Fletcher Building Limited · NZX:FBU
Fletcher Building — H1 FY2024 Earnings Presentation
40 slides from Fletcher Building's earnings presentation, Feb 14, 2024
Slide 1: Half Year Results to 31 December 2023
Fletcher Building Half Year Results to 31 December 2023 14 February 2024 Fletcher Building Limited
Slide 2: Important Information
Important Information This presentation has been prepared by Fletcher Building Limited and its group of companies (“Fletcher Building”) for informational purposes. This disclaimer applies to this document and the verbal or written comments of any person presenting it. This presentation provides addi
Slide 3: Agenda
Agenda 1. Results Overview Ross Taylor 2. Market Context Bevan McKenzie 3. Financial Results Bevan McKenzie 4. Outlook Ross Taylor Fletcher Building Limited
Slide 4: HY24 summary
HY24 summary Margins, costs & cash flows well-controlled; earnings impacted by tough trading environment & sig items ➔ HY24 performance ➔ Revenues solid overall but tough trading conditions vs. 1H23, esp. in NZ residential sector volumes -20% ➔ Group EBIT $264m, lower YoY due to weaker markets; part
Slide 5: HY24 results at a glance
HY24 results at a glance Revenue mix change YoY and lower EBIT from market volume decline; sales uplift in Fletcher Residential Revenue ($b) EBIT1 ($m) HY24 trading highlights 360 4.3 4.2 339 ▪ Group revenue flat YOY, with higher revenues in Resi & Devt and 3.5 3.2 261 264 Construction, offset by lo
Slide 6: HY24 results at a glance
HY24 results at a glance Strong trading cash flow outside of FCC legacy projects, reflecting tight control of working capital Trading Cash ($m) Trading Cash ex Legacy ($m1) HY24 trading highlights ▪ Trading cash impacted by Construction legacy cash outflows of 176 $295m due to NZICC steel remediatio
Slide 7: HY24 results at a glance
HY24 results at a glance Earnings impacted by legacy provisions and Tradelink write-down Net Earnings before sig items ($m) Net Earnings after sig items ($m) HY24 trading highlights 203 92 ▪ Net Loss of $120m impacted by $180m legacy provisions and $122m Tradelink write-down 117 ▪ The Company divide
Slide 8: Balanced Scorecard
Balanced Scorecard Continuing to drive safety culture and lowering our carbon emissions Safety Sustainability Total Recordable Injury ▪ 94% (920) of sites injury free Carbon (CO2) Emissions & ▪ On track for 30% lower carbon Frequency Rate1 in HY24; 5 businesses injury 2,000 Intensity2 165 by 2030; t
Slide 9: Balanced Scorecard
Balanced Scorecard Customer NPS and People engagement continue to trend positively Customer Engagement Net Promoter Score1 ▪ Strong HY24 NPS of 48, up Employee Engagement Rating ▪ Continued improvement, on 8pt from FY23; on track to track to our target eNPS > 40 our target NPS ≥ 55 (global upper qua
Slide 10: Divisional Performance
Divisional Performance Solid underlying results in tough market with strong focus on aligning cost base to current market Division EBIT1 EBIT1 Margin HY24 trading highlights Building ▪ Building Products, Distribution and Concrete materially softer $78m 11.1% volumes in NZ resi sector. Price & cost w
Slide 11: WA plumbing update
WA plumbing update Testing complete; leaks are caused by installation practices ➔ Testing of Pro-Fit pipe with Typlex resin for causation has completed ➔ Experts’ advice on causation has been received and confirms the leaks are caused by installation practices ➔ Iplex has inspected hundreds of homes
Slide 12: WA plumbing update
WA plumbing update Testing and expert reports Iplex has completed 24 different types of tests across 900 pipe samples - multiple local and external labs The expert reports of Ross Brown, Dr. Lucy Baker and Prof. Graeme George have been received and submitted to WA Consumer Protection In combination,
Slide 13: WA plumbing update
WA plumbing update The data from Perth homes shows installation is the cause ➔ In the last 9 months, Iplex has collected data from 505 homes (270 by its own plumbers and 235 by other builders/plumbers). ➔ BGC has continued to not provide access to homes, information about their leaks or pipes for in
Slide 14: WA plumbing update
WA plumbing update This remains a Perth problem Estimated homes built with Typlex Pro-fit ➔ Pro-Fit with Typlex resin was first produced in mid 2017 and was the bulk of the supply from then c.15k homes1 c.15k homes ➔ The rate of plumbing failures alone points to local construction practices compared
Slide 15: WA plumbing update
WA plumbing update Key updates across three workstreams SUPPORT CUSTOMERS & 1 HOMEOWNERS 2 ESTABLISHING CAUSATION 3 INDUSTRY SOLUTION ▪ Our A$15m interim investigation fund is ▪ Independent expert reports into causation ▪ Where required, nearly 200 full ceiling less than 50% drawn completed and conf
Slide 16: WA plumbing update
WA plumbing update Regulatory Update: Recall is not the solution ➔ WA Regulatory investigation ➔ The WA Consumer Protection’s investigation into whether there is evidence to support a recommendation to the Minister to recall the product is ongoing. While nothing formal has been advised, we expect it
Slide 17: Agenda
Agenda 1. Results Overview Ross Taylor 2. Market Context Bevan McKenzie 3. Financial Results Bevan McKenzie 4. Outlook Ross Taylor Fletcher Building Limited
Slide 18: HY24 Market Context – New Zealand Materials & Distribution
HY24 Market Context – New Zealand Materials & Distribution NZ market c.15% lower vs. HY23, driven mainly by weaker resi sector; FB revenues have held up solidly NZ M&D1 Market Volumes HY24 vs HY23 HY24 Market Commentary – NZ Materials & Distribution Initial Outlook What we’ve seen in H1 ▪ FB NZ mate
Slide 19: HY24 Market Context – Australia Materials & Distribution
HY24 Market Context – Australia Materials & Distribution AU market activity broadly in line with expectations, FB revenues solid AU Market Volumes HY24 vs HY23 HY24 Market Commentary – AU Materials & Distribution Initial Outlook What we’ve seen in H1 ▪ FB AU businesses are c.60% residential, c.40% c
Slide 20: HY24 Market Context – New Zealand Housing
HY24 Market Context – New Zealand Housing Improved housing market in past 12 months has supported higher sales volumes of c.20 units per week Fletcher Residential Average Weekly Sales (Conditional Agreements Signed Per Week) ▪ Despite ongoing elevated interest rates, market conditions improved throu
Slide 21: Agenda
Agenda 1. Results Overview Ross Taylor 2. Market Context Bevan McKenzie 3. Financial Results Bevan McKenzie 4. Outlook Ross Taylor Fletcher Building Limited
Slide 22: Income Statement
Income Statement Net earnings impacted by market activity and one-off costs related to legacy Construction & Tradelink Income statement Dec 2022 Dec 2023 NZ$m 6 months 6 months Var HY24 income statement Revenue 4,284 4,248 (1%) ▪ EBIT1 decline reflects softer operating environment, esp. NZ resi EBIT
Slide 23: Spotlight on Gross Margins & Overhead Costs – Materials & Distribution Divisions
Spotlight on Gross Margins & Overhead Costs – Materials & Distribution Divisions Gross margins solid despite price pressure and ongoing COGS inflation; good overhead cost management Gross Margin (%) Overhead1 Costs ($m) Commentary 30.3% 448 442 ▪ Building Products, Concrete, Distribution – 29.3% gen
Slide 24: Cash flow
Cash flow Underlying trading cash flows of $176m materially improved vs. 1H23; legacy cash impact significant Cash flow Dec 2022 Dec 2023 NZ$m 6 months 6 months HY24 cash flows EBIT before significant items 360 264 ▪ Underlying trading cash flow of $176m materially ahead of 1H23 Depreciation and amo
Slide 25: Working Capital
Working Capital Significant improvement vs. prior period through strong focus on receivables and inventory management Cash flow working capital movements Dec 2022 Dec 2023 NZ$m 6 months 6 months HY24 working capital Materials and Distribution Divisions ▪ Materials & distribution divisions – signific
Slide 26: Capex
Capex FY24 base capex in line with prior guidance, growth capex profile moderated Capex and Investments Dec 2022 Dec 2023 NZ$m 6 months 6 months Investment focus Base capex 87 111 ▪ Base1 capex (incl. ERP investment) expected to be c.$240m in Above Base: WWB new plant 57 31 FY24, in line with prior
Slide 27: Net Debt
Net Debt Increased debt levels due to legacy outflows Net Debt: Jun 23 to Dec 23 (NZ$m) 124 17 324 199 21 57 1,949 313 72 1,412 58 Net Debt M&D and Resi & Dev't Construction Funding Net Tax paid Dividend Other 1 Trading Net Debt Jun-23 Corporate Working Working Costs Capex & Cash2 Dec-23 Working Cap
Slide 28: Leverage
Leverage Increase to upper end of range as flagged, maintain headroom under banking agreements Leverage (Net Debt / EBITDA1) Leverage and Balance Sheet ▪ Group leverage increased as flagged due FCC legacy cash flows and growth capex investments 2.0x 1.8x ▪ Leverage remains within the Group’s target
Slide 29: Funding
Funding Group is well-funded with long-dated debt maturity and strong liquidity of $0.9b Debt facilities and drawings Facilities Drawings Debt maturity profile ($m) NZ$m 31 Dec 23 31 Dec 23 Bank Loans 2,053 1,344 1,063 USPP 456 456 Capital Notes 343 343 849 797 Other 21 21 725 Total 2,873 2,164 600
Slide 30: Outlook on Balance Sheet and Cash Flow
Outlook on Balance Sheet and Cash Flow Prudent measures taken to support balance sheet settings; underlying cash flow remains robust ▪ The Group remains committed to its target balance sheet settings. Given tougher market conditions and higher legacy cash outflows, a number of prudent steps have bee
Slide 31: Agenda
Agenda 1. Results Overview Ross Taylor 2. Market Context Bevan McKenzie 3. Financial Results Bevan McKenzie 4. Outlook Ross Taylor Fletcher Building Limited
Slide 32: FY24 Outlook
FY24 Outlook Expect 2H24 EBIT well ahead of 1H24 ➔ Expect market volumes to remain under pressure for next 6 to 12 months, but improving conditions in NZ end housing market ➔ FY24 Group EBIT1 guidance to be in a range of $540m-$640m, with the mid-point assuming a continuation of current market condi
Slide 33: Appendix
Appendix Fletcher Building Limited
Slide 34: HY24 Results: Building Products
HY24 Results: Building Products Gross Revenue ($m) EBIT ($m)1 HY24 trading performance 111 ▪ Revenue 8% lower YoY against market volume decline of 13%: 768 703 78 driven by lower resi market activity, destocking in pipes & steel channels, and lower steel prices. WWB & Laminex® share gains ▪ EBIT1 an
Slide 35: HY24 Results: Distribution
HY24 Results: Distribution Gross Revenue ($m) EBIT ($m)1 HY24 trading performance 965 65 ▪ Revenue 13% lower YoY against 17% market volume decline, with 836 division c.80% exposed to resi sector. Some share loss in 35 PlaceMakers in certain regions. ▪ Lower EBIT1 and EBIT1 margin due to reduced reve
Slide 36: HY24 Results: Concrete
HY24 Results: Concrete Gross Revenue ($m) EBIT ($m)1 HY24 trading performance 554 567 81 70 ▪ Revenue up 2% YoY compared to market volume decline of 13%: strategic shift to comm & infra segments delivered strong result counter to market slowdown, Winstone Aggregates® revenue up 23%, Firth share gain
Slide 37: HY24 Results: Australia
HY24 Results: Australia Gross Revenue ($m) EBIT ($m)1 HY24 trading performance 1,534 1,444 82 78 ▪ Revenue 6% lower, slightly better than 8% decline in market activity, with good performances from Laminex & Fletcher Insulation, Tradelink disappointing ▪ EBIT1 and EBIT1 margin solid: GM% improved c.1
Slide 38: HY24 Results: Residential and Development
HY24 Results: Residential and Development Gross Revenue ($m) EBIT ($m)1 HY24 trading performance 351 49 ▪ Revenue up 60% from higher unit sales: 419 unit sales incl. 47 41 apartments (vs. 189 unit sales incl. 6 apartments in 1H23). Strong 16 219 performance enabled by an offer targeted at most activ
Slide 39: HY24 Results: Construction
HY24 Results: Construction Gross Revenue ($m)1 EBIT ($m)1,2 HY24 trading performance 9 ▪ up $49m Revenue down 16%:in reduced the period: higher volume ofwork workvolumes on legacyinroading Higgins& 699 650 following vertical weather events & BPC significant programmes across build water, airports (T
Slide 40: Divisional revenue exposure and FB revenue by market
Divisional revenue exposure and FB revenue by market Divisional Revenue Exposure by Sector Total FB Revenue by Market (%) AU Building Resi, 49% Com, 33% Infra, 18% Infrastructure Products AU NZ Commercial Residential 4% 9% Distribution Resi, 79% Com, 20% 35% AU 20% Residential Concrete Resi, 43% Com