Typically, around 40% of cement demand is driven by the housing sector, 35% by infrastructure and 25% by non-dwelling
construction activity. For Boral's Blue Circle Southern Cement (BCSC) business we are disproportionately exposed to East Coast
markets, particularly New South Wales, because of our large cement manufacturing assets at Berrima in New South Wales and
Waurn Ponds in Victoria.
The immediate focus of the Cement division is to realign our cost base and supply network with reduced market demand while
maintaining capability to respond quickly to improving market conditions.
The Cement division operates across 13 operating sites in Australia and 95 in Asia,
and employs approximately 4,200 people (including 3,460 in Asia).
Blue Circle Southern Cement (BCSC)
Blue Circle has 13 operating and four distribution sites. Major operations are in the Southern Highlands of NSW at Berrima where the dry process cement capacity is 1.4 million tonnes p.a. At Maldon, up to 300k tonnes p.a. of off-white and grey cement can be produced and there is a bagging and dry mix facility. BCSC markets fly ash acquired from power stations in NSW and has a 50% shareholding in Fly Ash Australia. In Victoria, at Waurn Ponds near Geelong, the dry process kiln has a capacity of 800k tonnes p.a. BCSC also has a 50% interest in Sunstate Cement which operates a cement milling facility in Brisbane.
BCSC is a large producer of limestone for both internal and external customers from our substantial reserves at Marulan and at Galong in NSW. Lime is produced at Marulan and at Galong.
Indonesian Construction Materials
PT Jaya Readymix is the largest producer of premixed concrete in Indonesia, operating on 41 sites, predominantly located on the main island of Java. Its hard rock quarries produce aggregates for the Jakarta market. The business is expanding its concrete pipe and precast panels business.
Boral Thailand Concrete & Quarries
Boral's Thailand concrete and quarry business operates around 54 concrete batch plants and quarries throughout the country.
Blue Circle Southern Cement (BCSC)
Blue Circle has 13 operating and four distribution sites. Major operations are in the Southern Highlands of NSW at Berrima where the dry process cement capacity is 1.4 million tonnes p.a. At Maldon, up to 300k tonnes p.a. of off-white and grey cement can be produced and there is a bagging and dry mix facility. BCSC markets fly ash acquired from power stations in NSW and has a 50% shareholding in Fly Ash Australia. In Victoria, at Waurn Ponds near Geelong, the dry process kiln has a capacity of 800k tonnes p.a. BCSC also has a 50% interest in Sunstate Cement which operates a cement milling facility in Brisbane.
BCSC is a large producer of limestone for both internal and external customers from our substantial reserves at Marulan and at Galong in NSW. Lime is produced at Marulan and at Galong.
Indonesian Construction Materials
PT Jaya Readymix is the largest producer of premixed concrete in Indonesia, operating on 41 sites, predominantly located on the main island of Java. Its hard rock quarries produce aggregates for the Jakarta market. The business is expanding its concrete pipe and precast panels business.
Boral Thailand Concrete & Quarries
Boral's Thailand concrete and quarry business operates around 54 concrete batch plants and quarries throughout the country.
During the year, Cement volumes were down 9% on last year, with strong sales to the Hume Highway upgrade projects moderating the
impact of weakening demand from the premixed concrete industry, particularly in the second half
of the year. Average cement prices increased by 7% as suppliers sought to recover soaring input costs at the peak of the
resources boom.
Lime volumes fell by 29% as demand from the steel industry contracted but continuing focus on pricing delivered a 12%
improvement year-on-year. In mid January 2009, production at the quicklime facility at Galong in New South Wales was
temporarily suspended due to reduced demand from the steel sector.
EBITDA from BCSC was weaker, with reduced volumes and a steep rise in energy and imported clinker costs (to supply Sunstate) adversely impacting the result.
In Asia, despite the global economic downturn impacting from the September 2008 quarter and the unstable market environment in Thailand dampening overall construction activity, Boral's construction materials results in Asia improved significantly for the period. Concrete volumes in Indonesia fell by 8%; however, margins recovered on the back of rigorous cost control and a significant improvement in concrete prices. Market share leadership was maintained in Indonesia. In Thailand, concrete prices were down 5% and volumes were down 21% in challenging markets but a shift in focus from growth to cost reduction delivered a substantial improvement in gross margins.
For Cement's safety and environmental outcomes for 2008/09 refer to Review of Operating Divisions - Cement in Boral's 2009 Sustainability Report.
Outlook
Activity in Australia is expected to decline in 2009/10 due to the decline in non-dwellings and softening in infrastructure activity which will more than offset the benefits from slightly stronger dwellings activity and improved pricing. Our pricing focus in the first half of 2009/10 will be to gain full traction from previously announced price increases. Cement price increases that were announced effective 1 April 2009 are continuing to be realised. A significant step change program is underway in BCSC with the diagnostic phase completed in July 2009. Early indications are targeting a 10% compressible cost reduction over 2009/10 and 2010/11.
In Construction Materials in Asia we expect some volume and earnings pressures.
Mike Beardsell, EXECUTIVE GENERAL MANAGER
EBITDA from BCSC was weaker, with reduced volumes and a steep rise in energy and imported clinker costs (to supply Sunstate) adversely impacting the result.
In Asia, despite the global economic downturn impacting from the September 2008 quarter and the unstable market environment in Thailand dampening overall construction activity, Boral's construction materials results in Asia improved significantly for the period. Concrete volumes in Indonesia fell by 8%; however, margins recovered on the back of rigorous cost control and a significant improvement in concrete prices. Market share leadership was maintained in Indonesia. In Thailand, concrete prices were down 5% and volumes were down 21% in challenging markets but a shift in focus from growth to cost reduction delivered a substantial improvement in gross margins.
For Cement's safety and environmental outcomes for 2008/09 refer to Review of Operating Divisions - Cement in Boral's 2009 Sustainability Report.
Outlook
Activity in Australia is expected to decline in 2009/10 due to the decline in non-dwellings and softening in infrastructure activity which will more than offset the benefits from slightly stronger dwellings activity and improved pricing. Our pricing focus in the first half of 2009/10 will be to gain full traction from previously announced price increases. Cement price increases that were announced effective 1 April 2009 are continuing to be realised. A significant step change program is underway in BCSC with the diagnostic phase completed in July 2009. Early indications are targeting a 10% compressible cost reduction over 2009/10 and 2010/11.
In Construction Materials in Asia we expect some volume and earnings pressures.
Mike Beardsell, EXECUTIVE GENERAL MANAGER
In January 2009, production at Boral's quicklime facility at Galong in New South Wales was temporarily suspended due to reduced demand from the steel sector. Galong lime production will recommence when a sustainable lift in demand is expected.
Preparing for Australia's impending emissions trading scheme or Carbon Pollution Reduction Scheme (CPRS) has been a key priority for BCSC. We continue to engage with Government to minimise the impact on our import competitiveness, until such time as there is a global response, and to reduce incentives to manufacture overseas, which will simply result in "carbon leakage" and have no
overall environmental benefit.
The $85 million upgrade of Sunstate Cement's capacity in Queensland from 1.0 million to 1.5 million tonnes per annum has been completed. The expanded clinker storage was completed in the September 2008 quarter and the increased grinding capacity was completed in the June 2009 quarter. Sunstate is well positioned to meet Queensland's growing cement demand as markets recover.
During the year, a significant operational improvement program was implemented in Thailand construction materials, which included a focus on improving the culture and employee morale.
Despite volume pressures a solid turnaround in performance was delivered from the Asia construction materials businesses in Thailand and Indonesia.
