CEO: Zlatko Todorcevski – Turning Boral Around Amidst Seven Group’s Takeover | Boral (ASX: BLD)

HOSTS Alec Renehan & Bryce Leske|9 September, 2021

Meet your hosts

  • Alec Renehan

    Alec developed an interest in investing after realising he was spending all that he was earning. Investing became his form of 'forced saving'. While his first investment, Slater and Gordon (SGH), was a resounding failure, he learnt a lot from that experience. He hopes to share those lessons amongst others through the podcast and help people realise that if he can make money investing, anyone can.
  • Bryce Leske

    Bryce has had an interest in the stock market since his parents encouraged him to save 50c a fortnight from the age of 5. Once he had saved $500 he bought his first stock - BKI - a Listed Investment Company (LIC), and since then hasn't stopped. He hopes that Equity Mates can help make investing understandable and accessible. He loves the Essendon Football Club, and lives in Sydney.

Bryce and Alec continue their quest to interview all the CEOs of the ASX 200, and Boral’s Chief Executive and Managing Director, Zlatko Todorcevski joins them this episode. Zlatko’s 30-year career spans oil and gas, logistics and steel building products sectors, including as CFO for Energy at BHP, CFO at Oil Search and CFO at Brambles. In this conversation they cover a wide range of topics, including his atypical pandemic-influenced recruitment, the Seven Group takeover, his thoughts on ESG and sustainability, and what the future looks like for Boral.

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Bryce: [00:00:09] Welcome to another episode of Equity Mates, a podcast that follows our journey of investing, whether you're an absolute beginner or approaching Warren Buffett status, our aim is to break down your barriers to investing. My name is Bryce and as always, I'm joined by my equity buddy Ren. How's it going? [00:00:29][20.0]

Alec: [00:00:29] I'm very good. Bryce very excited for this episode. You said the challenge at the start of the financial year. Let's try and interview all ASX 200 CEOs, which I thought was lofty, but I loved the ambition. And I'm really excited that we've got another ASX CEO today and an ASX CEO that has been right in the in the middle of a big news story. And we're really excited that we can have him on and unpack it all on the show today. [00:00:56][26.3]

Bryce: [00:00:56] Absolutely. We are super pumped to welcome Zlatko Tartakovsky from Boral to Equity Mates, that guy. How are you going there? [00:01:04][7.6]

Zlatko Todorcevski: [00:01:04] Real good. Thanks a lot, Bryce. Thanks. Thanks for the opportunity. Looking forward to it. [00:01:08][3.6]

Bryce: [00:01:08] Absolutely. So for those of you who haven't come across Zlatko before, he's the CEO and managing director of Boral. The ASX ticker is B.L. Day. So that goes 30 year career spans oil and gas logistics and still building products sectors, including CFO for Energy at BHP, CFO at Oil Search and CFO at Brambles. So today we're going to be covering off a lot of company basics when it comes to Boral. Have a chat about the recent seven group takeover and then also close out with the conversation around people and culture as we always do. So let's kick it off Ren with hearing from Zlatko himself. Yeah, it's [00:01:49][40.2]

Alec: [00:01:49] like we love to start these interviews by having company later describe that company in their own words. So to kick us off today, what is Borrell? [00:01:57][8.3]

Zlatko Todorcevski: [00:01:58] Yeah, thanks, guys. Look, I'll answer that a couple of different ways. So what most people would probably expect is me to talk about the fact that we provide concrete for our customers. We provide Asheville, we produce cement, and we've got a number of quarries that produce aggregates that are used in both asphalt and concrete. But frankly, we've morphed a little bit over the last 12 months. We've defined our purpose more recently is creating a world that future generations will be proud of. And that's ultimately what the company is going to be about going forward. We don't want to be tied to particular materials or approaches, but understanding what our customers need, that pain points and how we solve them, that's ultimately what the company's about. [00:02:37][39.5]

Bryce: [00:02:37] Yeah, interesting. So in research for this, we came across an interesting story about your recruitment process. It seems that it was a classic Covid story. You know, the process was conducted entirely over Zoome And you only met Borel's chair, Catherine Fagg 15 minutes before your appointment was announced. How did you find that process? [00:02:58][20.2]

Zlatko Todorcevski: [00:02:58] Yeah, it was a completely unusual process and I guess I'd been a little bit old school in terms of the way I do other roles and the way they've been approached. So I had only ever conducted Face-To-Face interviews roles in the past. So this was really weird and it wasn't completely over. Zoome or teams know there were a number of Sydney directors that I had a chance to meet with face to face. This is all obviously pretty Covid, but I had not met Catherine and I had not met Paul Ryan and so the only interaction I had with them was over. Zoom through the whole process. And as Catherine said shortly after I was appointed, frankly, I didn't meet her until the morning we announced my appointment and I till we both met up drive over to the office in North Sydney. That was literally the first time we ever met face to face. It was a bit of a surreal process. But I can tell you that the what Paul did with the search firm that I use was really insightful. They kind of triangulated and calibrated their views through some pretty incisive psychometric testing, spoke to probably the most number of people that I'd work with in any process I've ever been involved with. So I think they absolutely did the homework. They knew what they were buying. And frankly, I'll get a chance to really get to know them as well. [00:04:13][74.5]

Alec: [00:04:14] And I think hearing that even CEOs have to go through psychometric testing will make all the grads who, you know, have to do it for their grad roles feel a little bit better. [00:04:25][10.9]

Zlatko Todorcevski: [00:04:25] Nevertheless, when you first start to do it because but at the end of the week, I'm fifty three years old. So you're comfortable with yourself, you know, your strengths and weaknesses. So for me, it's just an opportunity for everybody else to get to know me in a different way. [00:04:36][11.1]

Alec: [00:04:37] Now, it's like if you can take us back to the early days when you took over as CEO, you took over in a particularly tough period. Boral had suffered six profit downgrades in two years. And there was you know, it was a business that was that was in trouble. Can you take us back to those early days as CEO? What was some of the big decisions you had to make and how did you approach turning such a big business around? [00:05:01][23.9]

Zlatko Todorcevski: [00:05:01] Yeah, great question, Alex. Frankly, I had a little bit of an insight into the business from the company I was involved with prior to joining Boral. I knew the sector. I knew a little bit about Boral and frankly, all. I thought that I had the best assets and really strong capability, but I could never tell what appeared to be always not a serial underperformer, but not optimising what it could do or could never really unpack what was driving that. So when I was appointed, I did what I called a listening tour. I spoke to all of our major shareholders. I think in the first couple of weeks I spoke to 50 of the ladies across the organisation, and it's an opportunity for them to get to know me, but also for me to unpack what's on people's minds, what are they seeing, how they feeling about it. And then we embarked on what I call a portfolio review. I didn't have any fixed views. Everybody was giving me advice. If you read the press back then, everyone said, well, if you flog the US, then you're going to be fine. I didn't believe that because once again, I thought those opportunities in Australia and hadn't delivered what I thought but didn't really understand the US Boral plasterboard business. And frankly, I didn't have really well-formed views on North America. So we pulled apart every part of the organisation and nothing was left unturned. And I made sure that the review that we did was fact based because once again people were giving me their opinions. But in some cases it wasn't based on facts. So we embarked on on a four month exercise to pull apart every part of the organisation, understand how they're performing. Look at the headwinds while customers thought about us, our returns and our potential to make those businesses better. So we then got to October of last year. And at that stage, I had completed the portfolio review and we formed a view at that time that the best performing and probably highest potential part of the organisation was construction materials in Australia. So that first year, probably four or five months in the organisation for me was a lot of analysis, a lot of thinking about the organisation and really pulling apart every aspect of it. And then the path forward started become really clear, but it wasn't clear on day one. [00:07:11][129.9]

Bryce: [00:07:12] So you did mention that the American business and a key part of your time as CEO has been actually to reverse the North American expansion that was pursued by former CEO Mike Kane. So are you able to elaborate on that a little bit? Why sell the North American assets? What did I guess or learn from from this experience? [00:07:31][19.3]

Zlatko Todorcevski: [00:07:32] Bryce look, if I get back to that portfolio review that we did, my intention coming into the company was not to sell North America and it wasn't to sell us borrow predominantly in Asia. It was to understand where we've got the strongest competitive advantage and where we've got the potential to continue to deliver strong returns over multiple decades with that land. It then became clear that firstly, USG Boral in Asia and the posterboard sector was a business where we didn't have a right to grow as we were in a 50 50 joint venture with Cannava, who are the global leaders. And we're able to to finalise a sale with the Bavarians in a really short space of time. So I got to negotiate with them one on one, which which was fun, but that was about solving a couple of problems. It wasn't a business, as I said, where we had a natural competitive advantage and it wasn't delivering the returns we wanted. And frankly, those sell proceeds of a billion 15 US helped us solve the balance sheet problem. We then focus on North America and it was clear that building products in North America always had some really good businesses that hadn't delivered on their potential. So our focus started to be, well, how do we improve the performance? It felt like there are a series of standalone businesses being run that way. How do we think about any combined value from the portfolio that we've got? And once we had a handle on that, then the question became, are we the best people to unlock that value or is somebody willing to pay more? And we ran a series of processes, firstly on building products and running one on flush in North America at the moment. But at the end of the day, Westlake is put on the chemicals business in North America, branching out into building products, came forward with a bid that was well in excess of what the market expected that that building products business to be worth. And frankly, it was ahead of what we would have thought that we could have delivered ourselves. So we saw in that deal it was two point one five billion us. And in coming weeks, we'll finalise what we do with Flash that these are good businesses. The question for us is, are we the best owners and can we unlock the value? What if somebody else better value elsewhere? [00:09:40][127.1]

Alec: [00:09:40] So it's like you mentioned there, the strength and balance sheet, the the sales that you have over saying the flash sale that is likely coming is going to result in an incredibly strong balance sheet for Boral and give you the capacity to return capital to shareholders, invest in new businesses or in your existing ones. How are you approaching this decision of what to do with this capital? And can you give us a sense of what might be on the horizon? [00:10:07][26.8]

Zlatko Todorcevski: [00:10:08] Yeah, happy to, Elix. Back in February of this year, we defined and shared with the market what we called our. Financial framework, so that that's all about how we think about the business, the balance sheet reinvesting in the company, and then how we best return capital to shareholders. And frankly, it really hinges off the fact that we believe that as a company, Boral should be delivering better returns than we're doing at the moment because that then draws our expectations around the balance sheet and things like that. Interesting. Just to give you a sense, we when we completed the USG Boral transaction, that was about one point three billion dollars that we secured from the. We used part of that to pay down debt and get our balance sheet back to the position that we really wanted to be in, and then we use about eight hundred and fifty million to buy back our shoes because we fundamentally believe that what the shares were trading at was below the intrinsic value. So that programme of buybacks was was executed, completed in July at an average I think it was a seven Dollars in one sense. Now, going forward, we've got the balance sheet in a good shape. We probably have to pay down a little bit more debt if we sell some of the businesses. But there will be oodles of surplus capital. And the question in our mind will then become what's the best way to return that to shareholders? We've obviously spoken with shareholders in the past. We'll continue to do that. But it'll be a combination or mix of things like a capital return, which potentially will have tax benefits for shareholders. It could include further buybacks and it could include a dividend, particularly to the extent we have franking credits, which we don't have a lot of today. [00:11:50][101.9]

Bryce: [00:11:50] So we'll look as far as shareholders, you love to hear the CEO say that you have oodles of of surplus capital. So I'd love to say, look, before we jump into having a chat about the recent Citigroup takeover Zakho, we'll just take a very quick break to hear from our sponsors. So it's like at the same time that you were reviewing the Boral businesses, assessing the North American assets, seven group entered the share register and slowly started acquiring shares in May two thousand twenty one. They then launched a takeover bid and by July twenty twenty one, they owned two thirds of Boral. Can you talk us through this time? No doubt there's plenty of headlines coming through. We were chatting about it on the show. We just love to hear from your side. [00:12:39][48.6]

Zlatko Todorcevski: [00:12:40] Yeah, sure. Well, if I take you right back to the beginning, Bryce. Oh, at the final stages of the recruitment process for the CEO role and then Seven Group became public about this show. So what does that mean? I spoke with Catherine Fagg about it and she had obviously been in contact with Seven Group. There's nothing untoward beyond it was nothing more than I think seven group realising it was such an inherent value in the Boral business relative to what the company had been trading at, that they want to take the opportunity and advantage of that. And as I've gone out and met with a bunch of people since I started as CEO, including private equity and another bunch of other corporates, now it's been clear a lot of people saw the value in Boral, but to their credit, civic group are the ones that jumped in and took advantage of it. So, you know, it wasn't wasn't a secret. Everybody saw what potential setting in Boral. But if you roll forward, then they obviously creped, as they're entitled to do under corporations law. And then Ron called me on the evening of the 10th mindset, all by the way, we're launching a takeover targeting 30 percent. Obviously, that was a surprise. But on reflection, it probably shouldn't have been a surprise for me or the board because they backed the judgement. They saw the opportunity. And I clearly liked the strategy and the approach we're taking. And so more value in Boral once again than it was trading at that time. So I think it's completely understandable that they would want a larger exposure to that. Now, we obviously had to do what we felt as Boral was in the best interests of all shareholders. And and I think the response to that takeover, considering the seven group, weren't clear on ultimately what they wanted or the share price that they might ultimately be willing to pay. I think the response to why we ran that was really good. It coincided with a period where we were already in the midst of executing a buyback. So that was a process that continued on. But once we announced the North American building product sale price, we got for that. Now, clearly, that gave seven group the confidence to up their offer to 730 740 under the structure. And a lot of shareholders sold into that. Why? There are seven sixty nine point six percent today. Ryan's back in the boardroom. He's chairing the company these days. He and I talk regularly multiple times. Boy, what I can say completely, law on strategy, very supportive of the direction, continues to see value in the business going forward. [00:15:15][154.9]

Alec: [00:15:15] So it's not the it would have been a particularly, I guess, noisey time for you. When the existing Boral board were rejecting or recommending the rejection of the takeover bid, seven group were acquiring shares from the institutional shareholders. And yet at the same time, you're reviewing the business and trying to turn it around and trying to keep the team focussed on the task at hand. How did you approach that challenge as a new CEO and really keep the team focussed on turning the business around? [00:15:47][31.2]

Zlatko Todorcevski: [00:15:47] Yeah, I won't shy away from it. It was a really distracting period. Yeah. We had completed our portfolio review in October of last year. We'd announced the sale of USG Boral. We announced that we're kicking off the process, the North American building products. We were in the midst of changing the operating model for the business in Australia, changing out some leadership roles. And we had already kicked off the process of developing what we thought the strategy for the company should be going forward. And then the takeover was announced. It was unexpected from my perspective at least. It was unwelcome because now we were making really good progress and it wasn't something that we really wanted to do with at that point in time. But yeah, you don't get to choose the context, the operating. So once again, I think we did a great job on on the response to the takeover process. I don't think we dropped the ball on anything else we're trying to do in the background now. But we had a lot of people working seven days a week there for about three months. So we got through that. And I'm pleased to say we've now got the clarity of focus on the Australian construction materials business we wanted. I'm really pleased with the leadership team, with the clarity we've got in people's responsibilities. We've got the strategy lined up. Everybody's really clear on what we've got to do. And despite covid and bunch of lockdown's continue to impact construction, I think we're poised. It is really good things. [00:17:07][80.1]

Bryce: [00:17:09] It's like those retail investors just seeing it all sort of play out in the headlines, I guess some of the questions raised is around what does it actually mean to have seven group is a majority shareholder. Does it change anything significant for you? What does the future look like with them as as a majority shareholder? [00:17:25][15.8]

Zlatko Todorcevski: [00:17:25] Look, I think the good thing Bryce is, yes, they're a majority shareholder and they have to consolidate. But also most of the Einarsson what they've got to do is, is to them in the financial statements, but it doesn't change what we're doing as a company. The strategy has not changed. Ryan is very supportive of that direction. We continue to focus on our transformation programme and how we improve a bit by two hundred, two hundred and fifty million. That hasn't changed the way we go to market, the way that we think about innovation or the sustainability approach we announced last week. None of that's changed. So, yeah, we're going to major shareholder, but I think he's extremely aligned with the opportunity we see in all the direction we're taking. [00:18:04][38.9]

Alec: [00:18:05] It must feel pretty good as a new CEO or a takeover can go one of two ways. They can take majority control and clear house and change the strategy. But in this case, Dave, back to you in back to your strategy and back to your team. It's a pretty ringing endorsement that a massive company like Seven Group is willing to spend so much capital to get more exposure to what you're trying to do. [00:18:27][22.1]

Zlatko Todorcevski: [00:18:28] You all agree with that? Once again, I think they're really smart people, a fantastic track record they've had. But once again, I think they saw the opportunity that backed themselves to take that opportunity where others weren't willing to do that. But we've got really strong alignment. And I think people look at stories that there's no animosity in the boardroom or there's discontent, stuff like that. We don't see that. They get to a level of detail that I think some directors don't. But the the motivation is all about understanding how we're performing, what the future looks like, where the opportunities sit and making sure we're making progress on that. So it's a ringing endorsement, but I think, frankly, that reflects the quality of the team we've got. [00:19:08][40.3]

Bryce: [00:19:09] So you mentioned their sustainability is go. So it might be a good chance to just have a chat about that. Obviously, Boral is heavily in building materials, concrete, cement, you name it. And you mentioned that you announced last week your sustainability strategy and at the top that Boral is now about building a better future. So you're able to just elaborate on that a little for us. [00:19:30][21.4]

Zlatko Todorcevski: [00:19:31] Yeah, happy to Bryce and look frankly at everything we announced in our strategic framework. That's the that's the one piece that I'm really proud of. Not that I'm not proud of the other things, but if you think about the cement industry, it's one of the largest carbon emitting sectors anywhere in the world. And I'll say facetiously internally, sometimes you can take two approaches. You can kind of huddle in the dark corner and hope it goes away or you can view it as an opportunity. And you really think about how you change your business, change your approach, change your business model to take advantage of that. And I am really pleased to say, after a hell of a lot of work in the last 12 months, we've taken the latter approach. So we're taking a leadership position not just in construction materials in Australia, but globally with the targets we're setting, we're committing to science based targets. We're signed up to us PTI. We set ambitious goals by scope. One got to as well as scope three emissions and they're not pie in the sky targets. We spent a lot of the last year working through the pathways of how we take carbon out of our business. Some of those are quick wins. We're doing things like using waste stranger's fuel at our kiln down in Burma. In the highlands, we're at twenty, twenty five percent waste streams today. We think we can get that up to 60 percent, ultimately looking for renewable energy sources. We're working on carbon capture, which is one of the largest components of how we emit carbon into the atmosphere today. But we're looking at how do we capture that carbon from the calcination process? How do we combine it with waste streams and ultimately, ideally embed that back into concrete so it's permanently stored. So we've done a lot of work, but I think that work then gave me and the board the comfort to come out with those world leading objectives that we've announced and feel comfortable that we can do that. So I'm really pleased with the work that many people in our organisation have done and the fact that we've gone out on the front foot to set those objectives. [00:21:27][116.1]

Alec: [00:21:28] I love that Zlatko. In a previous life, I worked in the sustainability team at Coles and my eyes picked up there where you when you spoke about waste to energy, you we see Europe in Europe. It's such a big feature of what they do. And it's slowly starting to become a thing in Australia. But it's great to hear that you guys are on the front foot about it. I think the cement industry is like eight percent of global carbon emissions. So great. Great to hear that you guys are focussed on it. I guess for a lot of the Equity Mates community, ethical investing and sustainable investing is is a really front of mind at the moment. And it seems like for a lot of. The broader institutional investing community that's the same as an ASX listed say, are you feeling the increased pressure from shareholders around sustainability? I guess the crux of the question is, does sustainable ethic and ethical investing make a difference for the ASX listed CEOs? [00:22:28][59.4]

Zlatko Todorcevski: [00:22:29] Oh, look, I think it's a consideration, but I'd be lying if I said it here and said that's why we did it. We didn't do it because of that reason. I think we recognise the opportunity and frankly, it's an opportunity to differentiate Boral. So it just makes good business sense and it has tangential benefits for the community and significant benefits for the community, but alliances with a lot of both investor and community expectations. So it's absolutely something that we consider, but it's not something that drives us. [00:22:56][27.8]

Bryce: [00:22:57] So it's like, oh, you've had plenty of years experience in leadership positions in some of Australia's biggest companies. So let's turn to having a chat about people and culture. How would you describe your leadership philosophy as CEO? [00:23:11][14.1]

Zlatko Todorcevski: [00:23:12] Well, there's a couple of things. I look for Bryce and I really want to surround myself with really great people. You can't do anything unless you've got really strong capability and frankly, people that are happy to step out of their comfort zone and contribute right across the board. So we've got great people at Boral. We've always had great people. We've made a couple of changes, particularly in senior leadership roles. But it's always about having a great team that's focussed on doing the right thing for our customers and for the communities in which we operate. So that's amazing. Always going to be important. Clarity on expectations is really important. And I've said this a few times in different forums, but when I joined Boral. The strategy was unclear to me, it didn't look coherent, we were construction materials production in Australia Lord and building products in North America, and then I focussed plasterboard joint venture in Australia, in Asia. Just that lack of clarity for me in the strategy didn't make sense. So we spent a lot of time looking at the portfolio and building the strategic framework that we've now got to build that clarity to build alignment. And the last thing that I look for is when you've got really good people and you've got clarity what you're trying to do. I use this term internally freedom within a frame. I want to give really good leaders the ability to be able to react and respond when I see opportunities or challenges. But within the framework that we've all agreed that I would say is still an evolving face to borrow. Because if I look at the way the business was run before, there was a lot of freedom. Frankly, it wasn't much of a frame. So trying to bring everybody back in together and build that alliance important. So the frames probably going to be a little bit tighter for a period of time until everybody knows what we expect. But ultimately, I want to give really good leaders the freedom to run their element of our business in a way that they can respond to opportunities and challenges and not having kids coming back to me or the corporate centre to make decisions. So do the three things I tend to look for in leadership roles in different companies. [00:25:11][119.0]

Alec: [00:25:12] Now, Zarqawi mentioned at the top of this interview how your hiring process was a classic Covid story. Microsoft came and Zoom's. But but also the turnaround that you've been over saying has been a classic Covid story. It's been not a lot of travelling and a lot of Microsoft time and a lot of Zoom's. How do you approach and I guess what lessons have you learnt from this challenge of trying to change a culture and reinvigorate a workforce digitally? And what can way and other people trying to run businesses learn from that? [00:25:46][34.0]

Zlatko Todorcevski: [00:25:46] Yeah, I think I think the the inability to travel is a double edged sword, frankly. I retired from executive law six years ago because of travel. So I am not looking for a lot of travel. But in the context of Borrell, it's been frustrating because we had we had businesses in 17 countries and frankly, I couldn't get out of Australia. So I did not meet people face to face, be able to connect to them in a way that I'm used to meet with customers and and view the operations. That was extremely frustrating. But when you don't have an alternative, this kind of forum, the phone calls or Zoom's, that's all you've got. So you've got to do the best you can. And frankly, when we're going through the portfolio review, all spending a half day with North America every morning, just going through their businesses, talking about their performance, talking through products and customers, and it worked. We got an outcome. And Mom might not be as good as you'd ideally want with face to face connexion and all of the nonverbal cues you get. But we got an outcome. So I feel so good about our ability to navigate the cultural places. A little bit different, though, and particularly in a company like Barile, where I didn't understand the history or the depth of how people felt about the company. Yes, dangerous to go away and start saying, well, now this is the culture that we want. So what we embarked on towards the end of last calendar year was the first very, very detailed culture survey the Boral has done in a really long time. And we had 5000 people across the organisation contribute to that. And that's when the guys was an opportunity to really delve into how people feeling, what are they thinking, where are the opportunities, what do we want to retain and continue to to foster across the business? And what really came through was that people are proud of the company, proud of what we do, but view that we were slow, we weren't as nimble as we needed to be. We weren't as innovative as we needed to be, and we didn't collaborate as much as we needed to. So with some of those cues from that survey, with things that we had observed and based on my views of how one of the business to work in the future, we defined our purpose and values, which we launched across the organisation last month, we defined our operating model and the leaders we would put into key roles. And communication is part of that. It's absolutely critical. So now from day one on my first morning on the job, I spoke with the leadership across the organisation and the next morning I spoke with the entire organisation. So we've continue with regular dialogue, using whatever means we can, and we continue to do that. Straight after this call, I've got another call with the top one hundred leaders. We're trying to do that on a daily basis just to build that alignment. So I'll look, I wouldn't change in culture when you can't see a lot of people face to face is tough, but comms is always important. Transparency is important in staying connected is really important. [00:28:42][176.4]

Bryce: [00:28:43] So I go before we move to a final three questions on the future of Boral, just one on on growth. We talk about here at Equity Mates, the importance of building a thesis when you're investing in companies. And obviously a big part of building a thesis is to understand drivers of growth at an industry level and then what it means for the company. Are you able to sort of just briefly, I guess, highlight what are some of the big areas of growth that you're expecting to see over the next [00:29:10][27.4]

Zlatko Todorcevski: [00:29:11] 12 months or so? Yeah, it's really, really well, it's an interesting question, Bryce, but sometimes civics question. So people have always said to me, as we think about portfolio actions that we're taking, that we're shrinking back to Australia and we're growth. Frankly, when I look at business and I look for top line growth, I'm looking for bottom line growth and anyone can get by revenue. That's not smart. Now, whether that's a good investment and whether you do the right thing, once you've grown that revenue base through an acquisition, that's the real challenge. So what we're focussed on is how we grow earnings at Boral. That's the important thing for us. So we've done a couple of things in that space. One is we came out in February. We spoke about our what I'd say is a really significant transformation objective. We've got an Australian construction materials business now. We deliver one hundred and fifty seven million of bid network. Twenty one excluding property. Our target is to deliver two hundred, two hundred and fifty incrementally, but the next three to five years. And we think that's opportunity that's embedded within the business. We're not reliant on the market conditions, which frankly are pretty soft at the moment. We're not relying on pricing, which in a tough market conditions you shouldn't rely on. So it's all about self-help. And it goes back to our thesis around. If you run construction materials in Australia as a national business, it unlocks a lot of potential. And I think that potentially is within our grasp of the next couple of years. We then think about what are the adjacencies and how do we move into some of those adjacencies where we can bring our skills, our asset base, our capability to bear. And one of the really interesting ones is recycling for us at the moment. I like touched on it earlier, but when we think about recycling, we're looking at how we use our quarries for landfill in particular. Now we dig up stuff, we crush rock and that leaves a big hole in the ground. Well, down in Depok, we've used the quarry void for Cleanaway to put municipal waste into. Now, that makes sense for us, it's an asset we've created historic we haven't been monetising, we're looking at ways to energy. So how we change our fuel mix down in Burma from what was a number of years ago, one hundred percent coal to more waste streams and ultimately something that's sustainable. We see opportunities to make significant money off the back. Of the really exciting one, though, is waste materials. So we have had a couple of recycling centres around the country, predominantly in Sydney, where we take construction, demolition, waste. We process that and then we put it back into the concrete or Ashville. So it's more of a closed loop, circular economy concept. The work that we've done more recently, we see a significant opportunity in that space, so we're now working with a lot of property companies, construction companies around there. How do we manage and support them in their demolition process to take waste away, give them visibility on where those waste streams are going to not ending up in landfill? We process and ultimately, ideally, it ends up back in the concrete that they use on their new construction. Yeah, we see a significant opportunity in that space. So that's an area where if we can deliver on what I think the aspiration looks like, it'll create an adjacent growth area that for many, many years should create another revenue stream in an industry like us. [00:32:32][200.9]

Alec: [00:32:32] Speaking my language there, you're reminding me why I loved working in the sustainability team, because I've actually been to that Cleanaway landfill down in Victoria and saying your your team's quarrying out there. So it's all bringing back a lot of memories for me last night. [00:32:52][19.6]

Zlatko Todorcevski: [00:32:52] Also on the boards, the oil of coal. [00:32:54][1.5]

Alec: [00:32:55] Yeah, well, let's let's stop this waste and Koslov in and move to the, I guess, the future for Boral, both short and long term. We always like to finish these interviews with what's in the future for for your company. So if we start short term, if you think about the next 12 months for Boral, what what's in the pipeline? What should we expect? [00:33:19][24.4]

Zlatko Todorcevski: [00:33:20] Yeah, I think what you should be looking for is a really strong focus on execution, because if I think about the last of my first 12 months, it all about those macro moves. So what should the portfolio look like? What is the culture and operating model? We want to develop what is the strategy that we want to pursue and how sustainability fit into that that role. Really meaty opportunities that we had to do with for twenty two for us, and particularly the next 12 months is all about execution. We're now going to focus on construction materials in Australia. We've identified what the strategy, framework and sustainability strategy is going to look like. We need to now prove because frankly, Boral hasn't got the best credibility in the investment community based on people's experience in the last three to five years. We've got to prove that we can deliver on these plans that we've set. Now, how do we make the Aussie business a hell of a lot better? How do we unlock the value? Because we're organised on a national basis. How do we prove that we can capture some of the opportunities we see? And I think we're looking for that. And I'm sure the investment community is looking for that, because last year was not about the nuances of how we run the business. But this year needs to be we've got to deliver, we've got to show that execution and we've got to make progress on the sustainability journey that we've set ourselves on. [00:34:36][76.5]

Alec: [00:34:37] So it's like in terms of risks, there's always a multitude of risks facing any business. But if you were to narrow it down to just one, what do you think the biggest risk facing Boral right now is looking right? [00:34:49][12.8]

Zlatko Todorcevski: [00:34:50] We tend to talk about 20 to 30 risks that we're not going to buy them all journos stuff. That's not the biggest thing on my mind at the moment is confidence in the construction sector. Yeah, we manage to operate throughout all of twenty twenty without construction being shot down. Yeah, there were some restrictions in Melbourne through the elongated lockdown they had and even through the first half of this calendar year, construction continued. What's happened in July and subsequently August was unprecedent. That for me is the biggest risk to the business, to not only our business, but to the sector in the broader economy, because construction is one of the largest employers. So how do all participants in that sector provide confidence in construction so that we don't end up seeing shops and restrictions like we've got at the moment? That's the biggest risk, because it's not just the commercial or economic risk, frankly, because when you've got to sit down with six hundred and thirty people like we did back in Sydney in mid-July and stand down people, and you can't give them clarity on when the the job's going to be back up or when they're going to have work again, that's just not a conversation you want to have. What the human impact that people have got mortgages, got commitments. That's not something that any of us like to do. So if we can provide confidence around construction, whether that's vaccination rights or our right test, that might happen on a site to just keep construction open. That's the biggest thing that's taxing my mind at the moment. [00:36:23][92.6]

Alec: [00:36:23] And then, Zlatko, final question, where long term investors here at Equity Mates and we like we like to think long term. So if you think about Boral in ten years, what does success look like [00:36:37][13.2]

Zlatko Todorcevski: [00:36:37] for my successor, who will undoubtedly be a woman, will be focussed on construction solutions? So as I said at the outset, we probably would have historically defined ourselves as a concrete Nashville business with cement. Enquiries, but you know what I'd really love to see Böle in the future is a really diverse organisation that's got that solutions mindset and moving away from a focus on materials, but solving customers pain points right through, including sustainability, including the focus and innovation that we've got and being a real partner with communities. If we can do that over the next decade, which I've got no doubt we can do, everyone's passionate about that journey. That's where I'd love us to be, [00:37:21][43.4]

Bryce: [00:37:21] was let go. Unfortunately, we have run out of time, but we certainly appreciate the time that you've given us this morning. It's been an absolute pleasure talking to you. And I know that a lot of our community will have taken away a lot from that interview. It's always great to hear from the mouth of the CEO about how they're thinking about their company and and building value for shareholders. So very much appreciate it. It was great fun. [00:37:43][21.3]

Zlatko Todorcevski: [00:37:44] I appreciate the opportunity, guys. I've enjoyed it. Thanks. 

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