Displaying items by tag: Australia

Australia: Adelaide Brighton’s profit in 2019 was US$31.1m, down by 74% from US$122m in 2018. Sales were down by 7% to US$997m from US$1.07bn. Adelaide Brighton chairman Raymond Barro explained that ‘increased competition and softer demand for construction materials’ locally impacted revenue and earnings. He said that ‘cost pressures across sea freight, transport and raw materials’ caused the dive in profit.

The Queensland state government in Australia took a blunt approach to health and safety earlier this month when a report it commissioned said that it expected 12 deaths to occur in the mines and quarries sector over the next five years unless changes were made. This is far removed from the usual news stories that industry magazines like Global Cement and others cover. Typically, these are either plants or companies reaching Lost Time Injury (LTI) milestones or sad (but thankfully rare) reports of death.

The forecast in Queensland was based on a review of fatalities in the sector that the state commissioned from Sean Brady, Department of Natural Resource, Mines and Energy, looking at the years 2000 to 2019. Year-by-year the figures were significantly lower than those occurring in the 1900 to 2000 period but didn’t appear to have any discernable pattern. However, when presented as a 12-month rolling sum of fatalities, a two to three year cycle seemed to occur. Brady then went on to look at how the fatalities happened, how the industry behaved and reacted and what could be done to improve the situation. His recommendations included looking more deeply at the causes of seemingly unrelated accidents and then changing overall organisational behaviour and insight through methods such as adopting principles of High Reliability Organisational theory, simplifying the reporting system and changing the standard safety indicators like LTI.

That last point is interesting given the prevalence of LTI indicators on corporate sustainability reports in the cement industry. The point that Brady cites here is that LTI can become a measure of how well injuries are managed, not how safely an organisation is performing. For example, the definition of what an injury is can be manipulated, leading to distortion, as can workers being brought back to work before they recover or into lighter duties. Instead he recommends that ‘serious accidents’ be used in place of LTI. These are defined as incidents that result in a fatality or incidents where an individual requires admission to hospital for treatment of an injury. The preference here is based on so-called ‘serious accidents’ being unambiguous and transparent because they are defined by a third-party medical practitioner.

Wider critiques of health and safety measurements have identified under-reporting of incidents arising from safety incentive programmes, safety culture, employee perceptions of reporting and workplace bullying. This isn’t to say that the LTI measure is not fit for purpose. It has undoubtedly led to higher safety conditions around the world, with reduced injury and mortality from working conditions, and it allows for comparisons between organisations. Yet, any health and safety metric or indicator could be liable to bias or manipulation either unconsciously or consciously. Serious accidents, for example, could be potentially undermined by an organisation having its own medical centre and would also suffer from different health care systems in different locations. Throw in different legislative frameworks around the world and comparing countries can also start to become confusing.

This tension between data and real-life safety is acknowledged by the Global Cement and Concrete Association (GCCA) in its sustainability guidance from late 2018. It distinguishes between so-called ‘lagging’ indicators, like LTI and fatalities, which show the effectiveness of a safety programme after the fact and the importance of continual safety improvement plans that aim to prevent adverse events before they happen. It is easy to become lost in a dust storm of facts and figures on health and safety but, as the Queensland authorities and the GCCA agree, measuring health and safety is a means to an end. The aim is zero harm to everyone involved.

Australia: A report commissioned by the Queensland Ministry of Mines has investigated the causes of all 47 deaths in mines and quarries in the state between 2000 and 2019, concluding that systemic, organisational, supervision or training failures caused the deaths in almost all cases. The report proposed that the state government should require quarry operators to use the Serious Accident Frequency Rate (SAFR) as their metric for health and safety monitoring, calling the Lost Time Injury Frequency Rate (LTIFR) unreliable because it is prone to manipulation, being “a measure of how the industry manages injuries after they have occurred. It is possible, therefore, to reduce the LTIFR without making the industry safer,” said the report’s author Sean Brady.

In the Australian 2019 financial year, ending 31 July 2019, six people died in Queensland’s quarries and mine.

Australia: Boral has seen a 40% decrease in its profit during the first half of its fiscal year a period that ended on 31 December 2019. Its profit fell to US$90.4m for the period from US$151m a year earlier. Boral said that this was due to higher costs and weak housing activity in Australia and South Korea. It was also affected by the costs of transactions between its USG-Boral joint-venture partner USG and Knauf, which bought USG in 2019, along with its interest in USG-Boral.

Australia: The Australian Competition and Consumer Commission (ACCC) says that Barro Group’s acquisition of a 43% stake in Adelaide Brighton will not ‘substantially’ lessen competition. The ACCC examined the completed acquisition closely because the two vertically integrated companies have overlap in the market for the supply of cement, ready-mixed concrete and aggregates.

It found Barro and Adelaide Brighton will continue to face competition from Boral, Holcim and Hanson, three large vertically integrated competitors with national operations, along with a number of smaller independent competitors. The ACCC looked at competition impacts on the pre-mixed concrete and aggregates markets in Melbourne, Brisbane and Townsville, where Barro and Adelaide Brighton’s operations overlap and did not identify any areas of concern.

Barro did not seek informal merger clearance from the ACCC prior to acquiring Adelaide Brighton. However, the ACCC says it may reopen its investigation if it receives further information that alters its current conclusions.

Australia: National press in Australia has reported that the Irish building materials giant CRH has approached Boral regarding a possible takeover. CRH snapped up US$6.5bn of assets from Lafarge and Holcim in 2015 following their merger to become LafargeHolcim, and it consequently became the third-largest building materials supplier by market value internationally.

The speculation comes amid market expectations that Boral could be broken up if a takeover does not unfold soon. Suitors have looked at Boral before but a deal has never eventuated. The company’s market value is US$3.9bn, so it could be within the grasp of a cash-rich strategic player or private equity firm from overseas. Three years ago Boral was worth more than US$4.8bn.

Meanwhile, Australia's devastating recent bushfires have affected Boral’s Berrima plant in New South Wales, likely leading to lower production and margins. This was due to extended leave for staff and road closures.

Australia: German refractory producer Refratechnik has acquired Queensland Magnesia (QMAG). The acquisition adds 300,000Mt/yr of magnesium oxide to Refratechnik’s supply of raw materials. The company said, “With a common focus on performance excellence, we will deliver greater value to our customers.”

Australia: Adelaide Brighton’s court dispute with Concrete Supply has ended in a ruling in favour of the former. The Advertiser newspaper has reported that between August 2009 and November 2017 Adelaide Brighton supplied US$22.6 to Concrete Supply, for which Concrete Supply paid US$14.5 before entering administration in November 2017. Federal Court judge Anthony Besanko ruled that Concrete Supply ‘could not reasonably have held a genuine belief that it was entitled to the alleged discount or rebate.’

Australia: In a statement to the Australian Securities Exchange on 13 December 2019 Adelaide Brighton announced the appointment of Darryl Hughes as an additional company secretary, effective from 11 December 2019. Marcus Clayton will retain the position of Adelaide Brighton Company Secretary.

The Australian cement supply spat calmed down a little this week with the announcement that Wagners Holdings has agreed to resume the supply of cement products from its Pinkenba grinding plant in Brisbane to Boral. Legal proceedings are still on-going with a trial date set at the Supreme Court of Queensland in late November 2019.

The argument blew up publicly in March 2019, when Wagners said it had suspended its cement supply to Boral for six months. Wagners has a cement supply agreement with Boral whereby it supplies cement on an annual basis for a fixed price. However, Boral informed Wagners that it had found cheaper cement from a ‘long established’ supplier in South East Queensland. Local press speculated that this ‘long established’ supplier was Cement Australia, the joint venture between LafargeHolcim and HeidelbergCement. Wagners then had the choice to either match the lower price or suspend its supply. The disagreement took the legal route as the parties failed to reach an agreement. Wagner says that its cement supply agreement with Boral ‘remains binding on both parties’ until 2031.

Wagners later reported that it expected the suspension to cost it around US$7m in 2019. The deal with Boral constituted about 40% of its cement sales volumes. Its overall revenue grew year-on-year in its 2019 business year to the end of June 2019 but its cement sales volumes fell. Its earnings also fell. This was blamed on higher activity in lower margin areas such as contract haulage and fixed plant concrete, and delays in major infrastructure project work in South-East Queensland.

Boral, meanwhile, suffered from falling revenue and earnings from its Boral Australia subsidiary in its financial year to June 2019 due to a slowing construction market. Notably, its cement sales revenue rose by 7% due to ‘favourable’ pricing, higher volumes and cost-saving programs. It didn’t say whether the cost cutting included sourcing cement from a different supplier! All of this though was counteracted by lower contributions from its Sunstate joint venture (JV) with Adelaide Brighton and higher fuel and clinker costs.

All of this is fascinating because these kinds of disputes usually remain out of the public eye. The large size of Wagners’ cement supply deal with Boral meant that when it was threatened it likely had to tell its shareholders due to the potential financial impact. Whether Boral can wriggle out of the contract is now a matter for the courts.

The broader picture is that even though Boral Australia’s cement division seemed to be growing in its 2019 financial year it was still trying to reduce its costs in the face of a decelerating construction market. Added to this, the companies hold both a supplier and a competitor relationship. On the production side Boral operates an integrated plant at Berrima in New South Wales (NSW), a grinding plant at Maldon, NSW and another grinding plant in its Sunstate JV at Brisbane, Queensland. Wagners runs its own grinding plant at Pinkenba, Queensland. Both companies operate concrete plants. This is not unusual for a concentrated industrial sector like cement but it creates problems for the regulators. Note that, also this week, the Australian Competition and Consumer Commission was reportedly paying attention to the links between Barro Group and Adelaide Brighton. Barro owns a 43% stake in Adelaide Brighton but the authorities are concerned about a possible overlap in the two companies’ roles as suppliers of cement, concrete and aggregates. Any slowdown in construction in Australia seems likely to heighten these kinds of issues.