ABL's Performance in the Masonry Industry

Adelaide Brighton Limited (ABL) is a construction material and lime producing company that has three main operating divisions: Cement and Lime, Concrete and Aggregates, and Concrete Masonry Products. In 2014, ABL acquired C&L Brick Pty Ltd and Hanson Building Products to form its Adbri Masonry division. The division supplies civil and residential customers with pavers, structural block and brick, retaining walls, and environmental products. ABL claims to be the largest manufacturer of concrete masonry products in Australia, focusing on servicing the residential and commercial building markets on the eastern seaboard.

Executive Summary
The subject of this analysis is Adelaide Brighton Ltd, established in 1882, distributed in
strategic locations across Australia. Adelaide Brighton, the largest importer of cement in
Australia, supplies building, construction and infrastructure markets with material. Proactive
management has kept costs under control with a reliable and efficient asset base.
The prime motive for business is to make a profit and for investors to have a return on their
investments. The analysis of the financial statements looked at liquidity, profitability, capital
structure and share value providing a rounded analysis. The ratios representing liquidity,
profitability and capital structure show an organisation that is sustainable in the long-term
and supports investment. Analysis of the capital structure shows potential for the
organisation to grow the capital base.
The response from the investor market shows a share value that is above the share value
calculated using the constant dividend discount model. The financial statements lean
towards a recommendation to invest, while the investor market indicates a no-buy position.

Contents
1. Introduction...........................................................................................................................................1
2. Financial Analysis...................................................................................................................................1
2.1 Liquidity: Current ratio...................................................................................................................1
2.2 Profitability: Net profit margin ratio and Return on total assets...................................................3
2.3 Capital structure: Debt ratio and Interest cover ratio....................................................................5
2.4 Market value: Price-earning (P/E) ratio.........................................................................................6
3. Share Valuation - Constant Dividend Discount Model...........................................................................8
4. Recommendation................................................................................................................................10
5. Conclusion...........................................................................................................................................11
References...................................................................................................................................................12
6. Appendix 1...........................................................................................................................................14
1 Financials.........................................................................................................................................14
2 Growth & Ratios..............................................................................................................................15
3 Industry Averages............................................................................................................................16
4 Competitive Environment................................................................................................................17
7. Appendix 2...........................................................................................................................................21

1. Introduction
Adelaide Brighton Ltd is a publicly owned company, established in 1882 and is registered on the
Australian Stock Exchange (ASX) under the code ABC. Adelaide Brighton (ABC) manufactures and
distributes material across the building construction and infrastructure markets as well as
mineral processing market. Major manufacturing facilities are strategically located in South
Australia, Western Australia and the Northern Territory, enabling ABL to supply all Australian
major centres. To support this, ABL have distribution joint ventures in Victoria and Queensland.
The majority of revenue, 104.92%, for ABC is derived from the cement, lime, concrete and
aggregates segment with concrete products providing 10.09% and unallocated industry
segments returning -15.01% (IBISWorld 2015). Adelaide Brighton has a 38.6% share of the
cement and lime-manufacturing segment, followed by Cement Australia Holdings Pty Ltd and
Boral Ltd (IBISWorld 2015).
This report on the financial analysis of ABC, to support or not support investment in ABC, will
look at liquidity using the current ratio, profitability using net profit margin and return on total
assets, and finally the capital structure using debt ratio and interest cover ratio. The results of
the analysis will be presented in the recommendation section of this report with concluding
remarks in the conclusion.
Towards the end of November 2015 the shares recovered to an upward trend. The past five
years has seen patterns of upward and downward trends. Overall, there has been an upward
trend in the share price. The cyclical nature of the share price trends for ABC has seen drops in
price close the beginning of the year with recovery around July. Recovery for 2016 was early,
around January reflecting the possibility that the share price might be over inflated and due for a
downward trend.
2. Financial Analysis
The financial analysis from financial records published by ABC and reported on by IBISWorld
(2016).
2.1 Liquidity: Current ratio
Note: Unless otherwise stated, the values used are from Appendix 1.
Page | 1

The liquidity of a business can be defined as the ability for a business’s short-term assets to meet
short-term liabilities and provide an indicator of near future cash flow (O'Mara 2015), that is the
ability to meet short-term obligations (Vasiu et al. 2015). The current ratio is the result of
dividing current assets into current debts. A value below one represents current liabilities which
are higher than current assets and raises concern providing indication that inventory levels may
be excessive, borrowing power utilisation, or potential difficulties in operations (Vasiu et al.
2015). Vasiu, et al. (2015) states that although high levels of current ratio—current ratio above
two times—may not indicate critical issues, it is still an area of concern for the firm. Issues that
contribute to a higher current ratio includes poor customer collection, and low stock rotation.
The current ratio for ABC is 2.25 times, indicating a liquid financial position. In comparison to the
industry average of 1.64 we find that ABC’s liquidity is above the industry average in which it
operates. Inventory levels have grown 4.6% over the year while sales revenue has grown 5.7%
over the same time period, providing evidence that inventory is not contributing to a higher
current ratio. ABC has a debtors’ turnover of 41.52 days, down from 43.67 days for the previous
year, compared to an industry average of 40.44 days. The higher than average debtor turnover
may account for a part of the reason that there is a higher than average current ratio. The
improvement in the customer collection period has contributed to the change in the current
ratio from 2.33 the previous year to 2.25.
A limitation of this ratio is that it is a static measure, fixed point in time, and manipulated easily
to show favourable ratios. In addition, the receivable item in the financial statements influences
this ratio. As the collection period for receivables extends, the value of receivables increases
resulting in a higher current ratio. While this may show favourable liquidity, receivable defaults
could negatively affect the overall liquidity of ABC (Cagle et al. 2013).
In a comparison to the quick ratio, current ratio excluding inventory, we find that ABC remains in
a liquid state. The trend, as shown in fig 1, shows the two ratios have a stable trend over time.
Figure 1 ABC Liquidity ratios
Page | 2

Table 1 Liquidity ratios
31-Dec-2015 31-Dec-2014 31-Dec-2013 31-Dec-2012 31-Dec-2011
Total Current Assets
(Refer Appendix 1) 403100 387,200 390,200 363,700 307,800
Total Current
Liabilities
(Refer Appendix 1)
179300 166,000 211,200 193,500 133,700
Inventory
(Refer Appendix 1) 161500 154,700 136,300 134,800 127,900
Current Ratio
(Calculated using
Appendix 1 values)
2.25 2.33 1.85 1.88 2.30
Quick ratio
(Calculated using
Appendix 1 values)
1.35 1.40 1.20 1.18 1.35
Formulas used for calculations:
Current Ratio= Current Assets
Current Liabilities
Quick Ratio= Current Assets−Inventory
Current Liabilities
2.2 Profitability: Net profit margin ratio and Return on total assets
Note: Unless otherwise stated, the values used are from Appendix 1.
Page | 3
31-Dec-2010 31-Dec-2011 31-Dec-2012 31-Dec-2013 31-Dec-2014 31-Dec-2015
1.72
2.30
1.88 1.85
2.33 2.25
0.98
1.35
1.18 1.20
1.40 1.34
Liquidity Ratios
Current Ratio Quick ratio

The net profit margin reflects the outcome of operations after all the costs incurred by the
business are considered and is calculated by dividing net profit into sales. The net profit margin
demonstrates the company’s effectiveness at controlling costs (Titman et al. 2016) and should be
viewed as part of a bigger picture. In addition to profit margin, analysis of the return on the
capital investment required to produce profits and revenues is required to demonstrate further
the profitability. The sustainable part of earning is of particular interest to investors and analysts
because estimated future earnings are the basis of equity value (Amir et al. 2013)—a premium
will be paid on sustainable earnings.
The return on assets (ROA) ratio combines cost control with asset usage and presents a measure
of operating profitability (Titman et al. 2016). The return on assets is calculated by dividing the
operating profit—earnings before interest and tax (EBIT)—by the total assets. Titman (2016)
decomposes this to show the cost control and asset utilisation components, presenting the
following equation:
Returnon Assets=Operating Profit Margin ×Total Asset Turnover
Where OPM represents cost control of the firm and TATO represents the asset utilisation of the
organisation.
The net profit margin for ABC is 14.7% up in 12.9% from 2014 and an industry average of 8.4%
indicates that ABC has a competitive advantage over the average industry. The return on assets
has grown from 9.5% for 2014 to 11.3% for 2015. Comparing the ROA for ABC against the
industry average of 5.18%, the indication is that ABC is utilising their assets more efficiently than
the industry average. ABC actively engages in activities to enhance and promote company
performance and efficiency, and continually look for opportunities to improve (Brydon 2015).
Both measures are above the industry average, indicating that ABC is profitable when looking
profits against sales and profits against assets. The indication is that ABC are able to control costs
in an efficient manner as well as make use of assets efficiently. The net profit margin has shown
positive values over the past five years, with growth in the net profit margin between December
2013 and December 2015.
Page | 4

Figure 2 Net profit margin ratio
Dec 2011 Dec 2012 Dec 2013 Dec 2014 Dec 2015
13.53%
12.97%
12.33%
12.93%
14.73%
Net Profit Margin Ratio
2.3 Capital structure: Debt ratio and Interest cover ratio
Note: Unless otherwise stated, the values used are from Appendix 1.
Capital structure refers to how an organisation finances operations through debt and equity
(Farlex Financial Dictionary n.d.), specifically the percentage of the overall financing attributed to
each type of financing. The first part of this is the debt ratio, the total debt compared to total
assets, which provides a measure of financing through borrowing or debt (Titman et al. 2016). A
value below 0.5 indicates assets predominantly financed through equity while greater than 0.5
indicates financing of assets through debt (Ready Ratios 2016). The debt ratio provides an
indication of the long-term solvency of the firm (Spears & Morris 1995) but should be considered
in relation to the business model. The debt ratio of IBM in 1993 was 0.76 and was largely
attributable to a consumer-financing subsidiary.
A word of caution here is that debt ratios do not always follow sound financial guidelines, but are
subject to manager’s individualism level. Managers with high individualism tend to be
overconfident and have high optimism, which creates a bias in the debt ratio (Antoncyzk &
Salzman 2014).
The interest cover ratio (ICR) can be defined as the extent to which a company can cover interest
payments and represents the number of times interest payment can be made using EBIT over
the reporting period (Ready Ratios 2016). While a high ratio indicates financial health, it may also
indicate that the organisation is overlooking investment and growth opportunities. An
influencing factor of the ICR is covenants imposed by major lenders which require a minimum
Page | 5

level ICR be maintained by the firm resulting in the reduction of optimal leverage and lowers
distress costs (Dothan 2006).
The debt ratio for ABC indicates that 34.33% of assets are financed through debt, compared to
an industry average of 44.81%. This indicates that ABC has sufficient assets to support additional
borrowings for growth. In considering this position, the capability of ABC to cover interest
payments should be assessed. The interest cover rates for ABC is 20.70 times, well above the
industry average of 7.81 times. The higher than average ratio provides evidence that ABC is
capable of meeting interest payments easily.
2.4 Market value: Price-earning (P/E) ratio.
Note: Unless otherwise stated, the values used are from Appendix 1.
The price-earning (P/E) ratio is a widely used as a stock valuation measure and calculated by the
share price divided by the earnings per share. The P/E ratio is an expression of the value of
shares in relative terms, price per dollar earned, which allows us to compare various shares
(Titman et al. 2016). The variation between P/E ratios and shares can vary widely, attributable to
the risk and expected growth of the individual firms (Titman et al. 2016). Shares can be
evaluated using the P/E ratio at current market prices or alternatively calculated future value
using require P/E and estimated future earnings. The price assessed in this analysis is the daily
close price for the share. Other prices that are used include the opening price, daily high price
and daily low price.
The measure of the P/E ratio has been shown to provide an indication of real return over the
following 10 years (Weigand & Irons 2007). Siegel, cited in Weiand & Irons (2007), states that
high P/E ratios, due to earning decline, result in real return on equities average around 9.7% per
annum for the following five years. In contrast, high P/E ratios due to rising share prices display a
real return average of only 1.1%. Values between 20 and 25 for the P/E ratio are considered high
(Weigand & Irons 2007).
The P/E ratio for ABC as at 31 December 2015 was 14.84, with a minimum of 12.75 and
maximum of 15.49 for the period December 2011 to December 2015. The growth of dividends is
a contributor towards a higher P/E ratio (Titman et al. 2016). ABC have consistently paid
dividends over the past five years, however the growth of dividends has remained at zero
Page | 6

percent. The other determinant in the P/E ratio is the investor’s required rate of return (Titman
et al. 2016), which has an inverse effect on the P/E ratio. The P/E ratio for Boral Ltd, a competitor
of ABC, for December 2015 was 18.08. The P/E ratio for ABC reflects a stable return of
approximately 6.7 percent. Earnings and share price for ABC have shown consistency in
proportion and growth providing for a relatively stable P/E ratio. As of 19 April 2016, the P/E
ratio has risen to 16.43 with a market P/E at 15.87 and sector P/E of 14.03 showing a higher
value of ABC shares compared to the market and sector (Refer: Appendix 2).
Figure 3 Price earnings ratio
Dec 2011 Dec 2012 Dec 2013 Dec 2014 Dec 2015
12.75 13.00
15.49
13.27
14.84
Adelaide Brighton: P/E Ratio
Table 2 Price earnings ratio
30/12/2011 30/12/2012 30/12/2013 30/12/2014 30/12/2015
Share Price
(SP)
(Yahoo 7 2016)
2.
97
3.
12
3.
67
3.
57
4.
75
Earnings per Share
(EPS)
(Appendix 1)
0.
23
0.
24
0.
24
0.
27
0.
32
P/E Ratio
PE= SP
EPS 12.7
47
13.0
00
15.4
85
13.2
71
14.8
44
Page | 7

3. Share Valuation - Constant Dividend Discount Model
The constant dividend discount model (CDDM) is a way of valuing a share based on the expected
future divided using the investor’s required rate of return, as there is no promise of dividend
(Titman et al. 2016). The model is sensitive to both the expected rate of return selected and the
expected growth rate and that the expected rate of return should be larger than the growth rate
(Payne & Finch 1999). The CDDM is represented using the formula:
V E= ¿1
RE−g
VE = Ordinary share value
Div1 = Dividend after 1 year (Most recent dividend increased by growth rate)
RE = Required rate of return
G = Growth rate
In terms of ABC, the most recent dividend is 0.19c per share, the required rate of return is nine
percent and the expected dividend growth rate is four percent.
V E= 0.19(1+ 4 %)
9 %−4 % =3.95
This provides us with a share value of $3.95. Comparing this to the value of ABC shares at 31
December 2015 (date of financial results) and current share value as at 18 April 2016, which
were $4.60 and $5.08 respectively, we find that the share is trading above our estimated value.
Given the expectations of dividend growth rate and required rate of return, purchasing the share
above the $3.95 level would not support a required rate of return of nine percent. Hence the
share is considered to be over-valued given the parameters and a no-go for investing. While
there has been a dividend growth over the past year of approximately 15%, the past five years
growth rate has been negative further supporting the no-go for investing.
Page | 8

Figure 4 Share price and dividend
Dec 2011 Dec 2012 Dec 2013 Dec 2014 Dec 2015
2.97 3.12
3.67 3.57
4.75
0.21 0.19 0.16 0.16 0.19
Share Price and Dividend per share
Share Price Dividend
Figure 5 Weekly average share price
12/1/2011
1/26/2012
3/22/2012
5/17/2012
7/12/2012
9/6/2012
11/1/2012
12/27/2012
2/21/2013
4/18/2013
6/13/2013
8/8/2013
10/3/2013
11/28/2013
1/23/2014
3/20/2014
5/15/2014
7/10/2014
9/4/2014
10/30/2014
12/25/2014
2/19/2015
4/16/2015
6/11/2015
8/6/2015
10/1/2015
11/26/2015
1/21/2016
3/17/2016
2.5
3
3.5
4
4.5
5
5.5
Weekly Share Price
Page | 9

4. Recommendation
Adelaide Brighton is in a liquid position showing a current ratio of 2.25, and is in a position to
support the vertical integration strategy (Brydon 2015). Although there have been some land
sales totalling AUD 48 million, there has also been investment in operations and the purchase of
additional quarries. The outlook from a liquidity perspective is positive and supports an
investment decision from a liquidity perspective.
The above industry net profit margin and an increase in the return on assets supports the
statement in the annual general meeting report that ABC have invested in making operations
more efficient (Brydon 2015). ABC have engaged in a strategy of vertical integration (Brydon
2015), providing improved returns while keeping asset and liability variations to a minimum. ABC
retains a competitive advantage in the industry with efficient use of assts. A decision to invest
based on a profitability perspective is supported by the net profit margin and return on assets.
The capital structure reflects financing that has an equity bias. There is potential for additional
growth of the company through debt financing. The interest cover ratio adequately provides for
existing interest payments and can further service additional debt. The capital structure of ABC
further supports investment decision from a capital growth perspective in the long term.
The share market is a reflection of the overall performance of the firm and the perception of risk
in the firm by investors. The P/E ratio for ABC has remained consistent over the past five years
with a variance of 1.19 indicating stability in earnings and price growth with static risk
assessment. Investment from market perspective is that ABC is suited to long term investment
with predictable dividends and stable growth with low risk. Note that short term (less than three
years) investing shows little correlation between the P/E ratio and average returns, with long
term (five or more years) showing lower returns when P/E ratios are high (Trevino & Robertson
2002). This supports a long term investment strategy in ABC.
The CDDM provides a level of share value given the expectations of share and company
performance in terms of dividend payout. The share value calculated using CDDM is below the
market value and thus the final recommendation would be to not invest in Adelaide Brighton
Ltd.
Page | 10

In May 2014 Martin Brydon was appointed CEO. Although Brydon’s CEO experience is limited, he
has reportedly taken control of the organisation in a positive manner. ABC is well placed to
pursue the vertical integration strategy. Recent take overs and successful integration into ABC
inspires confidence that ABC will continue to be able to have successful integration. From this
standpoint, a long term investment strategy would be supported with regular assessment of the
financials to monitor liquidity, profitability and especially the capital structure.
5. Conclusion
Adelaide Brighton Pty Ltd is the largest competitor in the cement and lime manufacturing market
segment and is Australia’s biggest importer of cement (Binstead 2015). This exposure to
exchange rates exposes a vulnerable part of ABC’s profits. There is pressure from international
competitors with the merger of Holcim and Lafarge which could initiate consolidation of the
market in Australia (Brydon, cited in Binstead, 2015). ABC is in a strong position to counter
international competition with the potential of merging with Boral that would reduce the cost of
transport for products (Binstead 2015). The overall outlook for Adelaide Brighton is positive with
the change in the mining industry development being offset by housing growth. Demand from
the housing industry is expected to continue for the short term and be replaced with growth in
demand from infrastructure projects.
Page | 11

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Page | 13

6. Appendix 1
Adelaide Brighton Ltd
1 Financials
Balance Date 31-Dec-2015 31-Dec-2014 31-Dec-2013 31-Dec-2012 31-Dec-2011
Accounting Period Date 12 Months 12 Months 12 Months 12 Months 12 Months
Reported Currency AUD AUD AUD AUD AUD
Currency Units AUD000 AUD000 AUD000 AUD000 AUD000
PROFIT AND LOSS ACCOUNT
REVENUE ITEMS
Sales Revenue 1,411,000 1,335,600 1,225,500 1,180,100 1,096,800
Other Revenue 53,700 28,300 7,200 12,700 16,000
Total Revenue 1,464,700 1,363,900 1,232,700 1,192,800 1,112,800
Cost of Goods Sold 884,100 823,500 745,600 720,400 681,200
Depreciation 77,800 73,000 70,600 65,200 57,800
R&D Expenditure N/A N/A N/A N/A N/A
INTEREST
Interest Received 1,700 1,800 1,800 2,500 2,400
Interest Expense 14,500 16,200 16,000 18,700 17,200
PROFIT AND LOSS
Share of Profits of
Associates 19,900 21,700 24,200 27,700 35,700
EBITDA 376,200 319,900 293,400 288,900 279,000
Profit Before Tax 285,600 232,500 208,600 207,500 206,400
Income Tax Expense 77,800 59,900 57,500 54,600 58,000
Continuing Operations
After Tax 207,800 172,600 151,100 152,900 148,400
Discontinued Operations
After Tax N/A N/A N/A N/A N/A
Outside Equity Interest -100 -100 0 -100 0
NPAT 207,900 172,700 151,100 153,000 148,400
Significant Items 0 0 0 0 0
Dividends 139,500 124,700 105,200 105,100 120,800
AUDIT
Audit Fees 777 651 693 686 683
Audit Other 133 104 93 90 22
Total Audit Fees 910 755 786 776 705
BALANCE SHEET
CURRENT ASSETS
Cash at Bank 33,300 31,800 11,100 8,800 11,000
Trade Debtors 166,600 163,000 149,100 141,400 143,400
Inventory 161,500 154,400 136,300 134,800 127,900
Other Current Assets 41,700 38,200 93,700 78,700 25,500
Total Current Assets 403,100 387,400 390,200 363,700 307,800
NON-CURRENT ASSETS
Receivables 32,900 32,700 31,400 29,600 27,200
Investments 143,500 139,900 138,500 129,000 97,200
Property & Plant
Equipment 986,100 994,200 889,700 902,500 851,000
Intangible Assets 272,900 266,400 183,900 184,800 183,000
Page | 14

Other Non Current Assets 0 0 0 3,500 0
Total Non-Current
Assets 1,435,400 1,433,200 1,243,500 1,249,400 1,158,400
Total Assets 1,838,500 1,820,600 1,633,700 1,613,100 1,466,200
CURRENT LIABILITIES
Trade Creditors 122,900 121,300 105,400 95,000 93,700
Interest Bearing Debt 1,000 1,400 0 20,000 700
Provisions 33,600 38,700 66,400 51,300 21,700
Other Current Liabilities 21,800 5,500 39,400 27,200 17,600
Total Current Liabilities 179,300 166,900 211,200 193,500 133,700
NON-CURRENT LIABILITIES
Interest Bearing Debt 329,500 390,100 259,100 299,300 258,700
Provisions 36,900 52,100 37,200 47,600 45,900
Other Non-Current
Liabilities 85,500 74,800 64,400 66,800 70,800
Total Non-Current
Liabilities 451,900 517,000 360,700 413,700 375,400
Total Liabilities 631,200 683,900 571,900 607,200 509,100
SHAREHOLDERS' EQUITY
Share Capital 729,200 727,900 699,100 696,600 694,600
Reserves 1,200 3,300 4,300 2,100 2,300
Retained Earnings 474,300 402,800 355,600 304,400 257,300
Other 2,600 2,700 2,800 2,800 2,900
Total Equity 1,207,300 1,136,700 1,061,800 1,005,900 957,100
OTHER
Number of Employees 1,386 1,409 1,300 1,600 1,600
Number of Shares on
Issue (end of period) 648,885,747 648,267,667 638,456,688 637,387,488 636,277,810
Market Capitalisation
(end of period) ('000) 3,082,207 2,314,316 2,343,136 1,988,649 1,838,843
Earnings per Share
(basic) (cents) 32.0 26.9 23.7 24.0 23.3
Earnings per Share
(diluted) (cents) 31.9 26.8 23.4 23.8 23.2
Qualified Audit Report 0 0 0 0 0
2 Growth & Ratios
Financial Growth
Balance Date 31-Dec-2015 31-Dec-2014 31-Dec-2013 31-Dec-2012 Average
2010-2015
Total Revenue Growth (%
change) 7.4 10.6 3.3 7.2 6.3
Sales Revenue Growth (%
change) 5.6 9.0 3.8 7.6 5.7
EBITDA (% change) 17.6 9.0 1.6 3.5 6.9
NPAT (% change) 20.4 14.3 -1.2 3.1 6.5
Shareholders' Funds (% change) 6.2 7.1 5.6 5.1 5.3
Total Assets (% change) 1.0 11.4 1.3 10.0 6.7
Employees (% change) -1.6 8.4 -18.8 0.0 -2.8
Financial Ratios
Page | 15

Balance Date 31-Dec-2015 31-Dec-2014 31-Dec-2013 31-Dec-2012 31-Dec-2011
Return on Revenue (ROR) (%) 14.2 12.7 12.3 12.8 13.3
Return on Shareholders' Funds
(ROSF) (%) 17.2 15.2 14.2 15.2 15.5
Return on Assets (ROA) (%) 11.3 9.5 9.3 9.5 10.1
Profit Margin (%) 20.2 17.4 17.0 17.6 18.8
Revenue per Employee ($'000 per
person) 1,056.8 968.0 948.2 745.5 695.5
NPAT per Employee ($'000 per
person) 150.0 122.6 116.2 95.6 92.8
Effective Tax Rate (%) 27.2 25.8 27.6 26.3 28.1
Gearing (%) 34.3 37.6 35.0 37.6 34.7
Interest Cover (X) 20.7 15.4 14.0 12.1 13.0
Current Ratio (X) 2.3 2.3 1.9 1.9 2.3
Dividends Paid per Share ($) 0.2 0.2 0.2 0.2 0.2
3 Industry Averages
Financial Ratios
Financial Ratios Industry Average* Adelaide Brighton 31-Dec-2015 Unit
Asset Turnover Ratio 0.65 0.77 Times
Creditors T/O 48.46 50.74 Days
Current Ratio 1.64 2.25 Times
Days Stock Held 46.40 66.68 Days
Debtors T/O 40.44 41.52 Days
Dividend Payout Ratio 63.03 67.10 Percent
Dividend Per Share 0.20 0.21 A$
Earnings Per Share 0.31 0.32 A$
EBITDA 168,535.31 376,200.00 A$ 000
Effective Tax Rate 20.69 27.24 Percent
Gearing 44.81 34.33 Percent
Interest Cover 7.81 20.70 Times
Net Assets Per Share 3.04 1.86 A$
NPAT/Employee 48.94 150.00 A$000
Pre-Tax Margin 10.14 19.50 Percent
Return On Shareholders Funds 7.06 17.22 Percent
Return On Total Assets 5.18 11.31 Percent
Revenue/Employee 597.58 1,056.78 A$ 000
Growth Ratios
Growth Ratios Industry
Average*
Adelaide
Brighton 31-Dec-
2015
Unit
Asset Growth 3.43 0.98 Percent
Dividend
Growth Rate 7.20 11.90 Percent
Employees -3.64 -1.63 Percent
Page | 16

Growth
NPAT Growth 24.73 20.38 Percent
Revenue
Growth 3.24 7.39 Percent
*Companies included in the Industry Averages Calculations operate in the Non-Metallic Mineral Product
Manufacturing in Australia industry.
4 Competitive Environment
C2031 Cement and Lime Manufacturing in Australia
Industry Statistics
Industry Size 2015/2016 $ million 2278
Industry Turnover Growth Rate 2015/2016 -1.26
Industry Concentration Level High
Estimated Adelaide Brighton Market Share (%) 38.60
Number of Enterprises in Industry 28
Analysis:
Adelaide Brighton Ltd (ABL) originated in South Australia, but has expanded to all mainland states and
territories. ABL produces and markets clinker, cement and lime products, ready-mixed concrete,
aggregates and concrete products. Cement contributes 54.0% of company external sales and lime
accounts for 12.0%, with concrete products accounting for the balance.
ABL trades as Adelaide Brighton Cement in South Australia, as Cockburn Cement in Western Australia
and as Northern Cement in the Northern Territory. It also operates a grinding facility, Morgan Cement, in
New South Wales. It maintains joint venture operations in Queensland with Boral Limited (as Sunstate
Cement), and in New South Wales and Victoria with the Barro Group Pty Limited (as Independent Cement
and Lime).
Lime operations
ABL is the market leader in lime manufacturing in Australia and the ninth-largest in the world. It has lime
operations in Munster, Dongara, Kwinana, Kemerton, Karratha and Parkston in Western Australia
(operated by Cockburn Cement). ABL has additional operations at Angaston in South Australia, and
Mataranka in the Northern Territory. ABL has lifted its lime production capacity by 250,000 tonnes per
annum in recent years and delivered operational and environmental improvements, through upgrades to its
Munster and Mataranka plants.
During 2011 and 2012, the company invested $52.0 million to improve environmental standards and during
2014-15, the company delivered increased lime sales to the mineral sector in Western Australia and South
Australia (particularly the non-alumina and gold customers). This has foreshadowed higher sales for 2015-
16, stemming from volume and price increases.
Cement operations
ABL has cement operations in Western Australia, South Australia, the Northern Territory and Victoria, and
joint ventures in Victoria, New South Wales and Queensland. ABL has spread its reach into geographic
and specialist product markets through strategic supply agreements, to service customers in Victoria,
South Australia and Western Australia. It has also secured long-term clinker supply from Japan and
invested in a Malaysian white cement manufacturer.
Page | 17

An ongoing agreement for ABL to supply Cement Australia with 120,000 tonnes of cement to service
customers in the SA and WA markets was terminated in January 2015. Cement Australia may establish its
own grinding mill to supply the regional market. The loss of sales is expected to negatively affect company
pre-tax profit by about $15.0 million in 2015-16, although ABL has indicated that this will be offset by
lifting sales in WA, Victoria and NSW. ABL has projected a reduction in average cement prices during
2015-16 due to the increased volumes sold to lower priced markets, notably for infrastructure projects.
Financial performance
ABL’s lime and cement sales are projected to increase at an annualised 3.1% over the five years through
2015-16, to $880.0 million. This is despite the modest contraction during the current year as supply
arrangements with Cement Australia end and price competitiveness increases. The ABL performance
contrasts with the nominal decline in industry revenue over the five years. This reflects ABL’s solid
production performance to meet increasing demand in the faster growing markets of Western Australia,
South Australia and the Northern Territory, which has outweighed the competitive pricing pressure in the
Queensland, NSW and Victorian markets. The company’s total profit ranged between 15.0% and 20.0% of
revenue over the past five years, roughly corresponding with overall industry profitability.
Adelaide Brighton Ltd - industry segment performance*
Year Revenue Growth
2010-11 757.0 N/C
2011-12 727.0 -4.0
2012-13 810.2 11.4
2013-14 840.0 3.7
2014-15 882.9 5.1
2015-16 880.0 -0.3
Major Competitors Market Share
Adelaide Brighton Ltd 38.60
Cement Australia Holdings Pty Ltd 19.60
Boral Limited 12.80
BGC (Australia) Pty Ltd 7.80
Sibelco Asia Pacific Pty Ltd 7.00
C2033 Ready-Mixed Concrete Manufacturing in Australia
Industry Statistics
Industry Size 2015/2016 $ million 5404.3
Industry Turnover Growth Rate 2015/2016 -1.21
Industry Concentration Level Medium
Number of Enterprises in Industry 245
Analysis:
Adelaide Brighton is not a major player in this industry.
Major Competitors Market Share
Boral Limited 25.20
Hanson Australia (Holdings) Proprietary Limited 21.40
Holcim (Australia) Holdings Pty Ltd 18.50
Barro Group Pty Limited 5.70
C2034 Concrete Product Manufacturing in Australia
Page | 18

Industry Statistics
Industry Size 2015/2016 $ million 2270
Industry Turnover Growth Rate 2015/2016 -0.01
Industry Concentration Level Medium
Estimated Adelaide Brighton Market Share (%) 6.10
Number of Enterprises in Industry 785
Analysis:
Adelaide Brighton Ltd (ABL) is a major manufacturer of cement, clinker and lime products. In June 2003,
ABL entered the Concrete Product Manufacturing industry with the acquisition of Rocla Pavers and
Masonry (RPM). This was followed in 2007-08 by the acquisition of C&M Brick Pty Ltd and Hanson
Building Products, to form ABL’s Adbri Masonry division.
Adbri Masonry has manufacturing facilities in all Australian states except Western Australia. Adbri Masonry
supplies civil and residential customers with pavers, structural block and brick, retaining walls, and
environmental products including a lock-paving system and permeable paving for water conservation
projects. Adelaide Brighton, through its concrete products division, operates in Queensland, New South
Wales, Victoria, Tasmania and South Australia. Adbri Masonry claims to be the largest manufacturer of
concrete masonry products in Australia, and focuses on servicing the residential and commercial building
markets on the eastern seaboard.
The company upgraded its production facilities at the Stapylton in Queensland during 2014. The new
machinery has helped to lower production costs, hasten product change, and provide improved production
flexibility.
Financial performance
ABL’s industry-related revenue is estimated to grow by an annualised 3.4% over the five years through
December 2015, to $138.0 million. This growth contrasts with the minor nominal decline in overall industry
revenue over the same period, and reflects the company’s focus on positioning itself as the major player in
the industry’s masonry segment.
Profit for the concrete product division jumped from 1.7% of revenue in 2013 to 4.4% in 2014. The
company reported an increase in both volumes and prices during 2014, indicating it had delivered
significant cost savings by closing excess productive capacity and improving the organisation structure.
Adelaide Brighton Ltd - industry related performance**
Year* Revenue Growth
2010 116.8 N/C
2011 120.2 2.9
2012 123.7 2.9
2013 124.4 0.6
2014 137.4 10.5
2015 138.0 0.4
Major Competitors Market Share
Fletcher Building Limited 22.70
James Hardie Industries Public Limited Company 17.80
CSR Limited 17.40
Brickworks Ltd 11.90
Page | 19

Holcim (Australia) Holdings Pty Ltd 8.10
Boral Limited 7.40
Adelaide Brighton Ltd 6.10
F3339 Hardware Wholesaling in Australia
Industry Statistics
Industry Size 2015/2016 $ million 15757.4
Industry Turnover Growth Rate 2015/2016 1.70
Industry Concentration Level Low
Number of Enterprises in Industry 4,966
Analysis:
Adelaide Brighton is not a major player in this industry.
Major Competitors Market Share
Wesfarmers Limited 22.20
(Source: IBISWorld 2016)
Page | 20

7. Appendix 2
Adelaide Brighton Limited (ABC)
As at 18/04/2016 11:52:44 AM
Real-Time
Last Price Today's Change Open Day High Day Low 52-Week Range
5.110 0.010 (0.200%) 5.030 5.130 5.030 5.190 4.000
Research By:
Company Profile
Adelaide Brighton Limited (ABC) is an integrated construction material
and lime producing group of companies focused on the construction,
engineering, infrastructure and resource sectors in Australia. ABC has
three main operating divisions being: Cement and Lime, Concrete and
Aggregates and Concrete Masonry Products.
Balance Sheet
Capital Structure ($ 000s)
Total Debt 330,500 Interest: 14,700
Long Term Debt 329,500 (21% of capital)
Preferred Stock 0
Shareholders Equity 1,204,700 (79% of capital)
Key Measures
Value Company Market Sector
Earnings 0.71 1.00 1.20
P/E Ratio 16.43 15.87 14.03
Previous
Close
52 Week
High
52 Week
Low
5.10 5.19 4.00
P/E Ratio
16.43
Sector
Materials
Market Cap ($ Million)
3,309
Total Shareholder Return (avg
annual rate)
1 Yr 3 Yr 5 Yr 10 Yr
19.4% 20.4% 15.8% 13.7%
Earnings and Dividends Forecast
(cents per share)
Curr 2016 2017
EPS 31.7 29.5 31.1
Page | 21

P/B Ratio 2.75 1.29 0.98
P/E Growth -- 1.56 0.70
P/S Ratio 2.35 1.43 2.42
Income Company Market Sector
Dividend 4.4% 4.5% 3.8%
Franking 100.0%
Tax adj 3.4% 3.0% 2.4%
Stability 90.4% 91.9% 91.9%
Risk Company Market Sector
Beta 0.77 1.05 1.04
Current ratio 2.25 1.65 2.32
Quick ratio 1.35 1.03 1.82
Debt/Equity 27.4% 30.0% 13.2%
EarningsStability 48.2% 50.8% 54.6%
Income coverage 20.20 5.55 20.00
Growth Rates 10 yr 5 yr 1 yr 2 yr Fcast
Sales 4.7% 5.3% 4.5%
Cashflow 3.4% 3.6% 17.2%
Earnings 6.4% 6.0% 14.2% -1.0%
Dividends 0.4% -2.4% 11.8% 18.6%
Book Value 4.8% 4.8% 6.1%
DPS 19.0 25.6 26.7
(Source: ETrade Australia 2016)
Page | 22