Fletcher Building Limited · NZX:FBU
Fletcher Building — FY2015 Earnings Presentation
47 slides from Fletcher Building's earnings presentation, Aug 19, 2015
Slide 1: Fletcher Building Annual Results to 30 June 2015
Fletcher Building Annual Results to 30 June 2015 MARK ADAMSON Chief Executive Officer GERRY BOLLMAN Chief Financial Officer 19 August 2015
Slide 2: Disclaimer
Disclaimer This Annual Results presentation dated 19 August 2015 provides additional comment on the management commentary of the same date. As such, it should be read in conjunction with, and subject to, the explanations and views of future outlook on market conditions, earnings and activities given
Slide 3: Agenda
Agenda Results Overview Geographic & Sectoral Analysis Divisional Performances Financial Results Strategy Update Outlook Appendix 3 Fletcher Building Annual Results Presentation | © August 2015
Slide 4: Results Overview
Fletcher Building Annual Results Presentation 2015 Results Overview Construction WATERVIEW TUNNEL ALLIANCE
Slide 5: Results overview
Results overview Net earnings Revenue $8,661m $ 270 m 3% Dividend per share 20% Operating earnings 37c 3% $ 503 m Earnings per share 39.2c 15% 20% 5 Fletcher Building Annual Results Presentation | © August 2015
Slide 6: Results overview: 10% increase in net earnings before significant items
Results overview 10% increase in net earnings before significant items Reported Results June 2014 June 2015 % NZ$m (except EPS and DPS) 12 months 12 months change Revenue 8,401 8,661 +3 Operating earnings before significant items 624 653 +5 Significant items (32) (150) NM Operating earnings (EBIT) 5
Slide 7: Full year highlights
Full year highlights Volume Growth Australian Insulation 22% NZ Steel Distribution 17% NZ Cement 9% NZ Steel Reinforcing 20% NZ Concrete Product 7% Plasterboard 7% NZ Concrete 14% Windows & Doors 11% Canterbury • Over 65,000 permanent repairs completed • Extension of home repairs programme for a fur
Slide 8: Results overview: Revenue
Results overview Revenue • Reported revenue $260m or 3% higher than FY14 Revenue REVENUE GROWTH RATES $8,661m Geographic segments in local currency New Zealand +10% 3% Australia -5% Rest of World +3% • Adjusting for business divestments, revenue grew 5% year-on-year 8 Fletcher Building Annual Result
Slide 9: Results overview: Operating earnings
Results overview Operating earnings • Operating earnings before significant items up 5% Operating earnings • Within guidance range of $650m - $503m $690m • Reported operating earnings (EBIT) 15% down 15% SIGNIFICANT ITEMS Significant items related to goodwill impairment, site closures and sale of bu
Slide 10: Results overview: Net earnings
Results overview Net earnings • Net earnings before significant items were up 10% to $399m Net earnings EARNINGS PER SHARE $270m Earnings per share 39.2 cents -20% 20% Earnings per share 58.0 cents +10% (before significant items) Net earnings $399m before significant items 10% 10 Fletcher Building A
Slide 11: Results overview: Dividend
Results overview Dividend • Final dividend fully imputed for NZ taxation purposes Dividend per share • Dividend Reinvestment Plan will be 37c 3% operative for this dividend DIVIDEND Final dividend per share 19 cents Total dividend for the year 37 cents 11 Fletcher Building Annual Results Presentatio
Slide 12: Results overview: Cashflow from operations
Results overview Cashflow from operations • Cashflow from operations $575m an increase of $86m from FY14 Cashflow from operations ($489m) $575m • Increase is due to: 18% – Growth in EBIT (before significant items) – Timing of cash collections for construction contracts – Reduced working capital requ
Slide 13: Geographic & Sectoral Analysis
Fletcher Building Annual Results Presentation 2015 Geographic & Sectoral Analysis Heavy Building Products WINSTONE AGGREGATES
Slide 14: Sectoral exposure
Sectoral exposure Exposures based on revenues Residential Geographical Exposure by Sector¹ (New/A&A)* Commercial Infrastructure Other New Zealand 43% 28% 13% 16% Australia 49% 25% 13% 13% Rest of World 43% 51% 0% 6% Total Manufacturing 46% 31% 11% 12% New Zealand 81% 17% 0% 2% Australia 58% 42% 0% 0
Slide 15: Geographic earnings mix reflects economic performance of key markets
Geographic earnings mix reflects economic performance of key markets External Revenue EBIT¹ (12 months to 30 June 2015) (12 months to 30 June 2015) 14 13 18 51 35 69 New Zealand Australia Rest of World New Zealand Australia Rest of World 1. Before significant items 15 Fletcher Building Annual Result
Slide 16: New Zealand operating earnings up 24% on prior year
New Zealand operating earnings up 24% on prior year EBIT¹ NZ$m 449 362 171 119 91 85 New Zealand Australia Rest of the World 12 months to 30 June 14 12 months to 30 June 15 1. Before significant items 16 Fletcher Building Annual Results Presentation | © August 2015
Slide 17: New Zealand residential consents up 8% to 25,154
New Zealand residential consents up 8% to 25,154 driven by growth in Auckland Total residential consents¹ Change % year on year 25% 35,000 Peak (2004) 20% 15% 10% 30,000 5% 0% Auckland Canterbury Rest of NZ NZ 25,000 Long term average (2001-2015) Auckland and Christchurch represent 59% of total cons
Slide 18: Australian residential consents rose to record levels
Australian residential consents rose to record levels, with further growth in the multi-unit dwellings Total residential consents¹ 120,000 250,000 110,000 200,000 100,000 90,000 150,000 80,000 100,000 70,000 50,000 60,000 50,000 0 Sep-14 Dec-14 Sep-13 Jun-13 Dec-13 Mar-14 Jun-14 Mar-15 Jun-15 Sep-14
Slide 19: Strongest growth in Victoria, with NSW also up substantially
Strongest growth in Victoria, with NSW also up substantially Change in housing approvals – by state 12 months ended 30 June 2015 vs 2014 June 2014 June 2015 % 12 months 12 months change 35,000 Stand-alone 108,553 115,525 +6 30,000 Multi + other 86,144 98,113 +14 Residential 25,000 Total 194,697 213,
Slide 20: Divisional Performances
Fletcher Building Annual Results Presentation 2015 Divisional Performances Laminates & Panels LAMINEX
Slide 21: Divisional operating earnings overview
Divisional operating earnings overview EBIT¹ NZ$m 214 177 140 124 129 116 118 108 106 84 17 18 Heavy Building Light Building Laminates & Distribution NZ Distribution Aus Construction Products Products Panels 12 months to 30 June 14 12 months to 30 June 15 1. Before significant items 21 Fletcher Buil
Slide 22: Heavy Building Products Result
Heavy Building Products Result Total revenue down due to sale of Pacific June 2014 June 2015 % NZ$m 12 months 12 months change Steel in prior year Gross Revenue 2,274 2,144 -6 NZ Concrete Products External Revenue 1,859 1,782 -4 – Ready-mix concrete volumes +14% EBITDA¹ 261 – Concrete products volum
Slide 23: Light Building Products Result
Light Building Products Result NZ Building Materials June 2014 June 2015 % NZ$m 12 months 12 months change Earnings up in line with construction activity: Gross Revenue 1,312 1,306 - – Plasterboard volumes increased and External Revenue 1,166 1,156 -1 prices were stable – Insulation recorded higher
Slide 24: Laminates & Panels Result
Laminates & Panels Result Laminex June 2014 June 2015 % NZ$m 12 months 12 months change Earnings up 33% with strong operational performance Gross Revenue 1,731 1,828 +6 Australian revenue up 7% driven by growth External Revenue 1,710 1,809 +6 in key product categories and strong residential demand E
Slide 25: Formica: continued volume and earnings growth in North America
Formica: continued volume and earnings growth in North America June 2014 June 2015 % EBIT (NZ$m) 12 months 12 months change North America 43 49 +14 Asia 29 19 -34 Europe 6 - NM Formica EBIT pre-corporate costs 78 68 -13 L&P corporate costs (15) (20) -33 Total EBIT 63 48 -24 25 Fletcher Building Annu
Slide 26: Distribution New Zealand Result
Distribution New Zealand Result Building Supplies June 2014 June 2015 % NZ$m 12 months 12 months change Revenues up 6% with growth from both new and existing customers Gross Revenue 1,650 1,757 +6 Operating earnings up 42% External Revenue 1,462 1,548 +6 Turnaround of the Mico business from a EBITDA
Slide 27: Distribution Australia Result
Distribution Australia Result Tradelink June 2014 June 2015 % NZ$m 12 months 12 months change Revenue up 3% in domestic currency Gross Revenue 928 826 -11 Increase in operating earnings to A$15m (2014:A$12m) in domestic currency terms External Revenue 927 825 -11 Improved residential building activi
Slide 28: Construction Result
Construction Result Increased residential sales and June 2014 June 2015 % NZ$m 12 months 12 months change commercial construction activity in New Zealand and the South Pacific Gross Revenue 1,301 1,580 +21 Strong Auckland residential housing External Revenue 1,277 1,537 +20 market EBITDA¹ 114 148 +3
Slide 29: Health and safety performance
Health and safety performance Total recordable injury frequency rate* 11.07 8.48 6.80 6.36 6.00 2011 2012 2013 2014 2015 * Total injuries per million employee and contractor hours 29 Fletcher Building Annual Results Presentation | © August 2015
Slide 30: Financial Results
Fletcher Building Annual Results Presentation 2015 Financial Results Distribution New Zealand REINFORCING
Slide 31: Operating cashflow
Operating cashflow June 2014 June 2015 % NZ$m 12 months 12 months change Operating earnings before significant items 624 653 +5 Depreciation and amortisation 203 201 -1 Less cash tax paid (73) (72) -1 Less interest paid (131) (124) -5 Provisions, significant items and other (44) (42) -5 Results from
Slide 32: Net debt movement
Opening net debt 1,648 NZ$m Cash from operations (pre (616) working capital) Working capital (17) Investment in 58 land Growth capex + 109 acquisitions 32 Fletcher Building Annual Results Presentation | © August 2015 Stay in business 173 capex Divestments (68) cash flows and divestments Dividends 24
Slide 33: Capital expenditure
Capital expenditure NZ$m 325 June 2014 June 2015 % NZ$m 12 months 12 months change 105 Stay-in-business 175 173 -1 85 275 Growth 85 105 +24 203 201 Total Capex 260 278 +7 175 173 Acquisitions 4 4 - Depreciation 203 201 -1 2014 2015 2016 Stay in Business Depreciation Growth 2016 Forecast Capital Expe
Slide 34: Key ratios
Key ratios Total Shareholder Return (TSR) Debt/Debt Plus Equity Percentage Percentage 51 37 9 34 14 33 32 32 Jun-11 Jun-12 Jun-13 Jun-14 Jun-15 -3 -27 Jun-11 Jun-12 Jun-13 Jun-14 Jun-15 Return on Average Funds Net Debt/EBITDA Percentage¹ Times 13 12 13 11 2.62 10 2.36 2.27 1.99 2.02 Jun-11 Jun-12 Ju
Slide 35: Debt profile
Debt profile Funding and Maturity Profile June 2015 Undrawn credit lines of $614m and cash of $228m Average maturity of debt is 3.7 years Approximately 56% of all borrowings have fixed interest rates 248 350 Average interest rate on debt is 5.5% Mix of currency (hedged) 16 − NZ$ 32% − AU$ 47% 340 35
Slide 36: Capital management settings
Capital management settings Fletcher Building will continue to target strong ‘BBB’ credit characteristics Gearing • Target of Net Debt to Net Debt + Equity (including Capital Notes) of 30-40% • As at 30 June 2015: 32% Leverage • Target Net Debt to EBITDA of 2.0 to 2.5 times • As at 30 June 2015: 2.0
Slide 37: Strategy Update
Fletcher Building Annual Results Presentation 2015 Strategy Update Construction WATERVIEW TUNNEL ALLIANCE
Slide 38: Our aspiration: top-quartile shareholder value creation through core operational levers
Our aspiration: to deliver top-quartile shareholder value creation through driving core operational levers Capital Management Valuation Multiple Invest capex only where value is clear; drive efficiencies in working capital; exit underperforming businesses; return excess cash to shareholders Return o
Slide 39: Our strategy is deployed at three levels of the organisation
Our strategy is deployed at three levels of the organisation Where are we now? • Clear view of sustainable competitive advantage • Vision defined Group Portfolio • Focus on greatest value-creating • In execution phase Management opportunities • Clarity on where to invest, hold and • M&A outcomes pen
Slide 40: The portfolio can broadly be grouped into 7 core sectors
The portfolio can broadly be grouped into 7 core sectors Manufacture & Supply Raw Material Supply to End- Primary Secondary Extraction & Users & Merchant Distribution Construction Processing Processing Processing Installation Concrete: Ready- Mix, Masonry, Dri. Concrete: NZ + AU Concrete Pipes & Pro
Slide 41: Portfolio strategy
Portfolio strategy • New Zealand construction => leverage capability in the core Invest for • Australasian merchant distribution => growth Growth above through omni-channel the Base • Laminates & Panels => unlock earnings potential of leading global business • Integrated concrete NZ => develop suppl
Slide 42: FBUnite business transformation programmes now integrated into FBU business model
FBUnite business transformation programmes are now fully integrated into the FBU business model CUSTOMER Business Units: Customer-Leading Performance Central Functions Centres Of Excellence Finance HR Manufacturing Legal Supply Chain ICT Sales and Marketing Procurement Strategy Property Health & Saf
Slide 43: Outlook
Fletcher Building Annual Results Presentation 2015 Outlook Construction WATERVIEW TUNNEL ALLIANCE
Slide 44: Outlook FY16
Outlook FY16 New Zealand • Residential construction activity expected to continue at above average levels, but growth in consents likely to moderate • Net migration and Auckland housing demand key drivers • Commercial construction should track the upward trend in consents • Government infrastructure
Slide 45: Fletcher Building Annual Results to 30 June 2015
Fletcher Building Annual Results to 30 June 2015 MARK ADAMSON Chief Executive Officer GERRY BOLLMAN Chief Financial Officer 19 August 2015
Slide 46: Appendix: New Zealand construction activity expected to continue at record levels
Appendix: New Zealand construction activity expected to continue at record levels Value of all construction (historic and forecast) NZ$bn Source: Statistics NZ/BRANZ/Pacifecon 46 Fletcher Building Annual Results Presentation | © August 2015
Slide 47: Appendix: Building consent data
Appendix: Building consent data June 2013 June 2014 June 2015 15/14 NZ$m 12 months 12 months 12 months % Mvmt New Zealand Residential Consents 18,783 23,316 25,154 +8 Non Res WPIP ($m) 5,028 5,187 6,118 +18 Infrastructure WPIP ($m) 7,167 7,554 6,716 -11 Australia Source: Infometrics Residential Cons