Jim Leslie.
  In December 1991 Jim Leslie, who made his career with Mobil, succeeded Sir Peter Finley as chairman. Leslie implemented a three-year planning cycle for Boral when he took over this role. While the company's senior executives had run Boral very effectively, it was clear to Leslie that the company was entering a new era that called for different controls and longer-term planning. The recession that affected most Western economies in the early 1990s was hurting Boral's building materials businesses. After twenty years of successive profit growth, profits fell 34 per cent from $322 million to $211 million in 1991 and a further 28 per cent to $152 million in 1992. Some new approaches were required.

To ensure that the company had a clear longer term strategy, Leslie required that an annual five-year plan be prepared. The board would review this plan over three days of discussions with senior management. Directions for expansion and consolidation were set in these annual reviews. As part of this strategy, the timber interests were expanded. Pacific Dunlop had taken over Petersville Sleigh, principally to get hold of its food business, and then sold the timber division to Boral in 1992. With this purchase, Boral became Australia's major hardwood timber producer, expanding its operations in New South Wales and adding timber processing and woodchip businesses in Tasmania.

Kean then started to address the concerns about the diverse manufacturing activites and the volatility in earnings caused by the building cycles. While Boral had been in the energy business since its inception, it was now a minor contributor. Nevertheless, this sector had increasing attractions and a more stable earnings profile. Kean said, 'It came down to a situation of whether to persevere with the manufacturing and what to do with the energy. Everything else in the company had grown except gas.' When Boral first got into gas it had been half the business, but over time this had dwindled to around 10 per cent.

The Australian gas distribution industry had been a virtual monopoly which could only grow at little more than the population rate. Kean said, `Fundamentally, if the economy was growing at 3 per cent - with a mature and highly regulated industry like gas - returns could not get much better than that.' He saw, however, that in the future one of the industries that would have dynamism was, in fact, energy. Quite apart from this, it also had a stabilising effect on the cyclical nature of the building industry.

As part of Boral's emphasis on energy in the early 1990s, Kean was instruŽmental in the decision to upgrade Brisbane's gas distribution system and the conversion to natural gas, which started in 1992.

  The Boral board approved a plan that involved floating the manufacturing side of Boral and using the funds gained from the float to double the gas side of the business. Boral floated Azon (essentially many of the businesses acquired through Johns Perry, Norman J. Hurll and Cyclone) in 1993. Vern Bowles, who had been the managing director of Johns Perry and was responsible for the businesses that comprised Azon with Boral, became managing director of the new group. The float was fully subscribed in a short time. Boral simultaneously launched its bid for Sagasco Holdings Limited which was the largest takeover in Australia that year at a cost of $800 million. Leslie's change of emphasis was beginning to take effect.

Up to the 1990s usage of natural gas in Australia had reached less than half its full potential, due to fragmented, state-by-state management, over-regulation and an unattractive price to consumers. State gas utilities had profitable monopolies, and with no competition there was no incentive for them to upset the status quo, review pricing policies or expand their customer base. But in the early 1990s, this situation started to change dramatically. The grid of pipelines that cover Australia extended and interlocked. A truly national gas market was developing and along with it, a frenzy of competition and market expansion. In the future, major trunk lines would operate on a common-user basis, allowing gas suppliers direct access to industrial consumers.

The new consumers would mostly be industries that were switching away from other energy sources, and they would want firm guarantees of supply on top of lower energy costs to make the conversion worthwhile. Until the Sagasco acquisition Boral was not well positioned for these developments. Its energy business, with sales of $330 million, lacked gas reserves and marketing clout. Boral had the financial resources, but without the other two elements, it was never going to be in the race. The only major gas company with untapped reserves and an unstable share register was South Australia's Sagasco Holdings - this company became the obvious target.

Cover of the Azon prospectus.