Level 39
Company Perspectives:
The new Boral has great strengths on which to build its future. We are a resource-based company with large, strategically located reserves; we have built leading market positions in most of our markets; and developed strong relationships with a broad range of longstanding customers, based on decades of reliable delivery of quality products.
After several years of divestment and restructuring, new Boral's assets are robust and competitive; and the company's management team and people are experienced and committed to generating higher returns from their businesses.
With these advantages and a much stronger financial position, new Boral is well placed to move forward as a focused, value-driven building and construction materials supplier operating in Australia and increasingly overseas.
Founded as an oil-refining company shortly after the conclusion of World War II, Boral Limited later divorced itself from its initial interests, diversified into a wide range of resource and material fields, and is today one of Australia's largest manufacturers of building and construction materials. During the 1990s Boral expanded operations in the United States and Asia, but domestic operations still account for about 80 percent of overall revenues. The company, through a number of subsidiaries, is involved in quarrying, timber operations, and masonry, as well as the production of bricks, roofing tiles, cement, concrete, and asphalt.
Early Years: Focusing on Oil Refining
Boral, originally known as Bitumen and Oil Refineries (Australia) Limited, was incorporated in 1946. The new company was assisted financially by California Texas Oil Company, whose Australian subsidiary, Caltex, purchased 40 percent of the initial stock. Caltex also agreed to provide the new company with a 25-year supply of crude oil and technical assistance for three years. In return, Bitumen and Oil guaranteed Caltex a supply of refinery byproducts.
An entrepreneurial promoter named David Craig became the company's first chairman, and Elton Griffin was named chief executive. Griffin was an accountant by trade and maintained board positions with several other Australian companies, including the City Mutual Life Assurance Society and Email Limited.
T.G. Murray, another founding director, succeeded Craig as chairman in 1947. Murray also served as board chairman for the City Mutual Life Assurance Society, where Griffin was a director, and was a board member of other major Australian companies.
Bitumen and Oil stock, issued in early 1946, represented the 60 percent of the company that Caltex did not own. Initially the stock did well on the market as a result of widespread interest in the new corporation. The stock soon fell victim to nose-diving prices, before leveling off once production began in late 1948.
When production finally commenced, it was on Botany Bay, New South Wales, at a new plant on land in Matraville, leased from the Australian government. Despite difficulties in obtaining permission to construct the facility on the Botany Bay parcel, near Sydney, construction schedules stayed on course.
By 1949 Bitumen and Oil's prospects were good. Chairman Murray told stockholders that year that increased government-sanctioned roadwork should benefit the company, though the cost of interstate transport and the limited supply of steel for drums could hinder profits. The company closed out its first full year of production with a net profit of A$40,747.
Bitumen and Oil steadily increased production through the mid-1950s. In 1954 the company embarked on its first major expansion, and Queensland Oil Refineries—later known as Boral Resources (Queensland)—was founded. Activities of the new operation included processing semirefined oil received from Matraville into heavy fuel oil and bitumen.
The company entered the field of petroleum tars that same year, with the purchase of a minority interest in Petroleum and Chemical Corporation, which provided an outlet for refinery byproducts. The acquisition of a smaller company, W.B. Constructions, during this same time gave Bitumen and Oil a base for the manufacture and distribution of emulsion and tars in the states of New South Wales and Victoria.
Diversifying in the 1960s
Bitumen and Oil made a number of acquisitions during the early 1960s, which set the way for expansion in some areas and capital gains in others through the sale of new assets. In 1961 a controlling interest was purchased in Petroleum and Chemical Corporation. That same year Bitumen and Oil targeted Huddart Parker, a shipping group, for its first major takeover. Bitumen and Oil sold some of Huddart Parker's assets shortly after the successful acquisition, but picked up bargaining power within the oil industry, having secured markets to store heavy fuel and diesel oil.
During this time the company also expanded bituminous operations in Victoria, with the formation of Reid Brothers & Carr Proprietary, an asphalt-manufacturing company owned jointly by Reids Quarries and Bitumen and Oil. Fowler Road Construction Proprietary was also purchased and later became the spray division of Boral Resources (Victoria). Bituminous surfacing operations were then extended into South Australia through the purchase of an interest in Bitumax Proprietary, which later became a wholly owned subsidiary.
In 1963 Bitumen and Oil acquired Mt. Lyell Investments, primarily because of its large interest in the fertilizer industry. Mt. Lyell soon was sold, after plans to manufacture fertilizer from refinery byproducts fell through because of unforeseen high costs.
Early in 1964 the Gas Supply Company was acquired, which included gas plants in Victoria, New South Wales, and Queensland. The Victorian operations were later sold. The Norman J. Hurll Group was acquired later that year, and went on to form an integral part of the Bitumen and Oil subsidiary Gas Group. During this same time the company also purchased a majority interest in Mt. Lyell Mining and Railway, a tin manufacturing company. Company officials later decided to abandon the tin field, and the mining company was sold for capital gain.
A 1964 decision to diversify into construction resources was the highlight of the period. This diversification marked the beginning of a shift in corporate focus. Two large quarry groups were purchased in 1964, paving the way for restructuring and ultimately representing two major building blocks in the formation of the Boral of the early 21st century.
The two groups purchased—Albion and Reid—were consolidated under the name Albion Reid Proprietary, which later became the subsidiary Boral Resources (Victoria) Proprietary. Activities of smaller quarrying companies—including Carr Fowler, Reid Brothers & Carr, and Dammann Asphalt—were then incorporated into the interests of Albion Reid.
On November 19, 1963, the company adopted the name Boral Limited, which was an acronym for Bitumen and Oil Refineries (Australia) Limited. The new name signified the company's move away from its original core business, oil refining. With the formation of the Albion Reid group, Boral had entered the premixed-concrete industry in South Australia. Operations were later expanded to include quarrying, and the subsidiary became known as Boral Resources (South Australia) Proprietary. In 1966 Boral acquired its third major quarry company, Bayview, rounding out the group that was then Boral's foundation.
Boral's acquisitions were put on hold for the next three years while company operations were consolidated. In April 1967 John O'Neill was named a company director and later that year was appointed chairman, following the retirement of T.G. Murray. O'Neill, a director of the City Mutual Life Assurance Society, brought a background to Boral that included the law, banking, oil exploration, and insurance.
1970s: Exiting from Oil Refining, Expanding in Building and Construction
Boral merged its oil interests with the French-based Total in 1969. Boral's previous attempts to provide larger coverage of the retail petroleum market and acquire an assured crude oil supply had been less than successful. In a major reorganization spanning the next two years, Boral sold its remaining oil interests to Total and completely separated itself from its original field.
With oil refining behind it, Boral became increasingly committed to expansion in the building and construction industries. Early acquisitions spurred by this new direction included Warringah Brick in New South Wales, Brittains Bricks in Queensland, and Steel Mills Limited—later Boral Steel Limited—operating in New South Wales and Queensland.
Boral continued expansion into the brick field in the early 1970s, with the purchase of Glen Iris Bricks, later known as Boral Bricks (Victoria). Meanwhile, the company acquired a trio of concrete-masonry-block companies, including Besser Vibrapac of Queensland, Jaywoth Industries in New South Wales, and Hollostone, operating in Victoria and South Australia.
Boral also expanded into the field of gas and asphalt early in the decade with the acquisition of Brisbane Gas Company, which became Gas Corporation of Queensland, and asphalt operations from Esso.
In 1973 Elton Griffin retired as CEO and was succeeded by Eric J. Neal. Neal, a ten-year veteran of the company, had served in various managerial roles before replacing Griffin. The new CEO was quick to direct other diversification moves, and in 1976 Boral purchased Cyclone Company of Australia, which became Boral Cyclone. The acquisition brought Boral into the fields of fencing, materials-handling equipment, prefabricated buildings, aluminum window frames and shower screens, wire screen cloth, and hand tools.
Peter Finley was named Boral's fourth chairman in 1976. Finley, a chartered accountant, would in 1990 become vice-chairman of the National Australia Bank and chairman of Email Limited, a company of which Elton Griffin had once been a board member.
In 1978 Boral Cyclone purchased the Melwire Group, whose operations included woven-wire conveyor belts, wire screens for heavy industry, and other woven-wire products. Melwire later acquired Mounts Wire Industries, a New Zealand company with similar operations. That same year Boral took over its first mining interest and a major gypsum producer, Australian Gypsum Industries. The subsidiary Boral Bricks Proprietary also acquired Albury Brickworks and Pacific Brick Proprietary about the same time. Meanwhile, Boral was also establishing its presence in the United States, with the 1979 purchase of a partial interest in California Tile, a concrete-tile-manufacturing company based near Los Angeles (the remaining interest was purchased in 1980).
1980s: Further Acquisitions at Home and Abroad
Boral entered the 1980s joining a growing number of major Australian industrial suppliers diversifying into energy. Under an agreement with Esso Exploration and Production Australia, Boral began oil and gas exploration in Queensland's Galilee Basin in 1980. A few years later Boral acquired a 37 percent stake in the Oil Company of Australia (OCA), a Queensland-based gas exploration company. A subsequent purchase of additional interest in the oil company made OCA an 85 percent-owned subsidiary.
In 1982 the takeover of BMI Limited of Australia was completed, giving Boral full control over a major construction materials group. BMI's interests were complementary to those of Boral, and included operations in concrete, asphalt, and bricks, as well as timber, a new area for the company.
Expansion and diversification led to increasing sales, and by 1983 the company passed A$1 billion in sales for the first time. The 1980 acquisition of the Augusta, Georgia-based Merry Group, the third largest manufacturer of clay bricks in the United States, made Boral the fourth largest brick manufacturer in the world. Once under Boral's wing, the Merry Group went on to acquire brickworks in Maryland, Oklahoma, Texas, Virginia, and South Carolina.
In 1985 Boral purchased Johns Perry, an Australian company involved in heavy engineering, ropes and strappings, and lifts and escalators. The following year the Edenhall Group of the United Kingdom was acquired.
In order to safeguard its cement supply, Boral bought Blue Circle Southern Cement Limited, in 1987. The A$630 million acquisition was Boral's costliest takeover ever. Blue Circle, Australia's largest cement manufacturer, also had interests in coal and limestone. The purchase of Blue Circle and certain U.S. interests helped push Boral's sales over A$2 billion in 1987; the company posted A$2.37 billion in sales, more than double 1983's figures.
Also in 1987, Eric Neal retired as CEO. Neal had played a key role in Boral's expansion in the Pacific, the United States, and the United Kingdom. Neal was succeeded by Bruce R. Kean. Kean, who had joined Boral in 1968, had served as general manager of the company's energy group and later headed up a number of building-products, manufacturing, and overseas operations. Kean picked up where Neal left off, continuing expansion drives in the United States and Australia. The new CEO also led Boral into continental Europe. Acquisitions there included two clay-brick and tile operations and a limestone and gravel processing plant in West Germany, as well as two Dutch brick manufacturers.
During the late 1980s a handful of Australian companies agreed to be bought out by Boral, which led to further expansion into the tool manufacturing field. These acquisitions included the Bell quarrying concrete, asphalt, and tire business, based in Western Australia; Patience & Nicholson, a cutting-tool company; Trojan, a shovel and hand tool maker; the concrete and masonry manufacturing company Calsil Limited; and a window manufacturing company, Dowell Australia Limited.
Acquisition activity also picked up in the United States in the late 1980s, where Boral acquired Fontana Asphalt, a major southern California asphalt supplier and quarry operator. Other U.S. acquisitions in the late 1980s included Blair Paving and Vernon Paving; another southern California asphalt manufacturer; and U.S. Tile Company, a clay-roofing-tile manufacturer.
Struggles and Restructuring in the 1990s
Boral entered the 1990s on a wave of rising revenues, having posted annual profit increases for 19 consecutive years. Despite the spate of overseas endeavors, better than 80 percent of Boral's activities remained in its home country. The economic downturn of the early 1990s hit Boral hard, given the company's exposure to the cyclical housing market. For the fiscal year ending in June 1991, the company's annual profits failed to increase over the previous year, the first time that had happened in 20 years. Boral also cut its dividend for the first time in 43 years. Profits fell further still in 1992.
In December 1991 Mobil veteran Jim Leslie succeeded Finley as chairman of Boral. One of the first major moves under his chairmanship was the bolstering of timber operations through the purchase of Pacific Dunlop's forestry products division for A$158 million. This move made Boral the leading hardwood timber producer in Australia, with operations added in New South Wales and Tasmania. The Leslie era was also noted for an increased concentration on Boral's core building products and energy businesses. To that end a hodgepodge of manufacturing operations outside the two core areas were spun off as Azon Limited in 1993. Seeking to increase the company's energy operations as a counter to the cyclical building industry, Leslie and Kean launched a takeover bid of Sagasco Holdings, which operated South Australia's suburban gas network and held various production assets. Following some resistance from Sagasco and its major shareholders, Boral succeeded by increasing its bid to A$816 million. Shortly after the completion of this deal in late 1993, Tony Berg took over as managing director from the retiring Kean. Berg, with a background in investment banking, was a former head of Australia's Macquarie Bank. In November 1994 Leslie was succeeded as chairman by Peter Cottrell, who had been on the Boral board of directors since 1992.
Under Berg's leadership, Boral aimed to be one of the world's leaders in building and construction and to be a major player in the Australian energy sector, focusing particularly on production and distribution of natural gas. Most of the remaining operations outside of these areas were soon divested. For example, in 1995 Boral sold its elevator business to Otis Elevator Co. of the United States. Although there were no acquisitions completed on the scale of the Sagasco purchase, Boral did gain the leading position in the U.S. brick market through the 1995 purchases of Bickerstaff Clay Products Company and Isenhour Brick and Tile Company. In addition to bricks, Boral's U.S. operations also focused on tiles, fly ash, and plasterboard. The other major overseas push came in Asia, where the company concentrated on plasterboard and premixed concrete activities in Indonesia, Malaysia, and China. In 1994 Boral began work on the first plasterboard factory in Indonesia and purchased the only plasterboard producer in Malaysia, Wembley Gypsum Products Sdn Bhd. Boral entered the rapidly opening Chinese market for the first time in 1995 when it established a joint venture with a local firm to construct the first plasterboard factory in Shanghai.
Net income dropped nearly in half for the fiscal year ending in June 1996 as Boral was buffeted by another downturn in the housing and construction markets. Seeking to cut its debt load, Boral in July 1997 spun off its natural gas distribution operations to shareholders as a new company called Envestra Limited, a move that gained the company A$899 million. Boral's net debt to equity ratio was thereby reduced to only 25 percent. Other businesses deemed noncore were sold off as well, including the North American gypsum and German tile operations.
Early 21st Century: Newly Focused via Demerger
With the company's financial performance lagging behind that of its main building and construction material rivals, its share price depressed, and the Asian financial crisis hurting the company's operations in that region, Berg and Boral were under continuous pressure in the late 1990s from shareholders and the investment community. Many analysts advocated a company breakup into separate building and energy firms. In October 1999 Boral announced just such plans, with a demerger completed in February 2000. For various reasons, it was actually the building and construction materials business that was demerged from Boral. The old Boral, consisting of the energy operations, was renamed Origin Energy Limited, and the demerged entity took on the Boral Limited name.
With the completion of the demerger, Berg left the company, and Rod Pearse took over as managing director. Pearse had been hired by Berg in 1994 to head the construction materials division. A number of noncore operations were divested in the first several months following the demerger in order to reduce a newly enlarged debt load. Among these were the European brick operations, Boral Tyres, a woodchip operation in Tasmania, and the windows extrusion business. Boral also restructured its troubled Asian activities, in particular through the June 2000 establishment of an Asia-wide plasterboard joint venture with Lafarge, a French building materials firm. The venture, called Lafarge Boral Gypsum in Asia Ltd., was initially 26.7 percent owned by Boral, but the company committed to increasing that ownership to 50 percent within three years by financing new projects. By 2001, with the Australian housing and construction markets beginning to recover and Boral's financial state improving as well, Pearse began looking for acquisitions to further strengthen the company's position. In mid-2001 Boral completed the A$70 million purchase of Concrite Pty Limited, a privately held concrete maker based in Sydney. The market responded positively to the move, indicating that the new Boral might very well face a much brighter future than its dismal decade of the 1990s.
Principal Subsidiaries:Erinbrook Pty Ltd.; Hi-Quality Concrete Industries Pty Ltd.; Blue Circle Southern Cement Pty Ltd.; BCSC Gypsum Investments Pty Ltd.; BCSC Investments Pty Ltd.
Principal Divisions:Australian Construction Materials; Cement; Clay & Concrete Products; Plasterboard; Timber; Boral USA.
Principal Competitors:CSR Limited; Fletcher Building Limited; Holcim Ltd.; James Hardie Industries Limited; CRH plc; RMC Group plc; Aggregate Industries plc; Ube-Mitsubishi Cement Corporation.
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