Fletcher Building Limited · NZX:FBU
Fletcher Building — Presentation to Australian Steel Industry (September 2008)
20 slides from Fletcher Building's conference presentation, Sep 16, 2008
Slide 1: Creating Opportunities in Challenging Times - A New Zealand Perspective
For personal use only CREATING OPPORTUNITIES IN CHALLENGING TIMES - A New Zealand Perspective Paul Zuckerman Fletcher Building - Steel Division FBL Steel Division – September 2008 1
Slide 2: Disclaimer
Disclaimer For personal use only 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 operates. Because these statements are forward looking, Fletcher Building’s actual results could diff
Slide 3: Can we apply learnings from NZ across into Australia?
Can we apply learnings from NZ across into Australia? For personal use only FBL Steel Division – September 2008
Slide 4: Key Topics to be Discussed
Key Topics to be Discussed For personal use only • New Zealand is already in a recession and facing a downturn in traditional steel consuming markets. Where is Australia heading? • Opportunities exist for building suppliers to shift their focus to segments where investment remains strong. • A number
Slide 5: NZ steel consumption has risen steadily
NZ steel consumption has risen steadily For personal use only MAIN SEGMENTS 1,200,000 20,000 • Residential Construction 18,000 1,000,000 • Commercial/Industrial 16,000 800,000 • Manufacturing Sector 14,000 Consumption (tonnes) • Heavy Buildings (GFCF $m) 600,000 12,000 • Infrastructure and 10,000 40
Slide 6: A brief history of steelmaking in New Zealand
A brief history of steelmaking in New Zealand For personal use only Pacific Steel Group, Auckland - EAF New Zealand Steel, Glenbrook – Integrated Steelworks • Ingot casting started in 1962. 3 strand ROKOP concaster installed 1979 • Commenced in 1968 processing imported coil on a galvanising line • W
Slide 7: The NZ residential market is roughly the size of WA
The NZ residential market is roughly the size of WA For personal use only • Housing activity is currently depressed (around 20,000 starts) with modest price declines Other 12% • Pressed and stone coated steel tiles service 1/4 of the roofing market Longrun Steel 39% Concrete 24% • Sector revenue is
Slide 8: A forecast drop in residential activity is becoming reality
A forecast drop in residential activity is becoming reality For personal use only 35,000 30 Forecast 25 30,000 Consents (LH scale) 20 25,000 15 20,000 New Zealand’s first State House at Miramar in Wellington. Built by the Fletcher Construction 10 Company in 1937. 15,000 5 10,000 0 5,000 Nominal Hous
Slide 9: The NZ commercial & industrial building market
The NZ commercial & industrial building market For personal use only • Very strong steel share • Membranes are more significant than in the residential sector Delegat's winery, Blenheim • Sector revenue is estimated at ~NZ$220m • Estimated 75,000 steel tonnes Other 12% Concrete 4% Tile Steel 4% Long
Slide 10: Commercial building activity is forecast to soften as well
Commercial building activity is forecast to soften as well For personal use only Non-residential activity at 1995 - 96 prices. Gross fixed capital formation ($m) 5,000 Forecast 4,500 4,000 3,500 Installing steel plant cladding at Pacific Steel in 1962. This building housed ingot casting until 1979.
Slide 11: Manufacturing has moved off shore and spending is down
Manufacturing has moved off shore and spending is down For personal use only 7% 0.90 6% Forecast 0.80 • GDP and FX rate are fundamental drivers. 5% 0.70 4% 0.60 • Circa 300,000 tonnes are 3% 0.50 consumed: flat, merchant, special Percent US$ FX 2% 0.40 steels, etc 1% 0.30 • There has been some migra
Slide 12: Heavy construction projects continue to hold up the market
Heavy construction projects continue to hold up the market Activity at 1995-1996 prices. Gross fixed capital formation ($m) For personal use only 5,000 Forecast • GDP growth went into negative territory 4,500 in Q1 2008, but genuine recession likely began in Q2 4,000 3,500 • Circa 300,000 tonnes con
Slide 13: Large scale infrastructure and engineering projects continue
Large scale infrastructure and engineering projects continue For personal use only • Fueled by government spending • Significant participants are Downer, Fletchers, Mainzeal, and Multiplex • Serviced by large regional fabricators • Steel usage of 150,000+ tonnes per annum • Upgrades to Transportatio
Slide 14: Investment in power generation is forecast to be strong
Investment in power generation is forecast to be strong For personal use only • 3% of NZ’s electricity is from wind but its share is growing fast • 20% effective capacity share in Denmark, which is less windy • Medium term expectation for wind is for vicinity 1200 MW, which would consume about 25,00
Slide 15: Commodity prices have risen sharply, generating wealth
Commodity prices have risen sharply, generating wealth For personal use only 240 Average NZ commodity price converted to NZD 220 Average world price of NZ commodities World prices Last 12 mths, Total +11.6% yoy 200 (Aluminium 11%, Meat/Skins +19%, Dairy +2%, Horticulture 4%, Forestry -12%, Seafood +
Slide 16: Dairy farming and exports have "milked" large profits
Dairy farming and exports have “milked” large profits For personal use only 800 700 • Sound fundamentals in rural commodities 600 over the last few years with a strong 500 outlook. NZ has comparative advantage in 400 rural, and declining NZD is an added boost 300 • Significant investment in dairy pr
Slide 17: New Zealand's ETS is likely to become reality
New Zealand’s ETS is likely to become reality For personal use only • NZ ratified the Kyoto Protocol in Dec 2002. Its emissions in 2008 to 2012 to be no more than five times its 1990 emission level • NZ is 73 mt of CO2 equivalents for 0.2% of world. (Australia is 491 mt for 1.5%). New Zealand will n
Slide 18: Green Star New Zealand
Green Star New Zealand For personal use only • Star ratings similar to those in Australia are gaining a foot-hold, but are not formally part of the new Building Code. • While only 8 of the 130 credits relate to steel, there needs to be focus on steel if one seeks 5 or 6 star ratings. • Rather than t
Slide 19: Beyond our control but must be monitored…
Beyond our control but must be monitored… For personal use only • Kiwi/USD and AUD/USD exchange rates NZD USD Exchange Rate 1991-2008 0.9 • Banking/credit crisis 0.8 • Change in government policy toward spending 0.7 NZ$:US$ 0.6 • Global steel demand as US and EU consume less 0.5 • Iron ore/scrap cos
Slide 20: There will always be challenges and change
There will always be challenges and change For personal use only • While steel consumption has generally risen, the mix changes over time • Tight global supply has proven the value of local service • Traditional residential and commercial markets are at risk • Economic conditions and policy change w
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