FLETCHER BUILDING LIMITED — Interim / Quarterly Report 2012

Feb 21, 2012

FLETCHER BUILDING HALF YEAR RESULTS TO 31 DECEMBER 2011

22 February 2012

Jonathan Ling Chief Executive Officer Bill Roest Chief Financial Officer

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Half Year Results | Fletcher Building | © February 2012

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Disclaimer

This half year results presentation dated 22 February 2012 provides additional comment on the media release of the same date. As such, it should be read in conjunction with, and subject to, the explanations and views of future outlook on market conditions, earnings and activities given in that release.

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Half Year Results | Fletcher Building | © February 2012

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Agenda

Results Overview

Divisional Performance

Financial Results

Outlook

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Half Year Results | Fletcher Building | © February 2012

Results Overview | Page 4

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Half Year Results
RESULTS
OVERVIEW
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Half Year Results | Fletcher Building | © February 2012

Results Overview | Page 5

Results overview

Net earnings $144 million Operating earnings of $256 million Unusual items of $15 million after tax

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Net earnings, before unusual items $159 million Cashflow from operations $129 million

Revenues up 30% to $4,509 million

Revenues down 5% on a like-for-like basis excluding Crane

Final dividend 17.0 cents per share:

Fully franked for Australian tax purposes

Dividend Reinvestment Plan will be operative for the interim dividend

Half Year Results | Fletcher Building | © February 2012

Results Overview | Page 6

Record lows for new residential consents in New Zealand, and significant residential slowdown in Australia

Building Consents	Dec 2011 12 months Dec 2010 12 months Dec 2009 12 months 11/10 %Mvmt
New Zealand
Residential Consents	13,662 15,602 14,425 -12 4,521 4,817 4,895 -6 7,744 6,664 6,308 +16 Source: Statistics NZ, Infometrics
Non Res WPIP ($m)
Infrastructure WPIP ($m)
Australia
Residential Consents	149,076 176,564 146,492 -16 32.7 37.7 32.0 -13 101 77.6 77.2 +30 Source: ABS, BIS Shrapnel
Non Res WPIP (A$Bn)
Infrastructure WPIP (A$Bn)
US
Residential Construction Starts	609,000 600,000 570,000 +2 60.4 51.1 56.9 +18 97.1 110.8 112.2 -12
Commercial & Industrial (US$Bn)
Institutional (US$Bn)

Source: McGraw Hill

Half Year Results | Fletcher Building | © February 2012

Results Overview | Page 7

Weak residential construction markets in New Zealand and Australia impacted earnings

	Dec 2011	Dec 2010
NZ$m	6 months	6 months	% Change
Sales	4,509	3,468	+30
EBIT	256	285	-10
EBITDA before unusual items	393	381	+3
EBIT before unusual items	277	285	-3
Net earnings before unusual items	159	166	-4
Unusual items after tax	15	0
Net earnings	144	166	-13
EPS before unusual items - cps	23.4	27.3	-14
Dividend - cps	17.0	16.0	+6

Half Year Results | Fletcher Building | © February 2012

Results Overview | Page 8

Earnings Commentary

• First half performance a creditable outcome given tough trading conditions and low volumes in most markets

• Businesses exposed to NZ residential building consents were impacted by record low consent levels in the period from January to June 2011

• Australia has trended downward in new residential building

• Laminex, steel rollforming and Crane distribution businesses all impacted by reduction in activity levels

• Restructuring charge of $21 million before tax in Laminex

• Solid performances from businesses exposed to infrastructure sector

• Continued seismic activity has delayed reconstruction efforts in Canterbury, albeit smaller repairs are continuing to gain momentum

• Continued growth in Formica EBIT but strength of NZ$ moderated impact Strategic review of insulation business in Australia and NZ given change in market dynamics

Half Year Results | Fletcher Building | © February 2012

Divisional Performance | Page 9

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Half Year Results
DIVISIONAL
PERFORMANCE
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Half Year Results | Fletcher Building | © February 2012

Divisional Performance | Page 10

Weaker market conditions impacted all divisions

EBIT before unusuals NZ$million[1 ]

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80
63
60
56 57
53
43 43
33
25 25 24
15
0
Building Crane Distribution Concrete Construction Laminates & Steel
Products Panels
6 months ended
Dec-11 Dec-10
Earnings before interest, tax and unusual items
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1. Earnings before interest, tax and unusual items

Half Year Results | Fletcher Building | © February 2012

Divisional Performance | Page 11

Building Products result

NZ$m	Dec 11 6 mths Dec 10 6 mths % ∆
Sales	355 371 -4
EBITDA	56 69 -19
EBIT	43 56 -23
Funds Employed	578 674 -14
EBITDA/sales %	15.8 18.6
EBIT/sales %	12.1 15.1
ROFE %	14.9 16.6

Plasterboard earnings lower due to weaker NZ residential market, but market share maintained.

Insulation earnings down 25% due to weaker demand in Australia and NZ and strong import competition.

−Strategic review of Insulation business

−Gain of $4m from sale of Tasman Access Floors.

Roof Tiles volumes up in the America’s, Africa and Asia, but down in New Zealand and Europe.

Half Year Results | Fletcher Building | © February 2012

Divisional Performance | Page 12

Building Products: lower volumes driven by depressed residential activity in NZ and Australia

Gross Sales	Gross Sales	Dec 11	Dec 10
NZ$m		6 mths	6 mths	% ∆	Volume ∆	Price ∆	EBITDA ∆
New Zealand
	- Plasterboard	71	77	-8	↓	-	↓
	- Insulation1	93	91	+2	↓	↓	↓
	- Aluminium	31	36	-14	↓	↓	↓
Australia
	- Insulation	104	106	-2	↓	↓	↓
	- Sinkware	15	18	-17	↓	↑	↓
	Roof Tiles2	93	93	-	-	↑	↓
1.	Includes Forman
2.	Includes NZ, Europe,	Japan, Africa, USA

Half Year Results | Fletcher Building | © February 2012

Divisional Performance | Page 13

Concrete result

NZ$m	Dec 11 6 mths Dec 10 6 mths % ∆
Sales	468 442 +6
EBITDA	91 87 +5
EBIT	60 57 +5
Funds Employed	1,052 1,026 +3
EBITDA/sales %	19.4 19.7
EBIT/sales %	12.8 12.9
ROFE %	11.4 11.1

NZ Concrete

• Softer demand for aggregates and masonry products.

• Readymix concrete and concrete pipe product volumes stable.

• Cement volumes lower in both domestic and export markets, negatively impacted margins.

Australia Concrete

• Quarry revenues constant but earnings up on margin and product mix.

• • Volumes in the pipelines business up 5%.

Half Year Results | Fletcher Building | © February 2012

Divisional Performance | Page 14

Concrete: softer demand in New Zealand, but steady or improved volumes in Australia

Gross Sales	Dec 11	Dec 10
NZ$m	6 mths	6 mths	% ∆	Volume ∆	Price ∆	EBITDA ∆
New Zealand	331	326	+2
Cement				↓	↑	↓
Readymix				-	↓	↑
Aggregates				↓	↓	↓
Australia Concrete	222	199	+12
Quarries				↓	↑	↑
Concrete Products				↑	↑	↑

Half Year Results | Fletcher Building | © February 2012

Divisional Performance | Page 15

Construction result

NZ$m	Dec 11 6 mths Dec 10 6 mths % ∆
Sales	520 592 -12
EBITDA Total EBIT	30 25 38 33 -21 -24
Funds Employed	145 116 +25
EBITDA/sales %	5.8 6.4
EBIT/sales %	4.8 5.6
ROFE %	34.5 56.9

Several large projects completed during the period.

Tighter project margins due to subdued market.

Construction backlog of $1,204m with several large contracts won in the period.

Residential earnings up 33% due to strong sales in Stonefields subdivision in Auckland.

Funds employed increased due to residential land purchases.

Half Year Results | Fletcher Building | © February 2012

Divisional Performance | Page 16

Canterbury update

Strong progress on repairs

• 35,000 emergency repairs completed

• 9,200 full scope repairs completed, 30,000 underway or in progress

• 1,000 + firms contracted, 11,000 contractors inducted

• $335m paid to contractors to end of January

Targets for repairs to 100,000 homes agreed with Earthquake Commission:

• 80% of homes in managed repair programme completed by 2014

Houses with $50,000+ of damage: aim to have repairs completed by mid-2013

Reserve Bank of NZ estimates:

• Gradual lift in activity over calendar 2012 – housing repairs & demolition

• Reconstruction activities to get underway in earnest in 2013

Working assumption prior to Dec 2011 earthquakes: c. $20 billion of damaged property will be rebuilt.

Half Year Results | Fletcher Building | © February 2012

Divisional Performance | Page 17

Crane result

NZ$m	Dec 11 6 mths Dec 10¹ 6 mths % ∆
EBIT: Pipelines	28
Distribution - Australia - New Zealand	21 (1)
Industrial Products Unallocated	2 3
Total EBIT:	53 50 +6

Increased pipeline sales to gas and mining offset weaker residential demand.

Distribution volumes down due to lower residential and commercial activity in Australia and New Zealand.

NZ distribution restructuring completed – 2 separate brands: Mico for plumbing, and Corys for electrical.

1. Dec 2010 figures are for comparative purposes only; Fletcher Building acquired Crane in March 2011

Half Year Results | Fletcher Building | © February 2012

Divisional Performance | Page 18

Distribution result

NZ$m	Dec 11 6 mths Dec 10 6 mths % ∆
Sales	402 446 -10
EBITDA	19 29 -34
EBIT	15 25 -40
Funds Employed	137 138 -1
EBITDA/sales %	4.7 6.5
EBIT/sales %	3.7 5.6
ROFE %	21.9 36.2

Sales decline of 10% due to subdued activity levels and continued disruption to Christchurch stores – consistent with consent data. Gross margin maintained despite increased competition in DIY and retail segments.

Trade segment mixed with decline in new building activity. Focus on cost control and distribution network footprint.

Half Year Results | Fletcher Building | © February 2012

Divisional Performance | Page 19

Laminates & Panels result

NZ$m	Dec 11 6 mths Dec 10 6 mths % ∆
Sales	939 1,001 -6
EBITDA¹
- Laminex¹	56 77 -27
- Formica	41 36 +14
Total EBITDA¹	97 113 -14
EBIT¹	63 80 -21
Funds Employed	1,830 1,721 +6
EBITDA/sales %	10.3 11.3
EBIT/sales %	6.7 8.0
ROFE %	6.8 9.3

Laminex

• Australian volumes of higher margin decorated board down due to fall in new housing starts and additions and alterations decline.

• NZ volumes down 12% year on year.

• • $21 m pre-tax unusual items incurred to date for restructuring costs

Formica

• 9% volume growth in Asia but earnings impacted by flooding in Thailand.

• North America revenues up 3% in local currency terms.

• Conditions in Europe remained weak.

1. Before unusual items

Half Year Results | Fletcher Building | © February 2012

Divisional Performance | Page 20

Laminates & Panels: volumes declined in Australia, New Zealand and Europe, with continued growth in Asia and NA

Gross Sales	Dec 11	Dec 10
NZ$m	6 mths	6 mths	% ∆	Volume ∆	Price ∆	EBITDA ∆
Australia
- Laminex1	472	501	-6	↓	-	↓
New Zealand
- Laminex	71	76	-7	↓	-	↓
Formica
- Asia	112	111	+1	↑	-	-
- Europe	142	156	-9	↓	↑	-
- Nth America	159	171	-7	↑	-	↑
1. Domestic volumes, excluding export volumes

Half Year Results | Fletcher Building | © February 2012

Divisional Performance | Page 21

Formica: continued improvement in earnings due to volume growth in Asia and cost reduction measures

EBIT NZ$m	1H12	1H11	% Change
Asia	18	19	-5
North America	12	11	+9
Europe	2	1	+100
Corporate	(6)	(8)	-25
EBIT $NZ	26	23	+13

Half Year Results | Fletcher Building | © February 2012

Divisional Performance | Page 22

Steel result

NZ$m	Dec 11 6 Mths Dec 10 6 Mths % ∆
Sales	596 616 -3
EBITDA	36 54 -33
EBIT	24 43 -44
Funds Employed	578 568 +2
EBITDA/sales %	6.0 8.8
EBIT/sales %	4.0 7.0
ROFE %	8.3 15.1

Long steel earnings impacted by reduced margins, as a result of global pricing pressures, particularly in Australia.

Rollforming and coated steel volumes fell 6% due to lower residential activity in NZ and Australia.

Steel distribution and services earnings down 60% due to soft volumes and margin pressure.

Half Year Results | Fletcher Building | © February 2012

Divisional Performance | Page 23

Steel: lower volumes and margins in most businesses

Gross Sales NZ$m	Dec 11 6 mths Dec 10 6 mths % ∆ Volume ∆ Price ∆ EBITDA ∆ 136 124 +10 ↑ ↓ ↓ 80 89 -10 ↓ ↓ ↓ 125 130 -4 ↓ ↓ ↓ 327 340 -4 ↓ - ↓
New Zealand
- Long Steel
- Coated Steel
- Distribution & Services
Australia
- Rollforming

Half Year Results | Fletcher Building | © February 2012

Financial Results | Page 24

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Half Year Results
FINANCIAL
RESULTS
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Half Year Results | Fletcher Building | © February 2012

Financial Results | Page 25

Net earnings

NZ $m	Dec 2011 6 months Dec 2010 6 months % Change 279 294 -5 (6) (9) -33 4 0 (21) 0 256 285 -10 73 51 +43 35 63 -44 4 5 -20 144 166 -13
Divisional EBIT¹
- Corporate costs
- Asset sales
- Unusual items
Operating Earnings
Interest
Tax
Minority Interests
Net Earnings
1. Earnings before interest, tax and unusual items

Half Year Results | Fletcher Building | © February 2012

Financial Results | Page 26

Cashflow from operations impacted by working capital movements, higher funding costs and cash tax payments

	Dec 2011 6 months Dec 2010 6 months % Change 372 381 -2 (73) (51) +43 (51) (33) +55 12 (28) (17) +65 127 (174) (41) (15) (103) 71 (114) (27) (8) (78) +79 +53 +52 +88 +32 129 202 -36
EBITDA
Funding costs
Cash tax paid
Non cash unusual impact
Provisions movement/other
Working capital movements: - Debtors - Creditors - Stock - Other
Cashflow from operations

Half Year Results | Fletcher Building | © February 2012

Financial Results | Page 27

Increase in net debt due to capital expenditure and working capital requirements

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NZ$ m
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99 8 9 2,026
101
1,892
(7)
53
103
(232)
Capex
Opening Net Debt Cash from operations Working capital Growth Stay in Business Capex Divestments Dividends Minority Distribution FX on Debt Closing Net Debt
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Half Year Results | Fletcher Building | © February 2012

Financial Results | Page 28

Forecast capital expenditure includes $100m in acquisitions

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397
Acquisitions
Dec 11 Dec 10
FY12
Growth
6 mths 6 mths [% ∆ ] Forecast
100
Stay in business
¹
307
Stay-in-business 101 74 +36 227
289
70 Growth¹ 22 24 -8 70
237
211 206 205 Acquisitions² 31 52 -40 100
191
Total 154 150 +3 397
227
Depreciation 116 96 +21 239
2009 2010 2011 2012
Capital Expenditure Depreciation
Forecast 1. Forecast includes investment in Homapal & new Formica
plant in China
1. Excludes acquisition of shares in Crane Group Ltd 2. Excludes Crane in 1H11
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Half Year Results | Fletcher Building | © February 2012

Financial Results | Page 29

Key Ratios

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Total Shareholder Return (TSR)
Percentage
42
24
14 14
Jun-07 Jun-08 Jun-09 Jun-10 Jun-11 Dec-11
-26
-43
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Return on Average Funds
Percentage²
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25
19
12 13 13
10
Jun-07 Jun-08 Jun-09 Jun-10 Jun-11 Dec-11
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1. Net earnings / average equity 2. Earnings before interest, tax, and unusual items / average funds

Debt/Debt Plus Equity Percentage

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40
34 35
31
27
22
Jun-07 Jun-08 Jun-09 Jun-10 Jun-11 Dec-11
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Half Year Results | Fletcher Building | © February 2012

Financial Results | Page 30

Debt maturity profile

Funding and Maturity Profile December 2011 – Post US Private Placement

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200
247 12
110
427
14
319 319
197 173 171 205 187
106 105
2012 2013 2014 2015 2016 2017 2018 2020 2022 2024
NZ$m
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US$300m private placement to US investors completed post 31 December 2011.

Key credit statistics following US private placement:

• Undrawn credit lines of $583 million and $182 million cash on hand

• Average maturity of debt is 5 years

• Average interest rate on debt is 6.7%.

• 67% of borrowings are at fixed rates.

June Years

Debt - Drawn Commited Undrawn Debt Facilities

Half Year Results | Fletcher Building | © February 2012

Outlook | Page 31

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Half Year Results
OUTLOOK
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Half Year Results | Fletcher Building | © February 2012

Outlook | Page 32

Outlook FY2012

New Zealand

• Conditions expected to remain challenging

• Modest uplift in housing consents in first half should lift activity in second half, but from low base

• Infrastructure spending lower due to timing of key projects

• Canterbury rebuild – gradual lift in activity forecast over calendar 2012, following set back of December 23[rd] earthquake.

Australia

• Downturn in residential and weak commercial construction activity likely to be prevail in second half

• Infrastructure sector expected to remain strong

Asia: Continued volume growth expected

North America: slight improvement in conditions

Europe: depressed conditions will continue to impact volumes

Half Year Results | Fletcher Building | © February 2012

Outlook | Page 33

Financial outlook FY2012

Based on:

Current assessment of market conditions

Unaudited half year results

Net earnings before unusuals for the 2012 financial year are expected to be in the range of $310 million to $340 million

Performance will depend on macro-economic conditions and construction activity levels

Further restructuring charges of $40 to $50 million likely to be incurred in Laminex

Half Year Results | Fletcher Building | © February 2012

Outlook | Page 34

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