FLETCHER BUILDING LIMITED — Investor Presentation 2016

Apr 5, 2016

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Fletcher
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Building Limited

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6 April 2016
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Disclaimer

This presentation contains not only a review of operations, but also some forward looking statements about Fletcher Building and the environment in which the company Because these statements are forward operates. looking, Fletcher Building’s actual results could differ materially. Statistics included in this presentation are sourced from Statistics NZ unless otherwise stated.

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2 Fletcher Building Distribution Investor Day | © April 2016

Agenda

8:00am - 8:30am	Coffee/Registration	Coffee/Registration
8:30am - 9:15am	CEO Update / Q&A	Mark Adamson–Chief Executive Officer Lee Finney – Chief Transformation Officer
9:15am - 9.30am	Divisional Introduction	Dean Fradgley–Chief Executive, Distribution
9.30am -10:15am	PlaceMakers	Bruce McEwen–General Manager
10:15am - 10:30am	Morning tea
10:30am - 11.30am	Plumbing distribution: Mico and Tradelink	Bryn Harrison–GM, Mico Alan Ball–GM, Tradelink
11.30am - 12:30pm	Steel distribution - NZ and Australia	Hamish McBeath_– GM, Steel Distribution_ Paul Tudor_– GM, Stramit_
12:30pm – 1:00pm	Lunch
1pm	Depart for site visits from rear entrance on Pitt Street

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3 Fletcher Building Distribution Investor Day | © April 2016

Fletcher Building Distribution Investor Day Presentation 2016

CEO Update Mark Adamson CEO

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Structure will support greater focus on business performance

Building Products: Matt Crockett	International: Francisco Irazusta	Distribution: Dean Fradgley	Residential & Land Development: Steve Evans	Construction: Graham Darlow	Chief Transformation Officer: Lee Finney
• GBCWinstone (NZ) including Higgins Aggregates • Firth (NZ) • Humes (NZ) • Rocla Pipelines (Aus) • Winstone Wallboards/Tasma n Insulation (NZ) • Fletcher Insulation (Aus) • Iplex (NZ & Aus) • Sims Pacific Metals (NZ) • Fletcher Aluminium (NZ)	• Formica Asia • Formica Europe • Formica North America • Laminex (NZ & Aus) • Roof Tile Group (NZ; Africa; Asia; Europe; USA)	• PlaceMakers (NZ) • Mico (NZ) • Tradelink (Aus) • Stramit (Aus) • Tasman Sinkware (Aus); • Steel Distribution:	• Fletcher Living (NZ)	• Infrastructure (NZ) • Fletcher EQR (NZ) • South Pacific • Higgins Contracting (NZ & Fiji) • Building + Interiors (NZ)	• Procurement • Marketing • Operational Excellence • Transformation

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5 Fletcher Building Distribution Investor Day | © April 2016

Fletcher Building Distribution Investor Day Presentation 2016

Overview of Distribution Dean Fradgley CE Distribution

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Objectives for today’s Distribution Investor Presentation

• Present the divisional strategy

• Cover key strategic areas of focus and growth

• Meet the management team

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7 Fletcher Building Distribution Investor Day | © April 2016

The Distribution portfolio has 11 businesses across New Zealand and Australia which are well recognised within their markets

• Enlarged Distribution covers New Zealand and Australian Distribution business units

• 1st or 2nd in their markets

• Operate within traditional markets

• Well recognised within their industries

• Well established brands

• At different points in their maturity

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• Different scales of operation

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8 Fletcher Building Distribution Investor Day | © April 2016

Our Distribution division operates across Australia and New Zealand with a diverse portfolio of product businesses

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New Zealand's leading building supplies merchant specialising in the trade and B2B segment of the market

FY15 Revenue : NZ$1,167m Staff: 2,400 Key customer segments:

• Group home builders

• SME trade customers

• Commercial

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New Zealand’s largest specialty plumbing and bathroom merchant supplying trade and retail customers

FY15 Revenue : NZ$210m Staff: 450 Key customer segments:

• Residential and commercial construction

• Repairs and maintenance

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Supplies bathroom and plumbing products through a network of 200+ branches across Australia

FY15 Revenue: A$730m Staff: 1,480 Key customer segments:

• Network plumbers

• Commercial construction

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New Zealand's leading importer, distributor and processor of steel

FY15 Revenue : NZ$440m Staff: 600 Key customer segments:

• Infrastructure and commercial construction

• Manufacturing and Engineering

• Roofing and cladding roll formers

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Australia’s 2[nd] largest roll former and supplier to the building industry with steel roofing, cladding, rainwater and door systems

FY15 Revenue: A$460m Staff : 850 Key customer segments:

• Installers

• Builders and developers

• Network resellers

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9

Fletcher Building Distribution Investor Day | © April 2016

We are in year three of executing the Distribution strategy

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10 Fletcher Building Distribution Investor Day | © April 2016

FY15 financial highlights – total division

Revenue ROFE 14.1% bn NZ$3.2 2.3% Capital expenditure m NZ$54 EBIT 83% m NZ$148 Gross margin realisation 17% 20% 18%

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11 Fletcher Building Distribution Investor Day | © April 2016

Distribution is a key component of the Group’s financial performance

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FY15 Revenue FY15 Revenue
PlaceMakers
Mico
Distribution TradeLink
Rest of Group Stramit
Steel Distn NZ
Other
FY15 EBIT FY15 EBIT
PlaceMakers
Mico
Distribution TradeLink
Rest of Group Stramit
Steel Distn NZ
Other
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12 Fletcher Building Distribution Investor Day | © April 2016

Distribution has momentum and has delivered robust organic profit by executing its customer leading strategy

• Strong revenue and double-digit year on year EBIT growth in New Zealand

• Accelerated performance in PlaceMakers, successful turnaround in Mico and sustainable manufacturing improvements in Pacific Coil Coaters

• Benefits of a differentiated customer value proposition and customer service promise tangibly linked to profit improvement

• NZ business units are key earning centres for the division. Learnings are being deployed in Australia

• Australian portfolio has scale that needs to be leveraged

• Average EBIT to free cash conversion of 100%

• Capex / funding light business

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FY15 EBIT
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PlaceMakers
Mico
TradeLink
Stramit
Steel Distn NZ
Other
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13 Fletcher Building Distribution Investor Day | © April 2016

Distribution has the potential to unlock more shareholder value through the economic cycle

Critical areas

How

• Buy better / sell better

Profitable market share

• Gross margin realisation

• Efficiency and synergy

• Core category penetration

Organic growth

• Shop within a shop concept

• Omni channel

• Regional network performance

Execution in Australia

• Service and growth potential in Australia

• Export learnings and best practice from New Zealand strategies

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14 Fletcher Building Distribution Investor Day | © April 2016

The Distribution business units differentiate themselves within their markets

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15 Fletcher Building Distribution Investor Day | © April 2016

Strategic review and areas of focus for the future

2015 strategic review by external consultants focussed on the following three areas:

  - Leveraging FB’s newly created Asian sourcing office

• Promoting own exclusive branded ranges and specifications (Raymor / Adesso in Mico and Tradelink, for

• Commercial example)

• • Grow core customers and SOW – e.g. GHBs and Network Plumbers sectors

• • FB operational excellence deployed in Pacific Coil Coaters and Stramit

• •

• Operations Single Trans-Tasman ‘Distribution’ focus • Performance focus across branches and BUs to deliver YOY improvements. An obsession in execution

• Successful co-location and business combinations

• Cost leveraging group scale and synergies

  • Cost containment relative to growth, through the cycle

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16 Fletcher Building Distribution Investor Day | © April 2016

Distribution has momentum and line of sight to continue to grow returns and shareholder value

• Clear and simple divisional strategy that is common across all its businesses

• Demonstrable delivery in New Zealand over the last two years

• New Zealand success and learnings now being applied to Australian business units

• Our focus is clear – growing profitably with an obsessive focus on execution

• Distribution are clear enablers of overall Fletcher Building growth and value creation, key drivers of group ROFE

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Current ROFE relative to Group
50.0%
40.0%
30.0%
20.0%
FY15 FB Group
10.0% average
0.0%
PlaceMakers Mico TradeLink Stramit Steel Distn Other Distribution
NZ Total
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17 Fletcher Building Distribution Investor Day | © April 2016

Summary: continued progress within Distribution – growing earnings through strong execution

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Superior returns
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Service
differentiation
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Establish
critical areas of
focus
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Set “what good
looks like”
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Network
efficiency
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Reduce
complexity
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Embrace
Centralisation
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18 Fletcher Building Distribution Investor Day | © April 2016

Summary: continued progress within Distribution – growing earnings through strong execution

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Superior returns
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Service
differentiation
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Establish
critical areas of
focus
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Set “what good
looks like”
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Network
efficiency
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Reduce
complexity
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Embrace
Centralisation
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19 Fletcher Building Distribution Investor Day | © April 2016

Summary: continued progress within Distribution – growing earnings through strong execution

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Superior returns
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Service
differentiation
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Network
efficiency
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Establish
critical areas of
focus
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Set “what good
looks like”
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Reduce
complexity
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Embrace
Centralisation
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20 Fletcher Building Distribution Investor Day | © April 2016

Summary: continued progress within Distribution – growing earnings through strong execution

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Superior returns
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Service
differentiation
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Establish
critical areas of
focus
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Set “what good
looks like”
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Network
efficiency
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Reduce
complexity
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Embrace
Centralisation
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21 Fletcher Building Distribution Investor Day | © April 2016

Summary: continued progress within Distribution – growing earnings through strong execution

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Superior returns
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Service
differentiation
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Establish
critical areas of
focus
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Set “what good
looks like”
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Network
efficiency
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Reduce
complexity
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Embrace
Centralisation
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22 Fletcher Building Distribution Investor Day | © April 2016

Fletcher Building Distribution Investor Day Presentation 2016

PlaceMakers Bruce McEwen GM PlaceMakers

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PlaceMakers on a page

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• 2,400 employees, 70%+ employee engagement

• Performance focused operators / management team

• Differentiated model

• Relentless focus on service

• No.1 market share position

• • New loyalty scheme covering wider SME market

• Record low cost to serve

• Centralising back-office functions

• • Consolidation in Frame and Truss timber manufacturing

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• Record turnover in H1 FY16

• FY15 ROFE 41% – 25% CAGR from FY13 baseline

• • Average operating cash to EBIT - > 100% EBIT retention

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24 Fletcher Building Distribution Investor Day | © April 2016

FY15 KPI highlights from PlaceMakers improvements include double digit year-on-year EBIT growth

EBIT m $66.8 26% YoY

Gross margin realisation

25% 17% YoY

• Off FY13 baseline

Revenue m $1,167 8% YoY

ROFE 41% 13% YoY

Net operating profit retained* m to m $20 $53

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25 Fletcher Building Distribution Investor Day | © April 2016

PlaceMakers is the core revenue and profit engine of the Distribution division

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FY15 Revenue
PlaceMakers
Rest of
Distribution
FY15 EBIT
PlaceMakers
Rest of
Distribution
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26 Fletcher Building Distribution Investor Day | © April 2016

Our critical areas of focus to deliver on our strategy

No one is easier to do business with

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Critical areas of focus
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Efficiency
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Service
obsession
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Sales generation
/ SOW
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People capability
/ engagement
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GM quality
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27 Fletcher Building Distribution Investor Day | © April 2016

PlaceMakers is focused on efficiency to drive gross margin realisation improvements

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NZ$M
270.0 30%
250.0 25%
GM realisation
940Bps
230.0 20%
210.0 15%
Cost to Serve %
190.0 10%
320Bps
170.0 5%
150.0 0%
FY13 FY14 FY15
GM$ Cost to Serve $ GMR
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28 Fletcher Building Distribution Investor Day | © April 2016

Improved trading performance accentuated by the joint venture model change enhancing NOP retention

• PlaceMakers has over 60 locations, with 53% of revenue relating to joint ventures owned with local operators

• Changed the joint venture model, reducing joint venture equity, increasing term and giving surety of direction

• Joint venture contracts now targeted on critical areas of focus and delivering superior returns

• Improved EBIT growth and net operating profit (NOP) retained drives shareholder value

NZ$M

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80
60 Momentum and
40 structural changes
driving shareholder
20 value
-
FY13 FY14 FY15
EBIT Minority Interest EBIT
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29 Fletcher Building Distribution Investor Day | © April 2016

H1 FY16 sales growth of +10% driven by strong growth in Auckland supported by regional growth

• Strategic focus on improving Auckland market share

• Changed business model in Auckland - was fragmented and difficult to compete

• One year later YOY growth +21%

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Auckland Sales Growth
25%
+21% YTD
20%
15%
10%
5%
0%
Q1 Q2
FY15 FY16
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30 Fletcher Building Distribution Investor Day | © April 2016

Sales generation in core categories remains critical area of focus

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Category Opportunities Largest timber frame
and truss manufacturer
in New Zealand
Frame and Truss sales
continue to grow
profitably - $115m p.a.
growing at 13%
Network consolidation
into 8 sites
Frame and Truss - Cubic Metres
produced
90,000
80,000
70,000
60,000
50,000
FY13 FY14 FY15 FY16F
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Share of wallet focus is a key enabler for growth in white space categories

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32 Fletcher Building Distribution Investor Day | © April 2016

Targeted share of wallet campaigns take market share and increase pull-through of Fletcher Building products

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Leverage Pull- Creates
frame and through higher
truss benefits margin
capability for finishing
for market Fletcher products
share Building sale
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33 Fletcher Building Distribution Investor Day | © April 2016

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Famous for differentiated service model and bringing this to life

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34 Fletcher Building Distribution Investor Day | © April 2016

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We are obsessed with service and are the only national distributor in our sector that publishes its service erformance p

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Net Promoter
Score
From 21 24.7
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35 Fletcher Building Distribution Investor Day | © April 2016

We are measuring balanced performance across key metrics to maximise sustainable returns

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197 Wanaka

	197 Wanaka
	CUSTOMER	**Monthly Actual **	Monthly Target	YTD Actual	YTD Target
	Net Promoter Score			36.5%	28%
	Telephony Service Promise			86%	85
	Pricing Credit as % Invoice	0.16%	0.36%	0.23%	0.36%
	RED DOT %	99.6%	100.0%	98.2%	100.0%
	Customer Performance Score EMPLOYEE	20.00 Actual	20 Target	18.00 YTD Actual	20 YTD Target
	Safety Observations
	Staff Turnover(12 Months %) Absence(12 Months %)			25.9% 1.3%	27.0% 1.4%
	Employee Expense/Sales % Employee Performance Score	7.5% 15.00	8.0% 15	7.3% 15.00	7.4% 15
	OPERATIONS	Actual	Target	YTD Actual	YTD Target
	DIFOTIS % Purchase from Primary Supplier	86.9%	95.0%	94% 84.8%	95% 95.0%
	*** Sales Per FTE(000)**	66.0	59.0	424.1	424.6
	*** System Margin Per FTE(000)**	14.1	12.9	91.2	92.7
	Operations Performance Score	14.00	15	8.00	15
	FINANCIAL	Actual	Target	YTD Actual	YTD Target
	Debtor Collection % Stockturn - Inventory Days	87.1%	85.0%	85.5% 33.5	85.0% 32.7
	*** Shrinkage %**	-0.3%	0.2%	-0.1%	0.2%
	*** Freight Recovery %**	41.4%	111.7%	116.9%	111.7%
	Sales$ (000)	1,674.6	111.8%	10,392.0	108.3%
	Final GM$ (000)	419.3	367.7	2585.8	2360.2
	*** Final GM %**	25.0%	24.5%	24.9%	24.6%
	Controllable Costs % of Net Sales	10.7%	11.9%	11.0%	11.1%
	*** EBIT$ (000)**	195.8	144.1	1185.8	1023.8
	EBIT %	11.7%	9.6%	11.4%	10.7%
	Financial Performance Score	44.44	50	49.00	50
	Overall Branch Performance Score	93	100	90	100

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36 Fletcher Building Distribution Investor Day | © April 2016

In summary – customer leading behaviour is driving shareholder returns

• Service differentiation driving results and shareholder value

• Most profitable building supplies merchant in New Zealand

• ROFE – CAGR 25%

• Gross margin realisation up from 16% to 24%

• Record engagement and trading levels

• Positive momentum and line of sight to deliver on strategic plan

Customer Leading.

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37 Fletcher Building Distribution Investor Day | © April 2016

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Fletcher Building Distribution Investor Day Presentation 2016
Mico
Bryn Harrison
GM Mico
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Mico on a page

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• 450 employees with record employee engagement

• 66 branches nationwide – corporate ownership model

• Largest plumbing merchant in New Zealand

• Differentiated service offer

• Winning in back of wall and growing in bathrooms

• Taking profitable share

• Co-location programme across Fletcher Building sites

• • Implementing a successful branch footprint in lowest property cost to sales ratio

• Record turnover in Q4 of calendar 2015

• On track to be ROFE accretive ~25% vs negative in FY13

• Target ROFE of 30%+

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39 Fletcher Building Distribution Investor Day | © April 2016

Over the last two years Mico has achieved an organic turnaround led and delivered by our people

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FY14 EBIT FY15 EBIT FY16F EBIT
($1.6m) $3.5m $9m+
Business Focus: Business Focus: Business Focus:
• • •
Restructuring post Revenue growth Market share
•
Pipelines move to Cost reduction growth
• •
Humes Integration with Leverage
PlaceMakers Distribution
synergies
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Note: * Trading EBIT before one-offs

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40 Fletcher Building Distribution Investor Day | © April 2016

Key FY15 highlights from the Mico turnaround include:

EBIT m $3.5 $5.1m

Cost to Serve 26.6% 1.6% improvement

Revenue $210m

ROFE 7.8% 11.2%

Branches co-located 8 branches +6 branches

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41 Fletcher Building Distribution Investor Day | © April 2016

Mico accounts for 5% of the Distribution division’s result, but is a positive internally led turnaround story over the last two years

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FY15 Revenue
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Mico
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FY15 EBIT
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Mico
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42 Fletcher Building Distribution Investor Day | © April 2016

Our critical areas of focus to deliver on our game plan

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No one is easier to do
business with
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Lift performance
of poor branches
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----- Start of picture text -----

Take share:
market +1%
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----- Start of picture text -----

Reduce our cost
to serve
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Showroom
growth
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GM quality
+ 25bps
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43 Fletcher Building Distribution Investor Day | © April 2016

Mico is the industry leader, differentiating itself with an industry first customer service promise

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• Launched in June 2015

• Provides a tangible and defendable commitment to service for trade customers

• • Yet to be followed by other industry participants

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44 Fletcher Building Distribution Investor Day | © April 2016

Tangible link with service promise and financial performance

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

Change in Daily Sales Rate
%
vs SMLY (2015)
25
20
15
10
5
The service promise has improved 0
customer satisfaction Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Net Promoter Score Net Promoter Score
Oct 2014: 12 Mar 2016: 34 Service promise launch
Fletcher Building Distribution Investor Day | © April 2016Distribution Investor Day | © April 2016
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45 Fletcher Building Distribution Investor Day | © April 2016Distribution Investor Day | © April 2016

Mico’s strength was in BOW. We have grown FOW/ bathrooms and increased marketing activity for an improved balance

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Sales vs prior year FYTD Feb-16

Showroom products +10%

Exclusive Product Sales +12%

• Exclusive sponsorship and supply of bathroom fixtures to “The Block NZ 2015”

• Driven increase in footfall and showroom sales growth

• Drove increase in share in critical Auckland market

• New exclusive product ranges launched in tapware, vanities, sanitary ware at opening price points

• Enabler of critical focus on sales generation and share of wallet growth

Auckland Showroom +28%

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46 Fletcher Building Distribution Investor Day | © April 2016

Reducing the cost to serve has been key for Mico and will continue to be through the economic cycle

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

FY14 FY15 FY16
Target
YTD YTD YTD
GM% 26.4% 27.5% 27.9% 29%
Cost to Serve 28.4% 26.8% 24.7% 22%
→ People 16.4% 15.1% 13.6% 13.5%
→ Property 5.4% 5.5% 4.9% 3.5%
→ Other 7.4% 6.8% 6.2% 5%
EBIT (2.7%) 0.6% 3.2% 6-7%
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* Adjusted for National Office, lease income no longer received

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47 Fletcher Building Distribution Investor Day | © April 2016

Property cost reduction allows Mico to be profitable through the cycle

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PlaceMakers Mico Palmerston North
Mico Kumeu
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Humes Mico Timaru
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48 Fletcher Building Distribution Investor Day | © April 2016

• Property cost focus enables profit through the cycle, as well as market share gain through additional points of presence

• Two key strategies:

• Co-location with Fletcher Building business units (PlaceMakers, Humes Pipelines)

• Small-format sites (Kumeu)

• Total property cost savings delivered since FY14 c.$2.2m p.a.

• FY19 target run rate savings of a further $2m p.a.

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Growing global trend for trade supplies purchased online

• New e-commerce platform launched for bolt-on categories and further sales generation

• Equipsafety.co.nz website built over the last 6 months to enable another channel route to market

• Leading advancement into separate distribution channel to market

• Enables Mico to expand into adjacent categories and grow share

• Initial focus on work-wear and safety products, further categories to be added

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49 Fletcher Building Distribution Investor Day | © April 2016

In summary – in-house turnaround and customer focus driving increased shareholder value

• ROFE on track for 20%+ (+12% YOY)

• Customer focused service promise underpinning sales and EBIT growth

• Investing for sales generation – new branches, e-commerce and marketing

• Drive efficiency through leveraging Fletcher Building assets

• Positive employee engagement and trading levels

• Delivered turnaround with more opportunities for earnings and topline growth

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50 Fletcher Building Distribution Investor Day | © April 2016

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Fletcher Building Distribution Investor Day Presentation 2016
Tradelink
Alan Ball
GM Tradelink
Fletcher Building Distribution Investor Day | © April 2016
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Tradelink on a page

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• 1,600 employees

• Performance focused operators and management team

• • Focus on training and development for sustainable growth

• • Experienced distribution senior leadership team

• Number 2 in market with 18% share

• Densification of network providing additional locations to service market

• Executing a differentiated customer service promise in Australia

• Reducing operational cost

• Rightsizing branch network

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• 20 new locations per annum for next three years

• Expansion of product categories to complement range

• Destination showrooms to capture regional demographics

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52 Fletcher Building Distribution Investor Day | © April 2016

Tradelink provides the division with a platform to enable future earnings growth

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

FY15 Revenue
Tradelink
Rest of
Distribution
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----- Start of picture text -----

FY15 EBIT
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----- Start of picture text -----

Tradelink
Rest of
Distribution
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53

Fletcher Building Distribution Investor Day | © April 2016

FY15 financial summary:

EBIT m A$15 31%

Gross margin 28.7% 1.4%

Revenue m A$732 3%

ROFE 4% 18% FY16 annualised labour savings m A$10

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54 Fletcher Building Distribution Investor Day | © April 2016

Tradelink is forecasting A$22m of EBIT for FY16 with a range of A$24 to A$28m expected for FY17

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

16
28
(4) 22
24
(4)
14
Trading EBIT Property Gain Restructuring Stock provisions FY16 Forecast FY17
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55 Fletcher Building Distribution Investor Day | © April 2016

Our critical areas of focus to deliver on our plan

No one is easier to do business with

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

SME Customer
----- End of picture text -----

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

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

Densification of
network
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----- Start of picture text -----

Talent Management
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----- Start of picture text -----

Showrooms
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56 Fletcher Building Distribution Investor Day | © April 2016

The Australian plumbing market remains an attractive industry served by two dominant players and inde endents p

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

Market Size and share
4500
4000
3500
3000
2500
50%
2000 43% 46% 48%
40%
1500
36%
1000 35% 35% 33% 31%
23%
500 21%
19% 18% 18%
0
2011 2012 2013 2014 2015
Tradelink Reece Independent Total Market
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57 Fletcher Building Distribution Investor Day | © April 2016

Tradelink is in year two of executing the ‘winning in plumbing’ strategy, with accelerated focus on network plumber (SME)

Network Plumber Mix of maintenance, renovation and construction in residential and non-residential

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• Historically focused on large projects, which are volatile

• • In line with Tradelink’s strategy, focus now on network plumber for long-term stability through the cycle

• Lower cost to serve through higher collection (50%) and lower property costs as a % sales

• Aligning business and sales team to core growth segments

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58 Fletcher Building Distribution Investor Day | © April 2016

Clear customer segmentation and alignment delivering market share growth

	Trade	Trade+	Trade+ Project	Project
# Branches 2016	107	61	17	18
# Branches 2019	165	61	17	20
Annual Sales	$1m - $5m	$2m - $8m	$3m - $10m	$6m+
Branch Size	400 - 600	700 - 1,200	1,200+	1,200+
People	3+	5+	9+	9+
Famous For	SME Plumber	SME Plumber/Retail	SME Plumber/Retail /Network Builder	House Builder and Commercial Plumber
	• Plumbing core range • Spares	• Plumbing core range • Spares • Showroom • HVAC • Gas • Civil	• Plumbing core range • Spares • Showroom • HVAC • Gas • Civil	• Plumbing core range • Destination Showroom • HVAC • Gas • Civil

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59 Fletcher Building Distribution Investor Day | © April 2016

A program of branch expansion has commenced based on the ‘winning in plumbing’ trial. 60 new branches planned in next three years

Trial – 2014

Amended - 2015

Implement - 2016

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

Branch of the Future
•
80% of stock open to
view/pick
•
Circular standing
counter
• ‘Break out’ area for
refreshments and
meetings
• 1-to-1 and self service
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----- Start of picture text -----

Winning in Plumbing
(ACT Trial)
•
Fast moving pick up
stock open to view/pick
•
‘Designer’ standing
counter
• ‘Break out’ area for
refreshments and
informal meetings
• 1-to-1 and self service
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----- Start of picture text -----

Trade SME only
• Proven model
• Small Merch area
• Basic counter with stools
• 1-to-1 service
• Better presentation of fast
moving consumables and
common hand/power
tools
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60 Fletcher Building Distribution Investor Day | © April 2016

In line with our strategy, we need to invest for growth over the next three years, leveraging low cost format o tions p

• Having learned from the ACT pilot, we plan to spend A$10m over the next three years to expand our footprint by 60 branches

• Payback to be under two years

• Branches will be consistent, leveraging the national brand and consistent range and product classifications

• We will also densify the metro areas with tactical regional openings where appropriate

• Current planned branches are:

	FY 2017	FY 2018	FY 2019	Total
Queensland	7	8	8	23
NSW	8	9	9	26
SA	2	1	1	4
WA	1	1	1	3
NT	1	0	0	1
Vic / Tas / ACT	1	1	1	3

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61 Fletcher Building Distribution Investor Day | © April 2016

To regain share, Tradelink will refurbish its showroom network prioritising dormant branches following best practice from Mico

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Bundaberg branch - A$45k investment Sales up 7%

Showroom Share FY15

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

26% Reece
11% 63%
Tradelink
Independent
A$1.5m investment
A$10m Sales Increment
Payback in 7 months
2% Market Share gain
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62 Fletcher Building Distribution Investor Day | © April 2016

Management are focusing on people engagement and talent development to accelerate strategy execution

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63 Fletcher Building Distribution Investor Day | © April 2016

Whilst core growth remains a priority, Tradelink will enter white space, margin accretive categories. E-Commerce expansion offers further growth in the longer term

• FY17 FY18 HVAC Gas Products Gas Products • $100m market

• • Existing customer segment

• •

• Targeting $16m Targeting $3m (3% share)

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

FY19
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----- Start of picture text -----

E-Commerce
•
3% market penetration
•
Fixed price point model
•
USA counterpart delivers
30% revenue through this
route
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64 Fletcher Building Distribution Investor Day | © April 2016

In summary - management focus remains on the execution of the ‘winning in plumbing’ strategy and greater execution in three specific areas

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

SME Developing and
Densification of
Customer engaging our
branches
segment team
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65 Fletcher Building Distribution Investor Day | © April 2016

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NZ Steel Distribution Hamish McBeath GM NZ Steel Distribution

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NZ Steel Distribution on a page

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• 600 employees across four business units

• 32 branches nationwide – 8 co-locations

• All BUs are 1[st] or 2[nd] in market

• Executing a differentiated model driving volume and record order book

• $3m of synergies realised over last 2 years

• Network efficiencies have reduced distribution costs and improved service offer

• Capital investment in Fletcher Reinforcing and Pacific Coil Coaters reducing operating costs

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• Pacific Coil Coaters record domestic volumes and 3% growth in market share

• Peak sales run rate for Easysteel

• Long-term sales pipeline boosted by customer order book at Fletcher Construction

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67 Fletcher Building Distribution Investor Day | © April 2016

NZ Steel Distribution is a key enabler of the overall division’s EBIT outcome

FY15 Revenue

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NZ Steel
Distribution
Rest of
Distribution
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FY15 EBIT
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NZ Steel
Distribution
Rest of
Distribution
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68 Fletcher Building Distribution Investor Day | © April 2016

FY15 KPI highlights from NZ Steel Distribution include:

Revenue $437m437mm 7% Pacific Coilcoaters scrap rates 7%%

EBIT Revenue $437m437mm m $36 7% 7% Pacific Coilcoaters scrap rates 7%% Gross margin 4% 19% Steel Distribution ROFE 1% 30% 2%

4%

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69 Fletcher Building Distribution Investor Day | © April 2016

Our critical areas of focus to deliver on our game plan

No one is easier to do business with

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

Efficiency
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Service
obsession
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----- Start of picture text -----

Sales generation
/ SOW
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People capability
/ engagement
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GM quality
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70 Fletcher Building Distribution Investor Day | © April 2016

Leadership delivering the core engagement drivers upon integration

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71 Fletcher Building Distribution Investor Day | © April 2016

Differentiating our service offer

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• Launched main colours 48 hours, Make to order 5 days - Industry Benchmark 7-9 days

• Simplified product offer – Good, Better, Best

• Increased technical support resource to ensure customer has support in product selection

• Utilising Easysteel network to provide regional stock locations

• Providing app-based tools and online solutions for customers

• Penalty based service promise

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72 Fletcher Building Distribution Investor Day | © April 2016

Each business within NZ Steel Distribution’s portfolio has three key areas of focus that will deliver sustainable rofit p

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

Bar sizes indicative only
Manufacturing
Share
Market
Market
Share
Manufacturing
Market
Margin
Share
Margins, share, manufacturing excellence and synergies will
F15 EBIT F18 EBIT
underpin NZ Steel Distributions’ projected earnings growth
73 Fletcher Building Distribution Investor Day | © April 2016
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Despite challenging raw materials pricing New Zealand Steel Distribution still delivers profitable growth

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74 Fletcher Building Distribution Investor Day | © April 2016

In summary – BUs are well positioned for growth through the cycle and enhancing a differentiated model

• NZ Steel Distribution is a positive contributor to the overall Fletcher Building Group earnings

• Focused on customer, synergies, manufacturing excellence and managed costs

• Sustained improvements in international steel commodity pricing will have further positive impacts on trading results

• Positive employee engagement and lifted trading levels

• Momentum with further opportunities to deliver incremental shareholder value through growth, synergies and potential bolt-on opportunities

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75 Fletcher Building Distribution Investor Day | © April 2016

Fletcher Building Distribution Investor Day Presentation 2016

Stramit Paul Tudor GM Stramit

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Stramit on a Page – Australia’s 2[nd] largest roll former

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• 850 skilled employees across 20 locations

• New GM and experienced management team

• Continued focus on engagement, capability and accountability

• No. 2 market share position

• High brand equity and national coverage

• Immediate focus on creating a sustainable value proposition within a competitive market

• $2.2m of annualised overhead savings achieved in H1

• $2.7m of annualised manufacturing efficiencies achieved in H1

• Continued focus on simplification

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• FY15 ROFE of 8% with an improving run-rate

• Targeted ROFE of 20% by FY18

• FY16 H1 EBIT up 134% with strategy to deliver improved returns

77 Fletcher Building Distribution Investor Day | © April 2016

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Stramit provides 15% of the Distribution division’s revenue and has scale to provide further organic topline and earnin s rowth g g

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FY15 Revenue
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----- Start of picture text -----

Stramit
Rest of
Distribution
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----- Start of picture text -----

FY15 EBIT
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Stramit
Rest of
Distribution
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78 Fletcher Building Distribution Investor Day | © April 2016

2[nd] in market with a focus on profitable organic growth

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

• $459m in sales in FY15 Darwin
• Australia’s 2nd largest steel roll
former, supplying roofing,
cladding, rainwater and roller Cairns
door systems Townsville
• Operating 20 distribution Th e ustra A li an stee l ro ll
Mackay
facilities across the country – forming market shifted
scale and momentum to 655,000 tonnes in Rockhampton
return EBIT to pre-GFC levels FY15
Maryborough
• Five companies are estimated Brisbane Brisbane
to account for approx. 85% of (Eziform)
the Australian steel roll Coffs Harbour
forming market Perth
Orange Newcastle
– Lysaght / Fielders ~30% Adelaide Sydney
– Stramit ~20% Albury Canberra
Bendigo
– Metroll / Roofmart ~15% Melbourne Melbourne (Taurean)
Major metro centres
–
Steeline Franchises ~10%
Regional centres
–
Stratco ~10%
Estimate only (includes ~10% imported steel) Hobart
79 Fletcher Building Distribution Investor Day | © April 2016Distribution Investor Day | © April 2016
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79 Fletcher Building Distribution Investor Day | © April 2016Distribution Investor Day | © April 2016

Stramit supports 5,800 customers across three key markets

Markets	Customers	Products	Products	Brands
Residential % FY15 Sales: 52%	3,700 customers: •Installers •Distributors	•Roofing •Cladding •Rainwater •Doors
Commercial % FY15 Sales: 24%	1,200 customers: •Installers •Fabricators •Form workers
Sheds % FY15 Sales: 24%	900 customers: •Franchisees •Distributors •Independents	Pre-engineered buildings and designs

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80 Fletcher Building Distribution Investor Day | © April 2016

Financial insights for FY15 and H1 FY16

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

FY15 EBIT
A m
$12.5
H1 EBIT
26%
A m
$7.5
134%
FY15 GM
16.2%
H1 GM
0.8%
16.3%
9%
----- End of picture text -----

FY15 Revenue H1 Revenue A$459m A$241m 3% 0.2% FY15 ROFE H1 ROFE 7.7% 9.0% 15% 156%

H1 Cost Out A$4.9m of annualised savings

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81 Fletcher Building Distribution Investor Day | © April 2016

Our critical areas of focus to improve shareholder returns

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

No one is easier to do
business with
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Critical Areas of Focus
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----- Start of picture text -----

Smarter buying
and selling
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----- Start of picture text -----

Workforce
engagement,
capability and
accountability
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----- Start of picture text -----

Product and process
simplification
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We’re moving forward, at pace, with an owner’s mindset

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82 Fletcher Building Distribution Investor Day | © April 2016

Our critical areas of focus to improve shareholder returns

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

FY13 Baseline: Target:
• •
Sales : A$462m No one is easier to do Sales : A$500m
• EBIT : 2.9% business with • EBIT : 8%
Shut underperforming branches and
Holding market share and
actively purse site synergies
pursuing profitable growth
Critical Areas of Focus
Making it easier for Network performance
our customers Well positioned to better leverage and efficiency
Fletcher scale and buying power
Workforce
engagement, Smarter buying
capability and and selling
Product and process
accountability
simplification
Employee engagement Improved pricing disciplines
at 67% (up 12%) $4.9m of waste, labour and overhead contributing to FY16 EBIT
reductions contributing to FY16 EBIT
We’re moving forward, at pace, with an owner’s mindset
83 Fletcher Building Distribution Investor Day | © April 2016
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We’re on track heading into FY17 to deliver improved returns and a differentiated model

	FY16		FY17	FY18
	Profit improvement		Customer obsession	Accelerated organicgrowth
Shareholde r outcomes	Reduce our overheads and operating costs		•Significantly improve net margins •Simplify our SKUs •Rebuild and de-risk supply relationships	•Optimise the network •Pursue profitable topline growth •Sweat the assets
Customer outcomes	Listen to our customers and refresh our value proposition		•Make it easier for our customers •Deliver on our customer promise	•Grow profitable SOW and market share •Deliver product / service innovation
Employee outcomes	Simplify our management structure		•Simplify sales and customer service •Strengthen regional and functional teams	•Embed a high performance culture •Prioritise succession and sustainability

We’re currently here!!

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84 Fletcher Building Distribution Investor Day | © April 2016

In summary – we’re increasing our profitability and building a strong customer focussed business

• Successfully removed $4.9m of annualised cost during H1

• On track to deliver an EBIT result that is a marked improvement on FY15

• Preparing to launch a promise that will align our workforce to what truly matters to our customers

• Transforming our sales and customer service capabilities – smarter selling

• Working to improve supplier performance and reduce costs – smarter buying

• Obsessed with significantly (and rapidly) improving EBIT and ROFE

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85 Fletcher Building Distribution Investor Day | © April 2016

Fletcher Building Distribution Investor Day Presentation 2016

Distribution Division

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Our strategy is clear and is delivering strong returns in New Zealand. Now being applied in Australia

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87 Fletcher Building Distribution Investor Day | © April 2016

Summary: continued progress within Distribution – growing earnings through strong execution

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Superior returns
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----- Start of picture text -----

Service
differentiation
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Establish critical
areas of focus
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Set “what good
looks like”
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Network
efficiency
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Reduce
complexity
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Embrace
Centralisation
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88 Fletcher Building Distribution Investor Day | © April 2016