,800 - 25,000

- 94,276 1,018,769 - 102,107 941,315

9 11

Former MD & CEO MP Chellew

2014 665,560 - 869,000(7) 2013 1,713,800 1,697,069 -

6,250 291,877 1,126,198 2,958,885 25,000 - 752,820 4,188,689

38 18

Total executive 2014 3,490,646 2,259,490 1,135,667 106,990 291,877 1,769,634 9,054,304 remuneration 2013 4,201,241 3,722,164 - 112,122 - 1,397,660 9,433,187 (1) STI payment includes payments relating to 2014 performance accrued but not paid as at 31 December 2014. (2) Includes Company contributions to superannuation and allocations by employees made by way of salary sacrifice of fixed remuneration. (3) In accordance with the requirements of the Accounting Standards, remuneration includes a proportion of the notional value of equity compensation granted or outstanding during the year. The notional value of equity instruments is determined as at the grant date and is progressively allocated over the vesting period. The amount included as remuneration is not related to or indicative of the benefit (if any) that the individual Executives may ultimately realise should the equity instruments vest. The notional value of Awards as at the date of their grant has been determined in accordance with the accounting policy Note 1(v)(iv). (4) % of remuneration for the financial year which consists of the amortised annual value of Awards issued under the Adelaide Brighton Limited Executive Performance Share Plan. (5) Living Away from Home Allowance payment made pursuant to Mr Brydon’s Service Agreement to assist him in discharging his duties from the Company’s Sydney office. (6) Payment made to Mr Rogers to cash out certain entitlements as part of Mr Roger’s transition to a new fully compliant Service Agreement. (7) Payment made pursuant to Mr Chellew’s Service Agreement to support enforceability of the restraint of trade for the period 22 May 2014 to 22 November 2014.

8.3 Equity holdings of Key Management Personnel A summary of Executives’ and non-executive Directors’ current shareholdings in the Company as at 31 December 2014 is set out below. While the Board has considered minimum shareholding guidelines for non-executive Directors, it has determined that it does not currently consider it to be appropriate to require a particular holding, given that this is a matter for individual preference. On the basis that Executives have four years’ worth of LTI opportunity (as set out in section 5.3 of this Remuneration Report), the Board has decided not to introduce minimum shareholding guidelines for Executives. The Board considers that Executives’ interests are sufficiently aligned (through the LTI as the LTI is subject to share price fluctuation) to those of our shareholders.

Table 9 Balance at beginning of year(1)

Granted as remuneration during the year

Net movement due to other changes

Balance at end of year

Executives M Brydon M Kelly G Agriogiannis SB Rogers

8,400 - - -

120,000 100,000 65,000 65,000

(120,000 ) (100,000 ) (65,000 ) (65,000 )

8,400 -

Former MD & CEO MP Chellew(2)

448,366

1,498,466

(1,946,832 )

Non-executive Directors LV Hosking 4,739 - 112 4,851 RD Barro(3) 209,875,800 - 7,994,076 217,869,876 GF Pettigrew 7,739 - - 7,739 KB Scott-Mackenzie 5,000 - - 5,000 AM Tansey 10,000 - - 10,000 (1) The balances reported in this Table 9 include shares held directly, indirectly or beneficially by each KMP or close members of their family or an entity over which the person or the family member has either direct or indirect control, joint control or significant influence as at 31 December 2014. (2) MP Chellew retired 21 May 2014, therefore his equity holding has been reduced to nil at 31 December 2014 through “Net movement due to other changes”. (3) The balances relating to Raymond Barro include shares owned by entities over which Raymond Barro has a significant influence, or which he jointly controls, but he does not control these entities himself.

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Income statement

For the year ended 31 December 2014 ($ Million)

Consolidated Notes

2014

Revenue from continuing operations 3 1,337.8 Cost of sales (823.5 ) Freight and distribution costs (217.0 )

2013 1,228.0 (745.6 ) (196.1 )

Gross profit 297.3 286.3 Other income 3 26.1 4.7 Marketing costs (20.2 ) (21.3 ) Administration costs (75.6 ) (69.4 ) Finance costs 4 (16.8 ) (15.9 ) Share of net profits of joint ventures and associate accounted for using the equity method 10(a) 21.7 24.2 Profit before income tax 232.5 208.6 Income tax expense 5(a) (59.9 ) (57.5 ) Profit for the year

172.6 151.1

Profit attributable to: Owners of the Company Non-controlling interests

172.7 151.1 (0.1 ) -

172.6

151.1

Cents Cents Earnings per share for profit from continuing operations attributable to the ordinary equity holders of the Company: Basic earnings per share 34 26.9 23.7 Diluted earnings per share 34 26.8 23.4

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Statement of comprehensive income

For the year ended 31 December 2014

Consolidated Notes

2014

2013

Profit for the year Other comprehensive income Items that may be reclassified to profit or loss Exchange differences on translation of foreign operations Income tax relating to these items 5(c)

172.6

151.1

($ Million)

Items that will not be reclassified to profit or loss Actuarial (losses)/gains on retirement benefit obligation Income tax relating to these items

0.5 1.0 - -

20(b) 5(c)

(1.2 ) 7.6 0.4 (2.3 )

Other comprehensive income for the year, net of tax

(0.3 ) 6.3

Total comprehensive income for the year

172.3

Total comprehensive income for the year attributable to: Owners of the Company Non-controlling interests

172.4 157.4 (0.1 ) -

Total comprehensive income for the year

172.3

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157.4

157.4

Balance sheet

As at 31 December 2014 ($ Million)

Consolidated Notes

2014

2013

Current assets Cash and cash equivalents 6 T rade and other receivables 7 I nventories 8 Carbon units 14(b)

31.7 11.1 199.3 182.4 154.7 136.3 - 52.5

Assets classified as held for sale 9

385.7 382.3 1.5 7.9

Total current assets

387.2 390.2

on-current assets N Receivables 7 Joint arrangements and associate 10 Property, plant and equipment 11 Intangible assets 13

32.7 31.4 139.9 138.5 989.6 889.7 263.9 183.9

Total non-current assets

1,426.1 1,243.5

Total assets

1,813.3 1,633.7

Current liabilities Trade and other payables 15 Borrowings 16 Current tax liabilities Provisions 17 Provision for carbon emissions 14(b) Other liabilities 18

120.4 105.4 1.4 1.3 19.0 24.7 26.7 14.0 39.7 4.2 20.4

Total current liabilities

166.0

Non-current liabilities Borrowings 16 Deferred tax liabilities 19 Provisions 17 Retirement benefit obligations 20(b) P rovision for carbon emissions 14(b) Other non-current liabilities

390.1 259.1 76.8 64.3 41.4 28.5 2.2 0.5 - 8.2 0.1 0.1

Total non-current liabilities

510.6 360.7

Total liabilities

676.6 571.9

Net assets

211.2

1,136.7 1,061.8

Equity Contributed equity 21 727.9 699.1 Reserves 22(a) 3.3 4.3 Retained earnings 22(b) 402.8 355.6 Capital and reserves attributable to owners of the Company Non-controlling interests

1,134.0 1,059.0 2.7 2.8

Total equity

1,136.7

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1,061.8

Statement of changes in equity

For the year ended 31 December 2014

Attributable to owners of Adelaide Brighton Ltd

Consolidated Contributed Retained Non-controlling Total ($ Million) Notes equity Reserves earnings Total interests equity Balance at 1 January 2014 Profit for the year Other comprehensive income

699.1 - -

4.3 - 0.5

355.6 172.7 (0.8 )

1,059.0 172.7 (0.3 )

2.8 (0.1 ) -

1,061.8 172.6 (0.3 )

Total comprehensive income for the year

-

0.5

171.9

172.4

(0.1 )

172.3

Transactions with owners in their capacity as owners: Dividend reinvestment plan share issues 24.6 - - 24.6 - 24.6 Dividends provided for or paid 23 - - (124.7 ) (124.7 ) - (124.7 ) Executive performance share plan 21(b)/22(a) 4.2 (1.5 ) - 2.7 - 2.7

28.8

(1.5 )

(124.7 )

(97.4 )

-

Balance at 31 December 2014

727.9

3.3

402.8

1,134.0

2.7

(97.4 ) 1,136.7

Balance at 1 January 2013 696.6 2.1 304.4 1,003.1 2.8 1,005.9 Profit for the year - - 151.1 151.1 - 151.1 Other comprehensive income - 1.0 5.3 6.3 - 6.3 Total comprehensive income for the year

-

1.0 156.4 157.4

- 157.4

Transactions with owners in their capacity as owners: Dividends provided for or paid 23 - - (105.2 ) (105.2 ) - (105.2 ) Executive performance share plan 21(b)/22(a) 2.5 1.2 - 3.7 - 3.7

2.5 1.2 (105.2 ) (101.5 ) - (101.5 ) Balance at 31 December 2013 699.1

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4.3 355.6 1,059.0

2.8 1,061.8

Statement of cash flows

For the year ended 31 December 2014 ($ Million)

Consolidated Notes

Cash flows from operating activities Receipts from customers (inclusive of goods and services tax) Payments to suppliers and employees (inclusive of goods and services tax) Joint venture distributions received Interest received Interest paid Receipts from sale of carbon units Other income I ncome taxes paid Income taxes refunded Net cash inflow from operating activities

33

2014

2013

1,460.1 1,334.0 (1,227.1 ) (1,084.6 ) 21.0 16.4 1.8 1.8 (16.0 ) (16.0 ) 20.0 20.0 7.1 5.0 (72.9 ) (49.7 ) - 0.4 194.0

227.3

ash flows from investing activities C Payments for property, plant, equipment and intangibles (60.4 ) (66.9 ) Payments for acquisition of businesses, net of cash acquired (155.6 ) (0.6 ) Payments for acquisition of interest in associate - (0.4 ) Proceeds from sale of property, plant and equipment 13.6 6.5 L oans to joint venture entities (1.9 ) (1.9 ) Repayment of loans from other parties 0.6 0.1 Net cash (outflow) from investing activities (203.7 ) ash flows from financing activities C Proceeds from issue of shares Proceeds from borrowings Repayment of borrowings Dividends paid to Company’s shareholders 23

(63.2 )

8.1 3.7 122.2 - (60.2 ) (100.1 ) (105.2 )

Net cash inflow/(outflow) from financing activities 30.2

(161.7 )

et increase in cash and cash equivalents N Cash and cash equivalents at the beginning of the financial year Effects of exchange rate changes on cash and cash equivalents

20.5 2.4 11.1 8.8 0.1 (0.1 )

Cash and cash equivalents at the end of the year

31.7 11.1

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6

Notes to the consolidated financial statements

1 Summary of significant accounting policies Adelaide Brighton Ltd (the Company) is a company limited by shares, incorporated and domiciled in Australia whose shares are publicly traded on the Australian Securities Exchange (ASX). The financial report was authorised for issue by the Directors on 12 March 2015. The Directors have the power to amend and reissue the financial statements. The principal accounting policies adopted in the preparation of these consolidated financial statements are set out below. These policies have been consistently applied to all the years presented. The financial statements are for the consolidated entity consisting of Adelaide Brighton Ltd and its subsidiaries. (a) Basis of preparation These general purpose financial statements have been prepared in accordance with Australian Accounting Standards and Interpretations issued by the Australian Accounting Standards Board and the Corporations Act 2001. The Company is a for-profit entity for the purpose of preparing the financial statements. Comparative information has been re-stated where appropriate to enhance comparability. Historical cost convention These financial statements have been prepared under the historical cost convention, except for the circumstances when fair value method has been applied as detailed in the accounting policies below. Compliance with IFRS The consolidated financial statements of Adelaide Brighton Limited also comply with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB). (b) Principles of consolidation (i) Subsidiaries The consolidated financial statements incorporate the assets and liabilities of all subsidiaries controlled by Adelaide Brighton Ltd as at 31 December 2014 and the results of all subsidiaries for the year then ended. The

Company and its subsidiaries together are referred to in this financial report as “the Group”.

(iv) Joint arrangements Investments in joint arrangements are classified as either joint operations or joint ventures depending on the contractual rights Subsidiaries are all those entities over which and obligations of the Group to the joint the Group has control. The Group controls an arrangement. entity when the Group is exposed to, or has rights to, variable returns from its involvement Joint operations with the entity and has the ability to affect Interests in joint operations are accounted for those returns through its power to direct the using the proportionate consolidation method. activities of the entity. Under this method, the Group has recognised its share of assets, liabilities, revenues and Subsidiaries are fully consolidated from the expenses. Details of the joint operations are date on which control is transferred to the set out in Note 10. Group. They are deconsolidated from the date that control ceases. The acquisition method Joint ventures of accounting is used to account for business Interests in joint ventures are accounted for combinations by the Group (refer to using the equity method. Under this method, Note 1(h)). the interests are initially recognised in the consolidated balance sheet at cost and Intercompany transactions, balances adjusted thereafter to recognise the Group’s and unrealised gains on transactions share of the post-acquisition profits or losses between Group companies are eliminated. and movements in other comprehensive Unrealised losses are also eliminated income in the income statement and other unless the transaction provides evidence comprehensive income respectively. of the impairment of the asset transferred. Accounting policies of subsidiaries have When the Group’s share of losses in a joint been changed where necessary to ensure venture equals or exceeds its interests in the consistency with the policies adopted joint venture (which includes any long term by the Group. interests that, in substance, form part of the Group’s net investment in the joint venture), (ii) Employee Share Trust the Group does not recognise further losses The Group has formed a trust to administer unless it has incurred obligations or made the Group’s employee share scheme. payments on behalf of the joint venture. The company that acts as the Trustee is consolidated as the company is controlled by Unrealised gains on transactions between the the Group. The Adelaide Brighton employee Group and its joint ventures are eliminated share plan trust is not consolidated as it is not to the extent of the Group’s interest in the controlled by the Group. joint ventures. Unrealised losses are also eliminated unless the transaction provides (iii) Associate entity evidence of an impairment of the asset The interest in associate is accounted transferred. Accounting policies of the for using the equity method, after initially joint ventures have been changed where being recorded at cost. Under the equity necessary to ensure consistency with the method, the share of the profits or losses of policies adopted by the Group. the associate is recognised in the income statement, and the share of post-acquisition (v) Non-controlling interests movements in reserves is recognised in other Non-controlling interests in the results and comprehensive income. Profits or losses on equity of subsidiaries are shown separately transactions establishing the associate and in the consolidated income statement and transactions with the associate are eliminated balance sheet respectively. The Group treats to the extent of the Group’s ownership transactions with non-controlling interests interest until such time as they are realised by that do not result in a loss of control as the associate on consumption or sale, unless transactions with equity owners of the they relate to an unrealised loss that provides Group. For purchases from or sales to nonevidence of the impairment of an asset controlling interests, the difference between transferred. any consideration paid and the relevant share acquired of the carrying value of net assets of the subsidiary is deducted from equity.

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1 Summary of significant accounting policies (continued)

On consolidation, exchange differences arising from the translation of any net investment in foreign entities, and of borrowings and other financial instruments designated as hedges of such investments, are recognised in other comprehensive income.

(f) Income tax

The income tax expense or revenue for the period is the tax payable on the (c) Segment reporting current period’s taxable income based on the applicable income tax rate for each Operating segments are reported in a jurisdiction adjusted by changes in deferred manner consistent with the internal reporting tax assets and liabilities attributable to provided to the chief operating decision temporary differences between the tax bases maker. The chief operating decision maker, When a foreign operation is sold or any of assets and liabilities and their carrying who is responsible for allocating resources borrowings forming part of the net investment amounts in the financial statements, and to and assessing performance of the operating are repaid, a proportionate share of such unused tax losses. segments, has been identified as the Chief exchange differences is reclassified to profit Executive Officer. or loss, as part of the gain or loss on sale Deferred tax assets and liabilities are where applicable. recognised for temporary differences at the (d) Foreign currency translation tax rates expected to apply when the assets (e) Revenue recognition are recovered or liabilities are settled, based (i) Functional and presentation currency on those tax rates which are enacted or Items included in the financial statements of Revenue is measured at the fair value of substantively enacted for each jurisdiction. each of the Group’s entities are measured consideration received or receivable. Amounts The relevant tax rates are applied to the using the currency of the primary economic disclosed as revenue are net of returns, cumulative amounts of deductible and environment in which the entity operates trade allowances and duties and taxes paid. taxable temporary differences to measure the (‘the functional currency’). The consolidated Revenue is recognised for the major business deferred tax asset or liability. An exception financial statements are presented in activities as follows: is made for certain temporary differences Australian dollars, which is Adelaide Brighton (i) Sales revenue arising from the initial recognition of an asset Ltd’s functional and presentation currency. Revenue from the sale of goods is measured or a liability. No deferred tax asset or liability (ii) Transactions and balances at the fair value of the consideration received is recognised in relation to these temporary Foreign currency transactions are translated or receivable, net of returns, trade discounts differences if they arose in a transaction, other into the functional currency using the and volume rebates. Revenue is recognised than a business combination, that at the exchange rates prevailing at the dates of the when the significant risks and rewards of time of the transaction did not affect either transactions. Foreign exchange gains and ownership have been transferred to the buyer, accounting or taxable profit or loss. losses resulting from the settlement of such recovery of the consideration is considered Deferred tax assets are recognised for transactions and from the translation at year probable, the associated costs and deductible temporary differences and end exchange rates of monetary assets and possible return of goods can be estimated unused tax losses only if it is probable that liabilities denominated in foreign currencies reliably, there is no continuing management future taxable amounts will be available are recognised in the income statement. involvement with the goods and the amount to utilise those temporary differences and of revenue can be measured reliably. Sales (iii) Foreign operations losses. Deferred tax liabilities and assets are of services are recognised in the accounting The results and financial position of all the not recognised for temporary differences period in which the services are rendered. foreign operations that have a functional between the carrying amount and tax bases currency different from the presentation (ii) Deferred income of investments in controlled entities where currency are translated into the presentation Income received in advance in relation to the parent entity is able to control the timing currency as follows: contracts is deferred in the balance sheet and of the reversal of the temporary differences recognised as income on a straight-line basis and it is probable that the differences will not > Assets and liabilities for each balance sheet over the period of the contract. reverse in the foreseeable future. presented are translated at the closing rate at the date of that balance sheet; (iii) Interest income Deferred tax assets and liabilities are offset Interest income is recognised using the when there is a legally enforceable right to > Income and expenses for each income effective interest rate method. offset current tax assets and liabilities and statement and statement of comprehensive when the deferred tax balances relate to the income are translated at average exchange (iv) Dividends same taxation authority. Current tax assets rates (unless this is not a reasonable Dividends are recognised as revenue when and tax liabilities are offset where the entity approximation of the cumulative effect of the right to receive payment is established. has a legally enforceable right to offset and the rates prevailing on the transaction dates, intends either to settle on a net basis, or in which case income and expenses are to realise the asset and settle the liability translated at the dates of the transactions); simultaneously. and > All resulting exchange differences are recognised in other comprehensive income.

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Deferred tax balances relating to assets that (h) Business combinations had their tax values reset on joining the tax The acquisition method of accounting is used consolidated Group have been remeasured to account for all business combinations, (f) Income tax (continued) based on the carrying amount of those assets including business combinations involving in the tax consolidated Group and their reset equities or businesses under common Current and deferred tax is recognised in tax values. The adjustment to these deferred control, regardless of whether equity profit and loss, except to the extent it relates tax balances is recognised in the consolidated instruments or other assets are acquired. The to items recognised in other comprehensive financial statements against income tax consideration transferred for the acquisition income or directly in equity. In this case, the expense. of a subsidiary comprises the fair values of tax is also recognised in other comprehensive the assets transferred, the liabilities incurred income or directly in equity, respectively. (g) Leases and the equity interests issued by the Group. Tax consolidation The consideration transferred also includes Leases of property, plant and equipment Adelaide Brighton Ltd and its wholly owned the fair value of any contingent consideration where the Group, as lessee, has substantially Australian subsidiaries implemented the tax arrangement and the fair value of any preall the risks and rewards of ownership are consolidation legislation as of 1 January 2004. existing equity interest in the subsidiary. classified as finance leases. Finance leases Adelaide Brighton Ltd, as the head entity Acquisition-related costs are expensed as are capitalised at the lease’s inception at the in the tax consolidated Group, recognises incurred. Identifiable assets acquired and lower of the fair value of the leased property current tax liabilities and tax losses (subject liabilities and contingent liabilities assumed and the present value of the minimum to meeting the “probable test”) relating to all in a business combination are, with limited lease payments. The corresponding rental transactions, events and balances of the tax exceptions, measured initially at their obligations, net of finance charges, are consolidated Group as if those transactions, fair values at the acquisition date. On an included in borrowings. Each lease payment events and balances were its own. acquisition-by-acquisition basis, the Group is allocated between the liability and finance recognises any non-controlling interest in the The entities in the tax consolidated Group are charges so as to achieve a constant rate acquiree either at fair value or at the nonpart of a tax sharing agreement which, in the on the finance balance outstanding. The controlling interest’s proportionate share of opinion of the Directors, limits the joint and property, plant and equipment acquired under the acquiree’s net identifiable assets. several liability of the wholly-owned entities finance leases is depreciated over the asset’s 1 Summary of significant accounting policies (continued)

in the case of default by the head entity, Adelaide Brighton Ltd.

useful life or over the shorter of the asset’s The excess of the consideration transferred, useful life and the lease term if there is no the amount of any non-controlling interest reasonable certainty that the Group will obtain in the acquiree and the acquisition-date fair Amounts receivable or payable under an ownership at the end of the lease term. value of any previous equity interest in the accounting tax sharing agreement with the acquiree over the fair value of the Group’s tax consolidated entities are recognised The interest element of the finance cost is share of the net identifiable assets acquired separately as tax-related amounts receivable charged to the income statement over the is recorded as goodwill. If those amounts are or payable. Expenses and revenues arising lease period so as to produce a constant less than the fair value of the net identifiable under the tax sharing agreement are periodic rate of interest on the remaining assets of the subsidiary acquired and the recognised as a component of income tax balance of the liability for each period. measurement of all amounts has been expense. Leases in which a significant portion of the reviewed, the difference is recognised directly The wholly-owned entities fully compensate risks and rewards of ownership are retained in profit or loss as a bargain purchase. Adelaide Brighton Ltd for any current tax by the lessor are classified as operating payable assumed and are compensated by Where settlement of any part of cash leases. Payments made under operating Adelaide Brighton Ltd for any current tax consideration is deferred, the amounts leases (net of any incentives received from the receivable and deferred tax assets relating to payable in the future are discounted to their lessor) are charged to the income statement unused tax losses or unused tax credits that present value as at the date of exchange. The on a straight line basis over the period of the are transferred to Adelaide Brighton Ltd under discount rate used is the entity’s incremental lease. the tax consolidation legislation. The funding borrowing rate, being the rate at which a similar borrowing could be obtained from amounts are determined by reference to the an independent financier under comparable amounts recognised in the wholly-owned terms and conditions. entities’ financial statements. Contingent consideration is classified either as equity or a financial liability. Amounts classified as a financial liability are subsequently remeasured to fair value with changes in fair value recognised in the income statement.

Individual tax consolidated entities recognise tax expenses and revenues and current and deferred tax balances in relation to their own taxable income, temporary differences and tax losses using the separate taxpayer within the group method. Entities calculate their current and deferred tax balances on the basis that they are subject to tax as part of the tax consolidated Group.

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The collectability of trade receivables is reviewed regularly. Debts which are known to be uncollectible are written off by reducing (i) Impairment of assets the carrying amount directly. A provision for doubtful receivables is established Goodwill and intangible assets that have when there is objective evidence that the an indefinite useful life are not subject to Group will not be able to collect all amounts amortisation and are tested annually for due according to the original terms of impairment or more frequently if events or receivables. Significant financial difficulties changes in circumstances indicate that they of the debtor, probability that the debtor will might be impaired. Other assets are tested enter bankruptcy or financial reorganisation, for impairment whenever events or changes and default or delinquency in payments are in circumstances indicate that the carrying considered indicators that the trade receivable amount may not be recoverable. is impaired. The amount of the provision is An impairment loss is recognised for the the difference between the asset’s carrying amount by which the asset’s carrying amount and the estimated cash flows. Cash amount exceeds its recoverable amount. The flows relating to short term receivables are recoverable amount is the higher of an asset’s not discounted if the effect of discounting is fair value less costs to sell and value in use. immaterial. For the purposes of assessing impairment, The amount of the provision is recognised assets are grouped at the lowest levels for in the income statement. When a trade which there are separately identifiable cash receivable for which a provision for doubtful flows which are largely independent of the receivables has been recognised becomes cash flows from other assets or groups of uncollectible in a subsequent period, it is assets (cash generating units). Non-financial written off against the provision account. assets other than goodwill that suffered an Subsequent recoveries of amounts previously impairment are reviewed for possible reversal written off are credited against expenses in of the impairment at each reporting date. the income statement. (j) Cash and cash equivalents For the purpose of presentation in the statement of cash flows, cash and cash equivalents includes cash on hand, term deposits and deposits held at call with financial institutions, other short term, highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities on the balance sheet. (k) Trade receivables Trade receivables are recognised initially at fair value and subsequently measured at amortised cost, less provision for doubtful receivables. Trade receivables are typically due for settlement no more than 30 to 45 days from the end of the month of invoice.

(l) Inventories Raw materials and stores, work in progress and finished goods are stated at the lower of cost and net realisable value. Cost comprises direct materials, direct labour and an appropriate proportion of variable and fixed overhead expenditure, the latter being allocated on the basis of normal operating capacity. Costs are assigned to individual items of inventory on the basis of weighted average costs. Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale.

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(ii) Financial assets at fair value through profit or loss Financial assets at fair value through profit or loss are financial assets held for trading. A financial asset is classified in this category if acquired principally for the purpose of selling in the short term. Derivatives are classified as held for trading unless they are designated as hedges. Assets in this category are classified as current assets where they are expected to be realised within 12 months of balance sheet date. (n) Derivatives Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently remeasured to their fair value at each reporting date. Derivative instruments entered into by the Group do not qualify for hedge accounting. Changes in the fair value of any derivative instrument that does not qualify for hedge accounting are recognised immediately in the income statement and are included in finance costs. (o) Non-current assets (or disposal groups) held for sale Non current assets (or disposal groups) are classified as held for sale and stated at the lower of their carrying amount and fair value less costs to sell if their carrying amount will be recovered principally through a sale transaction rather than through continuing use and a sale is considered highly probable.

An impairment loss is recognised for any initial or subsequent write down of the asset (or disposal group) to fair value less costs to sell. A gain is recognised for any subsequent (m) Financial assets increases in fair value less costs to sell an The Group classifies its financial assets in the asset (or disposal group), but not in excess following categories: loans and receivables, of any cumulative impairment loss previously and financial assets at fair value through recognised. A gain or loss not previously profit or loss. The classification depends on recognised by the date of the sale of the nonthe purpose for which the financial assets current asset (or disposal group) is recognised were acquired. Management determines the at the date of de-recognition. classification of its financial assets at initial recognition.

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(i) Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are included in current assets, except for those with maturities greater than 12 months after the balance sheet date.

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(iii) Leasehold property (iii) IT development and software The cost of improvements to or on leasehold Costs incurred in developing products or properties is amortised over the unexpired systems and costs incurred in acquiring (o) Non-current assets (or disposal groups) period of the lease or the estimated useful life, software and licences that will contribute held for sale (continued) whichever is the shorter. Amortisation is over to future period financial benefits through 5 - 30 years. revenue generation and/or cost reduction are Non-current assets (including those that are capitalised to software and systems. Costs part of a disposal group) are not depreciated (iv) Other fixed assets capitalised include external direct costs of or amortised while they are classified as Freehold land is not depreciated. Depreciation materials and service and direct payroll and held for sale. Interest and other expenses on other assets is calculated using the payroll related costs of employees’ time spent attributable to the liabilities of a disposal straight line method to allocate their cost or on the project. Amortisation is calculated on group classified as held for sale continue to deemed cost amounts, over their estimated a straight-line basis over periods generally be recognised. useful lives, as follows: ranging from 5 to 10 years. > Buildings 20 - 40 years Non-current assets classified as held for sale > Plant and equipment 3 - 40 years IT development costs include only those costs and the assets of a disposal group classified directly attributable to the development phase as held for sale are presented separately from The assets’ residual values and useful lives and are only recognised following completion the other assets in the balance sheet. The are reviewed, and adjusted if appropriate, of technical feasibility and where the Group liabilities of a disposal group classified as held at each balance sheet date. An asset’s has an intention and ability to use the asset. for sale are presented separately from other carrying amount is written down immediately liabilities in the balance sheet. to its recoverable amount if the asset’s (r) Borrowings carrying amount is greater than its estimated (p) Property, plant and equipment recoverable amount (Note 1(i)). Gains and Borrowings are initially recognised at fair losses on disposals are determined by value, net of transaction costs incurred. Property, plant and equipment are shown at comparing proceeds with carrying amount. Borrowings are subsequently measured historical cost less accumulated depreciation These are included in the income statement. at amortised cost. Any difference between and accumulated impairment losses. the proceeds (net of transaction costs) and Cost includes expenditure that is directly (q) Intangible assets the redemption amount is recognised in attributable to the acquisition of the assets. the income statement over the period of (i) Goodwill Subsequent costs are included in the asset’s the borrowings using the effective interest Goodwill is measured as described in Note carrying amount or recognised as a separate method. Borrowings are classified as 1(h). Goodwill on acquisitions of subsidiaries asset, as appropriate, only when it is probable current liabilities unless the Group has an is included in intangible assets. Goodwill on that future economic benefits associated unconditional right to defer settlement of acquisition of joint ventures is included in with the item will flow to the Group and the the liability for at least 12 months after the investments in joint ventures. cost of the item can be measured reliably. reporting date. The carrying amount of any component Goodwill is not amortised. Instead, accounted for as a separate asset is goodwill is tested for impairment annually (s) Borrowing costs derecognised when replaced. All other or more frequently if events or changes Borrowing costs incurred for the construction repairs and maintenance are charged to in circumstances indicate that it might of any qualifying asset are capitalised during profit or loss during the reporting period in be impaired, and is carried at cost less the period of time that is required to complete which they are incurred. accumulated impairment losses. Gains and and prepare the asset for its intended use or losses on the disposal of an entity include (i) Mineral reserves sale. Other borrowing costs are expensed. the carrying amount of goodwill relating to Mineral reserves are amortised based on the entity sold. Goodwill is allocated to cash annual extraction rates over the estimated (t) Trade and other payables generating units which are expected to benefit life of the reserves. The remaining useful from the business combination in which the These amounts represent liabilities for goods life of each asset is reassessed at regular goodwill arose, for the purpose of impairment and services provided to the Group prior to intervals. Where there is a change during the testing. Each of those cash generating units the end of financial year which are unpaid. period to the useful life of the mineral reserve, are consistent with the Group’s reporting The amounts are unsecured and are usually amortisation rates are adjusted prospectively segments. paid within 30 - 60 days of recognition. from the beginning of the reporting period. (ii) Complex assets The costs of replacing major components of complex assets are depreciated over the estimated useful life, generally being the period until next scheduled replacement.

(ii) Lease rights Lease rights acquired have a finite useful life. Amortisation is calculated using the straightline method to allocate the cost over their estimated useful lives, which varies from 2 to 20 years.

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(iv) Provisions for close down and restoration Expected future payments are discounted costs using market yields at the end of the reporting Close down and restoration costs include the period on national government bonds with (u) Provisions dismantling and demolition of infrastructure terms to maturity and currency that match, and the removal of residual materials and as closely as possible, the estimated future Provisions are recognised if, as a result of a remediation of disturbed areas. Provisions cash outflows. past event, the Group has a present legal or for close down and restoration costs do not constructive obligation that can be estimated (iii) Retirement benefit obligations include any additional obligations which are reliably, and it is probable that an outflow of Except those employees that opt out of the expected to arise from future disturbance. economic benefits will be required to settle Group’s superannuation plan, all employees The costs are estimated on the basis of a the obligation. of the Group are entitled to benefits from the closure plan. The cost estimates are Group’s superannuation plan on retirement, Where there are a number of similar reviewed annually during the life of the disability or death. The Group has a defined obligations, the likelihood that an outflow operation, based on the net present value of benefit section and defined contribution will be required in settlement is determined estimated future costs. section within its plan. The defined benefit by considering the class of obligations as Estimate changes resulting from new section provides defined lump sum benefits a whole. A provision is recognised even if disturbance, updated cost estimates, on retirement, death, disablement and the likelihood of an outflow with respect to changes to the lives of operations and withdrawal, based on years of service and any one item included in the same class of revisions to discount rates are capitalised final average salary. The defined benefit plan obligations may be small. within property, plant and equipment. These section is closed to new members. The Provisions are measured at the present costs are then depreciated over the lives of defined contribution section receives fixed value of management’s best estimate of the the assets to which they relate. contributions from Group companies and expenditure required to settle the present the Group’s legal or constructive obligation is The amortisation or ‘unwinding’ of the obligation at the reporting date. Provisions limited to these contributions. discount applied in establishing the net are determined by discounting the expected present value of provisions is charged to the A liability or asset in respect of defined future cash flows at a pre-tax rate that reflects income statement in each accounting period. benefit superannuation plans is recognised current market assessments of the time value The amortisation of the discount is shown in in the balance sheet, and is measured as the of money and the risks specific to the liability. finance costs. present value of the defined benefit obligation The increase in the provision due to the at the reporting date less the fair value of the passage of time is recognised as (v) Employee benefits superannuation fund’s assets at that date. interest expense. (i) Short-term obligations The present value of the defined benefit Liabilities for wages and salaries, including obligation is based on expected future non-monetary benefits, annual leave and payments, which arise from membership of accumulating sick leave expected to be the fund to the reporting date, calculated settled within 12 months after the end of annually by independent actuaries using the the period in which the employees render projected unit credit method. Consideration the related service are recognised in respect is given to expected future wage and salary (ii) Workers’ compensation of employees’ services up to the end of levels, experience of employee departures Certain entities within the Group are self the reporting period and are measured at and periods of service. insured for workers’ compensation purposes. the amounts expected to be paid when Expected future payments are discounted For self-insured entities, provision is made the liabilities are settled. The liability for using market yields at the reporting date on that covers accidents that have occurred annual leave and accumulating sick leave national government bonds with terms to and have been reported together with an is recognised in the provision for employee maturity and currency that match, as closely allowance for incurred but not reported benefits. All other short-term employee benefit as possible, the estimated claims. The provision is based on an obligations are presented as payables. future cash outflows. actuarial assessment. (ii) Other long term employee benefit obligations Actuarial gains and losses arising from (iii) Restructuring costs The liability for long service leave and annual experience adjustments and changes in Liabilities arising directly from undertaking a leave which is not expected to be settled actuarial assumptions are recognised in restructuring program, not in connection with within 12 months after the end of the period the period in which they occur, outside the acquisition of an entity, are recognised in which the employees render the related profit or loss directly in the statement of when a detailed plan has been developed, service is recognised in the provision for comprehensive income. They are included implementation has commenced, by entering employee benefits and measured as the in retained earnings in the statement of into a binding sales agreement or making present value of expected future payments changes in equity and in the balance sheet. detailed public announcements such that to be made in respect of services provided the affected parties are in no doubt that by employees up to the end of the reporting Past service costs are recognised immediately the restructuring program will proceed. The period using the projected unit credit in profit or loss. cost of a restructuring program provided method. Consideration is given to expected for is the estimated future cash flows from future wage and salary levels, experience of implementation of the plan. employee departures and periods of service. (i) Dividends Provision is made for the amount of any dividend declared, being appropriately authorised and no longer at the discretion of the entity, on or before the end of the period but not distributed at balance date.

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1 Summary of significant accounting policies (continued) (v) Employee benefits (continued) Contributions to the defined contribution fund are recognised as an expense as they become payable. Prepaid contributions are recognised as an asset to the extent that a cash refund or a reduction in the future payments is available. (iv) Share-based payments Share-based compensation benefits are provided to executives via the Adelaide Brighton Ltd Executive Performance Share Plan (“the Plan”).

(vi) Termination benefits Termination benefits are payable when employment is terminated before the normal retirement date, or when an employee accepts voluntary redundancy in exchange for these benefits. The Group recognises termination benefits at the earlier of the following dates: (a) when the Group can no longer withdraw the offer of those benefits; and (b) when the entity recognises costs for a restructuring that is within the scope of AASB 137 Provisions, Contingent Liabilities and Contingent Assets and involves the payment of terminations benefits. In the case of an offer made to encourage voluntary redundancy, the termination benefits are measured based on the number of employees expected to accept the offer. Benefits falling due more than 12 months after balance sheet date are discounted to present value.

The fair value of Awards granted under the Plan is recognised as an employee benefit expense with a corresponding increase in equity. The fair value is measured at grant date and recognised over the period during (w) Contributed equity which the employees become unconditionally entitled to the Awards. Ordinary shares are classified as equity. Incremental costs directly attributable to the The fair value at grant date is independently issue of new shares or options are shown determined using a pricing model that takes in equity as a deduction, net of tax, from into account the exercise price, the term the proceeds. Incremental costs directly of the Award, the vesting and performance attributable to the issue of new shares or criteria, the impact of dilution, the nonoptions, for the purpose of acquisition of tradeable nature of the Award, the share price a business, are not included in the cost at grant date, the expected dividend yield and of the acquisition as part of the purchase the risk-free interest rate for the term of the consideration. Award. The fair value of the Awards granted excludes the impact of any non-market vesting conditions (e.g. earnings per share). Nonmarket vesting conditions are included in assumptions about the number of Awards that are expected to become exercisable. At each balance sheet date, the entity revises its estimate of the number of Awards that are expected to become exercisable. The employee benefit expense recognised each period takes into account the most recent estimate. The impact of the revision to original estimates, if any, is recognised in the income statement with a corresponding entry to equity.

(x) Earnings per share

(z) Goods and Services Tax (GST) Revenues, expenses and assets are recognised net of the amount of associated GST, unless the GST incurred is not recoverable from the taxation authority. In this case it is recognised as part of the cost of acquisition of the asset or as part of the expense. Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of GST recoverable from, or payable to, the taxation authority is included with other receivables or payables in the balance sheet. Cash flows are presented on a gross basis. The GST components of cash flows arising from investing or financing activities which are recoverable from, or payable to the taxation authority, are presented as operating cash flows. (aa) Financial guarantee contracts Financial guarantee contracts are recognised as a financial liability at the time the guarantee is issued. The liability is initially measured at fair value and subsequently at the higher of the amount determined in accordance with AASB 137 Provisions, Contingent Liabilities and Contingent Assets and the amount initially recognised less cumulative amortisation, where appropriate. (ab) Carbon Accounting

(i) Basic earnings per share An entity within the Group was a Liable Entity Basic earnings per share is calculated by under the Clean Energy Legislation (the dividing the profit attributable to equity holders Scheme) and also qualified for assistance of the Company, excluding any costs of under the Jobs and Competitiveness Program servicing equity other than ordinary shares, (JCP). The Scheme was repealed effective by the weighted average number of ordinary 1 July 2014 however obligations incurred up shares outstanding during the year. to 30 June 2014 were required to be settled. The Group was required to surrender eligible (ii) Diluted earnings per share emission units to the Clean Energy Regulator Diluted earnings per share adjusts the (the Regulator) for covered emissions, while figures used in the determination of basic units were available based upon production earnings per share to take into account the volumes of eligible products. after income tax effect of interest and other financing costs associated with dilutive potential ordinary shares and the weighted average number of shares assuming conversion of all dilutive potential ordinary shares.

(i) Provision for Carbon Emissions Where a facility is anticipated to produce covered emissions in excess of the threshold in an assessment year, a provision is recognised for the cost of eligible emission (v) Short-term incentives units as covered emissions are emitted. The Group recognises a liability and an (y) Rounding of amounts A provision for unit shortfall charges is expense for short-term incentives available to recognised at the time a shortfall in units The Company is of a kind referred to in certain employees on a formula that takes into surrendered to the Regulator occurs or Class Order 98/100, issued by the Australian consideration agreed performance targets. at the time a shortfall has been identified. Securities and Investments Commission, The Group recognises a provision where The provision is recognised in the income relating to the ‘‘rounding off’’ of amounts in contractually obliged or where there is a statement as incurred unless qualifying the financial report. Amounts in the financial past practice that has created a constructive for an alternative treatment under another report have been rounded off in accordance obligation. accounting standard or policy. with that Class Order to the nearest one hundred thousand dollars, unless otherwise stated. The Plan is administered by the Adelaide Brighton employee share plan trust; see Note 1(b)(ii).

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(ii) Tax consolidation legislation (iii) Financial guarantees The Company and its wholly-owned Where the Company has provided financial Australian controlled entities have guarantees in relation to loans and payables (ab) Carbon Accounting (continued) implemented the tax consolidation legislation. of subsidiaries for no compensation, the fair values of these guarantees are accounted for The measurement of the provision for carbon The Company and the controlled entities in as contributions and recognised as part of the emissions is in accordance with the Group’s the tax consolidated Group account for their cost of the investment. accounting policy for provisions, see own current and deferred tax amounts. These Note 1(u). tax amounts are measured as if each entity in (iv) Share based payments the tax consolidated Group continues to be a The grant by the Company of options over its (ii) Carbon Unit Asset stand alone taxpayer in its own right. equity instruments to employees of subsidiary An asset is recognised at fair value for undertakings in the Group is treated as a JCP units as they are received or become In addition to its own current and deferred receivable from that subsidiary undertaking. receivable. Units received in advance are tax amounts, the Company also recognises recognised as deferred income and released the current tax liabilities (or assets) and the (ad) New accounting standards and to the income statement as eligible deferred assets arising from unused tax interpretations production activity is undertaken. losses and unused tax credits assumed from controlled entities in the tax Certain new accounting standards and During the initial fixed price period of the consolidated Group. interpretations have been published that are Clean Energy Legislation, units purchased not mandatory for the 31 December 2014 from the Regulator are automatically The entities have also entered into a tax reporting period. The Group’s assessment surrendered to the Regulator as a remission funding agreement under which the whollyof the impact of these new standards and of liability under the Scheme and are owned entities fully compensate the Company interpretations is set out below. recognised as a reduction of the provision for any current tax payable assumed and are for carbon emissions. compensated by Adelaide Brighton Limited AASB 9 Financial Instruments for any current tax receivable and deferred Carbon units are classified into current and AASB 9 Financial Instruments addresses tax assets relating to unused tax losses or non-current based upon the anticipated the classification, measurement and unused tax credits that are transferred to timing of disposal of the unit, either through derecognition of financial assets and financial Adelaide Brighton Limited under the tax remission of liability under the Scheme or sale. liabilities and introduces new rules for hedge consolidation legislation. The funding accounting. In December 2014, the AASB amounts are determined by reference to (ac) Parent entity financial information made further changes to the classification and the amounts recognised in the whollymeasurement rules and also introduced a new The financial information for the parent entity, owned entities’ financial statements. impairment model. These latest amendments Adelaide Brighton Limited (“the Company”), The amounts receivable/payable under the now complete the new financial instruments disclosed in Note 37 has been prepared on tax funding agreement are due upon receipt standard. When adopted, the standard will the same basis as the consolidated financial of the funding advice from the head entity, not have a material impact on the financial statements, except as set out below. which is issued as soon as practicable after statements. The standard is mandatory for (i) Investments in subsidiaries, associate and the end of each financial year. The head entity financial years commencing on or after joint arrangements may also require payment of interim funding 1 January 2018. Investments in subsidiaries, associate and amounts to assist with its obligations to pay AASB 15 Revenue From Contracts With joint arrangements are accounted for at cost tax instalments. Customers in the financial statements of the Company. Assets or liabilities arising under tax funding Such investments include both investments AASB 15 Revenue From Contracts With agreements with the tax consolidated entities in shares issued by the subsidiary and other Customers will replace AASB 118 which are recognised as current amounts receivable parent entity interests that in substance covers contracts for goods and services from or payable to other entities in the Group. form part of the parent entity’s investment and AASB 111 which covers construction in the subsidiary. These include investments Any difference between the amounts contracts. The new standard replaces the in the form of interest-free loans which assumed and amounts receivable or payable existing notion of risk and rewards with the have no fixed repayment terms and which under the tax funding agreement are notion of control to recognise when a good have been provided to subsidiaries as an recognised as a contribution to (or distribution or service transfers to a customer. When additional source of long term capital. Trade from) wholly-owned tax consolidated entities. adopted, the standard will not have a material amounts receivable from subsidiaries in impact on the financial statements. The the normal course of business and other standard is mandatory for financial years amounts advanced on commercial terms commencing on or after 1 January 2017. and conditions are included in receivables. Any dividends received from associates are recognised in the parent entity’s profit or loss, rather than being deducted from the carrying amount of these investments.

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1 Summary of significant accounting policies (continued)

The AASB has made limited scope amendments to resolve a current inconsistency between AASB 10 (ad) New accounting standards and Consolidated Financial Statements and AASB interpretations (continued) 128 Investment in Associates and Joint Ventures. The amendments confirm that the AASB 11 Joint Arrangements and AASB accounting treatment depends on whether 2014-3 Amendments to Australian the non-monetary assets sold or contributed Accounting Standards - Accounting for to an associate or joint venture constitute a Acquisitions of Interests in Joint Operations ‘business’ (as defined in AASB 3 Business The AASB has made limited scope Combinations). Where the non-monetary amendments to AASB 11 Joint Arrangements assets constitute a business, the Group to explicitly address the accounting for the recognises the full gain or loss on the sale acquisition of an interest in a joint operation. or contribution. If the assets do not meet The amendments require an investor to the definition of a business, the gain or loss apply the principles of business combination is recognised only to the extent of the other accounting when it acquires an interest in a investors’ interests in the associate or joint joint operation that constitutes a business in venture. As this amendment merely clarifies AASB 3 (refer Note 1(h)). As this amendment the existing requirements, they do not affect merely clarifies the existing requirements, they the Group’s accounting policies or any of the do not affect the Group’s accounting policies disclosures. The Group intends to apply the or any of the disclosures. The Group intends amendment from 1 January 2016. to apply the amendment from Annual Improvements to 1 January 2016. IFRSs 2012-2014 cycle AASB 116 Property, Plant and Equipment, In January 2015, the AASB approved AASB 138 Intangible Assets and AASB 2014a number of amendments to Australian 4 Amendments to Australian Accounting Accounting Standards as a result of the Standards - Clarification of Acceptable annual improvements project. Management Methods of Depreciation and Amortisation does not believe that the application of the The AASB has made limited scope standard will have a material impact on the amendments to AASB 116 Property, Plant financial statements. The Group will apply and Equipment to clarify that a revenue-based the amendments from 1 January 2016. method should not be used to calculate the depreciation of items of property, plant and 2 Critical accounting estimates and equipment, and to AASB 138 Intangible assumptions Assets to introduce a rebuttable presumption The Group makes estimates and that the amortisation of intangible assets assumptions concerning the future. The based on revenue is inappropriate. As this resulting accounting estimates will, by amendment merely clarifies the existing definition, seldom equal the related actual requirements, they do not affect the Group’s results. The estimates and assumptions that accounting policies or any of the disclosures. are significant to the carrying amounts of The Group intends to apply the amendment assets and liabilities in the next financial year from 1 January 2016. are discussed below. AASB 10 Consolidated Financial Statements, AASB 128 Investment in Associates and Joint Ventures and AASB 2014-10 Amendments to Australian Accounting Standards - Sale or Contribution of Assets between an Investor and its Associate or Joint Venture

A D E L A I D E BRIGHT ON LT D AND IT S CONT ROLLED ENTI TI ES F O R T H E Y EA R END ED 3 1 D ECEM BER 2 0 1 4 N O T E S TO A ND F ORM ING PAR T OF T HE F INANCI AL STATEMENTS

75

(a) Provisions for close down and restoration costs Restoration provisions are based on estimates of the cost to rehabilitate currently disturbed areas based on current costs and legislative requirements. The Group progressively rehabilitates as part of the mining process. Cost estimates are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. The detailed accounting treatment is set out in Note 1(u)(iv). Provisions for close down and restoration costs at the end of the year was $36.6m (2013: $27.6m). (b) Impairment of assets The Group tests annually whether goodwill, other intangible assets with an indefinite life and other non-current assets have suffered any impairment, in accordance with the accounting policies stated in Notes 1(i) and 1(q). The recoverable amounts of cash generating units have been determined based on value-in-use calculations. These calculations require the use of assumptions. For detailed assumptions refer to Note 13(b). Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that may have a financial impact on the Group and that are believed to be reasonable under the circumstances. (c) Defined benefit superannuation plan The present value of defined benefit superannuation plan obligations depends on a number of factors that are determined on an actuarial basis using a number of assumptions. These include selection of a discount rate, future salary increases and expected rates of return. The assumptions used to determine the obligations and the sensitivity of balances to changes in these assumptions are detailed in Note 20.

($ Million)

Consolidated

2014

2013

3 Revenue and other income Revenue from continuing operations Sale of goods Interest from joint ventures Interest from other parties Royalties

1,335.6 1,225.5 0.8 0.8 1.0 1.0 0.4 0.7



1,337.8 1,228.0

Other income Net gain on disposal of property, plant and equipment Fair value accounting gain on business acquisition Claim settlement Rental income Other income

1.2 0.4 17.8 4.7 2.0 2.9 0.4 1.4



26.1 4.7

Revenue and other income (excluding share of net profits of joint ventures and associate accounted for using the equity method)

1,363.9 1,232.7

4 Expenses Profit before income tax includes the following specific expenses: Depreciation Buildings Plant and equipment Mineral reserves Total depreciation

4.3 3.8 62.7 61.7 4.5 3.6

71.5 69.1

Amortisation of intangibles 1.5 1.5 2.0 Impairment of plant and equipment1 Other charges Employee benefits expense 154.8 148.2 Defined contribution superannuation expense 10.1 9.4 Operating lease rental charge 2.1 3.3 Bad and doubtful debts - trade debtors 2.3 1.5 Provision for inventory 0.5 0.7 Finance costs Interest and finance charges paid / payable Unwinding of the discount on restoration provisions and retirement benefit obligation Exchange (gains) on foreign currency contracts

16.2 16.0 1.2 1.2 - (0.1 )

Total finance costs 17.4 17.1 Amount capitalised2 (0.6 ) (1.2 ) Finance costs expensed

16.8 15.9

1 As a result of the rationalisation of clinker production at the Munster site, an impairment charge of $2.0 million (2013: nil) was recognised for the excess of the written down value compared to the recoverable amount of the assets impacted by the rationalisation. 2 The rate used to determine the amount of borrowing costs to be capitalised is the average interest rate applicable to the Group’s outstanding b orrowings during the year, in this case 3.9% p.a. (2013: 4.2% p.a.).

A D E L A I D E B R I G H T ON LT D AND IT S CONT ROL L ED ENTI TI ES F O R T H E Y E A R E ND ED 3 1 D ECEM BER 2 0 1 4 N O T E S T O A N D F ORM ING PAR T OF T HE F INA NCIAL STATEMENTS

76

($ Million)

Consolidated

2014

2013

5 Income tax expense (a) Numerical reconciliation of income tax expense to prima facie tax payable Profit before income tax expense

232.5 208.6

Tax at the Australian tax rate of 30% (2013: 30%) Tax effect of amounts which are not deductible (taxable) in calculating taxable income: Non allowable expenses Non assessable capital profits Rebateable dividends Fair value adjustment Previously unrecognised tax losses used to reduce deferred tax liability (Over) under provided in prior years

69.8 62.6

Aggregate income tax expense

59.9 57.5

Aggregate income tax expense comprises: Current taxation expense Net deferred tax (Note 12 & 19) (Over) provided in prior year

54.5 61.0 5.5 (3.2 ) (0.1 ) (0.3 )



59.9 57.5

1.6 0.3 (1.8 ) (0.7 ) (4.1 ) (4.4 ) (5.4 ) - (0.5 ) (0.2 ) 0.2

(b) Amounts recognised directly in equity Aggregate current and deferred tax arising in the reporting period and not recognised in net profit or loss but directly (credited) debited to equity Current tax Net deferred tax

(1.8 ) 0.6

(0.8 ) (0.8 )



(1.2 )

(1.6 )

(c) Tax expense relating to items of other comprehensive income Actuarial (losses) / gains on retirement benefit obligation (Note 12)

(0.4 ) 2.3

(d) Tax losses Unused tax losses for which no deferred tax asset has been recognised: Capital losses

16.8 16.3

This benefit for tax losses will only be obtained if: (i) the Group derives future assessable income of a nature and of an amount sufficient to enable the benefit from the deductions for the losses to be realised, (ii) the Group continues to comply with the conditions for deductibility imposed by tax legislation, and (iii) no changes in tax legislation adversely affect the Group in realising the benefit from the deductions for the losses. The accounting policy in relation to tax consolidation legislation is set out in Note 1(f).

A D E L A I D E BRIGHT ON LT D AND IT S CONT ROLLED ENTI TI ES F O R T H E Y EA R END ED 3 1 D ECEM BER 2 0 1 4 N O T E S TO A ND F ORM ING PAR T OF T HE F INANCI AL STATEMENTS

77

($ Million)

Consolidated

2014

2013

6 Cash and cash equivalents Current Cash at bank and in hand Term deposits

29.7 9.1 2.0 2.0

Cash and cash equivalents

31.7 11.1

(a) Offsetting The Group has an offsetting agreement with its bank for cash facilities. The agreement allows the Group to manage cash balances on a total basis, offsetting individual cash balances against overdrafts. The gross value of the balance is as follows: Cash balances Cash overdrafts

31.7 11.1 - -

Net cash balance

31.7

11.1

Current Trade receivables Provision for doubtful receivables

164.9 (1.7 )

150.7 (1.6 )



163.2 149.1

(b) Risk exposure The Group’s exposure to interest rate risk is discussed in Note 24. The maximum exposure to credit risk at the end of the reporting period is the carrying amount of each class of cash and cash equivalents mentioned above. 7 Trade and other receivables

Amounts receivable from joint ventures Prepayments Other receivables

27.6 4.7 3.8

24.1 5.5 3.7



199.3

182.4

(a) Past due but not impaired Included in the Group’s trade receivables balance are debtors with a carrying value of $9.2 million (2013: $8.4 million) which are past due but not impaired. The Group has not provided for these amounts as there has not been a significant change in credit quality or the amounts relate to debtors for which there is no recent history of default. The Group believes these amounts are still recoverable. The ageing analysis is as follows: 60 days $8.1 million, over 90 days $1.1 million (2013: 60 days $6.8 million, over 90 days $1.6 million). (b) Impaired trade receivables As at 31 December 2014 current trade receivables of the Group with a nominal value of $2.2 million (2013: $2.7 million) were impaired. The amount of the provision was $1.7 million (2013: $1.6 million). The individually impaired receivables mainly relate to customers which are in unexpectedly difficult economic situations. It was assessed that a portion of the receivables is expected to be recovered.

A D E L A I D E B R I G H T ON LT D AND IT S CONT ROL L ED ENTI TI ES F O R T H E Y E A R E ND ED 3 1 D ECEM BER 2 0 1 4 N O T E S T O A N D F ORM ING PAR T OF T HE F INA NCIAL STATEMENTS

78

($ Million)

Consolidated

2014

2013

7 Trade and other receivables (continued) (b) Impaired trade receivables (continued) The ageing of these receivables is as follows: 1 to 3 months 3 to 6 months Over 6 months

- 0.3 2.0 1.9 0.7



2.2 2.7

Movement in provision for doubtful receivables Opening balance at 1 January Amounts written off during the year Provision for doubtful receivables recognised during the year

1.6 0.7 (2.4 ) (0.6 ) 2.5 1.5

Closing balance at 31 December

1.7

1.6

(c) Fair value and credit, interest and foreign exchange risk Due to the short-term nature of these receivables, their carrying value is assumed to approximate their fair value. All receivables are denominated in Australian dollars. Information concerning the fair value and risk management of both current and non-current receivables is set out in Note 24. Non-current Loans to joint ventures 29.7 27.8 Other non-current receivables 3.0 3.6

32.7 31.4

Details of the fair values, effective interest rate and credit risk are set out in Note 24. The maximum exposure to credit risk at the end of the reporting period is the carrying amount of each class of receivables mentioned above. (a) Impaired receivables and receivables past due None of the non-current receivables are impaired or past due but not impaired. 8 Inventories

Current Finished goods 71.8 58.4 Raw materials and work in progress 55.6 43.0 Engineering spare parts stores 27.3 34.9

154.7

136.3

Inventory expense Inventories recognised as expense during the year ended 31 December 2014 and included in cost of sales amounted to $770.2 million (2013: $686.5 million). 9 Assets classified as held for sale

Current Plant and equipment - 0.6 Land and buildings 1.5 7.3

A D E L A I D E BRIGHT ON LT D AND IT S CONT ROLLED ENTI TI ES F O R T H E Y EA R END ED 3 1 D ECEM BER 2 0 1 4 N O T E S TO A ND F ORM ING PAR T OF T HE F INANCI AL STATEMENTS

79

1.5 7.9

10 Joint arrangements and associate Non-current (a) Summarised financial information for joint ventures and associate The following tables provide summarised financial information for the joint ventures and associate which are individually immaterial and accounted for using the equity method. Total non-material Consolidated ($ Million)

Joint ventures 2014 2013

Associate

Investment in joint ventures and associate

104.5 104.8 35.5 33.7 139.9 138.5

2014

2013

2014

2013

Profit from continuing operations Other comprehensive income

20.3 22.6 1.4 1.6 21.7 24.2 - - - - - -

Total comprehensive income

20.3 22.6 1.4 1.6 21.7 24.2

(b) Interests in joint arrangements and associate

Ownership interest 2014 %

Name Principal place of business Burrell Mining Services JV Batesford Quarry Sunstate Cement Ltd Independent Cement and Lime Pty Ltd E.B. Mawson & Sons Pty Ltd and Lake Boga Quarries Pty Ltd Aalborg Portland Malaysia Sdn. Bhd. Peninsula Concrete Pty Ltd

2013 % Activities

New South Wales and Queensland Victoria Queensland New South Wales and Victoria

50 50 50 50

50 50 50 50

Concrete products for the coal mining industry Limestone products Cement milling and distribution Cementitious product distribution

New South Wales and Victoria Malaysia South Australia

50 30 50

50 30 -

Premixed concrete and quarry products White clinker and cement manufacture Premixed concrete

All joint arrangements and associates are equity accounted in accordance with Note 1(b)(iv) except Burrell Mining and Batesford, which are considered joint operations and are proportionately consolidated. Each of the above joint arrangements has a balance sheet date of 30 June which is different to the Group’s balance sheet date of 31 December. Financial reports as at 31 December for the joint arrangements are used in the preparation of the Group financial statements. Aalborg has a 31 December balance date. (c) Contingent liabilities in respect of joint ventures The Group has an unrecognised contingent liability to acquire the interest it does not own in certain of its joint ventures. Acquisition of the interest is subject to the occurrence of certain future events which affect both the probability and value of the interest. The minimum value of the contingent liability is $25 million (2013: $25 million).

A D E L A I D E B R I G H T ON LT D AND IT S CONT ROL L ED ENTI TI ES F O R T H E Y E A R E ND ED 3 1 D ECEM BER 2 0 1 4 N O T E S T O A N D F ORM ING PAR T OF T HE F INA NCIAL STATEMENTS

80

11 Property, plant and equipment Non-current Consolidated as at 31 December 2014 Asset Freehold Leasehold Plant & Mineral retirement In course of ($ Million) land Buildings property equipment reserves cost construction 20.8 (4.4 )

Total

At cost 156.4 142.1 Accumulated depreciation - (54.4 )

9.0 1,284.9 201.4 (2.6 ) (757.4 ) (28.3 )

22.1 1,836.7 - (847.1 )

Net book amount 156.4 87.7

6.4 527.5 173.1 16.4 22.1 989.6

Reconciliations Carrying amount at 1 January 2014 130.5 87.9 6.8 498.8 131.4 4.7 29.6 889.7 Additions 6.9 0.2 0.1 28.7 0.5 - 24.5 60.9 Disposals (0.3 ) (0.3 ) - (3.9 ) - - - (4.5 ) Business combinations 13.4 2.8 - 46.7 45.1 4.7 - 112.7 Held for sale (1.5 ) - - - - - - (1.5 ) Reclassification 7.4 1.4 - 21.4 - - (32.0 ) (1.8 ) Impairment - - - (2.0 ) - - - (2.0 ) Depreciation/amortisation - (4.3 ) (0.5 ) (62.2 ) (4.2 ) (0.3 ) - (71.5 ) Other - - - - 0.3 7.3 - 7.6 Carrying amount at 31 December 2014 156.4 87.7

6.4 527.5 173.1 16.4 22.1 989.6

Consolidated as at 31 December 2013 Asset Freehold Leasehold Plant & Mineral retirement In course of ($ Million) land Buildings property equipment reserves cost construction

Total

At cost 130.5 138.8 Accumulated depreciation - (50.9 )

9.0 1,225.4 155.8 (2.2 ) (726.6 ) (24.4 )

8.8 (4.1 )

Net book amount

6.8 498.8 131.4

4.7 29.6 889.7

130.5 87.9

29.6 1,697.9 - (808.2 )

Reconciliations Carrying amount at 1 January 2013 130.3 68.3 6.8 471.3 134.8 4.7 86.3 902.5 Additions 5.5 1.3 0.2 39.0 - 0.2 22.9 69.1 Disposals (0.7 ) (0.1 ) - (3.4 ) - - - (4.2 ) Held for sale (6.4 ) (0.9 ) - (0.6 ) - - - (7.9 ) Reclassification 1.8 23.1 0.2 53.8 - - (79.6 ) (0.7 ) Depreciation/amortisation - (3.8 ) (0.4 ) (61.3 ) (3.4 ) (0.2 ) - (69.1 ) Other - - - - - - - Carrying amount at 31 December 2013

130.5 87.9

6.8 498.8 131.4

4.7 29.6 889.7

($ Million)

Consolidated

2014

2013

Leased assets Plant and equipment includes the following amounts where the Group is a lessee under a finance lease: Cost Accumulated depreciation

3.5 (0.2 ) -

Net book amount

3.3 -

A D E L A I D E BRIGHT ON LT D AND IT S CONT ROLLED ENTI TI ES F O R T H E Y EA R END ED 3 1 D ECEM BER 2 0 1 4 N O T E S TO A ND F ORM ING PAR T OF T HE F INANCI AL STATEMENTS

81

($ Million)

Consolidated 2014



2013

12 Deferred tax assets Non-current The balance comprises temporary differences attributable to: Share based payment reserve 1.2 2.1 Defined benefit obligations 0.7 0.1 Provisions 27.3 41.9 Other assets 2.1 1.2 Tax losses 0.3 1.2

Deferred tax assets - before offset 31.6 46.5 (31.6 )

Offset deferred tax liability (Note 19)

(46.5 )

Net deferred tax assets - after offset - -

Movements: Opening balance at 1 January - before offset Recognised in the income statement Recognised in other comprehensive income Recognised in equity Acquired in business combinations

46.5 44.3 (19.5 ) 2.9 0.4 (2.3) (0.6 ) 1.6 4.8 -

Closing balance at 31 December - before offset

31.6

46.5

Other intangibles

Total

($ Million)

Consolidated

Goodwill

Software

246.2 -

16.4 (5.2 )

7.1 (0.6 )

269.7 (5.8 )

246.2

11.2

6.5

263.9

Opening balance at 1 January 2014 Reclassification Additions in current year Business combinations Amortisation charge

170.6 - - 75.6 -

10.6 1.8 0.2 - (1.4 )

2.7 - - 3.9 (0.1 )

183.9 1.8 0.2 79.5 (1.5 )

Closing balance at 31 December 2014

246.2

11.2

6.5

263.9

31 December 2013 Cost 170.6 Accumulated amortisation -

14.5 (3.9 )

3.2 (0.5 )

188.3 (4.4 )

Carrying amount at 31 December 2013

170.6

10.6

2.7

183.9

Opening balance at 1 January 2013 Additions in current year Amortisation change

170.6 - -

11.5 0.5 (1.4 )

2.7 0.1 (0.1 )

184.8 0.6 (1.5 )

Closing balance at 31 December 2013

170.6

10.6

2.7

183.9

13 Intangible assets Non-current 31 December 2014 Cost Accumulated amortisation

Carrying amount at 31 December 2014



A D E L A I D E B R I G H T ON LT D AND IT S CONT ROL L ED ENTI TI ES F O R T H E Y E A R E ND ED 3 1 D ECEM BER 2 0 1 4 N O T E S T O A N D F ORM ING PAR T OF T HE F INA NCIAL STATEMENTS

82

($ Million)

Consolidated

2014

2013

13 Intangible assets (continued) (a) Impairment tests for goodwill Goodwill is allocated to the Group’s cash-generating units (CGUs) identified according to business segments. A segment level summary of the goodwill allocation on a non-aggregation basis is presented below. Cement and Lime Concrete and Aggregates

134.0 131.0 103.4 30.8

Cement, Lime, Concrete and Aggregates CGU Concrete Products CGU

237.4 161.8 8.8 8.8



246.2

170.6

The recoverable amount of a CGU is determined based on value-in-use calculations. These calculations use cash flow projections based on 2014 actual results and 2015 financial budgets approved by management. The growth rate does not exceed the long term average growth rate for the business in which the CGU operates. (b) Key assumptions used for value-in-use calculations

Growth rate2 Discount rate3 Gross margin1 2014 2013 2014 2013 2014 2013

% % % % % % Cement, Lime, Concrete and Aggregates 36.0 36.3 1.9 1.7 7.8 10.0 Concrete Products 26.6 25.1 2.0 2.0 8.5 10.0 1 Budgeted gross margin (excluding fixed production costs) 2 Weighted average growth rate used to extrapolate cash flows beyond the specific market forecast period of up to 8 years 3 Pre-tax discount rate applied to cash flow projections

The assumptions have been used for the analysis of each CGU within the business segment. Management determined budgeted gross margin based on past performance and its expectations for the future. The discount rates used are pre-tax and reflect specific risks relevant to the segments. 14 Carbon asset and liability (a) Background The Federal Government introduced a price on carbon emissions from 1 July 2012 through the introduction of the Clean Energy Legislation (the Scheme). An entity within the Group was a Liable Entity under the Scheme and is required to surrender eligible emission units to the Clean Energy Regulator (the Regulator) in order to satisfy its liability for carbon emissions. The Group is also eligible to receive assistance under the Jobs and Competitiveness Program (JCP), where the Scheme provides units to industries that qualify as Emissions Intensive Trade Exposed. During 2014, the Scheme was repealed effective 1 July 2014. Obligations and benefits accrued before that date are not impacted by the repeal. The Scheme requires entities with operational control of a facility where certain emissions exceed 25,000 tonnes of carbon dioxide equivalence (tCO2 -e) to remit to the Regulator an equivalent number of eligible emission units to pay for their emissions. During the initial years of the Scheme, restrictions are placed on utilising eligible emission units that are not issued by the Regulator. The Group has operational control of a large number of facilities across Australia, however as a result of the threshold, only a limited number of sites related to the production of cement clinker and lime are directly liable under the Scheme. The production of cement clinker and lime require energy use to heat raw materials to produce chemical reactions necessary for the manufacturing process. Both the energy use for heat and the chemical reaction produce emissions that are covered by the Scheme. The accounting policy for carbon is set out in Note 1(ab). The Group is directly liable for certain emissions associated with sites that exceed the threshold. In addition to this, the Group incurs non-direct costs associated with the Scheme as a result of suppliers passing on the cost through higher charges. These costs form part of operating costs such as electricity charges.

A D E L A I D E BRIGHT ON LT D AND IT S CONT ROLLED ENTI TI ES F O R T H E Y EA R END ED 3 1 D ECEM BER 2 0 1 4 N O T E S TO A ND F ORM ING PAR T OF T HE F INANCI AL STATEMENTS

83



Consolidated

2014

2013

(i) Carbon unit asset Carbon units on hand

-

52.5

Classified as: Current Non-current

- 52.5 - -



-

($ Million) 14 Carbon asset and liability (continued) (b) Carbon balances recognised

52.5

(ii) Provision for carbon emissions Provision for carbon emissions

14.0 47.9

Classified as: Current Non-current

14.0 -

39.7 8.2



14.0

47.9

The movement in provision for carbon emissions is set out below: Opening balance Liability for covered emissions Carbon units remitted to Regulator

47.9 33.6 31.7 61.6 (65.6 ) (47.3 )

Closing balance

14.0 47.9

  15 Trade and other payables Current Trade payables and accruals Trade payables - joint ventures

108.0 98.9 12.4 6.5



120.4 105.4

Information about the Group’s exposure to foreign exchange risk is provided in Note 24. 16 Borrowings

Current Finance lease 1.4 Non-current Bank loans - unsecured Finance lease

388.3 259.1 1.8 -



390.1 259.1

Details of the Group’s exposure to interest rate changes and fair value of borrowings are set out in Note 24.

A D E L A I D E B R I G H T ON LT D AND IT S CONT ROL L ED ENTI TI ES F O R T H E Y E A R E ND ED 3 1 D ECEM BER 2 0 1 4 N O T E S T O A N D F ORM ING PAR T OF T HE F INA NCIAL STATEMENTS

84

($ Million)

Consolidated

2014

2013

17 Provisions Current Employee benefits Restoration provisions Workers’ compensation Other provisions

19.6 18.9 3.4 5.3 1.4 1.3 0.3 1.2



24.7 26.7

Non-current Employee benefits Restoration provisions

8.2 6.2 33.2 22.3



41.4 28.5

Movements in each class of provision during the financial year, other than employee benefits, are set out below. Workers’ ($ Million) compensation

Restoration provisions

Other provisions

Opening balance at 1 January 2014 Assumed in business combinations

1.3 -

27.6 4.7

1.2 -

Additional provision recognised - charged to income statement Additional provision recognised - charged to asset retirement cost Charged to income statement - unwind of discount Credited to income statement - reversal of amounts unused Payments

0.1 - - - -

- 7.3 1.2 - (4.2 )

(0.1 ) (0.8 )

Closing balance at 31 December 2014

1.4

36.6

0.3

($ Million)

Consolidated

2014

2013

18 Other liabilities

Current GST liability 4.2 3.2 Deferred income - JCP assistance - 17.1 Other liabilities - 0.1

4.2

20.4

19 Deferred tax liabilities Non-current The balance comprises temporary differences attributable to: Property, plant and equipment Inventories Other

95.8 84.2 9.3 8.3 3.3 18.3

Deferred tax liabilities - before offset 108.4 110.8 Offset deferred tax assets (Note 12) (31.6 ) (46.5 ) Net deferred tax liabilities - after offset 76.8 64.3 Net deferred tax liabilities to be settled after more than 12 months 76.4 63.8 Net deferred tax liabilities to be settled within 12 months 0.4 0.5

A D E L A I D E BRIGHT ON LT D AND IT S CONT ROLLED ENTI TI ES F O R T H E Y EA R END ED 3 1 D ECEM BER 2 0 1 4 N O T E S TO A ND F ORM ING PAR T OF T HE F INANCI AL STATEMENTS

85

76.8 64.3

($ Million)

Consolidated

2014

2013

19 Deferred tax liabilities (continued) Movements: Opening balance at 1 January - before offset Recognised in the income statement Acquired in business combinations (Over) provision in prior year

110.8 111.0 (15.4 ) (0.1 ) 13.3 (0.3 ) (0.1 )

Closing balance at 31 December - before offset

108.4 110.8 

20 Retirement benefit obligations Non-current

> Administration of the Plan and payment to the There are a number of risks to which the Plan beneficiaries from Plan assets when required exposes the Company. The more significant in accordance with the Plan rules; risks relating to the defined benefits are:

(a) Superannuation plan

> Management and investment of the Plan Other than those employees that have assets; and opted out, employees are members of the > Compliance with superannuation law and consolidated superannuation entity being the other applicable regulations. Adelaide Brighton Group Superannuation Plan (“the Plan”), a sub-plan of the Mercer Super The prudential regulator, the Australian Trust (“MST”). The MST is a superannuation Prudential Regulation Authority (APRA), master trust arrangement governed by an licenses and supervises regulated

> 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.

independent trustee, Mercer Investment superannuation plans. Nominees Ltd. The Plan commenced in the Membership is in either the Defined Benefit MST on 1 August 2001. The Superannuation or Accumulation sections of the Plan. Industry (Supervision) legislation (SIS) governs > Legislative risk - the risk that legislative The accumulation section receives fixed the superannuation industry and provides changes could be made which increase the contributions from Group companies and a framework within which superannuation cost of providing the defined benefits. the Group’s legal or constructive obligation is plans operate. The SIS Regulations require an > Timing of members leaving service - a limited to these contributions. The following actuarial valuation to be performed for each significant amount of benefits paid to sets out details in respect of the defined defined benefit superannuation plan every members leaving may have an impact on the benefit section only. three years, or every year if the plan pays financial position of the Plan, depending on defined benefit pensions. Defined benefit members receive lump sum the financial position of the Plan at the time benefits on retirement, death, disablement Plan assets are held in trusts which are they leave. The impact may be positive or and withdrawal, and are guaranteed benefits subject to supervision by the prudential negative, depending upon the circumstances to the equivalent of the notional balance regulator. Funding levels are reviewed and timing of the withdrawal. they would have received as accumulation regularly. Where assets are less than vested The defined benefit assets are invested in the members through additional contributions benefits, being those payable upon exit, a Mercer Growth investment option. The assets from the Group. The defined benefit section of management plan must be formed to restore are diversified within this investment option the Plan is closed to new members. All new the coverage to at least 100%. members receive accumulation only benefits. and therefore the Plan has no significant The Plan’s Trustee is responsible for the During the 12 months to 31 December concentration of investment risk.  governance of the Plan. The Trustee has 2014, all new employees, who are members a legal obligation to act solely in the best of this fund, have become members of the interests of Plan beneficiaries. The Trustee accumulation category of the Plan. has the following roles:

A D E L A I D E B R I G H T ON LT D AND IT S CONT ROL L ED ENTI TI ES F O R T H E Y E A R E ND ED 3 1 D ECEM BER 2 0 1 4 N O T E S T O A N D F ORM ING PAR T OF T HE F INA NCIAL STATEMENTS

86

20 Retirement benefit obligations (continued) (b) Balance sheet amounts The amounts recognised in the balance sheet and the movements in the net defined benefit obligation over the year are as follows: Present value ($ Million) of obligation

Fair value of plan assets

Total

At 1 January 2014 Current service cost Interest expense/(income) Transfers in

55.4

(54.9 )

0.5

2.1 2.0 -

- (2.0 ) -

2.1 -



4.1

(2.0 )

2.1

Remeasurements Return on plan assets, excluding amounts included in interest expense/(income) - (2.7 ) (2.7 ) Loss from change in financial assumptions 2.9 - 2.9 Experience losses 1.0 - 1.0

3.9

(2.7 )

1.2

Contributions: Employers - (1.6 ) (1.6 ) Plan participants 1.0 (1.0 ) Payments from Plan: Benefit payments (5.5 ) 5.5 At 31 December 2014 At 1 January 2013 Current service cost Interest expense/(income) Transfers in

58.9

(56.7 )

2.2

59.0

(51.0 )

8.0

2.2 1.7 0.2

- (1.5 ) (0.2 )

2.2 0.2 -

4.1

(1.7 )

2.4

Remeasurements Return on plan assets, excluding amounts included in interest expense/(income) - (7.1 ) (7.1 ) Gain from change in financial assumptions (2.0 ) - (2.0 ) Experience losses 1.5 - 1.5

(0.5 )

Contributions: Employers - Plan participants 1.0 Payments from Plan: Benefit payments (8.2 ) At 31 December 2013

A D E L A I D E BRIGHT ON LT D AND IT S CONT ROLLED ENTI TI ES F O R T H E Y EA R END ED 3 1 D ECEM BER 2 0 1 4 N O T E S TO A ND F ORM ING PAR T OF T HE F INANCI AL STATEMENTS

87

55.4

(7.1 )

(7.6 )

(2.3 ) (1.0 )

(2.3 ) -

8.2

-

(54.9 )

0.5

20 Retirement benefit obligations (continued) (c) Categories of plan assets The major categories of plan assets are as follows:

31 December 2014 31 December 2013 Un-quoted in % Un-quoted in % $ million $ million

Australian equity International equity Fixed income Property Cash Other

15.9 28% 18.1 32% 9.1 16% 5.7 10% 3.4 6% 4.5 8%

14.8 17.0 9.9 7.1 4.4 1.7

27% 31% 18% 13% 8% 3%

Total

56.7

54.9

100%

100%

The assets set out in the above table are held in the Mercer Growth investment fund which does not have a quoted price in an active market. There are no amounts relating to the Company’s own financial instruments, and property occupied by, or other assets used by, the Company. (d) Actuarial assumptions and sensitivity The significant actuarial assumptions used were as follows: %

Consolidated

2014

2013

Discount rate - % p.a. 2.7 3.9 Future salary increases - % p.a. 4.0 2.0 in first year then 4.0 thereafter The sensitivity of the defined benefit obligation to changes in the significant assumptions is:

Change in assumption

Impact on defined benefit obligation Increase in assumption Decrease in assumption

31 December 2014 Discount rate 0.50 ppts Decrease by 2.0% Increase by 2.2% Future salary increases 0.50 ppts Increase by 1.7% Decrease by 1.6% 31 December 2013 Discount rate 0.50 ppts Decrease by 2.1% Increase by 2.2% Future salary increases 0.50 ppts Increase by 1.7% Decrease by 1.6% The above sensitivity analysis is based on a change in an assumption while holding all other assumptions constant. In practice, this is unlikely to occur, and changes in some of the assumptions may be correlated. When calculating the sensitivity of the defined benefit obligation to significant actuarial assumptions the same method (present value of the defined benefit obligation calculated with the projected unit credit method at the end of the reporting period) has been applied as when calculating the defined benefit liability recognised in the balance sheet. (e) Defined benefit liability and employer contributions From 1 July 2014, the Group made contributions to the Plan at rates of between 6% and 9% of member salaries. For the period from 1 January 2013 to 30 June 2014, the Group made contributions to the Plan at rates of between 10% and 13% of member salaries. In addition, the Group made quarterly contributions of $150,000 during 2013. Expected contributions to the defined benefit plan for the year ending 31 December 2015 are $1.0 million. The weighted average duration of the defined benefit obligation is 7 years (2013: 6 years).  

A D E L A I D E B R I G H T ON LT D AND IT S CONT ROL L ED ENTI TI ES F O R T H E Y E A R E ND ED 3 1 D ECEM BER 2 0 1 4 N O T E S T O A N D F ORM ING PAR T OF T HE F INA NCIAL STATEMENTS

88

($ Million)

Consolidated 2014



2013

21 Contributed equity (a) Share capital Issued and paid up capital 648,267,667 (2013: 638,456,688) ordinary shares, fully paid

727.9 699.1

(b) Movements in ordinary share capital Opening balance at 1 January 699.1 696.6 2,078,332 shares issued under Executive Performance Share Plan (2013: 1,069,200) (i) 4.2 2.5 7,732,647 Dividend Reinvestment Plan share issues (2013: nil) (Note 21(d)) 24.6 727.9 699.1

Closing balance at 31 December (i) Ordinary shares issued under the Adelaide Brighton Ltd Executive Performance Share Plan (refer Note 28). (c) Ordinary shares

Ordinary shares entitle the holder to participate in dividends and the proceeds on winding up the Company in proportion to the number of and amounts paid on the shares held. On a show of hands every holder of ordinary shares present at a meeting in person or by proxy, is entitled to one vote and, on a poll, each share is entitled to one vote. Ordinary shares have no par value and the Company does not have a limited amount of authorised capital. (d) Dividend Reinvestment Plan In August 2014 the Company reactivated the Dividend Reinvestment Plan (DRP), effective for the 2014 interim dividend. Under the DRP, holders of ordinary shares may elect to have all or part of their dividend entitlements satisfied by the issue of new ordinary shares rather than by being paid in cash. Shares are issued under the DRP at a price determined by the Board. The operation of the DRP for any dividend is at the discretion of the Board, which suspended the DRP in February 2015 with immediate effect until further notice. (e) Capital risk management The Group’s objectives when managing capital are to safeguard their ability to continue as a going concern, so that they can continue to provide returns for shareholders and benefits for other stakeholders, and to maintain an optimal capital structure to reduce the cost of capital. In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, issue shares as well as issue new debt or redeem existing debt. The Group monitors capital on the basis of the gearing ratio. The gearing ratio at 31 December 2014 and 31 December 2013 was as follows: ($ Million)

Consolidated 2014



2013

Total borrowings Less: cash and cash equivalents

391.5 259.1 (31.7 ) (11.1)

Net debt Total equity Gearing ratio

359.8 248.0 1,136.7 1,061.8 31.7 % 23.4 %

(f) Employee share scheme and options Information relating to the employee share schemes, including details of shares issued under the schemes is set out in Note 28.  

A D E L A I D E BRIGHT ON LT D AND IT S CONT ROLLED ENTI TI ES F O R T H E Y EA R END ED 3 1 D ECEM BER 2 0 1 4 N O T E S TO A ND F ORM ING PAR T OF T HE F INANCI AL STATEMENTS

89

($ Million)

Consolidated

2014

2013

22 Reserves and retained earnings (a) Reserves Foreign currency translation reserve Share-based payment reserve

1.5 1.0 1.8 3.3



3.3 4.3

Foreign currency translation reserve Opening balance at 1 January Currency translation differences arising during the year

1.0 0.5 1.0

Closing balance at 31 December

1.5 1.0

Share-based payment reserve Opening balance at 1 January Awards expense Deferred tax Over provision of tax in prior periods Issue of shares to employees

3.3 2.1 1.5 2.1 (0.6 ) 0.3 - 0.5 (2.4 ) (1.7 )

Closing balance at 31 December

1.8 3.3

Nature and purpose of reserves Foreign currency translation Exchange differences arising on translation of foreign controlled entities and the foreign associate are recognised in other comprehensive income as described in Note 1(d) and accumulated in a separate reserve within equity. The cumulative amount is reclassified to profit or loss when the net investment is disposed of. Share-based payment The share-based payment reserve is used to recognise the fair value of Awards issued but not exercised. (b) Retained earnings Opening balance at 1 January Net profit for the year Actuarial (loss) / gain on defined benefit obligation (net of tax) Dividends Closing balance at 31 December

A D E L A I D E B R I G H T ON LT D AND IT S CONT ROL L ED ENTI TI ES F O R T H E Y E A R E ND ED 3 1 D ECEM BER 2 0 1 4 N O T E S T O A N D F ORM ING PAR T OF T HE F INA NCIAL STATEMENTS

90

355.6 304.4 172.7 151.1 (0.8 ) 5.3 (124.7 ) (105.2 )

402.8 355.6

($ Million)

Consolidated

2014

2013

23 Dividends Dividends paid during the year 2013 final ordinary dividend of 9.0 cents (2012 - 9.0 cents) per fully paid ordinary share, franked at 100% (2012 - 100%) paid on 15 April 2014 57.5 57.4 2013 final special dividend of 3.0 cents (2012 - nil cents) per fully paid ordinary share, franked at 100% (2012 - n/a) paid on 15 April 2014 19.1 2014 interim dividend of 7.5 cents (2013 - 7.5 cents) per fully paid ordinary share, franked at 100% (2013 - 100%) paid on 20 October 2014 48.1 47.8 Total dividends

124.7 105.2

Dividends paid: In cash 100.1 105.2 Issue of shares through dividend reinvestment plan 24.6 Total dividends

124.7 105.2

Dividend not recognised at year end Since the end of the year the Directors have recommended the payment of a final dividend of 9.5 cents (2013: 12.0 cents) per fully paid share, franked at 100% (2013: 100%).The aggregate amount of the proposed final dividend to be paid on 16 April 2015, not recognised as a liability at the end of the reporting period, is

61.6 76.6

Franked dividend The franked portion of the dividend proposed as at 31 December 2014 will be franked out of existing franking credits or out of franking credits arising from the payment of income tax in the year ending 31 December 2015. Franking credits available for subsequent financial years based on a tax rate of 30% (2013: 30%)

116.8 107.3

The above amounts represent the balance of the franking account as at the end of the financial year, adjusted for:

The Board approves written principles for overall risk management, as well as policies covering specific areas, such as foreign exchange risk, interest rate risk, credit (a) franking credits that will arise from the risk, use of derivative and non-derivative payment of any current tax liability financial instruments and investment of (b) franking debits that will arise from the excess liquidity. The Group does not enter payment of dividends recognised as a liability into or trade financial instruments, including at the reporting date derivative financial instruments, for speculative purposes. (c) franking credits that will arise from the receipt of dividends recognised as receivables at the The Group uses different methods to measure reporting date. different types of risk to which it is exposed. These methods include sensitivity analysis The impact on the franking account of the in the case of interest rate, foreign exchange dividend recommended by the Directors since and other price risks, and ageing analysis for year end, but not recognised as a liability at credit risk. The Group uses derivative financial year end, will be a reduction in the franking instruments in the form of foreign exchange account of $26.4 million (2013: $32.8 million). forward contracts to hedge certain currency risk exposures. 24 Financial risk management Derivatives are initially recognised at fair value The Group’s activities expose it to a variety at the date a derivative contract is entered of financial risks: market risk (including into and are subsequently remeasured at currency risk and interest rate risk), credit their fair value at each reporting date. The risk and liquidity risk. The Group’s overall Company does not utilise hedge accounting risk management program focuses on the as permitted under Australian Accounting unpredictability of financial markets and seeks Standards. to minimise potential adverse effects on the financial performance of the Group.

A D E L A I D E BRIGHT ON LT D AND IT S CONT ROLLED ENTI TI ES F O R T H E Y EA R END ED 3 1 D ECEM BER 2 0 1 4 N O T E S TO A ND F ORM ING PAR T OF T HE F INANCI AL STATEMENTS

91

The Group’s Corporate Treasury Function provides services to the business, coordinates access to domestic financial markets and monitors and manages the financial risks relating to the operations of the Group. The Group Corporate Treasury Function reports, on a monthly basis, an analysis of key market exposures. (a) Market risk (i) 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 commercial transactions and recognised assets and liabilities that are denominated in a currency that is not the entity’s functional currency. The risk is measured using sensitivity analysis and cash flow forecasting. The Group enters into foreign exchange forward contracts to hedge its foreign exchange risk on these overseas trading activities against movements in the Australian dollar.

24 Financial risk management (continued)

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 senior debt lending facilities on a 30, 60 or 90 day basis, 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 2014 and 2013, the Group’s borrowings at variable rates were denominated in Australian Dollars.

(a) Market risk (continued)

(i) Foreign exchange risk (continued) The Group Treasury’s risk management policy is to hedge commitments for purchases for up to six months forward. Longer hedge positions are deemed too expensive versus the value at risk due to the respective currencies’ interest rate spread. Derivative instruments entered into by the Group do not qualify for hedge accounting. (ii) Interest rate risk The Group analyses its interest rate The Group’s main interest rate risk arises exposure on a dynamic basis. Periodically, from bank borrowings. Borrowings issued at various scenarios are simulated taking variable rates expose the Group to interest into consideration refinancing, renewal of rate risk. Due to the historically low levels of existing positions, alternative financing and gearing, Group policy is to take on senior hedging. Based on these scenarios, the

Group calculates the impact on forecast profit and loss of a defined interest rate shift. The scenarios are run only for liabilities that represent the major interest-bearing positions. Based on the latest calculations performed, the impact on profit and equity of a 100 basis-point movement would be a maximum increase/decrease of $3.3 million (2013: $2.2 million). A 100 basis-point sensitivity has been selected as this is considered reasonable given the current level of both short term and long term Australian dollar interest rates. (iii) Summarised sensitivity analysis The following table summarises the sensitivity, on a pre-tax basis, of the Group’s financial assets and financial liabilities to interest rate risk.

2014 2013

($ Million - consolidated) Notes

Carrying Sensitivity Carrying Sensitivity value -1.0% +1.0% value -1.0% +1.0%

Financial assets Cash 6 31.7 (0.3 ) 0.3 11.1 (0.1 ) 0.1 Receivables 7 232.0 (0.3 ) 0.3 213.8 (0.3 ) 0.3



263.7

(0.6 )

0.6

224.9

(0.4 )

0.4

Financial liabilities Borrowings 16 391.5 3.9 (3.9 ) 259.1 2.6 (2.6 ) Payables 15 120.4 - - 105.4 - 511.9

3.9

(3.9 )

364.5

2.6

(2.6 )

Total increase/(decrease)

3.3

(3.3 )

2.2

(2.2 )



Foreign currency risk is immaterial as the majority of sales and assets are denominated in Australian Dollars, while the Group’s purchases that are in foreign currency are settled at the time of the transaction, consequently payables are generally in Australian Dollars. All borrowings are denominated in Australian Dollars.

Individual risk limits are set based on internal Consequently, the maximum exposure to or external ratings in accordance with credit risk represents the carrying value delegated authority limits set by the Board. of receivables and derivatives. Derivative The compliance with credit limits by credit counterparties and cash transactions are approved customers is regularly monitored by limited to high credit quality institutions. line credit management. Sales to non-account customers are settled either in cash, major (c) Liquidity risk credit cards or electronic funds transfer, The ultimate responsibility for liquidity risk mitigating credit risk. (b) Credit risk management rests with the Board which has Credit risk further arises in relation to financial established an appropriate risk management Credit risk is managed on a Group basis guarantees given to certain parties. Such framework for the management of the using delegated authority limits. Credit risk guarantees are only provided in exceptional Group’s short, medium and long term funding arises from cash and cash equivalents, circumstances and are subject to appropriate and liquidity management requirements. derivative financial instruments and deposits approval. The Group’s Corporate Treasury Function with banks and financial institutions, as well manages liquidity risk by maintaining as credit exposures to customers, including The Group has no significant concentration adequate reserves, banking facilities and outstanding receivables and committed of credit risk. The Group has policies and reserve borrowing facilities by continuously transactions. procedures in place to ensure that sales monitoring forecast and actual cash flows are made to customers with an appropriate For banks and financial institutions, only and matching the maturity profiles of financial credit history. In relation to a small number of independently rated parties with a minimum assets and liabilities. Included below is a customers with uncertain credit history, the rating of ‘A’ are accepted. For trading credit statement of undrawn facilities that the Group Group has taken out personal guarantees risk, Credit Control assesses the credit quality and Company has at its disposal to further in order to cover credit exposures. As at of the customer, taking into account its reduce liquidity risk. 31 December 2014, the Group held financial position, past experience, external no collateral over outstanding debts. credit agency reports and credit references.

A D E L A I D E B R I G H T ON LT D AND IT S CONT ROL L ED ENTI TI ES F O R T H E Y E A R E ND ED 3 1 D ECEM BER 2 0 1 4 N O T E S T O A N D F ORM ING PAR T OF T HE F INA NCIAL STATEMENTS

92

($ Million)

Consolidated 2014



2013

24 Financial risk management (continued) (c) Liquidity risk (continued) Financing arrangements Unrestricted access was available at balance date to the following lines of credit: Credit standby arrangements Total facilities Bank overdrafts Bank facilities - external parties

4.0 4.0 540.0 500.0

544.0 504.0

Used at balance date Bank overdrafts Bank facilities - external parties

- 390.0 260.0



390.0 260.0

Unused at balance date Bank overdrafts Bank facilities - external parties

4.0 4.0 150.0 240.0



154.0 244.0

Maturity profile of bank facilities. Maturing on: 1 July 2015 1 July 2016 5 January 2018 4 January 2019

- 300.0 - 200.0 330.0 210.0 -



540.0 500.0

The table below analyses the Group’s financial liabilities that will be settled on a gross basis. The amounts disclosed are the contractual undiscounted cash flows. For bank facilities the cash flows have been estimated using interest rates applicable at the end of the reporting period. ($ Million) < 6 months 6-12 months 1-2 years > 2 years Total Contractual maturities of financial liabilities 31 December 2014 Trade payables 120.4 - - - 120.4 Bank facilities 7.3 7.3 29.3 392.3 436.2 Finance leases 0.9 0.8 1.6 0.3 3.6 128.6



8.1 30.9 392.6 560.2

31 December 2013 Trade payables 105.4 - - - 105.4 Bank facilities 5.0 5.0 265.0 - 275.0

110.4

A D E L A I D E BRIGHT ON LT D AND IT S CONT ROLLED ENTI TI ES F O R T H E Y EA R END ED 3 1 D ECEM BER 2 0 1 4 N O T E S TO A ND F ORM ING PAR T OF T HE F INANCI AL STATEMENTS

93

5.0 265.0

- 380.4

25 Fair value measurements Fair value hierarchy (i) Recognised fair value measurements The Group measures and recognises financial assets at fair value through profit or loss (FVTPL) on a recurring basis. Derivative instruments entered into by the Group do not qualify for hedge accounting and are classified in this category. The only assets or liabilities measured and recognised at fair value are the asset in relation to the Carbon Tax which is measured in accordance with the price of units in the market (level 1) and the asset or liability in relation to forward exchange contracts determined using forward exchange market rates at the balance sheet date (level 1). The Group held no assets associated with the Carbon Tax (2013: $52.5 million) or assets or liabilities in relation to forward exchange contracts (2013: $0.1 million) at the balance sheet date.   (ii) Disclosed fair values The Group also has a number of assets and liabilities which are not measured at fair value, but for which fair values are disclosed in the notes. The carrying value less impairment provision of trade receivables and payables are assumed to approximate their fair values due to their short-term nature. The fair value of non-current receivables for disclosure purposes is based predominantly on the recoverable loan amount to joint ventures and external parties (level 3). The interest rate for current and non-current borrowings is reset on a short term basis, generally 30 to 90 days, and therefore the carrying value of current and non-current borrowings equal their fair values (level 2). Consolidated ($ Million)



2014

2013

26 Contingencies Details and estimates of maximum amounts of contingent liabilities are as follows: (a) Guarantees Bank guarantees Guarantees of joint venture borrowings

19.8 15.6 - 30.6

(b) Litigation At the time of preparing this financial report some companies included in the Group are parties to pending legal proceedings, the outcome of which is not known. The entities are defending, or prosecuting, these proceedings. The Directors have assessed the impact on the Group from the individual actions. No material losses are anticipated in respect of any of the above contingent liabilities. 27 Commitments for expenditure (a) Capital commitments - property, plant & equipment Capital expenditure contracted for at the reporting date but not recognised as liabilities is as follows: Within one year

5.0 8.3

(b) Lease commitments - operating leases Commitments in relation to operating leases contracted for at the reporting date, but not recognised as liabilities, are payable as follows: Within one year Later than one year but not later than five years Later than five years

4.9 5.3 9.8 13.0 8.8 17.1 23.5

35.4

Commitments for operating lease payments relate mainly to rental leases on property. The Group leases various properties under non-cancellable operating leases which contain varying terms, escalation clauses and renewal rights. On renewal, the terms of the leases are either renegotiated or the expiry date is extended under pre-negotiated terms.  

A D E L A I D E B R I G H T ON LT D AND IT S CONT ROL L ED ENTI TI ES F O R T H E Y E A R E ND ED 3 1 D ECEM BER 2 0 1 4 N O T E S T O A N D F ORM ING PAR T OF T HE F INA NCIAL STATEMENTS

94

($ Million)

Consolidated

2014

2013

27 Commitments for expenditure (continued) (c) Lease commitments - finance leases Commitments in relation to finance leases for various plant and equipment with a carrying amount of $3.3m (2013: nil) contracted for at the reporting date, but not recognised as liabilities, are payable as follows: Within one year Later than one year but not later than five years

1.7 1.9 -

Minimum lease payments Future finance charges

3.6 (0.4 ) -

Total lease liabilities (Note 16)

3.2

The present value of finance lease liabilities is as follows: Within one year Later than one year but not later than five years

1.4 1.8 -

Minimum lease payments

3.2

-

-

28 Share-based payment plans (a) Employee Share Plan The establishment of the Adelaide Brighton Ltd Employee Share Plan was approved by special resolution at the Annual General Meeting of the Company held on 19 November 1997. Subject to the Board approval of grants, all full time employees of the Company and its controlled entities who have been continuously employed by the Company or a controlled entity for a period of one year are eligible to participate in the Plan. Casual employees and contractors are not eligible to participate in the Plan. No shares were issued under the Employee Share Plan during the year (2013 - nil). In subsequent years, the Board will decide whether, considering the profitability of the Company and the demands of the business, further invitations to take up grants of shares should be made. (b) Executive Performance Share Plan The Adelaide Brighton Ltd Executive Performance Share Plan (“the Plan” or “EPSP”) provides for grants of Awards to eligible executives. This plan was approved by shareholders at the Annual General Meeting held on 19 November 1997. In accordance with the requirements of the ASX Listing Rules, Awards granted to the Managing Director who retired on 21 May 2014, have been approved by shareholders. Under the Plan, eligible executives are granted Awards (each being an entitlement to a fully paid ordinary share of Adelaide Brighton Ltd, subject to the satisfaction of performance conditions) on terms and conditions determined by the Board. On exercise of the Award following vesting, participants are issued shares of the Company. Detailed discussion of performance conditions is set out in the Remuneration Report on pages 47 to 61. The exercise price for each Award is $nil.

Consolidated

2014

2013

Movement in number of Awards outstanding Outstanding at beginning of the year 6,262,180 5,975,030 Granted 1,065,255 1,502,150 Forfeited (1,929,500 ) (145,800 ) Exercised (2,078,332 ) (1,069,200 ) Expired - Outstanding at the end of the year

3,319,603

6,262,180

Exercisable at the end of the year - The average value per share at the earliest exercise date during the year was $3.92 (2013: $3.40). The value per share is calculated using the Volume Weighted Closing Price which is the average of the closing price and number of Adelaide Brighton Limited shares traded on the Australian Securities Exchange for the five trading days before the exercise date, but not including the day of exercise.

A D E L A I D E BRIGHT ON LT D AND IT S CONT ROLLED ENTI TI ES F O R T H E Y EA R END ED 3 1 D ECEM BER 2 0 1 4 N O T E S TO A ND F ORM ING PAR T OF T HE F INANCI AL STATEMENTS

95

28 Share-based payment plans (continued) (b) Executive Performance Share Plan (continued) Fair values of Awards at the grant date are independently determined using a pricing model that takes into account the exercise price, the term of the Awards, the lack of marketability, the impact of the TSR vesting condition (applicable to 50% of Awards), the expected future dividends and the risk free interest rate for the term of the Award. For the purposes of pricing model inputs, the share price for calculation of the Award value is based on the closing published share price at grant date. The impact of the Award’s performance conditions have been incorporated into the valuation through the use of a discount for lack of marketability and TSR vesting conditions. Volatility of the Company’s share price has been considered in valuing the Awards, however the independent valuer has reached the conclusion that the volatility is not a factor in assessing the fair value of the Awards. The assessed fair value at grant date of Awards granted to individual participants is allocated equally over the period from grant date to vesting date. Awards granted in 2014 - weighted average pricing model inputs 2014 Awards 2013 Awards Share price at grant date Expected annual dividends Risk-free interest rate Lack of marketability discount TSR condition discount Earliest exercise date

$3.88 $0.17 3.37% p.a. 2.50% p.a. 50% 1-May-18

Awards granted in 2013 - weighted average pricing model inputs

$3.43 $0.19 2.71% p.a. 2.50% p.a. 50% 1-May-17

2012 Awards 2012 Awards - Tranche 2 - Tranche 1 $3.43 $0.19 2.71% p.a. 2.50% p.a. 50% 1-May-16

$3.43 $0.11 2.71% p.a. 2.50% p.a. 50% 1-May-15

2013 Awards

Share price at grant date Expected annual dividends Risk-free interest rate Lack of marketability discount TSR condition discount Earliest exercise date

$3.30 $0.17 2.81% p.a. 3.00% p.a. 50% 1-May-17

The Plan does not entitle the Participants to participate in any other share issues of the Company and the unexercised Awards do not attract dividend or voting rights. The Plan is accounted for by the Company in accordance with Note 1(v)(iv), with $1,521,941 (2013: $2,089,093) recognised as an expense during the year. The weighted average remaining contractual life of Awards outstanding at the end of the period was 1.8 years (2013: 1.8 years). ($)

Consolidated

2014

2013

29 Remuneration of auditors During the year the following fees were paid or payable for services provided by the auditor of the parent entity, its related practices and non-related audit firms: (a) Audit services PricewaterhouseCoopers Australian firm Audit and review of financial statements

651,210 692,540

Total remuneration for audit services

651,210 692,540

(b) Non-audit services PricewaterhouseCoopers Australian firm Other assurance services

104,073 92,798

Total remuneration for non-audit services

A D E L A I D E B R I G H T ON LT D AND IT S CONT ROL L ED ENTI TI ES F O R T H E Y E A R E ND ED 3 1 D ECEM BER 2 0 1 4 N O T E S T O A N D F ORM ING PAR T OF T HE F INA NCIAL STATEMENTS

96

104,073 92,798

($ Million)

Consolidated

2014

2013

30 Related parties (a) Compensation of key management personnel Short-term employee benefits 7.1 8.8 Post-employment benefits 1.0 0.2 Share-based payments 1.8 1.4

9.9

10.4

(b) Other transactions with key management personnel RD Barro, a Director of Adelaide Brighton Ltd, is Managing Director of Barro Group Pty Ltd. Barro Group Pty Ltd and Adelaide Brighton Ltd, through its 100% owned subsidiary, Adelaide Brighton Management Ltd, each control 50% of Independent Cement and Lime Pty Ltd, a distributor of cement and lime in Victoria and New South Wales. During the year, the Barro Group of companies purchased goods and materials from and sold goods, materials and services to Independent Cement and Lime Pty Ltd and the Group. The Barro Group of companies also purchased goods and materials from Sunstate Cement Ltd, a company in which the Group has a 50% share, and other entities in the Group. MP Chellew, an executive Director of Adelaide Brighton Ltd until his retirement on 21 May 2014, M Brydon, Chief Executive Officer, and M Kelly, a senior executive of Adelaide Brighton Ltd, have been Directors of Sunstate Cement Ltd during the reporting period. M Brydon was also a Director of Independent Cement and Lime Pty Ltd until 6 March 2014 and of Aalborg Portland Malaysia Sdn. Bhd. until 13 November 2014. G Agriogiannis, a senior executive of Adelaide Brighton Ltd and M Kelly are also Directors of the Mawsons Group. During the year, the Group traded significantly with Independent Cement and Lime Pty Ltd, Sunstate Cement Ltd and the Mawsons Group, which are all joint ventures of the Group. All transactions involving the Barro Group Pty Ltd and Adelaide Brighton Ltd and its subsidiaries, Independent Cement and Lime Pty Ltd and its subsidiaries, Sunstate Cement Ltd and the Mawsons Group were conducted on standard commercial terms. Transactions entered into during the year with Directors of the Company and the Group, or their related parties, are on stardard commercial terms and conditions, and include the purchase of goods from the Group and the receipt of dividends from the Company. Consolidated ($)



2014

2013

Aggregate amounts of the above transactions with the Directors and their related parties: Sales to Director related parties 54,853,108 45,019,728 Purchases from Director related parties 44,361,860 41,908,399 (c) Controlled entities Details of interests in controlled entities are set out in Note 31. The ultimate parent company is Adelaide Brighton Ltd. (d) Joint arrangement and associate entities Details of interests in joint arrangement and associate entities are set out in Note 10(b). The nature of transactions with joint arrangement and associate entities is detailed below: Adelaide Brighton Cement Ltd and Morgan Cement International Ltd supplied finished products and raw materials to Sunstate Cement Ltd, Independent Cement and Lime Pty Ltd and Peninsula Concrete Pty Ltd. Hy-Tec Industries Pty Ltd, Hy-Tec Industries (Victoria) Pty Ltd, Hy-Tec Industries (Queensland) Pty Ltd, Adbri Masonry Group Pty Ltd, Adelaide Brighton Cement Ltd and Cockburn Cement Ltd purchased finished products, raw materials and transportation services from Sunstate Cement Ltd, Independent Cement and Lime Pty Ltd and Aalborg Portland Malaysia Sdn. Bhd. All transactions are on normal commercial terms and conditions and transactions for the supply are covered by shareholder agreements.

A D E L A I D E BRIGHT ON LT D AND IT S CONT ROLLED ENTI TI ES F O R T H E Y EA R END ED 3 1 D ECEM BER 2 0 1 4 N O T E S TO A ND F ORM ING PAR T OF T HE F INANCI AL STATEMENTS

97

($’000)

Consolidated

2014

2013

30 Related parties (continued) (e) Transactions with related parties The following transactions occurred with related parties: Sale of goods - Joint venture entities 199,259 188,147 Purchases of materials and goods - Joint venture entities 76,793 64,008 Interest revenue - Joint venture entities 761 757 Dividend and distribution income - Joint venture entities 20,984 16,337 Superannuation contributions - Contributions to superannuation funds on behalf of employees 11,682 11,666 - Reimbursement of superannuation contribution by joint venture entity - 22 Loans advanced to/(from): - Joint venture entities 1,861 2,445 (f) Outstanding balances arising from sales/purchases of goods and services The following balances are outstanding at the reporting date in relation to transactions with related parties: Current receivables - Joint venture entities (interest) 393 378 - Joint venture entities (trade) 27,242 23,690 Non-current receivables - Joint venture entities (loans) 29,668 27,808 Current payables - Joint venture entities (trade) 12,378 6,450 Outstanding balances are unsecured and repayable in cash. No provisions for doubtful receivables have been raised in relation to any outstanding balances. (g) Loans to related parties A loan to a joint venture entity, Independent Cement and Lime Pty Ltd, has interest charged at commercial rates on the outstanding balance. Interest revenue brought to account by the Group during the reporting year on this loan was $760,758 (2013: $756,557).

A D E L A I D E B R I G H T ON LT D AND IT S CONT ROL L ED ENTI TI ES F O R T H E Y E A R E ND ED 3 1 D ECEM BER 2 0 1 4 N O T E S T O A N D F ORM ING PAR T OF T HE F INA NCIAL STATEMENTS

98

31 Subsidiaries and transactions with non-controlling interests Place of Name of entity incorporation

Class of shares

Ownership interest held by the Group 2014 2013 % %

Adelaide Brighton Ltd Australia Ord 100 100 Adelaide Brighton Cement Ltd2 Adelaide Brighton Cement Inc USA Ord 80 80 Adelaide Brighton Cement Investments Pty Ltd2 Australia Ord 100 100 Adelaide Brighton Management Ltd2 Australia Ord 100 100 Adelaide Brighton Cement International Pty Ltd1 Australia Ord 100 100 Adelaide Brighton Intellectual Property Pty Ltd1 Australia Ord 100 100 Cement Resources Consolidated Pty Ltd1 Australia Ord 100 100 Cockburn Cement Ltd2 Australia Ord 100 100 Hy-Tec Industries (Queensland) Pty Ltd2 Australia Ord 100 100 Northern Cement Ltd2 Australia Ord 100 100 Premier Resources Ltd2 Australia Ord 100 100 Adbri Masonry Group Pty Ltd2 Australia Ord 100 100 Adelaide Brighton Cement Ltd Exmouth Limestone Pty Ltd1 Australia Ord 51 51 Adelaide Brighton Cement Inc Adelaide Brighton Cement (Florida) Inc USA Ord 100 100 Adelaide Brighton Cement (Hawaii) Inc USA Ord 100 100 Hileah (Florida) Management Inc USA Ord 100 100 Adelaide Brighton Management Ltd Accendo Pty Ltd1 Australia Ord 100 100 Global Cement Australia Pty Ltd1 Australia Ord 100 100 Hurd Haulage Pty Ltd2 Australia Ord 100 100 K.C. Mawson Pty Ltd1 Australia Ord 100 100 Adelaide Brighton Cement International Pty Ltd Adelaide Brighton Cement Inc USA Ord 20 20 Fuel & Combustion Technology International Ltd United Kingdom Ord 100 100 Fuel & Combustion Technology International Ltd Fuel & Combustion Technology International Inc USA Ord 100 100 Northern Cement Ltd Mataranka Lime Pty Ltd1 Australia Ord 100 100 Cockburn Cement Ltd Cockburn Waters Pty Ltd1 Australia Ord 100 100 Hydrated Lime Pty Ltd1 Australia Ord 100 100 Chemical Unit Trust Australia Units 100 100 Kalgoorlie Lime & Chemical Company Pty Ltd1 Australia Ord 100 100 Premier Resources Ltd Hy-Tec Industries Pty Ltd2 Australia Ord 100 100 100 100 Hy-Tec Industries (Victoria) Pty Ltd2 Australia Ord Bonfoal Pty Ltd1 Australia Ord 100 100 Aus-10 Rhyolite Pty Ltd3 Australia Ord 100 100 100 100 Morgan Cement International Pty Ltd2 Australia Ord Screenings Pty Ltd2 Australia Ord 100 Lonsdale Sand & Metal Pty Ltd1 Australia Ord 100 Hy-Tec Industries (Victoria) Pty Ltd CRC2 Pty Ltd1 Australia Ord 100 100 CRC3 Pty Ltd1 Australia Ord 100 100 Hy-Tec Industries (Victoria) No 1 Pty Ltd1 Australia Ord 100 100 Hy-Tec Industries (Victoria) No 2 Pty Ltd1 Australia Ord 100 100 Sheltacrete Pty Ltd1 Australia Ord 100 100 Adbri Masonry Group Pty Ltd Adbri Masonry Pty Ltd2 Australia Ord 100 100 Adbri Mining Products Pty Ltd1 Australia Ord 100 100 C&M Masonry Products Pty Ltd2 Betta Brick Pty Ltd1 C&M Brick (Bendigo) Pty Ltd1 C&M Design/Construct Pty Ltd1

Australia Ord 100 100 Australia Ord 100 100 Australia Ord 100 100 Australia Ord 100 100

A D E L A I D E BRIGHT ON LT D AND IT S CONT ROLLED ENTI TI ES F O R T H E Y EA R END ED 3 1 D ECEM BER 2 0 1 4 N O T E S TO A ND F ORM ING PAR T OF T HE F INANCI AL STATEMENTS

99

31 Subsidiaries and transactions with non-controlling interests (continued) Place of Name of entity incorporation

Ownership interest held by the Group 2014 2013 % %

Class of shares

Screenings Pty Ltd Australia Ord 100 Agripeta Pty Ltd1 Productivex Pty Ltd1 Australia Ord 100 Southern Quarries Holdings Pty Ltd2 Australia Ord 100 Southern Quarries Holdings Pty Ltd Direct-Mix Holdings Pty Ltd2 Australia Ord 100 Direct-Screens Holdings Pty Ltd1 Australia Ord 100 Southern Lime Pty Ltd1 Australia Ord 100 Southern Quarries Pty Ltd2 Australia Ord 51 Direct-Screens Holdings Pty Ltd Peninsula Mixed Concrete Supplies Pty Ltd1 Australia Ord 100 Direct-Mix Holdings Pty Ltd Direct-Mix Concrete Pty Ltd1 Australia Ord 100 Direct-Mix Concrete (Products) Pty Ltd1 Australia Ord 100 Southern Quarries Pty Ltd2 Australia Ord 49 Southern Quarries Pty Ltd Adelaide Concrete Recyclers Pty Ltd1 Australia Ord 100

1 Small proprietary company as defined by the Corporations Act 2001 and is not required to be audited for statutory purposes.

2 These controlled entities have been granted relief from the necessity to prepare financial reports in accordance with ASIC Class Order 98/1418 (as amended) dated 12 June 2013. For further information see Note 32. 3 Aus-10 Rhyolite Pty Ltd joined Adelaide Brighton Ltd’s Deed of Cross Guarantee under ASIC Class Order 98/1418 (as amended) dated 12 June 2013 on 3 December 2014 by Assumption Deed.

Unless otherwise stated, the subsidiaries as listed above have share capital consisting solely of ordinary shares, which are held directly by the Group, and the proportion of ownership interests held equals the voting rights held by the Group. The country of incorporation or registration is also their principal place of business. 32 Deed of cross guarantee As at the date of this report, Adelaide Brighton Ltd, Adelaide Brighton Cement Ltd, Cockburn Cement Ltd, Adelaide Brighton Cement Investments Pty Ltd, Adelaide Brighton Management Ltd, Northern Cement Ltd, Premier Resources Ltd, Hy-Tec Industries Pty Ltd, Hy-Tec Industries (Victoria) Pty Ltd, Hy-Tec Industries (Queensland) Pty Ltd, Morgan Cement International Pty Ltd, Adbri Masonry Group Pty Ltd, C&M Masonry Products Pty Ltd, Adbri Masonry Pty Ltd, Hurd Haulage Pty Ltd, Aus-10 Rhyolite Pty Ltd, Screenings Pty Ltd, Southern Quarries Holdings Pty Ltd, Direct-Mix Holdings Pty Ltd and Southern Quarries Pty Ltd are parties to a Deed of Cross Guarantee (the Deed) under which each company guarantees the debts of the others. By entering into the Deed, the wholly-owned entities have been relieved from the requirement to prepare a financial report and Directors’ report under Class Order 98/1418 (as amended) issued by the Australian Securities & Investments Commission. The above companies represent a “Closed Group” for the purposes of the Class Order, and as there are no other parties to the Deed that are controlled by the Company, they also represent the “Extended Closed Group”. Aus-10 Rhyolite Pty Ltd, Screenings Pty Ltd, Southern Quarries Holdings Pty Ltd, Direct-Mix Holdings Pty Ltd and Southern Quarries Pty Ltd entered into the Deed on 3 December 2014. No other changes to the Deed were made during 2014. During 2013, to take into account changes that have been made to ASIC’s Class Order 98/1418 over recent years, the Closed Group revoked the Deed of Cross Guarantee that had been in effect in previous years and each of the members of the Closed Group entered into a new Deed of Cross Guarantee reflective of the current requirements of ASIC’s Class Order. The new Deed of Cross Guarantee was in effect at the end of the 2013 financial year. ($ Million)

Consolidated

2014

2013

Set out below is a consolidated balance sheet as at 31 December 2014 of the Closed Group. Current assets Cash and cash equivalents Trade and other receivables Inventories Carbon units

26.8 7.8 200.0 185.6 154.2 127.3 - 52.5

Assets classified as held for sale

381.0 373.2 1.5 7.9

Total current assets

382.5 381.1

A D E L A I D E B R I G H T ON LT D AND IT S CONT ROL L ED ENTI TI ES F O R T H E Y E A R E ND ED 3 1 D ECEM BER 2 0 1 4 N O T E S T O A N D F ORM ING PAR T OF T HE F INA NCIAL STATEMENTS

100

($ Million)

Consolidated

2014

2013

32 Deed of cross guarantee (continued) Non-current assets Receivables Joint arrangements and associate Other financial assets Property, plant and equipment Intangible assets

32.6 31.4 101.0 101.7 25.1 10.2 953.3 808.2 263.9 183.2

Total non-current assets

1,375.9 1,134.7

Total assets 1,758.4 1,515.8 Current liabilities Trade and other payables Borrowings Current tax liabilities Provisions Provision for carbon emissions Other liabilities

123.8 87.3 0.9 1.3 17.1 24.5 26.4 14.0 39.7 4.1 20.4

Total current liabilities

168.6

190.9

Non-current liabilities Borrowings 389.2 259.1 Deferred tax liabilities 76.2 53.5 Provisions 41.1 28.4 Retirement benefit obligations 2.2 0.5 Provision for carbon emissions - 8.2 Other non-current liabilities 0.1 0.1 Total non-current liabilities

508.8 349.8

Total liabilities 677.4 540.7

Net assets 1,081.0 975.1

Equity Contributed equity 727.9 699.1 Reserves 4.3 4.4 Retained earnings 348.8 271.6 Total equity 1,081.0 975.1

Set out below is a condensed consolidated statement of comprehensive income and a summary of movements in consolidated retained earnings for the year ended 31 December 2014 of the Closed Group. Profit before income tax 229.6 200.4 Income tax expense (59.8 ) (55.5 ) Profit for the year 169.8 144.9 Retained earnings 1 January 271.6 226.6 Retained earnings on members entering / leaving Closed Group 32.9 Profit for the year 169.8 144.9 Other comprehensive income (0.8 ) 5.3 Dividends paid (124.7 ) (105.2 ) Retained earnings 31 December 348.8 271.6

A D E L A I D E BRIGHT ON LT D AND IT S CONT ROLLED ENTI TI ES F O R T H E Y EA R END ED 3 1 D ECEM BER 2 0 1 4 N O T E S TO A ND F ORM ING PAR T OF T HE F INANCI AL STATEMENTS

101

($ Million)

Consolidated

2014

2013

33 Reconciliation of profit after income tax to net cash inflow from operating activities

Profit for the year Doubtful debts Depreciation, amortisation and impairment Share based payments expense Finance charges on remediation provision (Gain) on sale of non-current assets Share of undistributed profits of joint ventures Non-cash retirement benefits expense Non-cash remediation obligation Fair value accounting gain on acquisition of business Capitalised interest Other

Net cash provided by operating activities before changes in assets and liabilities



172.6 151.1 2.3 0.9 75.0 70.6 (5.5 ) (0.1 ) 1.2 1.0 (1.2 ) (0.4 ) (0.7 ) (7.9 ) 0.9 5.3 (7.3 ) (1.4 ) (17.8 ) (0.6 ) (1.2 ) 1.0 0.7 219.9 218.6

Changes in operating assets and liabilities, net of effects from purchase of controlled entity: (Increase) in inventories (13.9 ) (1.5 ) Decrease in prepayments 1.4 (Increase) in receivables (9.5 ) (13.1 ) Increase in trade creditors 4.7 9.4 Increase in provisions 3.6 13.0 (Decrease) / increase in taxes payable (18.6 ) 11.3 Increase / (decrease) in deferred taxes payable 4.0 (2.8 ) Increase/ (decrease) in other operating assets and liabilities 2.4 (7.6 )

Net cash inflow from operating activities

194.0 227.3

(Cents)

Consolidated

2014

2013

34 Earnings per share Basic earnings per share

26.9 23.7

Diluted earnings per share

26.8

(Number)

23.4

Consolidated

2014

2013

Weighted average number of shares used as the denominator Weighted average number of ordinary shares used as the denominator in calculating basic earnings per share 641,365,689 638,099,312 Adjustment for calculation of diluted earnings per share: Awards 3,319,603 6,262,180 Weighted average number of ordinary shares and potential ordinary shares used as the denominator in calculating diluted earnings per share

($ Million)

644,685,292 644,361,492

Consolidated

2014

2013

Reconciliation of earnings used in calculating earnings per share Basic and diluted earnings per share Profit after tax Loss/(profit) attributable to non-controlling interests

172.6 151.1 0.1 -

Profit attributable to ordinary equity holders of the Company used in calculating basic and diluted earnings per share

172.7

A D E L A I D E B R I G H T ON LT D AND IT S CONT ROL L ED ENTI TI ES F O R T H E Y E A R E ND ED 3 1 D ECEM BER 2 0 1 4 N O T E S T O A N D F ORM ING PAR T OF T HE F INA NCIAL STATEMENTS

102

151.1

35 Events occurring after the balance sheet date As at the date of this report, no matter or circumstance has arisen since 31 December 2014 that has significantly affected, or may significantly affect the Group’s operations, the results of those operations, or the Group’s state of affairs in future financial years. 36 Segment reporting (a) Description of segments Management has determined the operating segments based on the reports reviewed by the Chief Executive Officer. These reports are evaluated regularly in deciding how to allocate resources and in assessing performance. The two reportable segments have been identified as follows; > Cement, Lime, Concrete and Aggregates > Concrete Products The operating segments Cement, Lime, Concrete and Aggregates individually meet the quantitative thresholds required by AASB 8 as well as meeting the aggregation criteria allowing them to be reported as one segment. Concrete Products meets the quantitative threshold therefore is reported as a separate segment. Joint arrangements and associates related to the reportable segments form part of the above two reportable segments. During 2014, the Aggregates segment met the quantitative threshold for disclosure required by AASB 8 and is now incorporated into the Cement, Lime, Concrete and Aggregates segment. In accordance with the standard, comparative information has been restated to reflect this change. The major end-use markets of Adelaide Brighton’s products include residential and non-residential construction, engineering construction, alumina and steel production and mining. (b) Segment information provided to the Chief Executive Officer The segment information provided to the Chief Executive Officer for the reportable segments is as follows: 31 December 2014 ($ Million)

Cement, Lime, Concrete and Aggregates

Concrete Products

Unallocated

Total

Total segment operating revenue Inter-segment revenue

1,411.2 (40.8 )

137.4 -

- -

1,548.6 (40.8 )

Revenue from external customers Depreciation and amortisation Impairment EBIT Share of net profits of joint venture and associate entities accounted for using the equity method

1,370.4 (62.1 ) (2.0 ) 271.4

137.4 (7.7 ) - 6.1

- (3.2 ) - (30.0 )

1,507.8 (73.0 ) (2.0 ) 247.5

21.7

- -

21.7

31 December 2013 ($ Million)

Cement, Lime, Concrete and Aggregates

Concrete Products

Unallocated

Total

Total segment operating revenue Inter-segment revenue

1,290.6 (25.7 )

124.4 -

- -

1,415.0 (25.7 )

Revenue from external customers Depreciation and amortisation EBIT Share of net profits of joint venture and associate entities accounted for using the equity method

1,264.9 60.1 240.8

124.4 7.4 2.1

- 3.2 (20.2 )

1,389.3 70.7 222.7

- -

24.2

24.2

A D E L A I D E BRIGHT ON LT D AND IT S CONT ROLLED ENTI TI ES F O R T H E Y EA R END ED 3 1 D ECEM BER 2 0 1 4 N O T E S TO A ND F ORM ING PAR T OF T HE F INANCI AL STATEMENTS

103

36 Segment reporting (continued) (b) Segment information provided to the Chief Executive Officer (continued) Sales between segments are carried out at arms length and are eliminated on consolidation. The operating revenue assessed by the Chief Executive Officer includes revenue from external customers and a share of revenue from the joint ventures and associates in proportion to the Group’s ownership interest, excluding freight, interest and royalty revenue. A reconciliation of segment operating revenue to revenue from continuing operations is provided below: Consolidated ($ Million)



2014

2013

Total segment operating revenue 1,548.6 1,415.0 Inter-segment revenue elimination (40.8 ) (25.7 ) Freight revenue 139.4 128.3 Interest revenue 1.8 1.8 Royalties 0.4 0.7 Elimination of joint venture and associate revenue (311.6 ) (292.1 ) Revenue from continuing operations

The Chief Executive Officer assesses the performance of the operating segments based on a measure of EBIT. This measurement basis excludes the effect of net interest. A reconciliation of the EBIT to operating profit before income tax is provided as follows: EBIT Net interest

1,337.8 1,228.0

247.5 222.7 (15.0 ) (14.1 )

Profit before income tax

232.5 208.6

(c) Other segment information Revenues of approximately $168.7 million (2013: $157.2 million) are derived from a single customer. These revenues are attributable to the Cement, Lime, Concrete and Aggregates segment.

A D E L A I D E B R I G H T ON LT D AND IT S CONT ROL L ED ENTI TI ES F O R T H E Y E A R E ND ED 3 1 D ECEM BER 2 0 1 4 N O T E S T O A N D F ORM ING PAR T OF T HE F INA NCIAL STATEMENTS

104

($ Million)

The Company

2014

2013

37 Parent entity financial information (a) Summary financial information The individual financial statements for the Company show the following aggregate amounts: Balance sheet Current assets Total assets Current liabilities Total liabilities

1,556.3 1,051.3 1,920.5 1,572.0 674.3 475.6 1,063.9 736.0

Net assets 856.6 836.0 Shareholders’ equity Issued capital Reserves Share-based payments Retained earnings

720.8 692.0 1.8 3.3 134.0 140.7

Total shareholders’ equity 856.6 836.0 Profit for the year 118.1 128.3 Total comprehensive income 118.1

128.3

(b) Guarantees entered into by the parent entity Bank guarantees

2.5 2.5

(c) Contingent liabilities of the parent entity The parent entity did not have any contingent liabilities as at 31 December 2014 or 31 December 2013 other than the bank guarantees detailed above. 38 Business combinations During 2014, the Company acquired the following businesses: > Direct Mix / Southern Quarries, an integrated aggregate and premixed concrete business to the South Australian building and construction materials market. The Company acquired the business from October 2014 through the acquisition of a 100% interest in the entities associated with the construction materials business. > BM Webb construction materials is an integrated concrete, quarry, sand, transport and cement import business located in and around Townsville. The acquisition was completed in May 2014, with the Group acquiring 100% of the operating assets of the business. > Penrice Minerals & Quarry, a quarry business located in the Barossa Valley of South Australia. The acquisition was completed in July 2014, with the Group acquiring 100% of the owned operating assets of the business. The acquisitions are in line with Adelaide Brighton Ltd’s business strategy of vertical integration.  

A D E L A I D E BRIGHT ON LT D AND IT S CONT ROLLED ENTI TI ES F O R T H E Y EA R END ED 3 1 D ECEM BER 2 0 1 4 N O T E S TO A ND F ORM ING PAR T OF T HE F INANCI AL STATEMENTS

105

38 Business combinations (continued) Details of the purchase consideration, net assets acquired and goodwill are as follows: ($ Million)



Fair value

Purchase consideration Cash paid Contingent consideration

157.4 -

Total purchase consideration

157.4

The initial accounting for the acquisitions is not complete at the end of the year. Due to the timing of the acquisitions and the processes required to complete the fair value exercise, the initial accounting has not been completed for property, plant and equipment, intangible assets, inventory, restoration liabilities and deferred tax. Provisional information on the assets and liabilities recognised as a result of the acquisitions is set out below. Cash and cash equivalents Trade and other receivables Inventories Joint arrangements Freehold land Buildings Property, plant and equipment Mineral reserves Asset retirement cost Intangibles Deferred tax asset Trade and other payables Employment benefit liabilities, including superannuation Provision - restoration liability Current tax liability Borrowings Deferred tax liability

1.8 11.0 4.5 0.3 13.4 2.8 46.7 45.1 4.7 3.9 4.8 (9.0 ) (2.2 ) (4.7 ) (0.9 ) (9.3 ) (13.3 )

Net identifiable asset acquired

99.6

Add: goodwill Less: gain on bargain purchase

75.6 (17.8 )

Net assets acquired

157.4

The goodwill is attributable to two acquisitions and relates to the expected synergies expected to arise from the Company’s vertical integration strategy and the workforce. None of the goodwill is expected to be deductible for tax purposes. A gain relating to a bargain purchase of $17.8 million was recognised within Other Income in the Income Statement. The gain on acquisition reflects the Group’s overall strategy of completing on acquisitions, where negotiating conditions allow, at values approximating the fair value of the tangible assets. Transaction costs associated with the acquisitions of $6.2 million are included in administration costs in the Income Statement. The acquired businesses contributed revenues of $35.4 million and net profit before tax, excluding the gain on acquisitions and acquisition related expenses, of $0.3 million. If the acquisitions had occurred on 1 January 2014, the annualised consolidated revenue and net profit before tax for the year ended 31 December 2014 would have been $1,424.4 million and $239.7 million respectively. These amounts have been calculated using the Group’s accounting policies and by adjusting the results of the businesses to reflect additional depreciation and amortisation that would have been charged assuming the fair value adjustments to property, plant and equipment had applied from 1 January 2014, together with the consequential tax effects.

A D E L A I D E B R I G H T ON LT D AND IT S CONT ROL L ED ENTI TI ES F O R T H E Y E A R E ND ED 3 1 D ECEM BER 2 0 1 4 N O T E S T O A N D F ORM ING PAR T OF T HE F INA NCIAL STATEMENTS

106

Directors’ declaration

Auditor’s independence declaration

In the Directors’ opinion:

Auditor’s Independence Declaration

(a) the financial statements and notes set out on pages 62 to 106 are in accordance with the Corporations Act 2001, including:

As lead auditor for the audit of Adelaide Brighton Ltd for the year ended 31 December 2014, I declare that to the best of my knowledge and belief, there have been:

(i) complying with Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting requirements; and (ii) giving a true and fair view of the consolidated entity’s financial position as at 31 December 2014 and of its performance for the financial year ended on that date; and (b) there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable; and (c) at the date of this declaration, there are reasonable grounds to believe that the members of the Extended Closed Group identified in Note 31 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 described in Note 32. Note 1(a) confirms that the financial statements also comply with International Financial Reporting Standards as issued by the International Accounting Standards Board. The Directors have been given the declarations by the Chief Executive Officer and Chief Financial Officer required by section 295A of the Corporations Act 2001. This declaration is made in accordance with a resolution of the Directors.

a) no contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and b) no contraventions of any applicable code of professional conduct in relation to the audit. This declaration is in respect of Adelaide Brighton Ltd and the entities it controlled during the period.

KR Reid Partner PricewaterhouseCoopers

F O R T H E Y EA R END ED 3 1 D ECEM BER 2 0 1 4

Liability limited by a scheme approved under Professional Standards Legislation.

PricewaterhouseCoopers ABN 52 780 433 757 70 Franklin Street, Adelaide SA 5000 GPO Box 418, Adelaide SA 5001 Telephone +61 8 8218 7000 Facsimile +61 8 8218 7999 www.pwc.com.au

LV Hosking Chairman Dated 12 March 2015

A D E L A I D E BRIGHT ON LT D AND IT S CONT ROLLED ENTI TI ES

Adelaide 12 March 2015

107

Independent audit report

In making those risk assessments, the auditor Auditor’s opinion considers internal control relevant to the In our opinion, the remuneration report of We have audited the accompanying financial consolidated entity’s preparation and fair Adelaide Brighton Limited for the year ended report of Adelaide Brighton Limited (the presentation of the financial report in order to 31 December 2014 complies with section company), which comprises the balance design audit procedures that are appropriate 300A of the Corporations Act 2001. sheet as at 31 December 2014, the income in the circumstances, but not for the purpose statement, statement of comprehensive of expressing an opinion on the effectiveness income, statement of changes in equity of the entity’s internal control. An audit also PricewaterhouseCoopers and statement of cash flows for the year includes evaluating the appropriateness ended on that date, a summary of significant of accounting policies used and the accounting policies, other explanatory notes reasonableness of accounting estimates and the directors’ declaration for Adelaide made by the directors, as well as evaluating Brighton Group (the consolidated entity). The the overall presentation of the financial report. consolidated entity comprises the company and the entities it controlled at year’s end or We believe that the audit evidence we have KR Reid Adelaide from time to time during the financial year. obtained is sufficient and appropriate to Partner 12 March 2015 provide a basis for our audit opinion. Report on the financial report

Directors’ responsibility for the financial report

Independence

The directors of the company are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the financial report that is free from material misstatement, whether due to fraud or error. In Note 1, the directors also state, in accordance with Accounting Standard AASB 101 Presentation of Financial Statements, that the financial statements comply with International Financial Reporting Standards.

In conducting our audit, we have complied with the independence requirements of the Corporations Act 2001.

Auditor’s responsibility

(ii) complying with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Regulations 2001.

Auditor’s opinion In our opinion: (a) the financial report of Adelaide Brighton Limited is in accordance with the Corporations Act 2001, including: (i) giving a true and fair view of the consolidated entity’s financial position as at 31 December 2014 and of its performance for the year ended on that date; and

Our responsibility is to express an opinion on the financial report based on our audit. We conducted our audit in accordance with Australian Auditing Standards. Those (b) the financial report and notes also comply standards require that we comply with with International Financial Reporting relevant ethical requirements relating to audit Standards as disclosed in Note 1. engagements and plan and perform the audit to obtain reasonable assurance whether Report on the Remuneration Report the financial report is free from material We have audited the remuneration report misstatement. included in pages 47 to 61 of the directors’ An audit involves performing procedures to report for the year ended 31 December 2014. obtain audit evidence about the amounts The directors of the company are responsible and disclosures in the financial report. The for the preparation and presentation of the procedures selected depend on the auditor’s remuneration report in accordance with judgement, including the assessment of the section 300A of the Corporations Act 2001. risks of material misstatement of the financial Our responsibility is to express an opinion on report, whether due to fraud or error. the remuneration report, based on our audit conducted in accordance with Australian Auditing Standards.

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Liability limited by a scheme approved under Professional Standards Legislation.

PricewaterhouseCoopers ABN 52 780 433 757 70 Franklin Street, Adelaide SA 5000 GPO Box 418, Adelaide SA 5001 Telephone +61 8 8218 7000 Facsimile +61 8 8218 7999 www.pwc.com.au

Financial history

Year ended ($ Million unless stated)

7 9 6 Dec Dec Dec Dec Dec Dec Dec Dec Dec Dec Dec Dec Dec 2014 2013 2012 2011 2010 2009 2008 2007 2006 2005 2004 2003 2002

Statements of financial performance Sales revenue 1,337.8 1,228.0 1,183.1 1,100.4 1,072.9 987.2 1,022.4 888.4 794.7 717.3 683.4 630.6 486.8 Depreciation and amortisation

(75.0) (70.6) (65.2) (57.8) (52.8) (56.8) (56.8) (52.4) (51.8) (47.0) (51.4) (52.3) (45.1)

Earnings before interest & tax

247.5 222.7 222.1 219.87 216.2 185.3 189.1 171.3 148.8 134.1 119.6 97.0 80.0

Net interest earned (paid)

(15.0) (14.1) (14.6) (17.0) (14.0) (16.7) (33.8) (21.7) (15.2) (14.0) (14.7) (12.6) (13.1)

Profit before tax, abnormal & extraordinary items

232.5 208.6 207.5 206.4 202.2 168.6 155.3 149.6 133.6 120.1 104.9 84.4 66.9

Tax expense

(59.9) (57.5) (54.6) (58.0) (50.8) (45.4) (34.5) (35.7) (31.0) (29.2) (11.8) (25.8) (16.2)

Profit from discontinued operations - - - - - - - - - - 1.3 - Non-controlling interests

0.1 - 0.1 - 0.1 (0.1) - - (0.5) - (1.1) (0.9) -

Net profit after tax attributable to members

172.7 151.1 153.0 148.4 151.5 123.1 120.8 113.9 102.1 90.9 93.3 57.7 50.7

Group balance sheet Current assets

387.2 390.2 363.7 307.8 274.1 308.8 290.8 233.1 224.7 211.0 196.2 173.3 143.3

Property, plant & equipment

989.6 889.7 902.5 851.0 760.6 774.3 801.9 742.5 694.2 665.6 613.5 620.1 561.3

Receivables

32.7 31.4 29.6 27.2 30.4 30.4 28.4 29.5 27.5 23.3 19.1 12.2 12.5

Investments

139.9 138.5 129.0 97.2 87.7 72.5 67.6 66.9 40.8 38.1 35.6 33.6 30.8

Intangibles

263.9 183.9 184.8 183.0 179.1 169.0 169.4 164.4 164.6 165.0 165.5 166.4 146.6

Other non-current assets Total assets

0.0 0.0 3.5 0.0 0.0 0.0 0.0 2.7 22.9 19.0 19.7 17.1 28.5 1,813.3 1,633.7 1,613.1 1,466.2 1,331.9 1,355.0 1,358.1 1,239.1 1,174.7 1,122.0 1,049.6 1,022.7 923.0

Current borrowings & creditors

121.8 105.4 115.0 99.2 106.4 106.5 98.4 145.5 125.8 323.5 294.6 306.3 58.3

Current provisions

44.2 105.8 78.5 34.5 52.6 55.4 44.5 49.5 54.1 58.2 48.1 42.3 54.8

Non-current borrowings

390.1 259.1 299.3 258.7 150.2 200.5 410.5 281.9 210.7

1.0

1.1

1.5 200.8

Deferred income tax & other non-current provisions

120.5 101.6 114.4 116.7 88.4 95.6 102.8 94.3 109.1 105.3 116.8 97.0 83.3

Total liabilities

676.6 571.9 607.2 509.1 397.6 458.0 656.2 571.2 499.7 488.0 460.6 447.1 397.2

Net assets

1,136.7 1,061.8 1,005.9 957.1 934.3 897.0 701.9 667.9 675.0 634.0 589.0 575.6 525.8

Share capital

727.9 699.1 696.6 694.6 692.7 690.4 540.4 514.0 513.3 513.3 512.8 512.8 512.1

Reserves

3.3 4.3 2.1 2.3 2.6 2.9 3.5 14.5 13.3 14.0 12.8 30.4 30.6

Retained profits

402.8 355.6 304.4 257.3 236.0 200.6 155.0 136.4 139.8 98.4 54.1 22.4 -19.9

Shareholders’ equity attributable to members of the Company

1,134.0 1,059.0 1,003.1 954.2 931.3 893.9 698.9 664.9 666.4 625.7 579.7 565.6 522.8

Non-controlling interests Total shareholders’ funds

2.7 2.8 2.8 2.9 3.0 3.1 3.0 3.0 8.6 8.3 9.3 10.0 3.0 1,136.7 1,061.8 1,005.9 957.1 934.3 897.0 701.9 667.9 675.0 634.0 589.0 575.6 525.8

Share information Net Tangible Asset Backing ($/share) 1.35 1.38 1.29 1.22 1.19 1.15 0.97 0.93 0.94 0.87 0.78 0.76 0.70 Return on funds employed

17.7% 17.0% 18.0% 19.4% 20.0% 17.3% 18.0% 18.1% 16.7% 15.9% 13.4% 12.7% 11.7%

Basic earnings per share (¢/share)

26.9 23.7 24.0 23.3 23.9 20.4 22.2 21.0 18.8 16.8 17.2 10.7 9.9

Diluted earnings (¢/share)

26.8 23.4 23.8 23.2 23.7 20.3 22.0 20.8 16.4 16.2 14.6 10.7 9.9

Total dividend (¢/share)

17.0 1

19.51 16.51 16.51 21.51 13.51 15.01 18.51 18.51 10.51 7.51 6.0 5.25

Interim dividend (¢/share)

7.5

7.51 7.51 7.51 7.51 5.51 6.51 6.01 5.01 4.251 3.51 2.752 2.54

Final dividend (¢/share)

9.51

9.01 9.01 9.01 9.01 8.01 8.51 9.01 7.51 6.251 4.01 3.251,6 2.753

Special dividend (¢/share) Gearing 11 Fully franked

1

-

- 5.01 -

- 3.51 6.01 - - - -

31.7% 23.4% 30.9% 26.0% 15.9% 19.6% 55.3% 48.4% 33.6% 35.8% 31.4% 37.7% 34.6% 15 Dividend declared after year end as a

12 60% franked

result of Boral Ltd Takeover Offer of

13 35% franked

Adelaide Brighton Ltd

14 20% franked

3.01 -

17 Restated for changes to accounting policies (Note 42 to the 2013 Financial Statements)

16 Restated for AIFRS

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Information for shareholders

Annual general meeting

Online services

Change of address

The annual general meeting of shareholders will be held at the InterContinental, North Terrace, Adelaide, South Australia on Wednesday 27 May 2015 at 10.00 am.

Shareholders can access information and update information about their shareholding in Adelaide Brighton Limited via the internet by visiting Computershare Investor Services Pty Ltd website: www.investorcentre.com

Shareholders who are Issuer Sponsored should notify any change of address to the share registry, Computershare Investor Services Pty Limited, by telephone or in writing quoting your security holder reference number, previous address and new address. Broker Sponsored (CHESS) holders should advise their sponsoring broker of the change.

Securities exchange listing Adelaide Brighton Ltd is quoted on the official list of the Australian Securities Exchange and trades under the symbol “ABC”. Adelaide is Adelaide Brighton Ltd’s home exchange. Registered office Level 1, 157 Grenfell Street Adelaide SA 5000 Telephone: 08 8223 8000 Facsimile: 08 8215 0030 Enquiries about your shareholding Enquiries or notifications by shareholders regarding their shareholdings or dividends should be directed to Adelaide Brighton’s share registry: Computershare Investor Services Pty Limited Level 5, 115 Grenfell Street Adelaide SA 5000 Telephone 1800 339 522 International 613 9415 4031 Facsimile 1300 534 987 International 618 8236 2305 When communicating with the share registry, shareholders should quote their current address together with their Security Reference Number (SRN) or Holder Identification Number (HIN) as it appears on their Issuer Sponsored/CHESS statement.

Some of the services available online include: check current holding balances, choose your preferred annual report option, update address details, update bank details, confirm whether you have lodged your TFN, ABN or exemption, view your transaction and dividend history or download a variety of forms. Direct credit of dividends Dividends can be paid directly into an Australian bank or other financial institution. Payments are electronically credited on the dividend payment day and subsequently confirmed by mailed payment advice. Application forms are available from our share registry, Computershare Investor Services Pty Ltd or visit the website at www.computershare.com.au/easyupdate/abc to update your banking details.

Investor information other than that relating to a shareholding can be obtained from: Group Corporate Affairs Adviser Adelaide Brighton Ltd GPO Box 2155 Adelaide SA 5001 Telephone 08 8223 8005 Facsimile 08 8215 0030 Email [email protected] Communications Our internet site www.adbri.com.au offers access to our ASX announcements and news releases as well as information about our operations.

Dividend Reinvestment Plan (DRP)

Substantial shareholders

Following payment of the interim dividend on 20 October 2014, Adelaide Brighton’s DRP has been suspended until further notice. In future, if the DRP is reactivated, it will be notified by way of an ASX announcement.

Barro Properties Pty Ltd, by a notice of change of interests of substantial shareholder dated 20 October 2014, informed the Company that it or an associate had a relevant interest in 218,401,971 ordinary shares or 33.7% of the Company’s issued share capital. On market buy back At 1 April 2015 there is no on-market buy back of the Company’s shares being undertaken.

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Twenty largest shareholders shown in the Company’s Register of Members as at 1 April 2015 Shareholder

Unquoted securities

Number of ordinary shares held

% of issued capital

172,876,906

26.67

HSBC Custody Nominees (Australia) Limited

60,705,391

9.36

J P Morgan Nominees Australia Limited

53,383,388

8.23

Barro Group Pty Ltd

43,752,619

6.75

Citicorp Nominees Pty Limited

42,941,998

6.62

National Nominees Limited

30,649,316

4.73

BNP Paribas Noms Pty Ltd

10,091,248

1.56

Argo Investments Ltd

7,681,385

1.18

HSBC Custody Nominees (Australia) Limited

3,927,830

0.61

UBS Wealth Management Australia Nominees Pty Ltd

3,807,806

0.59

AMP Life Limited

3,075,839

0.47

Citicorp Nominees Pty Limited

2,850,745

0.44

Milton Corporation Limited

2,735,886

0.42

Sandhurst Trustees Ltd

2,027,236

0.31

BNP Paribas Nominees Pty Ltd

1,640,500

0.25

The Australian National University

1,570,000

0.24

Questor Financial Services Limited

1,413,988

0.22

Geoff and Helen Handbury Foundation Pty Limited

1,182,858

0.18

Netwealth Investments Limited

1,128,447

0.17

Bond Street Custodians Limited

1,075,039

0.17

Total top 20 shareholders

448,518,425

69.19

Total remaining holders balance

199,749,242

30.81

Barro Properties Pty Ltd

Voting rights All shares at 1 April 2015 were of one class with equal voting rights being one vote for each shareholder and, on a poll, one vote for each fully paid ordinary share. Shares held as at 1 April 2015

Number of shareholders

% of issued capital

100,001 - 101,000

3,707 0.27

101,001 - 105,000

9,785 4.29

105,001 - 110,000

4,977 5.68

110,001 - 100,000

4,252

14.85

177

74.91

100,001 - over Total shareholders

22,898 100.00

Less than a marketable parcel of 112 shares

A D E L A I D E BRIGHT ON LT D ANNU A L REP OR T 2014

740

111

3,319,601 Awards issued to the Chief Executive Officer and other members of the senior executive team under the Adelaide Brighton Ltd Executive Performance Share Plan as part of the Company’s long term incentive program. The Awards are not quoted and do not participate in the distribution of dividends and do not have voting rights. The total number of participants in the Adelaide Brighton Ltd Executive Performance Share Plan and eligible to receive the Awards is seven.

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The Adelaide Brighton logo, the MCI logo, the Cockburn Cement logo, the Swan Cement logo, Adbri Masonry logo, the Southern Quarries logo, the Direct Mix Concrete logo and the Penrice Quarry & Mineral logo are trade marks of Adelaide Brighton Ltd or its related bodies corporate.

JO RG ENSE N DE SI G N

the Northern Cement logo, the Hy-Tec logo, the

Adelaide Brighton Ltd ABN 15 007 596 018 Level 1 157 Grenfell Street Adelaide South Australia 5000 GPO Box 2155 Adelaide SA 5001 Telephone 08 8223 8000 Facsimile 08 8215 0030 Web www.adbri.com.au