FLETCHER BUILDING LIMITED — Annual Report 2012

Aug 21, 2012

Appendix 4E (rule 4.3A.) ASX - Annual Report

Appendix 4E (rule 4.3A.)

Annual Report

Fletcher Building Limited

Year ended 30 June 2012

ARBN - 002 232 368

• 1 Preliminary annual report on results for the year ended 30 June 2012 (including the comparative results for the year ended 30 June 2011) in accordance with Listing Rule 4.3A.

The amounts as presented have been prepared in accordance with Generally Accepted Accounting Practice in New Zealand which is the New Zealand equivalent to International Financial Reporting Standards (NZIFRS). They also comply with International Financial Reporting Standards. The amounts presented give a true and fair view of the matters to which the report relates and are based on audited accounts.

The Listed Issuer (Fletcher Building Limited) has a formally constituted Audit Committee of the Board of Directors.

2 Results for Announcement to the Market

NZm	30 June 2012	Up /(Down)	30 June 2011
2.1 Revenues from ordinary activities 2.2 Profit (loss) from ordinary activities after tax and before restructuring and impairment charges attributable to members 2.3 Net Profit (loss) and extraordinary Items after tax attributable to members	8,873 317 185	19.6% (11.7%) (34.6%)	7,416 359 283
2.4-2.5 Dividends (distributions) Current year; final dividend payable 17 October 2012
		Amount per security	Franked amount per security
		NZ 17.0 c	nil
The record date for determining entitlement to the current year dividend is 28 September 2012. Tax credits of NZ 6.6111 cps are attached to the dividend from the current year. Non New Zealand resident shareholders can benefit from New Zealand tax credits as outlined in the attached press release. There are no Australian franking credits attached to this dividend and the conduit foreign income component is nil.

Tax credits of NZ 6.6111 cps are attached to the dividend from the current year. Non New Zealand resident shareholders can benefit from New Zealand tax credits as outlined in the attached press release.

There are no Australian franking credits attached to this dividend and the conduit foreign income component is nil.

The record date for determining entitlement to the current year dividend is 28 September 2012.

3 Earnings Statement

Refer to the Financial Statements.

4 Balance Sheet

Refer to the Financial Statements.

5 Statement of Cash Flows

Refer to the Financial Statements.

6 Statement of Comprehensive Income and Movements in Equity

Refer to the Financial Statements.

7 Dividends

Details of the final dividend for the 2012 financial year are provide in Section 2 above.

Distributions recognised Final dividend for 2011 financial year on Ordinary shares Interim dividend for 2012 financial year on Ordinary shares Distributions paid Final dividend for 2011 financial year on Ordinary shares Interim dividend for 2012 financial year on Ordinary shares	$NZ millions	NZ Cents per share
	115	17
	116	17
	115	17
	116	17

1

Appendix 4E (rule 4.3A.) ASX - Annual Report

8 Dividend Reinvestment Plan

The Dividend Reinvestment Plan will be operative for this dividend payment. There will be no discount to the price applied to ordinary shares issued. Documentation for participation is available from the share registry or the website www.fletcherbuilding.com and must be received by the registry before the record date of Friday 28 September 2012.

The price used to determine entitlements under the Plan is the average of the individual daily volume weighted average sale prices of price-setting trades of the company’s shares sold on the NZX on each of the five business days following the NZX ex-dividend date of 26 September 2012. The new shares will rank equally with existing shares and will be issued on the dividend payment date of 17 October 2012.

9 10	Net Tangible assets per security NZ$	30 June 2012 2.65	Up / (Down) (2.2%)	30 June 2011 2.71
	Control of Entities gained or lost during year Control gained Name of subsidiary or group of subsidiaries Date from which such contribution has been calculated In addition, the group acquired other subsidiaries for an aggregate consideration of $34 million. These acquisitions contributed operating earnings for the period of $2 million. Control Lost Name of subsidiary or group of subsidiaries Contribution to net profit for the year attributable to members 1/04/2012 Homapal Plattenwerk GmbH & Co.KG $4 million Contribution to operating earnings for the period
			Homapal Plattenwerk GmbH & Co.KG
			$4 million
			1/04/2012

• 11 Associates

Fletcher Building's Share of Associates NZ$m: Carrying amount at the beginning of the year Acquisition of associates Loans to associates Purchase of controlling interest of Homapal investment Equity accounted earnings of associates Dividends from associates Acquisition restatement during the year Foreign currency translation movement to reserves Carrying amount at the end of the year Material Interests in Associates	30 June 2012	30 June 2011
	209 6 (1) (49) 26 (32) (5) (4)	189 14 2 33 (33) 4
	150	209

Fletcher Building has an interest (that is material to it) in the following associates:

Name of Associates	Percentage of ownership interest held at end ofyear (ordinary shares, units, etc)	Percentage of ownership interest held at end ofyear (ordinary shares, units, etc)	Contribution to Operating Profit after Taxation NZ$m	Contribution to Operating Profit after Taxation NZ$m
	30 June 2012 50.0% 50.0% 100.0%	30 June 2011 50.0% 50.0% 50.0%	30 June 2012 Equity Accounted	30 June 2011 Equity Accounted
Equity Accounted Associates Sims Pacific Metals Laminex associates -Wespine and Dynea Formica associate - Homapal Plattenwerk GmbH Miscellaneous
			9 8 4 5	10 12 6 5
Total			26	33
Other Material Interests NIL
Total			26	33

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Appendix 4E (rule 4.3A.) ASX - Annual Report

12 Other Significant information to assess entity's financial performance and financial position Refer Press Release.

13 Accounting Standards

The International Accounting Standards Board has issued a number of other standards, amendments and interpretations which are not yet effective. The group has not yet applied these in preparing these financial statements although the application of these standards, amendments and interpretations would require further disclosures, but they are not expected to have a material impact on the group's earnings. NZ IAS 19 Employee Benefits has been revised with an effective date of June 2014 for the group. This will result in the group's deferred actuarial loss of $182 million, as at 30 June 2012, in respect of its retirement plans to be written off direct to the other comprehensive reserve within equity. It is not expected to have a material impact on the groups earnings.

There have been no other changes in accounting policies in the year ended 30 June 2012, however certain comparatives have been restated to conform with the current year's presentation.

14 Commentary on results of the year

14.1. Details of basic and diluted EPS: NZ cents 30 June 2012 30 June 2011 Basic EPS 27.2 45.0 Diluted EPS 27.2 45.0 Diluted net earnings per share uses the weighted average number of shares used for basic net earnings per share, adjusted for dilutive securities. Capital notes and options are convertible into the Company's shares, and are therefore considered dilutive securities for diluted net earnings per share. For the year ended 30 June 2012, all capital notes were anti-dilutive. Numerator 30 June 2012 30 June 2011 Net earnings 185 283 Numerator for basic earnings per share 185 283 Dilutive capital notes distribution 7 Numerator for diluted net earnings per share 185 290 Denominator (millions of shares) 30 June 2012 30 June 2011 Denominator for basic net earnings per share 681 629 Conversion of dilutive capital notes 15 Denominator for diluted net earnings per share 681 644	30 June 2012	30 June 2011
	27.2 27.2	45.0 45.0
	30 June 2012	30 June 2011
	185 185 185	283 283 7 290
	30 June 2012	30 June 2011
	681 681	629 15 644

14.2 Returns to Shareholders including distributions and buy backs. Refer to item 6 for details of dividend distributions. Refer to press release.

14.3 Significant features of operating performance Refer to press release.

14.4 Segment results

Refer to attachment and press release for industry and geographic segment information.

14.5 Trends Refer to press release.

14.6 Any other factors which have affected the results in the year, or which are likely to affect results in the future Refer to press release.

15 This report is based on audited accounts.

16 Audit: dispute of qualification

Nil

3

Earnings statement For the year ended 30 June 2012

Fletcher Building Group

	Year ended	Year ended
	June 2012	June 2011
	NZ$M	NZ$M
Sales	8,873	7,416
Cost of goods sold	(6,647)	(5,566)
Gross margin	2,226	1,850
Selling and marketing expenses	(1,095)	(788)
Administration expenses	(603)	(516)
Share of profits of associates	26	33
Other investment income/(expense)	1	4
Other gains and losses	1	14
Amortisation of intangibles		(1)
Restructuring and impairment charges	(153)	(104)
Operating earnings (EBIT)	403	492
Funding costs	(152)	(122)
Earnings before taxation	251	370
Taxation expense	(58)	(79)
Earnings after taxation	193	291
Earnings attributable to minority interests	(8)	(8)
Net earnings attributable to the shareholders	185	283
Net earnings per share (cents)
Basic	27.2	45.0
Diluted	27.2	45.0
Weighted average number of shares outstanding (millions
of shares)
Basic	681	629
Diluted	681	644
Dividends declared pershare (cents)	34.0	33.0

4

Statements of comprehensive income and movements in equity For the year ended 30 June 2012

Fletcher Building Group

Statement of comprehensive income

	Year ended	Year ended
	June 2012	June 2011
	NZ$M	NZ$M
Net earnings - parent interest	185	283
Net earnings-minority interest	8	8
Net earnings	193	291
Movement in cashflow hedge reserve	(39)	(6)
Movement in currency translation reserve	(39)	10
Income and expenses recognised directly in equity	(78)	4
Total comprehensive income for the year	115	295
Statement of movements in equity
Total equity at the beginning of the year	3,700	3,023
Total comprehensive income for the year	115	295
Movement in minority equity	(10)	(8)
Movement in reported capital	30	645
Dividends	(231)	(189)
Distribution to Crane minority shareholders		(62)
Less movement in shares held under the
treasury stock method	(1)	(4)
Total equity	3,603	3,700

5

Balance Sheet As at 30 June 2012

Balance Sheet As at 30 June 2012
	Fletcher Building	Group
	June 2012	June 2011
	NZ$M	NZ$M
Assets
Current assets:
Cash and deposits	168	115
Current tax asset	28
Debtors	1,460	1,450
Stocks	1,434	1,539
Total current assets	3,090	3,104
Non current assets:
Fixed assets	2,348	2,206
Goodwill	1,243	1,424
Intangibles	519	404
Investments	224	281
Derivatives	73	67
Deferred taxation asset		6
Total non current assets	4,407	4,388
Total assets	**7,497 **	7,492
Liabilities
Current liabilities:
Provisions	95	78
Creditors and accruals	1,249	1,364
Current tax liability		27
Contracts	115	92
Borrowings	456	139
Total current liabilities	1,915	1,700
Non current liabilities:
Provisions	21	23
Creditors and accruals	92	93
Deferred taxation liability	13
Retirement plan liability	29	37
Derivatives	134	71
Borrowings	1,690	1,868
Total non current liabilities	1,979	2,092
Total liabilities	3,894	3,792
Equity
Reported capital	2,582	2,553
Revenue reserves	985	1,031
Other reserves	4	82
Shareholders' funds	3,571	3,666
Minorityequity	32	34
Total equity	3,603	3,700
Total liabilities and equity	**7,497 **	7,492

6

Statement of Cashflows For the year ended 30 June 2012

	Fletcher Building Group	Fletcher Building Group
	Year ended	Year ended
	June 2012	June 2011
	NZ$M	NZ$M
Cashflow from operating activities
Receipts from customers	8,908	7,370
Dividends received	32	33
Interest received	1
Total received	8,941	7,403
Payments to suppliers, employees and other	8,227	6,793
Interest paid	143	122
Income taxpaid	123	86
Total applied	8,493	7,001
Net cash from operating activities	448	402
Cashflow from investing activities
Sale of fixed assets	16	41
Sale of investments		1
Sale of subsidiaries	11
Total received	27	42
Purchase of fixed assets	261	249
Purchase of investments	6	2
Purchase of subsidiaries	86	1,106
Net debt in subsidiaries acquired	10	323
Total applied	363	1,680
Net cash from investing activities	(336)	(1,638)
Cashflow from financing activities
Issue of shares		645
Net debt drawdown	107	754
Issue of capital notes	67	69
Total received	174	1,468
Repurchase of capital notes	21	29
Advances to subsidiaries
Distribution to minority shareholders	13	13
Dividends	201	189
Total applied	235	231
Net cash from financing activities	(61)	1,237
Net movement in cash held	51	1
Add opening cash deposits	115	112
Effect of exchange rate changes on net cash	2	2
Closing cash and liquid deposits	168	115

7

Reconciliation of Net Earnings to Net Cash from Operating Activities

For the year ended 30 June 2012

Fletcher Building Group

	Year ended	Year ended
	June 2012	June 2011
	NZ$M	NZ$M
Cash was received from:
Net earnings	185	283
Earnings attributable to minority interests	8	8
	193	291
Adjustment for items not involving cash:
Depreciation, depletions, and amortisation	230	205
Restructuring and impairment charges	122	89
Provisions and other adjustments	(21)	(7)
Taxation	(65)	(7)
Non cash adjustments	266	280
Cashflow from operations(1)	459	571
Less gain on disposal of affiliates and fixed assets	(2)	(21)
Cashflow from operations before net working capital movements	457	550
Net working capital movements	(9)	(148)
Net cash from operating activities (2)	448	402
Net working capital movements:
Debtors	15	(42)
Stocks	71	(52)
Contracts	20	(4)
Creditors	(115)	(50)
	(9)	(148)

(1) Includes (gain)/loss on disposal of affiliates and fixed assets. (2) As per the statement of cashflows.

8

FLETCHER BUILDING FINANCIAL STATEMENTS

Notes to the financial statements

1 Basis of presentation

The financial statements presented are those of Fletcher Building Limited and its subsidiaries (the "group"). Fletcher Building Limited is a company domiciled in New Zealand, is registered under the Companies Act 1993, and is an issuer in terms of the Securities Act 1978 and the Financial Reporting Act 1993. These financial statements have been prepared in accordance with Generally Accepted Accounting Practice in New Zealand which is the New Zealand equivalent to International Financial Reporting Standards (NZ IFRS). They also comply with International Financial Reporting Standards.

2 Changes in accounting policies

The International Accounting Standards Board has issued a number of other standards, amendments and interpretations which are not yet effective. The group has not yet applied these in preparing these financial statements although the application of these standards,

amendments and interpretations would require further disclosures, but they are not expected to have a material impact on the group's earnings. NZ IAS 19 Employee Benefits has been revised with an effective date of June 2014 for the group. This will result in the group's deferred actuarial loss of $182 million, as at 30 June 2012, in respect of its retirement plans to be written off direct to the other comprehensive reserve within equity. It is not expected to have a material impact on the groups earnings.

There have been no other changes in accounting policies in the year ended 30 June 2012, however certain comparatives have been restated to conform with the current year's presentation.

3 Acquisitions

During the 2012 year the group acquired subsidiaries for a total consideration of $86 million (2011: $1,106 million).

The major acquisition during the year was the purchase of the remaining half of Homapal on 2 April 2012 for a consideration of $52 million, having previously held a 50 per cent investment. From that date Homapal has been accounted for as a subsidiary of the group, having previously been equity accounted as an associate prior to this date.

The following values are recognised in the financial statements in respect of this acquisition:

The following values are recognised in the financial statements in respect of this acquisition:
	PROVISIONAL
	FAIR VALUE
	NZ$M
Fixed assets	26
Goodwill on acquisition	81
Inventories	7
Receivables	3
Current liabilities	(2)
Enterprise value	115
Less debt acquired	(10)
Gain recognised in respect of investment previously held	(4)
Adjustment to derecognise investmentpreviouslyheld	(49)
Considerationpaid	52

During the year to 30 June 2012, Homapal contributed sales of $8 million and operating earnings of $4 million. If the acquisition had occurred on 1 July 2011, it is estimated that the contribution to group sales would have been $33 million and operating earnings would have been $12 million.

9

3 Acquisitions continued

Other acquisitions

During the year the group also acquired other subsidiaries for a total consideration of $34 million. The following values are recognised in the financial statements:

The following values are recognised in the financial statements:
	PROVISIONAL
	FAIR VALUE
	NZ$M
Fixed assets	15
Goodwill on acquisition	21
Minority interest	(2)
Current assets	9
Current liabilities	(9)
Enterprise value	34
Considerationpaid	34

During the year to 30 June 2012 these acquisitions contributed sales of $27 million and operating earnings of $2 million. If the acquisitions had occurred on 1 July 2011, it is estimated that the contribution to group sales would have been $49 million and operating earnings would have been $5 million.

A formal fair value exercise of the assets and liabilities for the above acquisitions is underway, but will not be completed until the 2013 year. At present the difference between the book value at acquisition and the purchase price has been recognised as goodwill, representing the expected profitability and the synergies to be achieved. The goodwill arising is not expected to be deductible for tax purposes.

Crane was acquired with an effective date of 28 March 2011 for consideration of $1,050 million inclusive of $323 million of net debt. The fair value exercise for Crane has now been completed. The following are the values recognised in the financial statements.

Crane

Crane
	FINAL	PROVISIONAL
	FAIR VALUE AT	FAIR VALUE AT
	ACQUISITION DATE	ACQUISITION DATE
	NZ$M	NZ$M
Fixed assets	426	286
Goodwill on acquisition	435	655
Goodwill in respect of the minority interest	62	62
Brands and other intangibles	143	8
Net tax asset / (liability)	(2)	47
Inventories	391	401
Receivables	363	366
Current liabilities	(456)	(468)
Investments	11	16
Enterprise value	1,373	1,373
Less debt acquired	(451)	(451)
Plus cash acquired	128	128
Considerationpaid	1,050	1,050
Lessgoodwill in respect of the minorityinterest	(62)	(62)
Net assets recognised	988	988

10

4 Restructuring and impairment charges - unusual items

Fletcher Building Group - June 2012

Restructuring and impairment charges, previously disclosed as unusual items consists of the following:

	Acquisition
	income and	Restructuring	Intangibles	Write-off of	Write-off
	expenses (1)	Costs (2)	Impairment(3)	Fixed Assets (4)	of Stock (5)	Other	Total
	NZ$m	NZ$m	NZ$m	NZ$m	NZ$m	NZ$m	NZ$m
Building Products division			75		4		79
Laminates &Panels division	(1)	45		20	10		74
Total restructuring and impairment charges - EBIT	(1)	45	75	20	14		153
Tax benefit on above items (6)		(7)	(4)	(6)	(4)		(21)
Total restructuring and impairment charges - net earnings	(1)	38	71	14	10		132
			Fletcher Building Group - June 2011
Building Products division			46	9	25		80
Crane division	18						18
Laminates & Panels division			4	5			9
Other -Corporate acquisitioncostsforCrane	(3)						(3)
Total restructuring and impairment charges - EBIT	15		50	14	25		104
Interest(7)						4	4
Tax benefit on above items(6)	(7)			(4)	(7)	(1)	(19)
Tax benefit - reversal of recognition of deferred tax liabilityon buildings(NZ) (6)						(13)	(13)
Total restructuring and impairment charges - net earnings	8		50	10	18	(10)	76

Fletcher Building Group 2012

(1) The group recorded a gain of $4 million arising from the revaluation of its existing 50 percent share in Homapal. In addition the group incurred $3 million of acquisition costs.

• (2) The group incurred $45 million of restructuring costs in the Laminates & Panels division. $21 million is attributable to the decision to close the Formica factory in Bilbao, Spain and consolidate operations at the Valencia site. The remaining $24 million was incurred in restructuring the Laminex Australia and New Zealand businesses.

(3) A strategic review of the Australian insulation business was completed during the year ended 30 June 2012. The review identified that medium term earnings prospects have deteriorated, necessitating a reduction in the carrying value of the business. As a result the group has written off $62 million of goodwill and $13 million of brands, refer notes 19 and 20.

• (4) The group has decided to write off a further $3 million of fixed assets for The O'Brien Group Limited and $17 million for Laminex Australia. The Laminex Australia write-offs are a result of product rationalisation initiatives.

(5) The group has also written off $10 million of stock in Laminex Australia as a result of product rationalisation initiatives, and incurred a further $4 million in disposing of surplus stock in Fletcher Insulation Australia. (6) Tax benefit, see note 7.

Fletcher Building Group 2011

(1) Crane incurred $18 million of redundancies and restructuring costs after the date of acquisition. In addition the group incurred $22 million of transaction costs as a result of the acquisition of Crane, plus

income of $25 million consisting of an equity swap of $4 million, the special dividend received on the pre-bid stake of $8 million and a fair value gain on the pre-bid stake of $13 million.

(3) The group impaired goodwill in The O'Brien Group Limited of $4 million, DVS Limited of $7 million and $39 million in Fletcher Insulation Australia, see note 19.

(4) The group decided to write off $5 million of fixed assets for The O'Brien Group Limited and $9 million for the manufacturing site closed in 2010 by Fletcher Insulation Australia following the sudden withdrawal of the Australian government's insulation subsidy scheme.

• (5) During the year the group wrote off $25 million of stock in Fletcher Insulation Australia. This was the surplus imported stock remaining after the sudden withdrawal of the Australian government's insulation subsidy scheme. (6) Tax benefit, see note 7.

(7) Interest expense relates to $4 million of costs relating to the close out of Crane debt instruments upon acquisition.

5 Contingencies and commitments

Provision has been made in the ordinary course of business for all known and probable future claims but not for such claims as cannot presently be reliably measured. There have been no material movements in capital expenditure commitments, lease commitments or contingent liabilities to that disclosed in the 2011 annual report.

11

SEGMENTAL INFORMATION

Industry Segments
Year ended	2012	2011	2012	2011
	NZ$M	NZ$M	NZ$M	NZ$M
	Gross Sales	Gross Sales	External Sales	External Sales
Building Products	767	786	670	692
Concrete	1,021	981	958	912
Construction	1,047	1,147	1,040	1,140
Crane	2,506	661	2,393	623
Distribution	817	859	813	856
Laminates & Panels	1,882	2,002	1,849	1,979
Steel	1,219	1,272	1,150	1,214
Other	6	7
Group	9,265	7,715	8,873	7,416
less intersegment sales	(392)	(299)
Group External sales	8,873	7,416
			Restructuring and	Restructuring and
			impairment charges	impairment charges
	Operating	Operating	in Operating	in Operating
	Earnings (EBIT)	Earnings (EBIT)	Earnings	Earnings
Building Products	(7)	31	(79)	(80)
Concrete	130	125
Construction	50	60
Crane	106	11		(18)
Distribution	27	39
Laminates & Panels	65	159	(74)	(9)
Steel	48	83
Other	(16)	(16)		3
Group	403	492	(153)	(104)
	Depreciation and	Depreciation and	Capital Expenditure	Capital Expenditure
	Amortisation	Amortisation	including	including
	Expense	Expense	acquisitions	acquisitions
Building Products	25	27	28	22
Concrete	62	62	94	107
Construction	11	10	11	24
Crane	32	9	29	7
Distribution	8	9	7	11
Laminates & Panels	66	64	163	114
Steel	25	23	27	20
Other	1	1	4	1,375
Group	230	205	363	1,680
	Funds*	Funds*
Building Products	481	583
Concrete	1,071	1,016
Construction	109	118
Crane	1,342	1,289
Distribution	141	142
Laminates & Panels	1,799	1,745
Steel	540	577
Other (including debt and taxation)	(1,880)	(1,770)
Group total equity	3,603	3,700

*Funds represent the net external assets and liabilities of the Group and are used for internal reporting purposes.

Geographic Segments

Geographic Segments
	External Sales	External Sales		Funds*	Funds*
New Zealand	3,676		3454	1,343	1,358
Australia	4,139		2857	1,362	1,486
North America	396		401	267	243
Asia	256		242	391	357
Europe	318		355	238	240
Other	88		107	2	16
Group	8,873		7,416	3,603	3,700

			Restructuring and	Restructuring and
			impairment charges	impairment charges
	Operating	Operating	in Operating	in Operating
	Earnings (EBIT)	Earnings (EBIT)	Earnings	Earnings
New Zealand	198	234	(9)	(16)
Australia	135	179	(124)	(88)
North America	26	20
Asia	40	37
Europe	(7)	11	(20)
Other	11	11
Group	403	492	(153)	(104)

12