Fletcher Building Limited · NZX:FBU
Fletcher Building — Investor Presentation (September 2010)
31 slides from Fletcher Building's investor presentation, Sep 13, 2010
Slide 1: Formica Europe – Presentation to Analysts
For personal use only Formica Europe – Presentation to Analysts September 2010 Formica Europe – Presentation to Analysts – September 2010 1
Slide 2: Agenda
Agenda Business Environment • Locations & Workforce For personal use only • Product Portfolio • Geographies, Channels and Market Shares • Industry Structure Regional Economics • Current Scenario • Regional Analysis Situational Assessment • Current Financials • Restructuring • Situation Analysis Stra
Slide 3: Agenda
Agenda Business Environment • Locations & Workforce For personal use only • Product Portfolio • Geographies, Channels and Market Shares • Industry Structure Regional Economics • Current Scenario • Regional Analysis Situational Assessment • Current Financials • Restructuring • Situation Analysis Stra
Slide 4: Formica Europe manufactures at five plants and operates across Europe, India & the Middle East
Formica Europe manufactures at five plants and operates across Europe, India & the Middle East with 80% revenue coming from UK, France, Holland, Spain & Scandinavia Europe Manufacturing, • Headcount: For personal use only Warehouse & Sales Office Direct Manufacturing 700 Warehouse Indirect 500 Sales
Slide 5: Sales revenue principally from HPL, CPL, Compact and Worktops
Sales revenue is principally derived from HPL, CPL, Compact and Worktops with the majority of revenue & margin delivered from HPL Revenue % by Product Line Gross Margin % by Product Line For personal use only Worktops, Other, 1% Worktops, Other, 1% 11% 12% Compact, Compact, 17% Standard 21% Standard
Slide 6: Revenue and margin streams spread over a large number of countries
Both Revenue & Margin streams are spread over a large number of countries Revenue % by Region Gross Margin % by Region For personal use only Other India Other India France & UK France & UK Italy Italy Central Central Spain Spain Scandinavia Scandinavia Source: Formica FY11 Plan Formica Europe – Pres
Slide 7: Product moves through Distribution into commercial specification sector
Product moves predominantly through Distribution and is sold primarily into the commercial specification sector—new housing is just 2% of the business Revenue % by Channel Revenue % by Sector For personal use only Residential Re-Model, 43% Commerical, Distribution, 55% 60% Direct, 40% Residential Ne
Slide 8: European Market Sizes and Formica Shares
Market shares have been mainly stable over the past five years and vary from +40% in the UK and Northern Europe to low single digit shares in Russia, Italy and Germany European Market Sizes and Formica Shares For personal use only 40 30 SQM millions 20 10 - Germany Italy Russia UK France Spain Benel
Slide 9: Agenda
Agenda Business Environment • Locations & Workforce For personal use only • Product Portfolio • Geographies, Channels and Market Shares • Industry Structure Regional Economics • Current Scenario • Regional Analysis Situational Assessment • Current Financials • Restructuring • Situation Analysis Stra
Slide 10: European economy growth and GDP recovery
Since 2000 the European economy has grown steadily at an average of ~2.3%. Europe was hit by the Global downturn in 2009, however, GDP recovery has started European Economic Area GDP % Change 5.0% For personal use only 3.9% 3.6% 3.5% 3.2% 3.0% 2.9% 2.5% 2.5% 2.0% 2.0% 1.7% 1.3% 1.3% Average 2.3% 0.7
Slide 11: Construction spending recoveries by 2012
Recoveries in spending occur in all markets by 2012, however, given the lag between construction & laminate demand, major volume growth looks unlikely in the short term Construction Spending Index (2005 = 100) UK & Ireland France & Italy Spain For personal use only 200.0 200.0 200.0 150.0 150.0 150.
Slide 12: Growth in developing markets to offset flat developed markets
Targeting growth in the developing markets will offset flat trading conditions forecast for the developed markets Developing Markets – growth opportunities For personal use only Country GDP Laminate Market Actions +8% in 2010 Four times the size India double digit Market entry strategy established o
Slide 13: Agenda
Agenda Business Environment • Locations & Workforce For personal use only • Product Portfolio • Geographies, Channels and Market Shares • Industry Structure Regional Economics • Current Scenario • Regional Analysis Situational Assessment • Current Financials • Restructuring • Situation Analysis Stra
Slide 14: FY08 EBIT increase from revenue growth and restructuring
FY08 saw a substantial increase in EBIT due to strong revenue growth and the 1st phase of the European restructuring programme Economic Boom Lag in 2006-2007 Demand 50 500 For personal use only Recession Revenue Revenue NZ$m @ FY11 plan rates Revenue NZ$m @ FY11 Rates EBIT NZ$m @ FY11 plan rates EBI
Slide 15: European restructuring programmes for cost reduction and centralisation
The European business has gone through numerous restructuring programmes aimed at cost reduction & centralisation in order to create a unified European business FY00 – FY10 European Headcount v Revenue 2,500 500 For personal use only Revenue NZ$m @ FY11 Rates Revenue Head Count 2,000 400 Headcount 1
Slide 16: The Reset Project realigned product offering and procurement
The Reset Project has realigned the product offering, shifted the focus to profitability by customer and altered the mentality around all aspects of procurement For personal use only Reset Programme Direct Indirect Customer Product Manufacturing Procurement Procurement Profitability Profitability •
Slide 17: Complexity growth from product permutations
Complexity has grown over the years due in part to the almost infinite number and combination of product permutations leading to increased costs that erode EBIT HPL % Components Original Current For personal use only change Decors 3,004 1,179 -61% Finish 106 25 -76% Grade Fire retardant ? Chemical r
Slide 18: Break even point down by 14%
The centralisation projects and the reset programme has helped drive the break even point down by 14% Breakeven Revenue For personal use only Revenue NZ$m @ FY11 Rates -14% 0 FY08 FY09 FY10 FY11 Source; Formica normalised Financials, excluding restructuring costs, pension costs and JV income, not in
Slide 19: Clear path to long term profitability through revenue growth
There is now a clear path to long term profitability through an aggressive revenue growth strategy Completed so far….. Strategic options…… For personal use only Initial expansion into developing markets, e.g. Re-position product offer to gain share of new trends Revenue Russia, Poland, Middle Ea
Slide 20: Agenda
Agenda Business Environment • Locations & Workforce For personal use only • Product Portfolio • Geographies, Channels and Market Shares • Industry Structure Regional Economics • Current Scenario • Regional Analysis Situational Assessment • Current Financials • Restructuring • Situation Analysis Stra
Slide 21: Strong set of strategic options for Formica Europe
There are a strong set of strategic options for Formica Europe to consider For personal use only Wholesale Raw material production Manufacturing Sales and marketing and Postforming/ fabrication 1• Primary focus of growing the distribution Core both organically and 7 through selective acquisitions HP
Slide 22: Projects to deliver long term profitability and returns
Over the next 3 years, Formica Europe will implement the following projects to deliver the strategies below that will ensure long term profitability and strong returns 1 Revenue Growth Strategy: Several opportunities exist to grow revenue and market share For personal use only • Exterior Compact • W
Slide 23: The revenue growth strategy is three fold
1 The revenue growth strategy is three fold For personal use only 1 • Large opportunity Exterior • Routes to market established Compact • Range defined 2 • Routes to market identified Worktops • Brand established in the UK • Significant opportunity to role UK model into Europe 3 Extra Large • Would
Slide 24: Laminate industry supplies four main sheet sizes
1.3 The laminate industry supplies four main sheet sizes which relate to particular applications 7’ x 3’ 10 x 4’ 12’ x 5’ 14’ x 6’ For personal use only Small Door Door Size Medium Size Size Size Large Size -doors Extra Large -doors -doors -general -worktops Size panelling -cladding -washroom -workt
Slide 25: Significant market for extra large sized laminate
1.3 1c There is a significant market for extra large sized laminate mainly focused around washroom cubicles, cladding and kitchen work surfaces in our core markets Kitchen For personal use only Doors Cladding Washroom Worktops Industrial channel Extra larges sizes give Legislation & design Reduce ma
Slide 26: Merger with Perstorp created unbalanced manufacturing footprint
2 The merger of Formica & Perstorp in 2000 created an unbalanced manufacturing footprint that has partially been addressed through the closure of 3 facilities Formica Sites Kolho, • Although volumes dipped significantly during For personal use only Ex. Perstorp Sites Finland the economic crisis, all
Slide 27: The Indian laminate market represents a significant opportunity
3 The Indian laminate market represents a significant opportunity for growth Market Overview Supplier For personal use only • India is one of the fastest growing world Distributor economies with a healthy and developing Office laminate market • The market is estimated at around 200m Delhi SQM, with
Slide 28: Supported by local Indian manufacturer and local management
3 Formica is supported by a local Indian manufacturer with a strong supply chain, we have also directly employed strong local management to drive growth • Laminate is sourced from a local supplier Olympic Laminates which is a well established manufacturer with over 30 years experience in the industr
Slide 29: Opportunity to sell European premium products into India
3 As well as the promotion of local Indian manufactured laminate, there is also an opportunity to sell European produced premium products into the market • Living standards increasing rapidly with strong GDP growth ColorCore Laminate • Early market entrants can guarantee share and market position Fo
Slide 30: Local manufacturing presence required as critical mass is reached
3 Growth projections show that a local manufacturing presence will be required as a critical volume mass is reached to achieve a dominant market position For personal use only 1 2 3 4 5 Market Grow to Market Entry Development Critical Mass Establish Establish Local Introduce Achieve Established dist
Slide 31: European laminate industry highly fragmented with little consolidation opportunity
4 The European laminate industry is highly fragmented with little opportunity for consolidation 100% 100% For personal use only Others Abet Duropal Puricille Egger 75% 75% Sonae Sonae Sonae Wilson Duropal Abet Art Abet Abet Duropal Wilson 50% 50% Apra Wilson Art Duropal Slotex Art Wilson Art 25% Apr
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