Fletcher Building Limited · NZX:FBU
Fletcher Building — H1 FY2015 Earnings Presentation
46 slides from Fletcher Building's earnings presentation, Feb 18, 2015
Slide 1: Half Year Results to 31 December 2014
Half Year Results to 31 December 2014 Mark Adamson -Chief Executive Officer Gerry Bollman -Chief Financial Officer 18 February 2015
Slide 2: Disclaimer
Disclaimer This half year results presentation dated 18 February 2015 provides additional comment on the management commentary 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
Slide 3: Agenda
Agenda Results Overview Geographic & Sectoral Analysis Divisional Performances Financial Results Strategy Update Outlook Appendix 3 Fletcher Building Half Year Results Presentation | © February 2015
Slide 4: Results Overview
Results Overview Firth EnviroPave, Beachlands
Slide 5: Results Overview Snapshot
Results Overview Snapshot $4,327 million $ million REVENUE 18c NET EARNINGS DIVIDEND PER SHARE $ OPERATING EARNINGS million 16.6c EARNINGS PER SHARE 5 Fletcher Building Half Year Results Presentation | © February 2015
Slide 6: Results Summary
Results Summary Dec 2013 Dec 2014 NZ$m 6 months 6 months %∆ Revenue 4,273 4,327 +1 EBITDA 385 327 -15 EBIT 281 224 -20 Net earnings 154 114 -26 EPS - cps 22.4 16.6 -26 Dividend - cps 18.0 18.0 0 EBIT before significant items 281 290 +3 Significant items - (66) 6 Fletcher Building Half Year Results P
Slide 7: Half Year Highlights
Half Year Highlights NZ Volumes Growth: Cement +13% Canterbury: Aggregates +7% Over 65,000 permanent Concrete +17% repairs completed Concrete Products +10% Plasterboard +8% Steel Reinforcing +32% Further FBUnite Progress: Doors & Windows +8% • $14m additional cost savings delivered in first half Aus
Slide 8: Results Overview Revenue
Results Overview Revenue • Reported revenue $54m higher than HY14 $4,327 million Revenue growth rates Geographic segments in local REVENUE up 1% currency New Zealand +6% Australia -3% Rest of World +8% • Underlying revenue growth of 3% when adjusted for sale of Pacific Steel and Hudson Building Supp
Slide 9: Results Overview Operating Earnings
Results Overview Operating Earnings • Operating earnings excluding significant items up 3% $224 OPERATING EARNINGS down 20% million Significant items Significant items relate to site closure costs and impairment of goodwill Site closure costs $34m Forman goodwill $290 $32m impairment Total $66m mill
Slide 10: Results Overview Net earnings
Results Overview Net earnings • Net earnings before significant $114 items were up 11% to $171m million Earnings per share NET EARNINGS down 26% Earnings per share 16.6 cents -26% Earnings per share 24.9 +11% (before significant items) cents $171 NET EARNINGS before significant items million up 11%
Slide 11: Results Overview Dividend & Cash flow
Results Overview Dividend & Cash flow • Cash flow from operations before working capital movements up 6% to $146 $282m million • Cash flow from operating activities down 18% due to: CASH FLOW FROM OPERATIONS down 18% – Residential land purchases $57m – Purchase of head office complex $43m • Interim
Slide 12: Geographic & Sectoral Analysis
Geographic & Sectoral Analysis Winstone Wallboards, Opawa, Christchurch 12
Slide 13: Sectoral exposure
Sectoral exposure Exposures based on revenues Geographical Residential Commercial Infrastructure Other Exposure by Sector¹ (New/A&A)* New Zealand 47% 30% 18% 5% Australia 49% 27% 12% 12% Rest of World 44% 51% 0% 5% Total Manufacturing 47% 32% 13% 8% New Zealand 87% 13% 0% 0% Australia 41% 59% 0% 0%
Slide 14: Geographic earnings mix
Geographic earnings mix • Revenues EBIT¹ (6 months to Dec 2014) (6 months to Dec 2014) 13% 14% 17% 50% 37% 69% New Zealand Australia Rest of World New Zealand Australia Rest of World 1. Before significant items 14 Fletcher Building Half Year Results Presentation | © February 2015
Slide 15: New Zealand operating earnings up strongly, Australia impacted by difficult market conditions
New Zealand operating earnings up strongly, Australia impacted by difficult market conditions EBIT¹ NZ$m 200 167 77 49 37 41 New Zealand Australia Rest of the World 6 months to Dec 13 6 months to Dec 14 1. Before significant items 15 Fletcher Building Half Year Results Presentation | © February 2015
Slide 16: New Zealand residential consents up 16% to 24,680
New Zealand residential consents up 16% to 24,680 Total residential consents 12 month rolling – New Zealand Change % year on year 35,000 30% 27 Peak (2004) 25% 20 30,000 20% 16 15% 25,000 10% Long run average (2003-2014) 6 5% 20,000 0% Auckland Canterbury Rest of NZ NZ 15,000 10,000 Auckland and Chr
Slide 17: Australian residential consents up 12%
Australian residential consents up 12% with strong recovery in stand-alone housing Total residential consents 12 month rolling – Australia 120,000 200,000 180,000 110,000 160,000 100,000 140,000 120,000 90,000 100,000 80,000 80,000 70,000 60,000 40,000 60,000 20,000 50,000 0 Dec-12 Sep-14 Mar-13 Jun
Slide 18: Divisional Performances
Divisional Performances Decra Roofing Systems, Kenya
Slide 19: Divisional operating earnings overview
Divisional operating earnings overview EBIT¹ NZ$m 90 79 74 57 56 51 51 53 41 43 8 6 Heavy Building Light Building Laminates & Distribution Distribution Construction Products Products Panels NZ AUS 6 months to Dec 13 6 months to Dec 14 1. Before significant items 19 Fletcher Building Half Year Result
Slide 20: Heavy Building Products Result
Heavy Building Products Result Dec 2013 Dec 2014 Total revenue down due to sale of NZ$M 6 months 6 months %∆ Pacific Steel in prior year Sales 950 863 -9 NZ Concrete Products EBITDA¹ 116 – Ready-mix concrete volumes +17% 132 -12 – Concrete products volumes +10% EBIT¹ 90 74 -18 NZ Concrete NZ Cement
Slide 21: Light Building Products Result
Light Building Products Result Dec 2013 Dec 2014 NZ Building Materials NZ$M 6 months 6 months %∆ Earnings up in line with construction activity: Sales 597 601 +1 – Plasterboard volumes increased and EBITDA¹ 66 67 +2 prices were stable – Insulation recorded higher sales of foil EBIT¹ 51 51 - and lami
Slide 22: Laminates & Panels Result
Laminates & Panels Result Dec 2013 Dec 2014 Laminex NZ$M 6 months 6 months %∆ – Earnings up 37% Sales 866 904 +4 – Increased activity in Australia residential & commercial sectors EBITDA 83 85 +2 Formica EBIT 53 57 +8 – Revenue up in domestic currencies across all major jurisdictions Laminex 27 37 +
Slide 23: Formica: continued growth in North America, Asia impacted
Formica: continued growth in North America, Asia impacted by more competitive China market Dec 2013 Dec 2014 EBIT NZ$M 6 months 6 months %∆ Asia 18 11 -39 North America 17 20 +18 Europe (1) (2) - Corporate (8) (9) +13 Total EBIT 26 20 -23 23 Fletcher Building Half Year Results Presentation | © Febru
Slide 24: Distribution New Zealand Result
Distribution New Zealand Result Dec 2013 Dec 2014 Building Supplies NZ$M 6 months 6 months %∆ – Revenues up 8% with positive trading conditions in PlaceMakers Sales 725 780 +8 and Mico EBITDA¹ 48 50 +4 – Operating earnings up 12% - volume increases and operational EBIT¹ 41 43 +5 efficiencies offset
Slide 25: Distribution Australia Result
Distribution Australia Result Dec 2013 Dec 2014 Revenue and operating earnings down NZ$M 6 months 6 months %∆ due to sale of Hudson Building Supplies business during the period Sales 476 446 -6 4% increase in Tradelink revenue in EBITDA 12 10 -17 domestic currency terms Refocus and alignment of reso
Slide 26: Construction Result
Construction Result Dec 2013 Dec 2014 Earnings growth driven by strong NZ$M 6 months 6 months %∆ performance across NZ and South Pacific Sales 659 733 +11 Significant infrastructure projects EBITDA¹ 60 83 +38 ongoing include several large projects reached 20% completion EBIT¹ 56 79 +41 Construction
Slide 27: Health and safety performance
Health and safety performance Total recordable injury frequency rate* 12.90 9.39 7.54 6.18 6.10 Dec 2010 Dec 2011 Dec 2012 Dec 2013 Dec 2014 * Total injuries per million employee and contractor hours. Note prior period data can change due to reclassification of injuries and updates of estimated hour
Slide 28: Financial Results
Financial Results Fletcher Construction, Christchurch
Slide 29: Operating cash flow
Operating cash flow Dec 2013 Dec 2014 NZ$m 6 months 6 months Operating earnings before significant items 281 290 Depreciation and amortisation 104 103 Less cash tax paid (32) (29) Less interest paid (66) (63) Other non-cash adjustments (20) (19) Results from operations before working capital 267 282
Slide 30: Net debt movement
Opening net debt 1,648 Cash from operations (pre (282) working capital) 36 Working capital Investment in 100 land 44 Growth capex 30 Fletcher Building Half Year Results Presentation | © February 2015 Stay in business 72 capex currency translation impacts Divestments (29) Dividends 124 Minority 19 di
Slide 31: Capital expenditure expected to be at bottom end of guidance range
Capital expenditure expected to be at bottom end of guidance range ($275m to $325m) 44 104 103 Dec 2013 Dec 2014 38 NZ$m 6 months 6 months %∆ Stay-in-business 59 72 +22 Growth 38 44 +16 72 Total Capex 97 116 +20 59 Acquisitions 4 0 Depreciation 104 103 -1 1H14 1H15 Stay in Business Depreciation Grow
Slide 32: Key ratios
Key ratios Total Shareholder Return (TSR) Debt/Debt Plus Equity Percentage Percentage 37 51 34 34 33 32 14 9 3 Jun-11 Jun-12 Jun-13 Jun-14 Dec-14 (27) Jun-11 Jun-12 Jun-13 Jun-14 Dec-14 Return on Average Funds Percentage¹ 13 12 11 11 10 Jun-11 Jun-12 Jun-13 Jun-14 Dec-14 1. Earnings before interest,
Slide 33: Debt profile
Debt profile Funding and Maturity Profile NZ$m Undrawn credit lines of $543m and cash of $124m Average maturity of debt is 4 176 years 350 Approximately 51% of all borrowings have fixed interest rates 17 405 Average interest rate on debt is 318 295 170 6.02% 140 163 148 - 100 127 Mix of currency (he
Slide 34: Capital management settings
Capital management settings Fletcher Building will continue to target strong ‘BBB’ credit characteristics Gearing Target of Net Debt to Net Debt + Equity (including Capital Notes) of 30-40% As at 31 December 2014: 34% Leverage Target Net Debt to EBITDA of 2.0 to 2.5 times As at 31 December 2
Slide 35: Strategy Update
Strategy Update Penrose Campus Redevelopment, Auckland
Slide 36: Our aspiration: top-quartile shareholder value creation
Our aspiration: to deliver top-quartile shareholder value creation through driving core operational levers Capital Management Valuation Multiple Invest capex only where value is clear; drive efficiencies in working capital; exit underperforming businesses; return excess cash to shareholders Return o
Slide 37: Strategy is focused on key areas
Strategy is focused on 6 Key areas Manufacture & Supply Raw Material Supply to End- Primary Secondary Extraction & Users & Merchant Distribution Construction Processing Processing Processing Installation Concrete: Ready- Rocla Quarries Mix, Masonry, Dri. Winstone Golden Bay Firth Aggregates Concrete
Slide 38: FBUnite business transformation programmes fully integrated
FBUnite business transformation programmes are now fully integrated into the FBU business model CUSTOMER Business Units: Customer-Leading Performance Central Functions Centres Of Excellence Finance Manufacturing HR Supply Chain Legal Sales and Marketing ICT Strategy Procurement Health & Safety Prope
Slide 39: A clear set of strategic priorities
To achieve our aspirations, we have a clear set of strategic priorities Objectives: Strategic Priorities: What does success mean? How do we make it happen? People • Safety Our aspiration is to be…. • Leadership Create a great • Capability place to work • Culture: High performance, High- In the top q
Slide 40: Outlook
Outlook Laminex, Australia
Slide 41: Outlook FY15
Outlook FY15 New Zealand Residential consents continuing at levels above long run trend Encouraging outlook for commercial construction Civil infrastructure driven by ongoing government investment Australia Residential construction expected to remain strong Non-residential outlook challeng
Slide 42: Outlook FY15
Outlook FY15 FY15 performance will be impacted by businesses sold in FY14, and substantial completion of the Canterbury Home Repair Programme Earnings from Fletcher Living residential development business now forecast to be up year-on-year Further cost savings from FBUnite of $25m in FY15 Operating
Slide 43: Half Year Results to December 2014
Half Year Results to 31 December 2014 Mark Adamson -Chief Executive Officer Gerry Bollman -Chief Financial Officer 18 February 2015
Slide 44: Appendix 1: Building consent data
Appendix 1: Building consent data Dec 2012 Dec 2013 Dec 2014 14/13 Building Consents 6 months 6 months 6 months % Mvmt New Zealand Residential Consents 16,929 21,300 24,680 +16 Non Res WPIP ($m) 4,734 4,890 5,889 +20 Infrastructure WPIP ($m) 6,517 7,494 7,449 -1 Australia Source: Statistics NZ, Info
Slide 45: Appendix 2: Business Unit Roadmap
Appendix 2: Business Unit Roadmap Manufacture & Supply NZ AU ROW Raw Material Supply to End- Primary Secondary Extraction & Users & Merchant Distribution Construction Processing Processing Processing Installation Concrete: Ready- Rocla Quarries Mix, Masonry, Dri. Winstone Golden Bay Firth Aggregates
Slide 46: Appendix 3: Divisional and Business Unit Overview
Appendix 3: Divisional and Business Unit Overview Heavy Building Products: Vacant Light Building Products: Francisco Irazusta • Firth + Humes • Winstone Wallboards + Tasman • Golden Bay Cement + Aggregates Insulation • Rocla Products • Stramit • Rocla Quarries • Coated Steel • Iplex Australia • Roof