Adelaide Brighton Limited (ABC) - Taylor Collison Limited

19 February 2010
Adelaide Brighton Limited (ABC) Marketperform
Initiating Coverage & FY09 – Sound Business Constrained by Short Term Challenges $2.60
Robin Morgan
rmorgan@taylorcollison.com.au
+618 8217 3900
Summary
Market Capitalisation $1,648.8M
Share Price $2.60
52 week low $1.45
52 week high $3.01
Ave Monthly Vol (year rolling) 61.354M
Key Financials (A$ million)
Year End FY09
Actual
FY10
Est.
FY11
Est.
Revenue ($m) 1,011.3 991.2 1,071.0
EBIT ($m) 185.3 181.6 208.1
NPAT ($m) 123.1 122.4 142.3
EPS (c) 20.4 19.3 22.4
Growth (pcp) -8.0% -5.3% 16.3%
PE Ratio (x) 12.8 13.5 11.6
DPS (c) 13.5 13.5 15.0
Div Yield 5.2% 5.2% 5.8%
Franking 100% 100% 100%
EV ($M) 1,824.2 1,804.5 1,787.3
EV/EBIT 9.8 9.9 8.6
ROE 15.4% 13.4% 14.8%
EBIT Margin 18.8% 18.5% 19.7%
Payout Ratio 66.2% 69.9% 66.8%
Share Price Graph (A$)
$4.50
$4.00
$3.50
$3.00
$2.50
$2.00
$1.50
$1.00
$0.50
No v-0 9
Aug-09
May-09
Feb-09
No v-0 8
Aug-08
May-08
Feb-08
Key Points
Initiating coverage of Adelaide Brighton (ABC) with a
Marketperform recommendation, believing its longer term
attractions to be overshadowed by a challenging FY10.
FY09 result above expectation with volume decline well
managed through cost reductions and enhanced pricing.
The high AUD and increased domestic competition will
constrain ABC’s ability to recover FY10 cost increases and
lower volumes through price increases.
Our View
• Sound long term strategy eclipsed by macro challenges –
As an increasingly integrated cement and concrete supplier,
Adelaide Brighton’s (ABC) ability to supplement domestic
manufacture with imported product, has served it well through
the current economic downturn. Whilst ABC has proven itself
a resilient player in the building material sector, we
acknowledge the tough macro environment is still to play out,
believing market conditions will prove challenging in the 12
months ahead.
• Key long term attractions – Despite initiating coverage with
a Marketperform recommendation, we believe ABC’s business
model and long term strategies to be sound due to:
� Increasingly vertically integrated structure
� A balanced strategy of local manufacture and imports
� Monopolistic lime assets well positioned in WA markets
� Potential appeal as an acquisition target
� Discount to domestic peer valuations
• FY09 exceeded guidance and consensus estimates – ABC
reported NPAT up 1.9% to $123.1 million on sales down 3.3%
to $985.0 million. EBIT declined 2.0% to $185.3 million, with
margins increasing to 18.8% from 18.6% in pcp, as price
increases, cost reduction strategies, and reduced sales of
lower margin imported cement enabled margin expansion
despite falling market activity. Improved operational cash
flows, constrained capex, and the equity raising of April 2009,
significantly strengthened the balance sheet with ND/E at
19.6% and EBIT interest cover an impressive 10.1 times.
• Initiate with a Marketperform recommendation – Trading
on 13.5 times our FY10 EPS forecasts, and 9.9 times on an
EV/EBIT basis, we are attracted to ABC’s business model, but
do not believe the Company is a compelling buy in the current
environment. Whilst ABC has in the past negated lower
volumes through price increases and cost reductions, there is
less scope to rely on these levers in FY10. Because of this,
we believe that ABC is less leveraged to a 2010 recovery than
its peers, with its current discount being justified. At this stage
we initiate coverage with a Marketperform recommendation,
and would look for buying opportunities further into the cycle.

Adelaide Brighton Limited Page 2 of 10
A resilient player, but the
tough macro environment is
still to play out for ABC.
Limited leverage when
compared with peers in FY10.
Less scope to rely on cost
reductions and increased
prices to negate FY10 volume
decline.
Trading in line with
international cement players.
Discount to domestic peers.
ABC’s multiples unlikely to
move towards domestic peers,
in the short term at least.
Initiating Coverage with a Marketperform Recommendation
As an increasingly integrated cement and concrete supplier to the Australian
construction market, Adelaide Brighton’s (ABC) ability to supplement domestic
manufacture with imported product, has served it well through the current
economic downturn.
Whilst ABC has proven itself a resilient player in the building material sector, we
acknowledge the tough macro environment is still to play out. We initiate
coverage with a Marketperform recommendation believing market conditions will
prove challenging in the 12 months ahead. We will be carefully monitoring
ABC’s share price and any changes in industry conditions, and will review our
recommendation as appropriate.
Trading on 13.5 times our FY10 EPS forecasts, and 9.9 times on an
EV/EBIT basis, we view ABC’s business model and long term strategies
favourably, but believe the Company’s leverage to a construction industry
recovery to be limited in FY10, when compared with building sector peers.
Macro Environment Caution for FY10
We expect a challenging year ahead for ABC. Cement demand is forecast to
decline a further 5%, with improving residential construction activity in 2H10,
likely to be more than offset by constrained commercial and industrial demand.
Whilst ABC has in the past negated lower volumes through price increases and
cost reductions, there is less scope to rely on these levers in FY10.
Rising FY10 energy prices will make the task of reducing ABC’s cost base all the
more difficult. Furthermore, the combination of an historically high AUD, lower
shipping costs, and increased domestic competition in the cement market is
placing downward pressure on import parity pricing. This constrains ABC’s ability
to recover cost increases and lower expected volumes through enhanced
pricing. The arrival of imported lime into the WA market is a further risk to prices,
volumes and margins, and ABC’s FY10 year therefore merits some caution.
Peer Group Comparison
The table below compares ABC with both international and domestic peers.
Despite ABC’s discount, we believe it to be less leveraged to a 2010 recovery
than its peers who are not subject to the same magnitude of import parity price
pressures and are typically more diversified. We note BLD and FBU have June
year ends, exaggerating ABC’s discount to its domestic peer average.
Mkt Cap
PE EV/EBIT
(AU$m) FY1 FY2 FY1 FY2
International
Heidelberg Cement 11,476 12.4 10.5 11.7 9.0
Holcim N 19,122 14.5 13.4 10.6 8.9
Lafarge 21,863 12.6 11.3 10.8 9.8
International Average 13.1 11.8 11.0 9.2
ABC Prem/(Disc) to Intl Av. 2.5% (1.2%) (9.7%) (7.0%)
Domestic
Boral Limited 3,298 25.3 15.8 17.9 12.3
CSR Limited 2,522 10.3 9.7 8.3 7.9
Fletcher Building 3,788 16.2 12.4 11.4 9.3
James Hardie Indust 3,372 17.9 13.6 12.3 9.2
Adelaide Brighton 1,629 13.5 11.6 9.9 8.6
Domestic Average (excl. ABC) 17.4 12.9 12.5 9.7
ABC Prem/(Disc) to Dom Av. (22.8%) (9.8%) (20.4%) (11.1%)
Overall Average (excl. ABC) 17.9 12.6 11.9 9.5
ABC Prem/(Disc) to Overall Av. (24.7%) (7.8%) (16.2%) (9.4%)
Note: FY1 relates to the following yr ends: ABC & intl peers - 31 Dec 2010; BLD & FBU - 30 Jun 2010; CSR & JHX - 31 Mar 2011
ABC typically trades at a discount to peers. Historically, ABC operated solely as
a cement manufacturer, lacking growth opportunities or diversity. Even when
lime and downstream concrete were introduced, ABC’s register was cramped by
Barro and Boral. Having diversified its product offering, and with a register more
open than it has been for over a decade (following Boral’s exit in May 09), ABC’s
multiple may more closely align with peers. However, given the FY10 pressures
on demand, pricing and costs are perhaps more excessive than those on peers
– and with ABC less equipped to counter them – the current discount is justified.
Taylor Collison Limited 19 February 2010

Adelaide Brighton Limited Page 3 of 10
Attractive long term business
model and strategies.
Increasing vertical integration
provides greater security to
end market demand.
Using imports as a balance
against changing demand,
enables full capacity
utilisation.
Longer Term Business Attractions
Despite initiating coverage with a Marketperform recommendation based on
challenging FY10 market conditions, we believe ABC’s business model and long
term strategies to be sound. The following factors are key long term attractions:
1. Increasingly vertically integrated structure
2. Sensible balancing of domestic clinker manufacturing and overseas import
3. Monopolistic lime assets serving the WA alumina and gold sectors
4. Discount to peers and potential appeal as an acquisition target
We first detail the above key attractions, before providing a business overview,
and finally a summary of FY09 and the key risks facing the business.
1. Increasing vertical integration across cement, aggregates & concrete
Vertical integration is the key to long-term success in the cement industry,
providing security of cement and clinker outlets and an extra avenue for
diversified growth. Since its 2002 acquisition of Premier Resources, ABC has
built an integrated portfolio of quarrying, clinker grinding and pre-mixed concrete
assets. The charts below highlight the successful execution of ABC’s
downstream strategy over the past 10 years.
Segment Turnover - 2000
20%
12%
68%
Cement Lime Other
Segment Turnover - 2009
Taylor Collison Limited 19 February 2010
16%
14%
16%
54%
Cement Lime
Concrete & Agg's Masonry Prod's
ABC’s strategy has provided market leverage, a greater security to end market
demand, and exposure to existing facilities along Australia’s east coast. ABC
now derives integration benefits across the entire value chain. We note that
whilst this is a major improvement for ABC, it simply brings it more into line with
its already integrated competitors both in Australia and overseas.
2. Two-pronged strategy of local manufacture with supplementary imports
ABC’s focus on domestic clinker manufacture and long term import agreements
provides some protection from both the vagaries of a fragile construction market,
and the downside leverage associated with a high fixed cost cement industry.
Using imports as a balancing factor against changing demand, ABC has
maintained full utilisation at its local manufacturing facilities. The benefits of this
strategy are further enhanced as imports command a lower margin, and are the
first to be cut in a declining demand environment. In 2009, ABC manufactured
1.9 mt of clinker and imported approx. 0.4 mt, maintaining its domestic
manufacture at close to 2008 levels, but reducing its imports by approx. 45%.
12.0
10.0
8.0
6.0
4.0
2.0
0.0
2000
2001
Clinker Capacity vs. Demand
2002
2003
2004
2005
2006
2007
2008
2009
Domestic clinker capacity (mtpa) Market Demand (mtpa)
The chart above details the Australian clinker market over the past decade. With
the exception of the 2001 recession, demand has consistently outstripped
production, even in 2009’s GFC affected slowdown. Market commentators are
currently calling a bottom in construction market demand with a predicted late
2010 recovery, with ABC likely to maintain its clinker plants at full capacity.

Adelaide Brighton Limited Page 4 of 10
ABC’s lime assets dominate
the Australian marketplace.
Low cost production means
high profitability.
Security of customers given
their low global refining costs.
Demand growth expected
over medium term.
More open register and
attractive lime assets provide
some acquisition appeal.
3. Monopolistic lime assets serving the WA alumina and gold industries
ABC has a leading position in the lime market with continuing expected strength
in Australian lime demand:
� ABC’s lime producing assets dominate the Australian lime market –
Quicklime consumption by WA’s four alumina refineries (operated by Alcoa
and Worsley) account for approximately 70% of ABC’s lime demand. The
gold industry currently represents 15-20% of demand.
� Low cost production – With ABC’s Cockburn lime business sourcing local low
cost sea sands and utilising modern fuel efficient pre-heater kilns firing on
local low cost coal, we understand ABC’s lime assets to be highly profitable.
The capital costs involved in setting up a plant, and the difficulties in locating
suitable resources near to suitable markets, provide high barriers to entry.
� Only supplier of scale – With no other source able to logistically or
economically supply 0.55 mt of lime to the Australian alumina industry (and
0.35 mt to the WA gold industry), ABC is in a strong position. Major long term
contracts with Alcoa and Worsley are to be renegotiated in 2011 and 2013
and we believe ABC will achieve significant price increases. There is a risk
that the arrival of import competition may affect price negotiations, but ABC’s
low cost domestic operations put it at a competitive advantage.
� Supplier to lowest quartile alumina cost producers – The security of BHP’s
Worsley and Alcoa’s WA refineries is assured given they are in the lowest
quartile of alumina refining cost worldwide. Even through the lowest points of
a resources trough, risks to capacity are limited. In fact, during a resource
downturn, marginal high-cost producers are forced out of production, only
enhancing the prospects for the competitive Australian refineries.
� Refinery expansion should drive demand – The medium term requirements
for lime in the WA market are set to increase with the expansion of BHP’s
Worsley alumina refinery currently underway. The expansion project is
expected to lift Worsley’s alumina output capacity from the current 3.5 mtpa
to 4.6 mtpa, increasing its lime consumption by some 60,000 to 70,000
tonnes per year, and making it one of the largest alumina refineries in the
world.
4. Discount to peers and potential appeal as an acquisition target
Following Boral’s sell down of its 17.6% stake in May 2009, ABC’s register is
now more open with only Barro Group holding a substantial 23% position. There
is a general consensus from our industry discussions that the structure of the
Australian cement industry is likely to change over the medium term. We
question Cement Australia’s current 75:25 Holcim:Hanson JV structure, and
whether Holcim will take full ownership in time. We also note that Lafarge is the
last major cement manufacturer without Australian exposure, although its Asian
operations and the Australian market’s limited size, perhaps means it does not
necessarily need a presence here. We believe industry change is likely, and
whilst it is impossible to predict if this will involve ABC or not, ABC’s open
register, smaller size, and its unique lime assets do make it a viable player in
any medium term industry consolidation.
Taylor Collison Limited 19 February 2010

Adelaide Brighton Limited Page 5 of 10
Integrated construction
materials and lime producer.
Complicated Australian
cement industry structure, but
it works efficiently.
Increasing downstream
operations on the east coast.
Adelaide Brighton - Business Overview
ABC is an integrated construction materials and lime producer. The business can
be split into three broad divisions involving: clinker (a raw material of cement)
and lime production; pre-mixed concrete and aggregate manufacture; and a
masonry products business.
Clinker, cement and lime involves the production of clinker and cement in SA
(1.5 mtpa capacity) and WA (0.6 mtpa capacity), and quicklime through ABC’s
Cockburn operations at Kwinana in WA (1.0 mtpa capacity). Limestone is
sourced from various quarry operations across SA, WA and the Northern
Territory, with lime sand dredged from Owen Anchorage near Perth by Cockburn
Cement.
Ownership of the Australian cement industry is dominated by three domestic
manufacturers – Blue Circle Southern Cement (100% Boral); Cement Australia
(75% Holcim; 25% Hanson); and ABC. There are also two major independents
importing clinker and cement directly – Buckeridge Group (WA) and Wagners
(Qld). Given the numerous JV’s existing within the industry, the structure is best
represented in a flow chart as below. Whilst complicated, we understand the
Australian cement industry to work remarkably efficiently.
Australian Cement Industry Ownership
Source: Adelaide Brighton Limited
Concrete and aggregates is involved in the pre-mixed concrete markets of Vic,
NSW and SE Qld through ABC’s 100% owned Hy-Tec business, and a 50:50 JV
with the Mawson Group. Emerging positions exist in aggregates supply with
strategic reserves of aggregates west of Sydney and in Northern NSW.
Masonry products incorporates ABC’s Adbri Masonry brand which holds a
market leading position in Australia in the masonry products markets with
operations in Qld, NSW, Vic, Tasmania and SA.
Taylor Collison Limited 19 February 2010

Adelaide Brighton Limited Page 6 of 10
Resilient FY09 sales and
earnings performance.
EBIT margin expansion.
EPS decline on equity raising.
Tight control of working
capital.
Undergeared balance sheet.
FY09 Result above Expectations
Sales decline of 3.3% despite lower cement and concrete volumes. Lower
demand for cement, concrete and concrete products was partially offset by
enhanced pricing. The level of sales decline is commendable given cement
volumes contracted by 11%, concrete volumes by 15%, and concrete product
demand by 15%. The key components of ABC’s FY09 result are detailed below.
($ million) FY08A FY09A FY10E FY11E
Sales 1,018.3 985.0 979.3 1,059.0
Growth (%) 15.1% -3.3% -0.6% 8.1%
EBIT 189.1 185.3 181.6 208.1
EBIT Margin (%) 18.6% 18.8% 18.5% 19.7%
NPAT 120.8 123.1 122.4 142.3
Growth (%) 6.1% 1.9% -0.6% 16.3%
EBIT down 2.0%, but 9.0% ahead of our forecasts. FY09 margins increased
to 18.8% from 18.6% in pcp. Price increases, cost reduction strategies
(delivering $15 million of EBIT improvements), and reduced sales of lower
margin imported cement enabled margin expansion despite falling market
activity.
NPAT increased 1.9% to $123.1 million, ahead of guided $105-115 million.
ABC’s tax rate reverted back to a more typical 27%, following the 22% of pcp,
further highlighting the quality of FY09’s earnings resilience.
EPS decline to 20.4 cents from 22.2 cents in pcp, due to the dilutionary
effects of 2009’s institutional equity raising and share purchase plan.
Dividend of 8.0 cents declared, bringing FY09 payment to 13.5 cents, with
the Board maintaining ABC’s 60-70% payout ratio. The 2.5% discounted DRP
was suspended. At current prices ABC offers a 5.2% fully franked dividend yield.
Operating cash flows of $188.1 million, up from $150.1 million in pcp.
Focused working capital management enabled inventories to be reduced 7.1%,
with tight control over engineering spare parts in particular.
Net debt reduced to $175 million from $388 million in pcp, through improved
operational cash flows, constrained capex, and the $111 million equity raising of
April 2009. ABC’s balance sheet is now significantly undergeared with gearing
(ND/E) of 19.6% well below management’s comfort range of 40-60%, and EBIT
interest cover at an impressive 10.1 times. The chart below details ABC’s
improving EBIT interest cover and gearing levels together with our forecasts.
60%
40%
20%
0%
Gearing (ND/E) & EBIT Interest Cover
FY06A
Taylor Collison Limited 19 February 2010
FY07A
FY08A
FY09A
FY10E
Gearing EBIT Interest Cover
ABC operates in a high fixed cost industry with substantial cash tied up in clinker
and lime producing assets. Cement and lime plants require ongoing and at times
major capital works and this is represented in ABC’s rolling five year FCF cash
conversion averaging a moderate, albeit consistent, 50-60%. ABC’s well
documented WA lime kiln expansion plans have the potential to tie up $25-30
million over a three year period when committed. We have factored this spend
into our FY10 and FY11 numbers with ABC’s balance sheet flexibility and cash
flow positions more than adequate to cover its downstream integration strategy.
FY11E
20
15
10
5
0

Adelaide Brighton Limited Page 7 of 10
Cement to experience a 5%
volume decline in FY10.
Price increases constrained
by higher AUD and lower
shipping rates.
Lack of funding in commercial
and industrial sector.
Flat lime demand in FY09,
with expectations for the same
in FY10.
New entrant to WA lime
market a threat to prices.
Energy costs to rise $8-10
million in FY10.
Integration synergies now
being delivered.
FY09 Segmental Performance
Cement, Lime & Concrete reported a 3.5% decline in EBIT on sales down
4.7% as detailed below. EBIT margins expanded to 17.4% from 17.2% in pcp.
Cement, Lime & Concrete FY08A FY09A FY10E FY11E
Sales 1,114.7 1,062.5 1,035.9 1,121.4
Sales Growth (%) 39.0% -4.7% -2.5% 8.3%
EBIT 191.8 185.1 180.3 205.8
EBIT Growth (%) 22.9% -3.5% -2.6% 14.2%
EBIT Margin (%) 17.2% 17.4% 17.4% 18.4%
Although this division is not split into cement, concrete and lime operations,
management did disclose FY09 sales trends and provide an FY10 commentary.
� Cement – Despite a 15% decline in FY09 Australian cement demand, ABC’s
cement volumes declined only 11% with modest cement price increases
achieved early in the year. Predictions are for a 5% national decline in cement
volumes in FY10, although ABC’s greater SA, WA and mining exposure
means it will be less impacted than its east coast centric peers. Lost volumes
through BHP’s Olympic Dam shaft malfunction will however continue in 1Q10
as the shaft remains under repair. We understand ABC’s quarterly supply of
cement to Olympic Dam to be approx. 30,000 tonnes. Overall we forecast a
3.5% reduction in ABC cement volumes during FY10.
Price increases in FY10 will be more difficult given the combined effects that
AUD strength and lower shipping rates have on import parity pricing, as well
as the competitive pressures of Wagners’ new Qld clinker grinding facilities.
� Concrete & Aggregates – With pre-mixed concrete volumes down 15% in
FY09, commercial construction still constrained by funding, and any
meaningful residential sector demand not expected until 2H10, ABC’s concrete
business is likely to remain under pressure over the next six months. Pricing
was increased early in FY09, but management indicate pressures were
evident towards the end of the year.
Aggregates demand in FY09 increased as the Pacific Highway upgrade and
regional NSW infrastructure demand consumed volumes. Price increases
were ahead of inflation, and this is likely to continue in FY10.
� Lime – Lime volumes were flat in FY09 as demand from the gold and alumina
sectors offset decreases in nickel. Demand is expected to remain flat in FY10.
Lime pricing improved by 6% in FY09, enabling margins to be sustained. The
ability to implement future price rises is expected to be impacted by the arrival
of an overseas lime importer in to the WA market. With lime being the most
profitable part of ABC’s business, management will aggressively protect
market share. This is likely to see any new entrant crowded out of the market
over the medium term, but short term price risks are a real threat.
Energy costs are a major concern for FY10, effecting both cement and lime
manufacture. Gas prices in particular are expected to increase energy costs by
$8-10 million in FY10, adding to the headwinds currently facing ABC.
Masonry Products reported 3.3% EBIT growth on 8.7% sales growth as
detailed below. 2H09 earnings improved to $4.4 million following 1H09’s
breakeven EBIT, although FY09 margins still fell to 3.3% from 7.0% in pcp.
Masonry Products FY08A FY09A FY10E FY11E
Sales 122.2 132.8 141.4 152.4
Sales Growth (%) 48.1% 8.7% 6.5% 7.8%
EBIT 8.5 4.4 5.7 6.9
EBIT Growth (%) 372.2% -48.2% 28.6% 21.2%
EBIT Margin (%) 7.0% 3.3% 4.0% 4.5%
Industry volumes declined 25% on average. Price increases offset some of the
input cost pressures, whilst the final stages of the integration of the Hanson/C&M
acquisition successfully delivered $3.0 million of annualised synergies.
Taylor Collison Limited 19 February 2010

Adelaide Brighton Limited Page 8 of 10
Greatest risk is to industry
stability.
Industry conditions unlikely to
improve in FY10.
Imported clinker and lime a
threat to volumes and pricing.
AUD strength is placing
downward pressure on import
price parity.
Gas price rises a risk for
ABC’s energy intensive
operations.
Uncertainty over a future
emissions trading scheme
(ETS).
Maintenance downtime and
plant failures an ongoing
industry risk.
Key Risks
Industry stability
In the current environment of lower construction material demand, with a new
CEO in place at Boral, and a new market entrant (Wagners) importing cement
into the Qld market, the biggest risk to ABC currently is stability within the
Australian cement industry.
Market demand risks
Whilst there are encouraging early signs for Australian residential markets, the
next six months are likely to prove challenging. The commercial and industrial
sectors remain impacted by funding constraints, with our industry discussions
confirming the immediate outlook for commercial construction looks far from
encouraging. Government stimulus packages are certainly helping, but need to
be supported by the private sector.
Imported Asian clinker and lime
The Asian dumping of cement that was hugely problematic for the cement
industry in 2000 are long gone, but the threat of independents importing product
remains, as highlighted with Wagners in Qld. The arrival of imported lime in WA
places pressure on ABC’s highly profitable lime operations and is a clear
reminder of the risks associated with import competition.
AUD strength
With Australian cement prices linked to import price parity, the strengthening
AUD is placing downward pressure on cement prices. In ABC’s case, sharp
spikes in the AUD can in fact benefit its imported cement earnings, but longer
term lower AUD rates are preferred. As previously indicated, historically high
AUD levels, in combination with lower shipping costs and increased domestic
competition, are placing downward pressure on import price parity.
Cost inflation on higher energy prices
With energy estimated at approximately 30% of cement and lime plant COGS,
ABC is significantly exposed to energy price rises. The rising cost of gas has to
some extent been managed through the conversion of ABC’s lime kilns to coal in
the past 18 months, and ABC’s yearly maintenance shutdown being rescheduled
to February each year when energy demand and energy costs can be at their
most extreme. This however only mitigates a portion of energy cost pressures.
ABC’s confirmation of an $8-10 million impact from gas costs in FY10 clearly
highlights the risks for energy intensive industries.
Emissions Trading Scheme...or lack thereof
Uncertainty surrounding the Government’s failed ETS and what may replace it is
cause for some caution. Any impacts are likely to still be some years away, but
the ETS has potentially significant repercussions for highly energy intensive
industries such as cement and lime. ABC has estimated the possible impacts of
an ETS as anywhere from a $5-14 million EBIT reduction by 2016. We will
continue to monitor developments over coming months.
Operational issues
With cement and lime being highly capital intensive industries there is the
ongoing risk of plant failures, maintenance downtime, and the requirement for
major capital investment. We do however understand ABC’s main cement plant
at Birkenhead in SA to be well maintained, despite aging, whilst ABC’s lime
assets are for the most part modern and efficient.
Taylor Collison Limited 19 February 2010

Adelaide Brighton Limited Page 9 of 10
Adelaide Brighton Limited - Summary of Forecasts ABC $ 2.60
PROFIT & LOSS SUMMARY (A$m) BALANCE SHEET SUMMARY
Period FY08A FY09A FY10E FY11E Period FY08A FY09A FY10E FY11E
Total Revenue 1,034.1 1,011.3 991.2 1,071.0 Cash 23.1 25.5 29.1 31.9
Growth (pcp) 15.5% -2.2% -2.0% 8.0% Receivables 151.6 162.8 175.9 192.8
EBITDA 245.9 242.1 240.2 266.8 Inventories 116.1 107.8 114.0 128.5
Dep'n/Other Amort'n (56.8) (56.8) (58.6) (58.7) Other 0.0 12.7 12.7 12.7
EBIT 189.1 185.3 181.6 208.1 Total Current Assets 290.8 308.8 331.8 365.9
Net Interest (33.8) (16.7) (13.9) (13.1) Receivables 28.4 30.4 34.7 37.5
Pre-Tax Profit 155.3 168.6 167.7 195.0 Investments 67.6 72.5 72.5 72.5
Tax Expense (34.5) (45.4) (45.3) (52.6) Inventories 0.0 0.0 0.0 0.0
Minorities 0.0 (0.1) 0.0 0.0 Property Plant & Equip 801.9 774.3 775.7 787.0
NPAT Adj. 120.8 123.1 122.4 142.3 Intangibles 169.4 169.0 169.0 169.0
Growth (pcp) 6.1% 1.9% -0.6% 16.3% Other 0.0 0.0 1.0 1.6
Abnormals 0.0 0.0 0.0 0.0 Total Non-Current Assets 1,067.3 1,046.2 1,052.9 1,067.6
Reported Profit 120.8 123.1 122.4 142.3 TOTAL ASSETS 1,358.1 1,355.0 1,384.7 1,433.5
Accounts Payable 98.0 106.1 114.0 123.2
PER SHARE DATA Borrowings 0.4 0.4 0.4 0.4
Period FY08A FY09A FY10E FY11E Provisions 23.6 24.4 29.7 30.0
EPS Adj. (c) 22.2 20.4 19.3 22.4 Other 20.9 31.0 26.1 26.6
Growth (pcp) 5.6% -8.0% -5.3% 16.3% Total Current Liab 142.9 161.9 170.2 180.2
Dividend (c) 15.0 13.5 13.5 15.0 Borrowings 410.5 200.5 184.5 170.0
Franking 100% 100% 100% 100% Provisions 32.7 29.9 29.7 31.1
Gross CF per Share (c) 25.2 30.3 26.1 27.8 Other 70.1 65.7 64.7 63.7
NTA per share (c) 97.0 121.0 120.9 129.2 Total Non-Current Liab 513.3 296.1 278.9 264.7
TOTAL LIABILITIES 656.2 458.0 449.2 444.9
KEY RATIOS TOTAL EQUITY 701.9 897.0 935.5 988.6
Period FY08A FY09A FY10E FY11E
EBITDA/Sales Margin % 24.1% 24.6% 24.5% 25.2% CASH FLOW SUMMARY
EBIT/Sales Margin % 18.6% 18.8% 18.5% 19.7% Period FY08A FY09A FY10E FY11E
EBIT Interest cover (x) 5.1 10.1 12.5 15.0 EBIT (excl Abs/Extr) 189.1 185.3 181.6 208.1
Free CF / NPAT (5 yr avg) 56.9% 66.5% 79.7% 80.8% Add: Depreciation 56.8 56.8 58.6 58.7
Current ratio (x) 2.0 1.9 1.9 2.0 Change in Pay. 13.2 8.1 7.9 9.2
Net Debt : Equity (%) 55.3% 19.6% 16.7% 14.0% Less: Tax paid (34.5) (45.4) (45.3) (52.6)
ROE (%) 17.6% 15.4% 13.4% 14.8% Net Interest (33.8) (16.7) (13.9) (13.1)
Dividend Payout Ratio (%) 67.7% 66.2% 69.9% 66.8% Change in Rec. (21.7) (13.2) (17.4) (19.6)
Change in Inv. (31.8) 8.3 (6.2) (14.5)
VALUATION MULTIPLES Gross Cashflows 137.3 183.2 165.2 176.1
Period FY08A FY09A FY10E FY11E Capex (56.0) (43.1) (60.0) (70.0)
PER (x) 11.7 12.8 13.5 11.6 Free Cashflows 81.3 140.1 105.2 106.1
Dividend Yield (%) 5.8% 5.2% 5.2% 5.8% Dividends Paid (76.4) (45.6) (85.6) (88.8)
FCF Yield (%) 5.7% 8.9% 6.4% 6.4% Net Cash Flow 4.9 94.5 19.6 17.3
EV/EBITDA (x) 8.3 7.5 7.5 6.7
EV/EBIT (x) 10.8 9.8 9.9 8.6
Taylor Collison Limited 19 February 2010

Adelaide Brighton Limited Page 10 of 10
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Date Prepared: 19 February 2010
Analyst: Robin Morgan
Release Authorised by: Mark Pittman
Taylor Collison Limited 19 February 2010