Fletcher Building Limited · NZX:FBU

Fletcher Building — Investor Day (June 2022)

18 slides from Fletcher Building's investor day presentation, June 2022

  1. Slide 1: Near-term profit growth

    1. Near-term profit growth We expect FY22 EBIT of c.$750m, with an FY23 target for a $100m+ uplift (assuming a broadly flat market) FY22F EBIT1 by Division ($m) FY23 EBIT1 Target Building Products c.$210m  FY23 target is for $100m+ uplift in Group EBIT (vs. FY22F) Distribution c.$135m  Key assumpt

  2. Slide 2: Margin: EBIT margin improved by 200bps vs FY19

    2. Margin EBIT margin has improved by 200bps (vs. FY19), driven by cost-out, improved pricing and revenue mix Group EBIT1 Margin (%) Key levers driving improvement over FY19-22  Cost-out: Gross cost reduction of >$250m, focused +230 particularly on supply chain and overheads bps  Efficiency: c.$10

  3. Slide 3: Price effectiveness and cost efficiency drive margin improvement

    2. Margin Price effectiveness and cost efficiency have been key drivers of margin improvement Gross Margin % in Products & Distribution Div’s1 Overheads / Revenue % in Products & Distribution Div’s1 +70 -140 bps 22.9% bps c.30.0% 21.9% 29.6% c.21.5% 29.3% FY19 2 FY21 2H22F FY19 2 FY21 2H22F 1. Build

  4. Slide 4: Targeting 100-200bps of further EBIT margin expansion

    2. Margin Targeting 100-200bps of further EBIT margin expansion at current activity levels; 9-10% target at mid-cycle Current EBIT1 Margin (%) Drivers of Margin Expansion Medium-Term Target EBIT1 Margin (%) Growth in margin-accretive NZ segments +50-100 bps c.10.5-11.5% (i.e. materials, distribution

  5. Slide 5: Fletcher Construction order book well-placed to deliver 3-5% margins

    2. Margin Fletcher Construction order book well-placed to deliver 3-5% margins, with two legacy projects to complete Fletcher Construction  Committed forward order book of $3.1b  Underpins c.80% of FY23F revenue  Focus on NZ civil infrastructure: roading, marine, airports & water. Strong forward

  6. Slide 6: Base capex of $200-250m p.a.

    3. Investment ‘Base’ capex of $200-250m p.a. to support underlying business; focus is on digital, efficiency & sustainability ‘Base’ Capex: $200-250m p.a.  $150-175m p.a. to maintain current asset base Maintenance  Compares to underlying depreciation1 of $165m p.a. in FY22  $25-50m p.a. Digital 

  7. Slide 7: Above base growth capex of c.$500m over FY23-25

    3. Investment ‘Above base’ growth capex of c.$500m over FY23-25, mainly on organic investments into NZ adjacencies ‘Above Base’ Growth Capex: c.$500m over FY23-25, targeting ROFE ≥ 15% and $75m+ of EBIT uplift at maturity  c.$500m of investment in product & network adjacencies over FY23-25  Curren

  8. Slide 8: Residential Development investment approach

    3. Investment Residential Development investment based on through-the-cycle metrics, with sensible capital allocation Residential Development Business: Investment Approach and Resilience  Land pipeline secured to deliver growth to c.1,400 units in FY25 Disciplined approach to investing for growth 

  9. Slide 9: Operating at lower end of target leverage range

    4. Financial position and returns We expect to operate at the lower end of our target leverage range – resilient balance sheet settings Leverage (Net Debt / EBITDA)  Strong balance sheet to support growth investments 2.0x  Investments may lift the Group’s leverage by c.0.2x to 0.5x over the FY23-2

  10. Slide 10: Material improvement in ROFE; strong shareholder returns

    4. Financial position and returns Material improvement in ROFE; strong and sustainable shareholder returns ROFE1 (%) Returns Dividends (cps) Share buyback c.18.0% >15% 13.5% 18.0 41.2m shares repurchased for 18.0 $275m completed in May-22 FY19 2 FY22F Through-the-cycle Through-the- Last 12 Months ta

  11. Slide 11: Shareholder returns supported by underlying trading cash flows

    4. Financial position and returns Shareholder returns supported by underlying trading cash flows Underlying Trading Cash Flow1 ($m)  c.$2.5b of total underlying trading cash flow in FY19-22F  FY22F trading cash flow lower on investments in inventory 929  Draw-down of stocks in FY21  Investments

  12. Slide 12: Market outlook – summary

    5. Market outlook – summary Current volumes strong; backlog to support activity over next 12-18 months  Current trading volumes in the business remain strong  Demand is running ahead of industry capacity to build in residential, particularly in New Zealand  NZ residential consents of c.50k p.a. a

  13. Slide 13: Market outlook – macroeconomic impact

    5. Market outlook – macroeconomic impact Given heightened macro uncertainty, we asked Deloitte to look at the relationship between key economic variables and activity in our markets – and to provide an independent view of the medium-term outlook Model Example: NZ Residential WPIP  Deloitte Access E

  14. Slide 14: Market outlook – non-residential NZ & AU

    5. Market outlook – non-residential NZ & AU NZ & AU non-residential are 45-50% of FB’s market exposure. Pipeline of work expected to be solid NZ Commercial & Infrastructure WPIP ($b) Commercial Infrastructure  Non-residential activity is expected to 19% 18% 6.7 8 remain supportive over the medium-

  15. Slide 15: Market outlook – residential AU

    5. Market outlook – residential AU AU residential activity is currently at an average of the past five years – material near-term backlog and solid outlook AU Residential Work Done (A$b)  AU residential activity is currently at an average of the past 19% 93.0 85.3 87.2 five years 75.1  Recent leve

  16. Slide 16: Market outlook – residential NZ

    5. Market outlook – residential NZ NZ residential currently at capacity – backlog likely to support next 12-18 months; FY24 softening expected NZ Residential WPIP ($b)  Current consenting levels of c.50k p.a. are c.20-30% above 14.0 33% 12.4 industry capacity to build 12.0 12.1 9.8  This backlog i

  17. Slide 17: Summary

    Summary We will drive ongoing performance and growth – building a sustainably better, more resilient business 01 02 03 04 05 Significant Plans and Established Strong Well-positioned  near-term runway for pipeline of enduring for macro profit growth further margin growth financial trends improvement

  18. Slide 18: Questions

    Questions Page 35 | Fletcher Building Limited Investor Day Presentation | © June 2022

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