Fletcher Building Limited · NZX:FBU
Fletcher Building — Investor Day (May 2013)
53 slides from Fletcher Building's investor day presentation, May 22, 2013
Slide 1: Investor Strategy Day
FLETCHER BUILDING For personal use only INVESTOR STRATEGY DAY 22 May 2013 Mark Adamson Chief Executive Officer Gerry Bollman Chief Executive Business Strategy and Performance
Slide 2: Investor Strategy Day: Mark Adamson, Chief Executive Officer
Investor Strategy Day | Fletcher Building | © May 2013 | Page 2 Investor Strategy Day MARK ADAMSON For personal use only CHIEF EXECUTIVE OFFICER Golden Bay Cement, Whangarei (NZ)
Slide 3: Disclaimer
Investor Strategy Day | Fletcher Building | © May 2013 | Page 3 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 ar
Slide 4: Aspirations for today
Investor Strategy Day | Fletcher Building | © May 2013 | Page 4 Aspirations for today For personal use only 1. Update the market on our current thinking on group strategy, and the challenges and opportunities in each of our divisions; 2. Provide a “teach in” for those investors who are new to Fletch
Slide 5: Presentation overview
Investor Strategy Day | Fletcher Building | © May 2013 | Page 5 Presentation overview For personal use only Current situation assessment Defining the future Action plans to deliver on our aspirations Building organisational capability
Slide 6: Current situation assessment
Investor Strategy Day | Fletcher Building | © May 2013 | Page 6 Current situation assessment For personal use only We have achieved our goal of geographic diversification In doing so we have created further challenges: − Too many small businesses, − Complex organisational structure, − Strategic dire
Slide 7: Geographic diversification has been achieved
Investor Strategy Day | Fletcher Building | © May 2013 | Page 7 Geographic diversification has been achieved For personal use only Revenues: EBIT (6 months to 31 Dec 2012) (6 months to 31 Dec 2012) 12% 13% 45% 47% 43% 40% New Zealand New Zealand Australia Australia Rest of World Rest of World
Slide 8: New Zealand margins have steadily declined as volumes have reduced
Investor Strategy Day | Fletcher Building | © May 2013 | Page 8 New Zealand margins have steadily declined as volumes have reduced For personal use only Revenue vs EBIT margin NZ$million 3900 14 3800 3700 12 EBIT margin (%) 3600 10 Revenue 3500 8 3400 6 3300 4 3200 3100 2 3000 0 2007 2008 2009 2010
Slide 9: Australian EBIT margins have fallen with decline in activity levels
Investor Strategy Day | Fletcher Building | © May 2013 | Page 9 Australian EBIT margins have fallen in recent times with decline in activity levels For personal use only Revenue vs EBIT margin NZ$million 4500 14 4000 3500 12 EBIT margin (%) 3000 10 Revenue 2500 8 2000 6 1500 4 1000 500 2 0 0 2007 20
Slide 10: Beyond Australasia improved margins driven by operational efficiency
Investor Strategy Day | Fletcher Building | © May 2013 | Page 10 Beyond Australasia improved margins have been driven by operational efficiency improvements For personal use only Revenue vs EBIT margin NZ$million 1400 14 1200 12 EBIT margin (%) 1000 10 Revenue 800 8 600 6 400 4 200 2 0 0 2007 2008 2
Slide 11: NZ consents forecast to increase through to FY15
Investor Strategy Day | Fletcher Building | © May 2013 | Page 11 NZ consents forecast to increase through to FY15 For personal use only Year-to-June residential consents – New Zealand 35,000 30,000 25,000 Consents Long run average 20,000 15,000 10,000 5,000 2003 2004 2005 2006 2007 2008 2009 2010 20
Slide 12: Conservative forward assumptions for Australia residential
Investor Strategy Day | Fletcher Building | © May 2013 | Page 12 Conservative forward assumptions for Australia residential For personal use only Year-to-June residential approvals –Australia 190000 180000 170000 Approvals 160000 Long run average 150000 140000 130000 120000 2003 2004 2005 2006 2007
Slide 13: In Australia, multi-family approvals as a % of total have increased
Investor Strategy Day | Fletcher Building | © May 2013 | Page 13 In Australia, multi-family approvals as a % of total have steadily increased over time For personal use only Source: Merrill Lynch, ABS, Seasonally Adjusted, Monthly
Slide 14: US Architecture Billing Index positive since August 2012
Investor Strategy Day | Fletcher Building | © May 2013 | Page 14 In the US, Architecture Billing Index has been positive since August 2012, but forecasts for commercial remain negative For personal use only Architecture Billing Index 50 = neutral activity; <50 = negative activity; >50 = positive For
Slide 15: Defining the future
Investor Strategy Day | Fletcher Building | © May 2013 | Page 15 Defining the future For personal use only There is no change to our core business as an integrated manufacturer and distributor of infrastructure and building products, as well as a construction company. However: − We are moving from t
Slide 16: Defining the future: transformational change
Investor Strategy Day | Fletcher Building | © May 2013 | Page 16 Defining the future For personal use only Transformational change to build a platform for sustainable growth: From: To: Highly decentralised Decentralised + active centre Complete autonomy Centres of Excellence Growth externally focuse
Slide 17: Business structure simplified around 5 divisional groupings
Investor Strategy Day | Fletcher Building | © May 2013 | Page 17 Business structure has been simplified around 5 divisional groupings For personal use only Infrastructure Building Laminates Distribution Construction Products Products & Panels Cement Building Materials Laminex New Zealand Construct
Slide 18: FBUnite is at the heart of driving improved returns
Half Year Results | Fletcher Building | © February 2013 Results Overview | Page 18 FBUnite is at the heart of driving improved returns over time For personal use only Divisional Gerry Gerry CE’s Bollman Bollman
Slide 19: FBUnite is at the heart of driving improved returns over time
Investor Strategy Day | Fletcher Building | © May 2013 | Page 19 FBUnite is at the heart of driving improved returns over time For personal use only - Cost out & operational excellence programmes - New investments around: - Digital Strategy - Enabling IT investment - Exploration of new distribution
Slide 20: Distribution strategy review
Investor Strategy Day | Fletcher Building | © May 2013 | Page 20 Distribution strategy review is considering all activities from the factory gate to the end-user For personal use only End-to-end view of distribution activities Salesforce, Marketing Large Customer Transport and Distribution Transport
Slide 21: Four main channels to market in NZ and Australia
Investor Strategy Day | Fletcher Building | © May 2013 | Page 21 Four main channels to market observed in NZ and Australian building products industry For personal use only 1 Direct to customers Larger 2 Manufacturer's owned network In-house manufacturing Customers 3 "Sell & Install" 4 Merchant Smal
Slide 22: Building organisational capability
Investor Strategy Day | Fletcher Building | © May 2013 | Page 22 Building organisational capability For personal use only Leadership • Accelerated learning and development for our Leaders to mitigate the experience gaps and to build the desired level of capability Talent • Increased focus on Leaders
Slide 23: Crane has been split into manufacturing and distribution businesses
Investor Strategy Day | Fletcher Building | © May 2013 | Page 23 Crane has been split into manufacturing and distribution businesses For personal use only Manufacturing Distribution Crane Iplex Tradelink (Australia) Crane Copper Tube Hudsons/Northerns (Australia) Mico Plumbing (New Zealand) • Crane
Slide 24: Tradelink: Performance improvement, timing and execution
Investor Strategy Day | Fletcher Building | © May 2013 | Page 24 Tradelink: Performance improvement, timing and execution For personal use only Phase 1 (yr 1) Phase 2 (yr 2) Phase 3 (yr 3-5) Pay the Growth Growth journey phase dynasty • Improve product • Improve customer product • Compelling brand a
Slide 25: Outlook FY2013
Investor Strategy Day | Fletcher Building | © May 2013 | Page 25 Outlook FY2013 For personal use only New Zealand − Uplift in housing consents in first half should lift performance of businesses exposed to residential sector in the second half − Infrastructure projects continue to underpin non-resid
Slide 26: Financial outlook FY2013
Investor Strategy Day | Fletcher Building | © May 2013 | Page 26 Financial outlook FY2013 For personal use only Guidance provided at Annual Shareholders Meeting confirmed. Operating earnings for the 2013 financial year are expected to be in the range of $560 million to $610 million, inclusive of all
Slide 27: Investor Strategy Day: Gerry Bollman
Investor Strategy Day | Fletcher Building | © May 2013 | Page 27 Investor Strategy Day GERRY BOLLMAN For personal use only CHIEF EXECUTIVE, BUSINESS STRATEGY & PERFORMANCE Golden Bay Cement, Whangarei (NZ)
Slide 28: Presentation Overview
Investor Strategy Day | Fletcher Building | © May 2013 | Page 28 Presentation Overview For personal use only Fletcher Building Strategy Role of the Centre Business Unit Strategy
Slide 29: Fletcher Building Overview
Investor Strategy Day | Fletcher Building | © May 2013 | Page 29 Fletcher Building Overview For personal use only Fletcher Building: Who Are We An integrated manufacturer and distributor of infrastructure and building products, as well as a construction company • Fletcher Building: How We Create Val
Slide 30: Where We Look To Grow Earnings
Investor Strategy Day | Fletcher Building | © May 2013 | Page 30 Fletcher Building: Where We Look To Grow Earnings For personal use only Growth Strategy Development ILLUSTRATIVE 1 Realign the portfolio and position 2 Reinforce and replicate 3 Extend and build capabilities for further organic growth
Slide 31: This has implications for...
Investor Strategy Day | Fletcher Building | © May 2013 | Page 31 This has implications for… For personal use only • Make-up of the portfolio • Don‟t anticipate any significant M&A activity • Do see the opportunity to shape the portfolio • Investment, both CAPEX and OPEX • Investment has to be differ
Slide 32: FB has operated a very decentralised business model
Investor Strategy Day | Fletcher Building | © May 2013 | Page 32 FB has operated a very decentralised business model with a small corporate centre For personal use only Under this model, shareholder value is created almost exclusively through the activities performed by the business units… BU Value
Slide 33: Significant incremental value creating activities the Centre can provide
Investor Strategy Day | Fletcher Building | © May 2013 | Page 33 We believe there are significant incremental value creating activities that the Centre can provide For personal use only Our goal should be to grow shareholder value ahead of expectations by optimising our business value and our corpor
Slide 34: An Activist Centre seeks to deliver incremental value
Investor Strategy Day | Fletcher Building | © May 2013 | Page 34 An Activist Centre seeks to engage in activities that deliver incremental value in one or more ways For personal use only Incremental Enhanced Organisation Lower Costs Lower Risk Growth Capabilities Development • Identification • Group
Slide 35: FBUnite: multi-year business transformation programme
Investor Strategy Day | Fletcher Building | © May 2013 | Page 35 FBUnite: multi-year business transformation programme For personal use only
Slide 36: Group Procurement: Total third party spend NZ$4.8bn
Investor Strategy Day | Fletcher Building | © May 2013 | Page 36 Group Procurement: Total third party spend in NZ / Australia is NZ$4.8bn For personal use only FY12 Third Party Spend (NZ$bn) $0.1 Direct $0.1 $0.5 Product for Resale $0.4 $1.7 Indirect & Manufacturing Overheads $0.6 Transport & Logist
Slide 37: Group Procurement: Phased implementation
Investor Strategy Day | Fletcher Building | © May 2013 | Page 37 Group Procurement: Phased implementation For personal use only Phase 1 – Phase 2 Phase 3 Discovery + Quick wins Execution Future State • Recruiting the team • Build and develop the team • Continual improvement • Defining operational mo
Slide 38: Group Procurement: Objectives
Investor Strategy Day | Fletcher Building | © May 2013 | Page 38 Group Procurement: Objectives For personal use only Increase value and reduce cost A more efficient and effective group-wide Procurement function Move from transactional to strategic procurement Provide opportunities for all suppliers
Slide 39: Group Procurement: The Hybrid Operational Model
Investor Strategy Day | Fletcher Building | © May 2013 | Page 39 Group Procurement: The Hybrid Operational Model - Leverage to the Highest Point of Opportunity For personal use only Group Centre Led – Governance - Policy, Methodology, Process Centralised – Goods / Services Strategy & Procurement of
Slide 40: Property portfolio: large, vast, underutilised
Investor Strategy Day | Fletcher Building | © May 2013 | Page 40 Fletcher Building property portfolio - “large, vast, underutilised” For personal use only NZ & Australia 1,000 interests 2.5m m² buildings Melbourne VIC $200m cost pa $700 m BV
Slide 41: Property: Lease Expiry Profile
Investor Strategy Day | Fletcher Building | © May 2013 | Page 41 Property: Lease Expiry Profile – “Opportunity to Change” For personal use only $m Rent Leases & Opex 300 60 250 50 200 40 150 30 100 20 50 10 0 0 Current 1 - 2 2-3 3-4 4-5 5-6 6-7 7-8 8-9 9 - 10 10 + Year
Slide 42: Property: Strategic Improvement Themes
Investor Strategy Day | Fletcher Building | © May 2013 | Page 42 Property: Strategic Improvement Themes For personal use only 1. Property Rationalisation • Reduction in Fletcher property footprint through network optimisation and business co-location opportunities 2. Property Transactions • Maximise
Slide 43: Operations Excellence: Pillars to Success
Investor Strategy Day | Fletcher Building | © May 2013 | Page 43 Operations Excellence: 10 Pillars to Success For personal use only Key assumptions and direction • Programme will address manufacturing and supply chain (excluding procurement) • The „10 Pillars‟ programme will provide the tools needed
Slide 44: Operations Excellence programme
Investor Strategy Day | Fletcher Building | © May 2013 | Page 44 Operations Excellence programme For personal use only 1 Safety & 10 2 Wellbeing Deployment Organising & of Cleaning Objectives 9 3 Environment & Safety & Wellbeing Sustainability Quality Service & Assurance Inventory Management Quality
Slide 45: Operations Excellence: Pillar 6 Efficiency control
Investor Strategy Day | Fletcher Building | © May 2013 | Page 45 Operations Excellence: Example: “Pillar 6- Efficiency control” For personal use only LEVEL 1 PLANT LEVEL 2 PLANT LEVEL 3 PLANT • Standard Operations Procedure (SOP) in place • SOP in place but not used by all employees • SOP in place a
Slide 46: Operations Excellence: early observations and opportunities
Investor Strategy Day | Fletcher Building | © May 2013 | Page 46 Operations Excellence: Summary of early observations and opportunities For personal use only Observations in Manufacturing: Employees are passionate about their business Strong product range produced across FB Group Some „pockets
Slide 47: Operations Excellence: supply chain observations and opportunities
Investor Strategy Day | Fletcher Building | © May 2013 | Page 47 Operations Excellence: Summary of early observations and opportunities For personal use only Observations in Supply Chain (transport and warehousing): Some excellent examples of best practice: o Warehouse management o Transport manag
Slide 48: Network optimisation overview
Investor Strategy Day | Fletcher Building | © May 2013 | Page 48 Network optimisation overview For personal use only What do we mean by network optimisation: • Identifying, evaluating and implementing options to move products from the point of manufacture or supply to the customer at the lowest cost
Slide 49: Network optimisation: what is in and out of scope
Investor Strategy Day | Fletcher Building | © May 2013 | Page 49 Network optimisation - What is in (and out) of scope? For personal use only In Scope Joint with Procurement Out of scope • Inbound transport • Equipment • Supplier consolidation standardisation / fleet • Linehaul and multi- optimisatio
Slide 50: Overview of regional transport spend
Investor Strategy Day | Fletcher Building | © May 2013 | Page 50 Overview of regional transport spend For personal use only Top 12 Australian Transport Lanes by Spend Top 5 NZ Transport Lanes by Spend Melbourne to Darwin NZ$9.8 M Recommended focus for initial Intra Auckland NZ$22.9 M phase of networ
Slide 51: Understanding historic drivers of value
Investor Strategy Day | Fletcher Building | © May 2013 | Page 51 We have worked with our businesses to understand historic drivers of value For personal use only Drivers of Financial Performance Relative to Industry 1 2 3 Strong Asset 4 Capability Value Chain Low Cost Position Position Differentiati
Slide 52: Leveraging historical strengths and creating new sources of value
Investor Strategy Day | Fletcher Building | © May 2013 | Page 52 We are now working to understand how historical strengths can be further leveraged and new sources of value created For personal use only We now understand the …this has informed our long term path to sustainable shareholder sources of
Slide 53: Where We Look To Grow Earnings
Investor Strategy Day | Fletcher Building | © May 2013 | Page 53 Fletcher Building: Where We Look To Grow Earnings For personal use only Growth Strategy Development ILLUSTRATIVE 1 Realign the portfolio and position 2 Reinforce and replicate 3 Extend and build capabilities for further organic growth