Fletcher Building Limited — AGM Information 2017

Oct 24, 2017

Building communities, building lives.

2017 Annual Shareholders’ Meeting 25 October 2017

==> picture [494 x 540] intentionally omitted <==

Fletcher Building Annual Shareholders’ Meeting 2017

Building communities, building lives.

Sir Ralph Norris Chairman

==> picture [494 x 540] intentionally omitted <==

Fletcher Building Annual Shareholders’ Meeting 2017

Directors

Sir Ralph Norris (Chairman) John Judge

Dr Alan Jackson Bruce Hassall

Tony Carter

Cecilia Tarrant Steve Vamos

==> picture [65 x 55] intentionally omitted <==

3

Fletcher Building Annual Shareholders’ Meeting 2017

Meeting agenda

FY17 review

• Overview of FY17 financial performance

• Construction Division update

• Board actions

• FY17 performance by Division

• Progress on turnaround strategies

FY18 outlook

• CEO appointment

• Strategic review

• FY18 outlook and earnings guidance

ASM procedures

• Voting on resolutions

• Q&A

==> picture [65 x 55] intentionally omitted <==

4 Fletcher Building Annual Shareholders’ Meeting 2017

Building communities, building lives.

2017 Performance Overview

==> picture [494 x 540] intentionally omitted <==

Fletcher Building Annual Shareholders’ Meeting 2017

2017 financial performance overview

Operating earnings before significant items m $525

23%

Net earnings before significant items m $321

23%

Revenue $9,399m 4% Total dividend per share

39c Flat YoY

Basic earnings per share before significant items 46.3c 24%

==> picture [65 x 55] intentionally omitted <==

6 Fletcher Building Annual Shareholders’ Meeting 2017

Divisional performances

EBIT¹ NZ$m

Stripping out B+I, Group EBIT was up 20% YoY and NZ EBIT was up c30%

==> picture [758 x 249] intentionally omitted <==

----- Start of picture text -----

+6%
267 +10%
252²
+27%
193 +55%
169 176
133 130
84 78
(63) (30)
(204)
Building Products International Distribution Residential & Land Construction Corporate
Development
----- End of picture text -----

1. Before significant items 2. FY2016 Building Products EBIT adjusted for divestment of Rocla Quarries and Pacific Steel

FY 2016 FY 2017

==> picture [65 x 55] intentionally omitted <==

7 Fletcher Building Annual Shareholders’ Meeting 2017

Building communities, building lives.

Construction Division Update

==> picture [495 x 540] intentionally omitted <==

Fletcher Building Annual Shareholders’ Meeting 2017

Construction in context

•

• • • • •

•

==> picture [65 x 55] intentionally omitted <==

9 Fletcher Building Annual Shareholders’ Meeting 2017

What we said we would do, and what we have done

1

Improve business and project governance

→ New financial management system in place for B+I, Infrastructure and South Pacific, with project reporting now standardised

→ Monthly reviews of all projects by Construction Leadership Team (CLT)

→ Monthly reviews of all major projects by the CEO and Executive

→ FB Board undertakes regular operational review meetings with the CLT

==> picture [42 x 42] intentionally omitted <==

----- Start of picture text -----

2
----- End of picture text -----

Improve commercial and construction expertise

→ Recruitment of Board Director with deep construction and contracting experience →Chief Executive Michele Kernahan – strong commercial expertise, led the Christchurch rebuild

• →B+I General Manager David Kennedy 30+ years experience in construction + Balfour Beatty UK

→ Highly experienced CLT, all internally appointed:

o David Geor, Infrastructure o Brent Leach, South Pacific o Ken Lotu-I’iga, Higgins → Significant recruitment in 2017 to lift skill base and augment capability – focus on project management/delivery/operations, risk and commercial management

==> picture [65 x 55] intentionally omitted <==

10 Fletcher Building Annual Shareholders’ Meeting 2017

What we said we would do, and what we have done

Introduce more 3 commercial rigour around bids

→ Revised bidding process has been in place since the start of 2017

→ Bid criteria established – focussed on what we can win and what will deliver/exceed bid margins in today’s environment

→ Stage gate approval process – improved oversight of risks and mitigations

• → Board now appoints a Subcommittee to review and make recommendations on major projects

==> picture [42 x 41] intentionally omitted <==

----- Start of picture text -----

4
----- End of picture text -----

Focus on key sectors → Better coordinated approach across FB businesses on key construction clients and clients

• → Focus on specific industry sectors and clients – strength of relationship and acceptable risk profiles

==> picture [65 x 55] intentionally omitted <==

11[Fletcher Building ][Annual Shareholders’ Meeting 2017]

KPMG review findings: key projects

→ Highly challenging project with significant remaining risks

International Convention Centre / Hobson Street Hotel (B+I)

→ High staff turnover has had major adverse impact

→ New, stable leadership team is improving organisation and morale

→ Forecast outcome materially worse than previously expected

→ Significant ongoing judgment required to account for unknown and unquantifiable risk

→ Well-run project, forecast outcome consistent with FB expectation

Commercial Bay (B+I)

→ Many complex technical aspects successfully worked through

→ High percentage of subcontracting work contracted

Puhoi to Warkworth & Hamilton City Edge Expressway (Infrastructure)

→ Well-run projects, strong partners

→ Relatively early-stage, major earthworks to be undertaken over next two years – dependent on weather and terrain

→ Forecast outcomes broadly consistent with FB expectation

==> picture [65 x 55] intentionally omitted <==

12 Fletcher Building Annual Shareholders’ Meeting 2017

KPMG review findings: project governance

• → Need to implement standardised approach to tender process, project management, control environment, design management, and risk and opportunity management across B+I

Building + Interiors

• → Increased use of “design & build” contracts and design novation underscores importance of tendering and design management expertise

• → Deficiencies in processes and project controls have been key contributors to NZICC issues – new team addressing issues, but will take time to embed

→ Opportunities to better-integrate JDE into project management

→ Opportunities to adopt areas of good practice observed on Infrastructure projects

Infrastructure

• → Governance and management processes, systems and controls are robust, clearly-defined and comprehensive

==> picture [65 x 55] intentionally omitted <==

13 Fletcher Building Annual Shareholders’ Meeting 2017

Construction Division – future focus

SAFETY DELIVERY TALENT BIDDING SYSTEMS

All our people going home safe every day

Strengthened project management talent, robust governance, clear accountabilities, client focus Attracting and retaining the best people in the industry, investment in leadership and capability

Disciplined approach to winning new work, strengthened governance and a focus on long-term profitable growth Stronger finance and IT systems improving our ability to forecast, manage and control performance

==> picture [65 x 55] intentionally omitted <==

14 Fletcher Building Annual Shareholders’ Meeting 2017

Building communities, building lives.

Board Actions

==> picture [494 x 540] intentionally omitted <==

Fletcher Building Annual Shareholders’ Meeting 2017

Board actions

1

Board renewal

→ Appointment of a Director with deep construction and contracting experience will strengthen Board and Audit and Risk Committee

→ Additional Director will be appointed as part of standard renewal process

==> picture [42 x 41] intentionally omitted <==

----- Start of picture text -----

2
----- End of picture text -----

Director fee → Board resolved to reduce all Directors fees by 20%, effective immediately freeze → Maintain existing requirement for Directors to acquire a holding of at least 20,000 shares as a condition of their appointment – not common amongst largest listed companies in NZ and ensures financial alignment between Board and shareholders

==> picture [42 x 42] intentionally omitted <==

----- Start of picture text -----

3
----- End of picture text -----

→ Updated Shareholder Communications Policy, reflecting industry best practice Best-practice communications → Continue to provide timely and relevant information to all shareholders

==> picture [65 x 55] intentionally omitted <==

16

Fletcher Building Annual Shareholders’ Meeting 2017

We have strong foundations

People engagement

Employee engagement index

==> picture [423 x 193] intentionally omitted <==

----- Start of picture text -----

85
66 67 69
FB FY16 FB FY17 INDUSTRY FB TOP 25%
NORM*
----- End of picture text -----**

Leadership capability

3,000+

Leadership program participants FY14-FY17

Results of FBuSay employee engagement survey

• Industry norm = composite of Manufacturing, Heavy Building Products and Retail sectors

** FB Top 25% = the top 25% of FB teams with the highest engagement

==> picture [65 x 55] intentionally omitted <==

17

Fletcher Building Annual Shareholders’ Meeting 2017

We have strong foundations

Safety performance

Total reportable injury frequency rate has reduced from 57.5 in 2006 to 6.8 in 2017. Major new safety initiative launched in 2017 – Protect.

YEARS

==> picture [218 x 94] intentionally omitted <==

• Total reportable injury frequency rate, measured as the sum of lost time and medical treatment hours, per million employee and contractor hours

==> picture [65 x 55] intentionally omitted <==

18 Fletcher Building Annual Shareholders’ Meeting 2017

Building communities, building lives.

FY17 Performance by Division

==> picture [494 x 540] intentionally omitted <==

Fletcher Building Annual Shareholders’ Meeting 2017

Fletcher Building’s divisional structure

==> picture [960 x 378] intentionally omitted <==

20

Fletcher Building Annual Shareholders’ Meeting 2017

Building Products Division

==> picture [273 x 357] intentionally omitted <==

==> picture [599 x 166] intentionally omitted <==

----- Start of picture text -----

Chief Executive: Matt Crockett Approx. 3,900 people employed
Local investment and
Over 80 manufacturing sites in
high quality standards a
NZ and AU
competitive advantage
----- End of picture text -----

HIGHLIGHTS

• → Increased volumes, revenues and EBIT in NZ concrete and aggregates value chain

• → Solid growth in demand for plasterboard and increased price for insulation

• → Good EBIT improvement in plastic pipes, turnaround in Australia → Looking for further opportunities to achieve price increases

==> picture [65 x 55] intentionally omitted <==

21

Fletcher Building Annual Shareholders’ Meeting 2017

Distribution Division

==> picture [276 x 361] intentionally omitted <==

==> picture [541 x 362] intentionally omitted <==

----- Start of picture text -----

Chief Executive: Dean Fradgley Approx. 6,000 people employed
Over 330 retail sites in Customer leading focus a
NZ and AU competitive advantage
HIGHLIGHTS
→ Very good result across NZ building supplies, and NZ and AU steel
distribution businesses – EBIT more than 20% higher than FY16
→ PlaceMakers and Mico benefiting from heightened levels of activity in
the NZ building and construction markets
→ Turnaround in Tradelink gaining some momentum, but still a long way
from achieving acceptable returns
----- End of picture text -----

==> picture [65 x 55] intentionally omitted <==

22 Fletcher Building Annual Shareholders’ Meeting 2017

International Division

==> picture [275 x 361] intentionally omitted <==

Interim Chief Executive: Approx. 5,500 people employed Mitch Quint Operations across Europe, North Significant focus on innovation America and Asia for competitive advantage HIGHLIGHTS → Formica group hitting $88m of EBIT, including a $21m positive swing in EBIT of Formica Europe → First time there has been positive momentum in all three Formica regions → Laminex NZ and AU proved to be a robust performer in all regions except Western Australia

HIGHLIGHTS

==> picture [65 x 55] intentionally omitted <==

23 Fletcher Building Annual Shareholders’ Meeting 2017

Residential and Land Development Division

==> picture [276 x 364] intentionally omitted <==

==> picture [541 x 364] intentionally omitted <==

----- Start of picture text -----

Chief Executive: Steve Evans 11 developments in Auckland
Aspiration to deliver 1,000
5 developments in Canterbury
homes per year
HIGHLIGHTS
→ Increase in residential units sold following investment in land and
builds
→ Still very strong demand for new houses in Auckland, while
Christchurch market is well supplied
→ Significant profits derived from the Land Development business,
mainly due to sale of large James Fletcher Drive site
----- End of picture text -----

==> picture [65 x 55] intentionally omitted <==

* Sales or construction underway

24 Fletcher Building Annual Shareholders’ Meeting 2017

Construction Division

==> picture [277 x 358] intentionally omitted <==

Chief Executive: Approx. 4,400 people employed Michele Kernahan Significant government focus on Higgins delivered 15% ROFE infrastructure investment in its first year post acquisition in NZ and AU HIGHLIGHTS

• → Infrastructure benefitted from completion of Waterview Tunnel plus MacKay’s to Peka Peka road

• → Higgins had very successful first year delivering $39m of EBIT, joining Kaikoura rebuild alliance and being integrated into Construction division

• → Strong year for South Pacific with 18% improvement in EBIT after completing a number of large contracts

==> picture [65 x 55] intentionally omitted <==

25 Fletcher Building Annual Shareholders’ Meeting 2017

Turnaround strategies progress

==> picture [239 x 67] intentionally omitted <==

→AUSTRALIA

→ $27m turnaround over last two years due to restructured product offering, manufacturing site improvements and cost overhead reductions

→ Further upside now reliant on improved industry dynamics

==> picture [174 x 93] intentionally omitted <==

→EUROPE

→ $21m swing to positive EBIT in FY17 due to growth in local currency revenue, operational improvements of North Shields plant and overhead reductions

==> picture [243 x 94] intentionally omitted <==

→AUSTRALIA

• → Early stages of improving revenue trend centred around new store rollout, regaining share of SME wallet and stocking and delivering the right products

• → Significantly impacted by weakness in Western Australia and losses in market share

==> picture [65 x 55] intentionally omitted <==

26

Fletcher Building Annual Shareholders’ Meeting 2017

Building communities, building lives.

CEO Appointment

==> picture [494 x 540] intentionally omitted <==

Fletcher Building Annual Shareholders’ Meeting 2017

Introducing Ross Taylor

• → Starts 22 November 2017

==> picture [266 x 349] intentionally omitted <==

• → Impressive career in construction, real estate, manufacturing and engineering sectors

• → Worked across our core markets of NZ and Australia, plus Europe, Asia and USA

• → Most recently CEO of UGL, an international engineering, services, construction and product manufacturing business, acquired by CIMIC in early 2017

• → Prior to this Managing Director and CEO of Tenix, and before that various senior positions with Lend Lease

• → Proven experience leading business turnarounds and improving performance and shareholder returns

• → Direct experience across a range of our core sectors – housing, manufacturing and construction

• → Focus on people and culture, safety performance, client and customer satisfaction and sustainability

==> picture [65 x 55] intentionally omitted <==

28 Fletcher Building Annual Shareholders’ Meeting 2017

Building communities, building lives.

Strategic Review

Fletcher Building Annual Shareholders’ Meeting 2017

==> picture [494 x 540] intentionally omitted <==

Strategic review

• → CEO to lead review of Fletcher Building strategy, alongside Executive Team and Board

→ Executive Team and Board have commenced a review of current business performance and the competitive landscape to assist this process

→ We continually review our portfolio to ensure we are allocating capital in a way that delivers the most value to our shareholders

==> picture [65 x 55] intentionally omitted <==

30 Fletcher Building Annual Shareholders’ Meeting 2017

Building communities, building lives.

FY18 Outlook and Earnings Guidance

==> picture [494 x 540] intentionally omitted <==

Fletcher Building Annual Shareholders’ Meeting 2017

FY18 outlook

New Zealand

• → Overall market remains robust, but with low-growth – impacted by resource constraints, unusually wet weather in Q1, and anticipation of new government policy

• → Building materials and distribution businesses recording flat to low single-digit YoY growth

→ Strained supply chains creating some cost headwinds

• → House prices in Auckland have softened slightly, though in line with expectations and sales volumes are solid – fullyear volume dependent on consent and development timelines

Australia

• → Overall market flat to slightly down – eastern seaboard solid, WA still struggling

• → Turnarounds are key to full-year performance: Tradelink, Fletcher Insulation, Rocla, Iplex

• → Cost headwinds on energy

Rest of World

→ Modest growth in local currency terms, Formica trading to plan

==> picture [65 x 55] intentionally omitted <==

32 Fletcher Building Annual Shareholders’ Meeting 2017

Earnings guidance

Given the uncertainty in estimating the final outcomes of the major B+I projects, and the resulting impact on in-year earnings, Fletcher Building is separating guidance of the B+I business from the remainder of the Group’s earnings.

: FY18 earnings before interest & tax (EBIT)[(1)]

Fletcher Building excl. B+I: B+I:

$680m to $720m

Estimated loss of $160m

Fletcher Building will provide regular updates to shareholders on performance of the B+I business and progress on key projects. Updates to take place at half-year results (February), May, full-year results (August), and Annual Shareholders’ Meeting (October).

Fletcher Building will maintain its standard disclosure obligations on the FY18 earnings guidance for the Group excluding B+I.

(1) EBIT is pre-significant items

==> picture [65 x 55] intentionally omitted <==

33 Fletcher Building Annual Shareholders’ Meeting 2017

Building communities, building lives.

Electronic voting instructions

Fletcher Building Annual Shareholders’ Meeting 2017

==> picture [366 x 135] intentionally omitted <==

==> picture [151 x 161] intentionally omitted <==

Handset instructions – inserting your smartcard

• The smartcard should be inserted into your handset

• If the smartcard is not inserted into your handset please do so now

• Make sure the chip at the bottom of the smartcard is inserted and facing you

• A welcome message will briefly appear when the card is inserted correctly

• You will then be returned to the holding screen where your name will now appear at the top of the display

==> picture [165 x 300] intentionally omitted <==

==> picture [165 x 252] intentionally omitted <==

==> picture [65 x 55] intentionally omitted <==

35 Fletcher Building Annual Shareholders’ Meeting 2017

Handset instructions – casting your vote

• When the chairman opens the poll, instructions will appear in the device screen.

• Use the red triangle, green square and blue track ball to select/navigate through the screens.

==> picture [158 x 252] intentionally omitted <==

==> picture [65 x 55] intentionally omitted <==

36 Fletcher Building Annual Shareholders’ Meeting 2017

Handset instructions – casting your vote

• Voting options will appear on the screen. Press:

Button 1 to vote for

Button 2 to vote against

Button 3 to withhold your vote

• Confirmation that your vote has been received will appear on the screen.

==> picture [156 x 252] intentionally omitted <==

==> picture [65 x 55] intentionally omitted <==

37 Fletcher Building Annual Shareholders’ Meeting 2017

Handset instructions – casting your vote

• Confirmation that your vote has been received will appear on the screen

• To change your vote, simply enter your new choice (1, 2 or 3) to overwrite your previous selection

• If you wish to cancel your vote, press the ‘X’ button

==> picture [187 x 252] intentionally omitted <==

==> picture [65 x 55] intentionally omitted <==

38

Fletcher Building Annual Shareholders’ Meeting 2017

Voting via Lumi AGM app

• A voting icon will appear on the navigation bar

• Select one of the options to cast your vote

==> picture [230 x 371] intentionally omitted <==

==> picture [65 x 55] intentionally omitted <==

39

Fletcher Building Annual Shareholders’ Meeting 2017

ASM voting

==> picture [619 x 461] intentionally omitted <==

40 Fletcher Building Annual Shareholders’ Meeting 2017

Resolution 1: Election of Bruce Hassall as a director of the company

==> picture [65 x 55] intentionally omitted <==

41

Fletcher Building Annual Shareholders’ Meeting 2017

Resolution 2: Re-election of Cecilia Tarrant as a director of the company

==> picture [65 x 55] intentionally omitted <==

42

Fletcher Building Annual Shareholders’ Meeting 2017

Resolution 3: Auditor’s remuneration

==> picture [65 x 55] intentionally omitted <==

43

Fletcher Building Annual Shareholders’ Meeting 2017

Building communities, building lives.

Q&A

==> picture [494 x 540] intentionally omitted <==

Fletcher Building Annual Shareholders’ Meeting 2017