FLETCHER BUILDING LIMITED — AGM Information 2012

Nov 19, 2012

Shareholders’ Meeting | Fletcher Building | © November 2012 | Page 1

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Shareholders’ Meeting | Fletcher Building | © November 2012

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Annual Shareholders’ Meeting
MR RALPH WATERS
CHAIRMAN
Golden Bay Cement , Whangarei (NZ)
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Shareholders’ Meeting | Fletcher Building | © November 2012

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Directors

Ralph Waters (Chairman)

Mark Adamson (Managing Director)

Tony Carter

Dr Alan Jackson

John Judge

Kathryn Spargo

Cecilia Tarrant

Gene Tilbrook

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Shareholders’ Meeting | Fletcher Building | © November 2012

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Meeting agenda

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Chairman’s overview and 2012 highlights

Chief Executive Officer’s address

Trading outlook

Shareholder questions and discussion

Consideration of, and voting on, the resolutions of the meeting

Shareholders’ Meeting | Fletcher Building | © November 2012

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New Zealand residential consents – sustained improvement

Total residential consents; 12-month rolling – New Zealand

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17,000
16,500
16,000
15,500
15,000
14,500
14,000
13,500
13,000
12,500
Source: Statistics NZ
Apr-11 May-11 Jun-11 Jul-11 Aug-11 Sep-11 Oct-11 Nov-11 Dec-11 Jan-12 Feb-12 Mar-12 Apr-12 May-12 Jun-12 Jul-12 Aug-12 Sep-12
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Shareholders’ Meeting | Fletcher Building | © November 2012

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Decline in Australian residential activity during the year

Total residential consents; 12-month rolling - Australia

170000
120000 125000 130000 135000 140000 145000 150000 155000 160000 165000
	Apr-11	May-11	Jun-11	Jul-11	Aug-11	Sep-11	Oct-11	Nov-11	Dec-11	Jan-12	Feb-12	Mar-12	Apr-12	May-12	Jun-12	Jul-12	Aug-12	Sep-12
Source:	Australian Bureau of Statistics

Shareholders’ Meeting | Fletcher Building | © November 2012

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2012 Milestones

Fletcher Earthquake Recovery progress in Canterbury:

26,000 full-scope house repairs completed

47,000 emergency repairs completed

18,000 heating installations completed

First full year contribution of Crane Group

Strategic review of insulation business completed; restructuring programme underway in Laminex

Consolidation of Formica manufacturing plants in Spain

Shareholders’ Meeting | Fletcher Building | © November 2012

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Results for the 2012 financial year

	June 2012	June 2011	June 2011
NZ$m	12 months	12	months	% Change
Sales	8,873		7,416	+20
EBITDA¹	786		801	-2
EBIT¹	556		596	-7
Net earnings1	317		359	-12
Restructuring and impairment
charges after tax	(132)		(76)
Net earnings	185		283	-35
EPS – cps1	46.5		57.1	-19
Dividend - cps	34.0		33.0	+3
1. EBITDA, EBIT, Net Earnings and EPS all before	restructuring and impairment charges

Shareholders’ Meeting | Fletcher Building | © November 2012

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Cashflow from operations up 11%

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NZ$m
533
522
448
434
402
2008 2009 2010 2011 2012
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Building Products result

	June 12	June 11
NZ$m	12 Mths	12 Mths	% ∆
Sales	670	692	-3
EBIT1	72	111	-35

1. Excluding restructuring and impairment charges

Plasterboard

Operating earnings down 10% due to lower volumes

Insulation

Continued industry over-supply in Australia and NZ$ and A$ strength adversely impacted earnings

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Gerard Roofs ‘Corona Shake’
Zab, Poland
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Roof tiles

Volume growth in Africa and USA, flat volumes in Asia and down in NZ and Europe

Shareholders’ Meeting | Fletcher Building | © November 2012

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Concrete result

	June 12	June 11
NZ$m	12 Mths	12 Mths	% ∆
Sales	958	912	+5
EBIT	130	125	+4

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Firth classic pavers
Hamilton, New Zealand
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NZ concrete

Revenues 3% higher with most product volumes similar or slightly up on prior year;

Cement and masonry volumes lower, cement export margins also lower;

Market shares for all core products stable.

Australia concrete

Earnings contributions from Australian Construction Products and Atlantic Civil Products acquisitions;

Pipeline products: pricing initiatives and operational enhancements increased earnings;

Quarry earnings benefited from favourable sales mix and improved margins.

Shareholders’ Meeting | Fletcher Building | © November 2012

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Construction result

	June 12	June 11
NZ$m	12 Mths	12 Mths	% ∆
Sales	1,040	1,140	-9
EBIT	50	60	-17

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ASB North Wharf
Auckland, New Zealand
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Tighter construction margins in subdued market

Construction backlog of $1.3 billion at the end of October

Secured contracts for Waterview motorway extension and new men’s prison at Wiri – these will positively impact FY14 earnings

Residential earnings up 35% due to increased house sales, particularly in Stonefields subdivision in Auckland

Shareholders’ Meeting | Fletcher Building | © November 2012

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Crane result

	June 12	June 11
NZ$m	12 Mths	3 Mths
Sales	2,397	623
EBIT1	106	29

1. Excluding restructuring and impairment charges

Pipelines

Operating earnings up 28% to $59 million

Increased revenues from two coal seam gas contracts

Demand from resources, civil and rural sectors offset decline in building activity

Trade distribution

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Iplex pipe being installed
Queensland, Australia
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Operating earnings down 31% to $38m due to decline in residential and commercial building

Divestments

Corys Electrical conditional sale Austral Wright Metals and Mico Metals sold at year end

Anticipated total proceeds of NZ$90m

Shareholders’ Meeting | Fletcher Building | © November 2012

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Distribution result

	June 12	June 11
NZ$m	12 Mths	12 Mths	% ∆
Sales	813	856	-5
EBIT	27	39	-31

Revenues down 5%, impacted by continued low levels of residential house building

Increased competitor activity impacted margins in the second half

Operating costs reduced by 2% and inventory levels down by 8%

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PlaceMakers
Auckland, New Zealand
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Laminates & Panels result

	June 12	June 11
NZ$m	12 Mths	12 Mths	% ∆
Sales	1,849	1,979	-7
EBIT1	139	168	-17
-Formica	71	56	+27
-Laminex	68	112	-39
1. Excluding restructuring and impairment charges

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Formica

Operating earnings up 27% due to increased revenue in North America and Asia, and operational improvements

$4m EBIT contribution from Homapal acquisition

Bilbao plant closure

Laminex

Australian revenues down 9%

Cost increases not fully offset by compensating price changes

Staff levels reduced by 332

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Formica ‘Vivix’ exterior façade
Santa Cristina d'Aro, Spain
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Shareholders’ Meeting | Fletcher Building | © November 2012

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Steel result

	June 12	June 11
NZ$m	12 Mths	12 Mths	% ∆
Sales	1,150	1,214	-5
EBIT	48	83	-41

Lower rollforming volumes in Australia, margins impacted by increased competition

Long steel

Impacted by strong NZ$ and A$

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NZ volumes up 20%, but export returns lower

Low volumes and increased competition impacted Distribution margins

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Dimond – Delegats Vineyard
Marlborough, New Zealand
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Shareholders’ Meeting | Fletcher Building | © November 2012

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Dividend

Total dividend of 34 cents per share for the 2012 financial year, up on 33 cents per share distributed in 2011

Final dividend of 17 cents per share

Dividend to grow at a slower rate than earnings in coming years, with the dividend pay-out ratio to return to between 50 and 60 per cent of earnings

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Total shareholder return

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Total Shareholder Return (TSR)
Percentage
42
24
14 14
Jun-07 Jun-08 Jun-09 Jun-10 Jun-11 Jun-12
-27
-43
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Total Shareholder Return (TSR) Percentage

Shareholders’ Meeting | Fletcher Building | © November 2012

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Changes to the board

Kathryn Spargo appointed to the board in March 2012

Jonathan Ling retired from the board concurrent with his retirement as Fletcher Building Chief Executive Officer

Hugh Fletcher retired from the board at the end of September

Shareholders’ Meeting | Fletcher Building | © November 2012

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People

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Shareholders’ Meeting | Fletcher Building | © November 2012

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Annual Shareholders’ Meeting
MR MARK ADAMSON
CHIEF EXECUTIVE
OFFICER
Golden Bay Cement , Whangarei (NZ)
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Mark Adamson

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Originally from Newcastle in Northern England

Past experience

Chief Executive, Laminates & Panels division

Chief Executive, Formica Corporation

President, Formica Europe Managing Director, Formica UK CFO, Formica Europe Financial controller, GlaxoSmithKline

Shareholders’ Meeting | Fletcher Building | © November 2012

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Strategy

Revenue (FY12)

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12%
41%
EBIT (FY12)
47%
16%
37%
New Zealand
Australia
Rest of World
47%
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Structure the business to deliver on agreed strategies

Continue to pursue further growth overseas, principally Australia

Selectively pursue opportunities beyond Australia/NZ: e.g Formica expansion in China and India

Priority is to deliver value from our current portfolio

* Excluding restructuring and impairment charges

Shareholders’ Meeting | Fletcher Building | © November 2012

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Priorities

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Our challenge is to grow earnings regardless of the economic cycle

Through the creation of ‘centres of excellence’, seek to lift our performance in:

• Procurement

• Logistics and distribution

• Manufacturing excellence

• Digital technologies

• Business services

Shareholders’ Meeting | Fletcher Building | © November 2012

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Reducing distribution and logistics costs

Explore opportunities to reduce cost across New Zealand and Australia

• Sharing of retail outlets and distribution centres

• Rationalisation of sites

• Reduction in logistics costs

• Maintaining customer focus throughout is vital

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Developing a shared services capability

Improving efficiency across the business by centralising shared services

• Finance

• Human resources

• Procurement

We expect to complete a review of these business functions by the end of the calendar year.

Shareholders’ Meeting | Fletcher Building | © November 2012

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Invest in digital capability

Expand and improve our reach into the digital era

• Customer interaction - Customer Relationship Management

• Improve the customer experience - point-of-sale technology etc

• Improve efficiency, reduce cost

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Planned reduction in capital expenditure in 2013

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363
307
96
56
264
246
60 230
51
205
102^
200 207
162
2011 2012 2013
Acquisitions Stay in business Growth Depreciation
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*Budget ^Includes investment in Formica China and acquisition of HPL business in India

Shareholders’ Meeting | Fletcher Building | © November 2012

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Maintain a strong balance sheet

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Debt/ Debt Plus Equity
Percentage
40
35
34
31
27
Jun-08 Jun-09 Jun-10 Jun-11 Jun-12
We currently have approximately $800 million of undrawn banking lines and cash available .
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• We currently have approximately $800 million of undrawn banking lines and cash available .

Shareholders’ Meeting | Fletcher Building | © November 2012

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Delivering on our commitment to Canterbury

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Christchurch, November 2012

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Health and safety: continued improvement

Total recordable injury frequency rate (TRIFR)

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Total recordable injury frequency rate (TRIFR)
70.00
60.00
50.00
40.00
30.00
20.00
10.00
-
2005 2006 2007 2008 2009 2010 2011 2012
TRIFR
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Shareholders’ Meeting | Fletcher Building | © November 2012

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Management changes

Gerry Bollman

Chief Executive, Business Strategy and Performance (formerly Vice President, Business Development, Formica Group)

Paul Zuckerman

Chief Executive, Laminates & Panels division (formerly Chief Executive, Steel)

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Divisional structure

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Building Products

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Infrastructure Laminates Construction Crane Distribution Products & Panels

Construction

• Plasterboard

• Insulation

• Coated Steel  General Products Construction

• Windows & doors

• Infrastructure Projects

• Sinkware  Residential house

development

Pipelines – Manufacture & Distribution Trade Distribution  225 Tradelink stores (Aus)

• 61 Mico stores and 2 Mastertrade stores (NZ)

• Cement Laminex

• Readymix  Aggregates  MDF  Concrete  Products 

Building Materials Distribution

  - Particleboard

  - LPM  HPL

• 63 Placemakers Products stores  Concrete Pipes

• Quarries

• Long Steel:

Formica

• Reinforcing bar, mesh and wire

  • HPL

• Scrap

• Copper Tube – Manufacture & Distribution

• Steel

• Distribution

FLETCHER BUILDING 2012 ANNUAL SHAREHOLDERS’ MEETING

20 November 2012

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Hunua Quarry , Auckland

Shareholders’ Meeting | Fletcher Building | © November 2012

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Annual Shareholders’ Meeting
MR RALPH WATERS
CHAIRMAN
Golden Bay Cement , Whangarei (NZ)
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Shareholders’ Meeting | Fletcher Building | © November 2012

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Outlook

New Zealand

Improved activity in the residential construction sector, particularly Auckland and Christchurch

Building activity in Canterbury gaining momentum as seismic activity reduces; insurance companies now offering new cover

Christchurch CBD plan released; demolition work likely to be completed by mid-2013

Sustained improvement seen in new house building in Auckland

Commercial construction likely to remain flat; infrastructure projects to underpin construction sector

Shareholders’ Meeting | Fletcher Building | © November 2012

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Outlook

Australia

Continued decline in consents negatively impacting those businesses exposed to the residential market. Future outlook unclear

Improved consumer confidence a pre-requisite for a pick-up in new housing construction

Commercial construction sector weak

Infrastructure has been strong, but increased uncertainty as to timing of future resources sector projects

Shareholders’ Meeting | Fletcher Building | © November 2012

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Outlook

North America

Formica benefitting from increased house building, but commercial activity yet to improve

Europe

Parts of Europe remain difficult, particularly Spain; no marked improvement foreseen in the near future

Asia growth satisfactory although signs of a slowdown in China

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Financial outlook FY2013

Change in reporting of restructuring costs

All restructuring costs will now be treated as normal expenses, and included in EBIT/operating earnings rather than shown as an unusual item

Prior period operating earnings, restated in line with new reporting approach, were $502m including restructuring costs of $54m

Operating earnings for FY2013*

Expected to be in the range of $560m to $610m, including further $20m restructuring costs First-half earnings expected to be in line with the same period in the 2012 financial year

Second-half growth expected from momentum seen in New Zealand market

- Assumes no further deterioration in Australia or other markets

FLETCHER BUILDING 2012 ANNUAL SHAREHOLDERS’ MEETING

20 November 2012

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Hunua Quarry , Auckland