Fletcher Building Limited · NZX:FBU
Fletcher Building — Corporate Update (October 2023)
40 slides from Fletcher Building's corporate update, Oct 13, 2023
Slide 1: Western Australia Plumbing Issues Update
Western Australia Plumbing Issues Update 13 October 2023
Slide 2: Agenda
Agenda Overview Support to Customers and Homeowners Safety Establishing Causation Industry Solution Next Steps Q&A All financials are in AUD Fletcher Building Limited
Slide 3: Summary
Summary Fletcher Building is committed to helping the industry get to the bottom of the plumbing failures that have arisen in Perth. We have been supporting customers and homeowners with our $15m fund while causation, best fix methods and an industry solution are developed We dispute many aspe
Slide 4: How have we been approaching the plumbing failures
How have we been approaching the plumbing failures ❶ Support for Customers & Homeowners, ❷ Establishing Causation, and ❸ Industry solution As an industry leader with deep expertise in pipe manufacture and performance, Iplex is committed to its role in engaging with the industry to identify the cause
Slide 5: What have we been doing to support customers and homeowners
What have we been doing to support customers and homeowners Given the complexity, Iplex established a $15m fund to support the industry and homeowners while the issues are worked through. Inspect the failures and capture Implement a suite of options for the $15m A relevant data for the fix B builder
Slide 6: Safety is a core value to Fletcher Building and Iplex
Safety is a core value to Fletcher Building and Iplex Safety is a core value to Iplex, and the well-being of homeowners is a clear priority for all participants in the home building industry We acknowledge that BGC has been advised that some homeowners have raised concerns that are said to be re
Slide 7: The plumbing failures are a Perth issue – not a national issue
The plumbing failures are a Perth issue – not a national issue Homes built with Pro-Fit (mid 2017 – 2022) Similar volumes of Pro-Fit sold in Perth and rest of AU from 2017- 2022 c.17.5K homes c.15K homes Iplex has reached out to all our merchants and major plumbers / builders on the East Coast –
Slide 8: The abnormal plumbing failure rates are only occurring in the Perth area
The abnormal plumbing failure rates are only occurring in the Perth area but rates of failure are very different across participants Plumbing failure rates ❶ BGC and two ❷ Significantly (% of plumbing failures1 / homes built between 2017-22) plumbing groups different plumbing account for 94% failure
Slide 9: We are consistently seeing four types of poor installation practices in Perth
We are consistently seeing four types of poor installation practices in Perth BGC only referred to bending radius. However, there are multiple examples of different non-compliant plumbing practices in Perth that are of the type that generate leaks ❶ OVER-BENDING ❷ INADEQUATE MOVEMENT ❸ POOR LAGGING
Slide 10: Iplex investigation has identified extensive evidence of poor installation
Iplex investigation has identified extensive evidence of poor installation 96% of homes have at least 1 installation failure. 86% have multiple installation failures Plumbing installation failings seen across home inspections Data as at 24th September Iplex has worked with Perth builders since the
Slide 11: Further examples of installation non-compliant with standards and specifications
Further examples of installation non-compliant with standards and specifications ~92% of homes we have inspected / repaired have had non-compliant radial bends Minimum bending radius must be 10 times the outside diameter of the pipe. All of the pipes shown here have been over-bent Page 11 | Fletcher
Slide 12: Further examples of installation non-compliant with standards and specifications
Further examples of installation non-compliant with standards and specifications Multiple issues of kinking, inadequate lagging and insufficient allowance for thermal expansion and movement Kinked or damaged pipes, Pinch/pressure point caused by Kinking or damaged pipe not Pulled hard against timber
Slide 13: Iplex has observed a small number of failures on straight pieces of pipe
Iplex has observed a small number of failures on straight pieces of pipe. Each shows installation failure leading to the leaks Iplex has heard claims that plumbing failures are occurring ‘on the straights’. The implication is that leaks are occurring in straight pieces of pipes that are not under ex
Slide 14: A cursory look at BGC's presentation suggests concerning installation practices
A cursory look at BGC’s presentation suggests a number of concerning plumbing installation practices in their affected homes Lagging material (wrapping around pipe), which appears to be permeable – this The bend of these pipes are likely to be outside of Iplex Pro-fit instructions is not compliant w
Slide 15: BGC presented photos of houses inspected on the Gold Coast
BGC presented photos of houses inspected on the Gold Coast which highlights key differences in building methods and reinforces the reasons for the failures in Perth BGC PHOTOS OF HOUSES ON THE GOLD COAST1 Perth walls are double-brick and a chase is created in one of the brick walls where the pipe
Slide 16: Why are the failures occurring in Perth and why now? (I)
Why are the failures occurring in Perth and why now? (I) The evidence is pointing to a deterioration in installation practices We know that poor installation can result in a shortened lifespan of pipe (rather than instant failure), which can take time to identify POOR INSTALLATION PRACTICES THAT E
Slide 17: Why are the failures occurring in Perth and why now? (II)
Why are the failures occurring in Perth and why now? (II) The evidence is pointing to a deterioration in installation practices The Iplex Pro-fit Technical Guide states that the minimum bending radius be 10 times the outside diameter of the pipe. If that is not possible, an IPLEX Pro-fit® elbow sh
Slide 18: Why are the failures predominately occurring in cold water pipe?
Why are the failures predominately occurring in cold water pipe? WA houses contain significantly more cold water pipes than hot, and cold water is used much more frequently Effective Pipe Ratio Percentages in a House As of October 2023, approximately 85% of failures are occurring in cold water pip
Slide 19: Product testing program undertaken by Iplex
Product testing program undertaken by Iplex Iplex has used multiple external laboratories from across the globe, and several independent experts across polymer science, plumbing regulations and statistics professors External laboratories Independent experts COUNTRY EXPERTISE ROLES EXPERT EXPERTISE •
Slide 20: Testing approach taken by Iplex
Testing approach taken by Iplex Iplex has conducted a logical and comprehensive approach to its testing program All pipes have shown the same type of failure with brittle radial fractures To determine the root originating at the bore of the pipe, indicating tensile stresses caused OBJECTIVE cause of
Slide 21: Testing program and results
Testing program and results Iplex has conducted a logical and comprehensive approach to its testing program STAGE TEST TYPE PURPOSE OF TEST # INTERNAL EXTERNAL RESULTS Hydrostatic Pressure Testing Polymer strength and long term creep rupture strength 24 1 Dimensional Conformance Ensure dimensi
Slide 22: Resin change to Ylem managed with extensive QA process
Resin change to Ylem managed with extensive QA process Ylem has not experienced any issues of this nature elsewhere in the world Overview of Ylem Timelines of events Resin change process and testing Ylem is a major manufacturer of PB, Iplex visited Ylem factory in 2016 Iplex NATA technical lab
Slide 23: Why did we stop manufacturing and supplying Pro-fit?
Why did we stop manufacturing and supplying Pro-fit? Pro-fit was an uneconomic product that we stopped manufacturing in 2021 The decision to cease production of Pro-fit was a COMMERCIAL DECISION MADE IN 2021. HIGH MARKET SMALL % OF SALES, FULL RANGE REVIEW PRODUCTION Once leaks became SHARE ONLY IN
Slide 24: Why do we consider that BGC's expert report is not credible? (I)
Why do we consider that BGC’s expert report is not credible? (I) We and our leading global polymer experts consider the report from Dr Scheirs lacks credibility TESTING METHODOLOGY SCHEIRS REPORT IS NOT The hypothesis put forward by BGC is just that – a hypothesis. CREDIBLE It starts with the pr
Slide 25: Why do we consider that BGC's expert report is not credible? (II)
Why do we consider that BGC’s expert report is not credible? (II) We and our leading global polymer experts consider the report from Dr Scheirs lacks credibility SCHEIRS TEST RESULTS ARE THE MOLECULAR WEIGHT DISTRIBUTION THEORY FLAWED Much was made by BGC that, based on LYB patent literature, ther
Slide 26: Why do we consider that BGC's expert report is not credible? (III)
Why do we consider that BGC’s expert report is not credible? (III) We and our leading global polymer experts consider the report from Dr Scheirs lacks credibility ENVIRONMENTAL STRESS CRACKING PRO-FIT TYPLEX PIPES ARE NOT BGC alleges that the mode of failure of the Typlex pipes in WA is “Environme
Slide 27: Why do we consider that BGC's expert report is not credible? (IV)
Why do we consider that BGC’s expert report is not credible? (IV) We and our leading global polymer experts consider the report from Dr Scheirs lacks credibility The comments on the prior three pages are based on the information and testing results available to Iplex at the current time. Iplex v
Slide 28: Why have we not previously responded publicly to BGC's latest theory? (I)
Why have we not previously responded publicly to BGC’s latest theory – or other theories that have been put to us? (I) As we have noted in our previous market releases, both DMIRS (Building & Energy) and BGC have said that they believe the pipe failures are due to an Iplex manufacturing defect. Th
Slide 29: Why have we not previously responded publicly to BGC's latest theory? (II)
Why have we not previously responded publicly to BGC’s latest theory – or other theories that have been put to us? (II) In June, BGC wrote to us with the theory presented at its briefing, and enclosed extracts of Dr Scheirs reports. On receipt, as it has done with all propositions, Iplex and its
Slide 30: A reminder of our prior disclosure on this matter, which remains true
A reminder of our prior disclosure on this matter, which remains true Fletcher Building’s disclosures about the risk of this matter in its Annual Report released on 16 August (see page 77 in particular) remain true: “Ultimately, if Iplex Australia is found to bear some responsibility, the cost to
Slide 31: How might the industry respond to and resolve these issues?
How might the industry respond to and resolve these issues? Remember: this is a Perth issue, not a national one Homes built with Pro-Fit (mid 2017 – 2022) c.17.5K homes c.15K homes 35% Others 45% Others 20% 3 builders (c.3000 homes) 65% 1 builder 35% (c.5250 homes) Perth Rest of AU 1,908 Homes leake
Slide 32: The evidence does not support the claim that all houses in Perth will be affected
How might the industry respond to and resolve these issues? The evidence does not support the claim that all houses in Perth will be affected Time from construction completed to 1st leak (in months) Leak rate by house build period 30 # of Houses Built % Leaked 250 60% Leaked Not Leaked % Leaked 25 2
Slide 33: Failure rates in non-BGC homes appear to be on a different trajectory
How might the industry respond to and resolve these issues? Failure rates in non-BGC homes outside appear to be on a different trajectory Plumbing failures (Jul 21 – Sep 23) 201 BGC claims the situation is getting worse 200 178 184 and we are only seeing the tip of the BGC All other builders icebe
Slide 34: There are multiple approaches that may be used to provide a solution
How might the industry respond to and resolve these issues? There are multiple approaches that may be used to provide a solution ❶ ❷ ❸ ❹ ❺ ❻ ❼ ❽ CEILING PIPE TOP PLATE PIPE LEAK WALL PIPE NON-DESTRUCTIVE DATA ANALYTICS PIPE RE-LINING PIPE RE-LINING REPLACEMENT REPLACEMENT DETECTION MAPPING TILE REMO
Slide 35: A product recall is not justified and would be needlessly disruptive
How might the industry respond to and resolve these issues? A product recall is not justified and would be needlessly disruptive to homeowners The issue is only occurring in Perth, not nationally. Suggesting that it is a national issue is creating needless worry for many thousands of homeowners In t
Slide 36: BGC's estimated repair cost is sensationalist
How might the industry respond to and resolve these issues? BGC’s estimated repair cost is sensationalist – scenarios that better align with the current evidence suggest that an industry cost to repair affected Perth houses could be a fraction of that, something in the order of $50m to $100m Perth o
Slide 37: Where to from here?
Where to from here? 1. Continue to support customers and homeowners with our Fund 2. Continue to collect evidence as to causation, including a period of joint inspections with DMIRS as discussed with them in September 3. Apply data science to the expanded database. With more data, the industry shoul
Slide 38: Summary
Summary Fletcher Building is committed to helping the industry get to the bottom of the plumbing failures that have arisen in Perth. We have been supporting customers and homeowners with our $15m fund while causation, best fix methods and an industry solution are developed We dispute many aspe
Slide 39: Questions?
Questions? < Fletcher Building
Slide 40: 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. The information in this present