Ken Moss - Non-Executive Chairman

All of Boral's major markets deteriorated significantly during the year, particularly in the second half of the year, with the exception of the Australian roads and infrastructure market segment, which remained strong. US housing activity slumped to around 650,000 starts, a 42% decline on the prior year; Australian housing activity was down by 18% to 130,000 starts; the value of non-dwelling activity in Australia was down 1% and approvals were down 25%; and in Asia, the global recession slowed activity in domestic building and construction markets.

In 2008/09, Boral delivered a reported profit after tax of $142 million, which was 42% below the prior year. The reported profit included a number of significant items which had a net favourable impact of $11 million. Excluding those significant items, Boral's underlying profit after tax of $131 million was 47% lower than the prior year. This reduced profit reflects significant downturns in activity in Boral's housing and commercial construction markets underpinned by the global recession.

The significant items that delivered a net benefit of $11 million in 2008/09 included a $27 million after tax profit arising from the sale of Boral's 17.6% shareholding in Adelaide Brighton Limited and a $64 million favourable reduction in tax provisions. These favourable significant items were largely offset by $63 million of after tax impairment charges and a $17 million after tax expense in relation to contractual obligations to purchase fly ash in Florida where market conditions are limiting product sales. The impairment charges were taken in relation to US construction materials, an Australian precast concrete panels business, idle US and Australian brick production assets, and land and capitalised project costs in Australia and Asia.

For the year ended 30 June 2009, sales revenue of $4.9 billion was 6% lower than the prior year and Boral's underlying EBITDA (earnings before interest, tax, depreciation and amortisation) was down 22% to $539 million.

Responding to significant market challenges
To help mitigate the impacts of the severe decline in US markets and the downturns in Australia and Asia, extensive cost reduction programs, disciplined price management, capacity rationalisation and substantial lowering of capital expenditure continued throughout the business.

Step change cost reductions and "performance enhancement programs" (PEP) delivered $195 million of benefits during the year. This was the largest cost down/PEP program of the past 10 years. Employee numbers at 30 June 2009 of 14,766 were 7% lower compared with 15,928 employees in the prior year. Across most operations we are also using a lot less contract labour, with total full-time equivalent contractors reducing from around 7,000 to around 5,700 during the year. Overall, Boral's total number of full-time employees and contractors reduced by 2,460 or about 11% in FY2009.

A comprehensive focus on managing the business for cash through the downturn helped to support Boral's solid balance sheet. Cash flow from operations, lower capital expenditure, proceeds from the divestment of Boral's 17.6% stake in Adelaide Brighton and a 16% appreciation of the AUD/USD exchange rate at 30 June 2009 compared to 31 December 2008 resulted in Boral's net debt of $1,514 million at 30 June 2009 being $670 million lower than the net debt of $2,184 million at 31 December 2008. Gearing (debt/equity) decreased from 79% at 31 December 2008 to 55% at 30 June 2009.

Shareholder returns
A fully franked final dividend of 5.5 cents per share takes the full year fully franked dividend to 13.0 cents. The final dividend represents a pay-out ratio of 58% of underlying after tax earnings, which is in line with an average of around 60% of earnings over the past nine years. As a result of the significant market related earnings decline, the full year dividend of 13.0 cents is substantially lower than the 34.0 cent dividend which has been paid out of earnings over the past four years.

For the half year dividend, shares issued under Boral's Dividend Reinvestment Plan (DRP) were issued at a 2.5% discount to the market price and the takeup of the DRP lifted from around 30% to 41%. This initiative assisted in preserving cash in the period. The 2.5% DRP discount will also apply to Boral's final dividend.

Boral's total shareholder return (TSR) from share price appreciation and dividends was around 16% per annum over the nine and a half years since demerger to 31 August 2009. Boral's TSR performance is above average, ranking in the second quartile of ASX 100 companies over the period.

Corporate governance and remuneration
Following Boral's 2008 Annual General Meeting, the Board undertook a fundamental review of executive remuneration practices in Boral, which was carried out with the assistance of an independent adviser, Ernst & Young. The review process was concluded with a comprehensive stakeholder engagement program, involving members of the Remuneration Committee and other Board members meeting with representatives of retail and institutional investors and governance advisory firms. We have worked hard to balance the needs and expectations of our shareholders and the broader community with the need to appropriately remunerate our people in a competitive marketplace. Our remuneration policies and practices are focused on linking performance and reward while taking into consideration the particular challenges that a cyclical company like Boral presents.

In addition to the specific actions taken by the Board as a result of the formal remuneration review, a number of remuneration restraint initiatives were implemented during the year in response to shareholder concerns and the difficult market conditions impacting Boral's profitability. These restraint initiatives include: a salary "freeze" for the CEO, Management Committee and other senior executives from September 2008 through to September 2010; the CEO and Management Committee voluntarily forgoing their short term incentive entitlements for 2008/09; and a "freeze" on Directors' fees from July 2008 through to July 2010. These actions demonstrate a shared commitment of the Board and Management to lead by example.

This year's Remuneration Report provides further detail of our approach to remuneration, the improvements that have been made following the review and remuneration outcomes in 2009.

Boral's Directors are committed to ensuring that Boral's policies and practices reflect a high standard of corporate governance. We report on our corporate governance activities in accordance with the Corporate Governance Principles and Recommendations of the ASX Corporate Governance Council.

Boral's Board and CEO succession
In 2008/09, there were a number of announcements and steps taken in relation to Board and CEO succession.

In September 2008, Paul Rayner was appointed as a non-executive Director of Boral Limited. His appointment was confirmed by shareholders at the 2008 Annual General Meeting.

In June 2009, Rod Pearse announced his intention to retire at the end of December 2009, when his second five year contract comes to an end. Rod joined Boral in 1994 and has been Managing Director and CEO since the demerger of the Company in January 2000. While Rod still has several months in the job, on behalf of the Board, I congratulate Rod for his achievements as Boral's CEO and I thank him for the way he has led the Company in good times and in challenging times. Rod is a natural leader with strong personal values that have permeated throughout the organisation and in his dealings with customers, shareholders and others.

While he may not be retiring at a point in the cycle when Boral's earnings are strong, Rod has successfully reshaped Boral into a focused building and construction materials company that has performed well through the cycle. Rod has delivered strong improvements in pricing and in the underlying performance of the business as well as continuous improvements in safety and sustainability outcomes. On the growth side, around $2.5 billion has been invested in growth initiatives over the past decade, which has seen Boral's production capacity, resource positions and distribution networks strengthen as well as stepouts into new markets and geographies. Of note has been Boral's move into construction materials in the USA, growth in plasterboard throughout Asia, and numerous bolt-on acquisitions in Australia that have secured Boral's leading market positions. The Quarry End Use business was established early in Rod's tenure; it has contributed an average annual profit of almost $40 million over the past nine years. Boral is very well positioned to deliver superior performance as markets recover.

Following Rod's decision to retire, I made a decision that I would seek re-election as Boral's Chairman to provide continuity during the change of CEO. Assuming I have shareholders' support, I intend to stay on as Chairman until May 2010. In July 2009, we announced that Dr Bob Every had been appointed Deputy Chairman of the Board with the intention of Bob becoming Chairman when I retire in May 2010.

We also announced that John Cloney, who joined the Board in 1998, will retire as a Director at this year's Annual General Meeting. Together with the Board, I acknowledge the significant contribution that John has made to Boral, including his valued contribution as Chair of the Remuneration Committee.

The Board is continuing to progress the appointment of a new CEO and Managing Director to take over from Rod from 1 January 2010. We intend to make an announcement prior to Boral's Annual General Meeting, which is scheduled for 28 October 2009.

Boral's people
Apart from Boral's CEO, the remaining 11 senior executives on Boral's Management Committee have an average tenure of 11 years with Boral, ranging from one to 21 years. This is a capable team of executives with a good blend of internal and external experience. During the year, there was some renewal on the Management Committee with the appointment of Margaret Taylor as Boral's new General Counsel and Company Secretary and the internal appointments of three new Executive General Managers, Nick Clark, Warren Davison and Mike Beardsell. Nick is running Boral's Clay & Concrete Products division, Warren is heading up Construction Related Businesses, and Mike Beardsell is running the Cement division. These three appointments followed the resignation of two long-serving EGMs earlier in the year.

I thank Boral's CEO, management team and all of Boral's employees for their hard work and contribution over the past year. It has not been an easy time for any of our businesses and when the focus is on reducing costs as far as possible, it is commendable to see morale remaining strong and safety performance continuing to strengthen.

Ken Moss Signature

Ken Moss, CHAIRMAN