CSR LIMITED ANNUAL REPORT 2021 BUILDING SOLUTIONS FOR A BETTER FUTURE Contents 2 CSR at a glance 24 Financial Overview 4 Chair’s Message 25 Operating and Financial Review 6 Managing Director’s Review 30 Corporate Governance Statement and Risk 8 Building Products Overview 44 Board of Directors 8 – Masonry & Insulation 46 Directors Report 10 – Interior Systems 50 Remuneration Report 12 – Construction Systems 71 Financial Report 14 Property 112 Directors Declaration 15 Aluminium 113 Independent Auditor’s Report 16 Sustainability at a glance 116 Shareholder Information 18 – Environment 20 – People and Safety AGM DETAILS 22 – Community CSR’s Annual General Meeting (AGM) will be held on 25 June 2021 at 10am (AEST). Details on arrangements for the AGM are included in the Notice of Meeting. CSR LIMITED ABN 90 000 001 276 CSR is building solutions for a better future for our customers by investing in new building systems to reduce construction time and deliver better energy efficiency, comfort and design…and for our people and the environment by creating a safe, diverse and sustainable place to work and grow. 1 CSR AT A GLANCE CSR is a leading building products company in Australia and New Zealand. Formed in 1855, CSR is one of Australia’s oldest manufacturing companies. Today it is a leading building products company in Australia and New Zealand and is the name behind some of the market’s most trusted and recognised brand names. BUSINESS SEGMENT OVERVIEW CONSTRUCTION MARKET DIVERSIFICATION % 9% 8 Building Products 8% Detached Property Non-residential 21% YEM21 YEM21 Aluminium 10% Building Products Medium density EBIT Revenue High density 70% 54% $238m $1.5bn Alterations and additions 20% Strong financial position1 Operational excellence with a strong foundation 4% 10% $2.1bn $238m 2,538 170+ Revenue Earnings Before Interest CSR employees Manufacturing and and Tax (EBIT) distribution sites across Australia and New Zealand 17% 21% $146m 33.1c 50+ 18,000+ Statutory net profit Earnings per share Property sites owned Customers across Australia after tax across Australia and New Zealand 23c 13.5c $251m $2.2bn Full year ordinary dividend Special dividends Net cash Total assets (fully franked) (fully franked) 1. Before significant items, unless stated. 2 CSR LIMITED ANNUAL REPORT 2021 MASONRY & INSULATION Building Products Masonry & Insulation brings together the key areas of PGH Bricks and Monier Roofing CSR’s leading range of building for selection of external colours and design, integrating with Bradford’s insulation and products and systems serve ventilation systems for improved energy efficiency and home comfort. a broad range of construction INTERIOR SYSTEMS segments backed by technical Interior Systems builds on Gyprock’s leading brand position in the plasterboard market expertise across building with the extensive range of Martini, Himmel and Potter commercial fitout offerings. technology, compliance, energy CONSTRUCTION SYSTEMS efficiency and architectural design. Construction Systems develops engineered walling and cladding systems across three leading brands of Hebel, AFS and Cemintel which bring speed of construction with CSR continues to invest in new versatile design applications. solutions to reduce construction time and improve the comfort and design of homes and buildings. Aluminium Property Through its 70% shareholding CSR generates additional in Gove Aluminium Finance earnings from its Property Limited, CSR holds an business which focuses on effective 25.2% interest maximising financial returns in the Tomago aluminium from surplus former smelter in New South Wales. manufacturing sites and industrial land. 3 CHAIR’S MESSAGE STRONG OPERATIONAL AND FINANCIAL Significant increase in dividends reflects strong cash generation PERFORMANCE CSR’s strong operational performance and financial position has enabled the company to provide a significant lift in dividends for shareholders. Following the additional proceeds from Property this year, we have also declared a special dividend of 9.5 cents per share (fully franked). This is in addition to the final dividend we have declared of 14.5 cents per share (fully franked). This compares to the previous year when no final dividend was paid due the company’s COVID-19 cash preservation position. This will bring the full year dividend JOHN GILLAM CHAIR (excluding special dividends) to 23.0 cents per share (fully franked) up from 10.0 cents per share (50% Group statutory net profit after tax franking) in the previous year. Result reflects up 17% We ended the year with a strong net improved performance Our statutory net profit after tax of cash position of $251 million which is in Building Products $146.1 million was up 17% from before the $116.5 million in dividends $125.3 million in the previous year. to be paid in July 2021. This provides and increased Before significant items, net profit after significant opportunity to invest in the Property contribution tax of $160.4 million was up 19%. business over the coming years. The lift in net profit was driven by an Building Products positioned I am pleased to report that we ended the 8% increase in Building Products earnings for growth year with a strong result for the business. to $184.3 million. Strong cost control and A key milestone this year was the launch Throughout this year, we have operated operational efficiency offset the impact of of a number of strategic initiatives for within the COVID-19 environment with the slowdown in residential construction the business. CSR has a very strong the health and safety of our teams activity which declined 4% during the year. remaining our first priority. We also position in the detached housing market, ensured the business had a solid liquidity Property delivered earnings of but we see opportunities to diversify into position and managed our costs, so we $54.2 million compared to the previous other sectors so we can drive improved were prepared for the year ahead with year when no significant earnings performance through the housing cycle a secure financial position. were recorded due to the timing of and scale for growth by leveraging transactions. This result is the second capability from across the business. With this platform, we performed very major settlement of the Horsley Park Julie and the team have reorganised well while making a number of important industrial development and is a great the business this year to deliver on strategic changes to how we organise the example of the significant value created this strategy. This was achieved while business and drive future growth. from our Property projects. ensuring the business stayed focused Earnings from our investment in on our customers and operating in the Aluminium declined to $23.4 million COVID-19 environment. This was a down from $59.6 million reflecting a difficult situation to manage and our sharp decline in aluminium prices at result this year is a strong endorsement the start of the financial year which of the capabilities of the CSR team. was partly offset by hedging and lower input costs. 4 CSR LIMITED ANNUAL REPORT 2021 “ We are increasing our position across more diverse construction segments and markets to drive improved performance through the housing cycle and scale for growth. ” Environment and climate change Work continues on the next stage of We will also be saying farewell to non- a key priority our Horsley Park development. We have executive director Mike Ihlein later this year. also made good progress on our 200 As an experienced board director across Climate change is a key priority area hectare site at Badgery’s Creek which a range of industries, Mike has played a for CSR. We continue to progress our is adjacent to the new Western Sydney crucial role on our board committees and strategy to improve the sustainability of Airport. The industrial zoning of this site we thank him for his contribution to CSR our operations. This includes ongoing was completed in September 2020 and over the past 10 years. review of the risks and opportunities of we are now providing water from the climate change across the business. Thank you to the CSR team rehabilitation of the quarry at the site for Over the past ten years, we have covered the construction of the airport which is On behalf of the board, I want to many of the key recommendations of the saving over 1 billion litres of potable water. commend the 2,500 CSR employees Task Force on Climate-related Financial across Australia and New Zealand for The strong demand for industrial sites Disclosures (TCFD) framework. This their efforts this year. The team faced in western Sydney, combined with the includes how we manage our internal many challenges and delivered delivery of contracted transactions above risks to capture specific questions on a strong performance. expectations, has significantly increased climate risks on the business. the valuation of CSR’s extensive Thanks to all of our teams for supporting Further details on our approach to Property portfolio. each other and our customers during sustainability over the past year are this difficult year. Thanks as well to our Our Property portfolio is well positioned included in the 2020 CSR Sustainability shareholders for your ongoing support. to deliver strong returns over the next Report which was published in 10 years and beyond. December 2020. Board changes Property delivering strong returns In December 2020, we welcomed Property plays a crucial role in our Nigel Garrard to the CSR board as a strategy to provide flexibility for our non-executive director. Nigel brings Building Products operations, capture extensive operational, manufacturing the best value from our extensive land and listed company experience to CSR. holdings and fund reinvestment in our Nigel has already provided a valuable manufacturing businesses. JOHN GILLAM contribution to the board over the last CHAIR few months since he joined the company.