Fletcher Building Limited · NZX:FBU
Fletcher Building — H1 2007 Earnings Presentation
52 slides from Fletcher Building's earnings presentation, Feb 14, 2007
Slide 1: Fletcher Building Limited Half Year Results 2007
Fletcher Building Limited Half Year Results 2007 14 February 2007
Slide 2: Disclaimer
Disclaimer This half year results presentation dated 14 February 2007 provides additional comment on the media release 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 in
Slide 3: Highlights
3 Highlights Net Earnings $193 million Geographic and product diversification continues to deliver improved earnings despite softer markets EPS 41.1 cps Interim dividend increased to 22cps – Increased Returns the 10th consecutive dividend increase To Shareholders TSR of 24% for the six months Progre
Slide 4: Summary of Results
4 Summary of Results Dec Dec Jun 2006 2005 2006 $m 6 Mths 6 Mths 12 Mths Sales 2980 2764 5520 EBITDA 418 406 819 EBIT 340 335 675 Net Earnings 193 190 379 EPS (cents) 41.1 40.9 81.3 Dividend cps 22.0 19.0 40.0 Half Year Results – February 2007
Slide 5: Geographic Diversity
5 Geographic Diversity Operating Earnings $NZ 6 Months Dec 06 6 Months Dec 05 Other Other 5% 4% Australia Australia 32% 30% NZ NZ 63% 66% Half Year Results – February 2007
Slide 6: Market Diversity
6 Market Diversity Operating Earnings $NZ 6 Months Dec 06 6 Months Dec 05 Steel Steel 13% 11% Infrastructure Infrastructure 36% Distribution Distribution 37% 11% 11% Laminates & Panels Laminates 18% & Panels 19% Building Products Building Products 21% 23% Half Year Results – February 2007
Slide 7: Strong Earnings In All Divisions
7 Strong Earnings In All Divisions EBIT $m 140 120 Dec 2006 100 Dec 2005 80 60 122 125 40 77 72 65 62 20 46 38 39 36 0 Building Products Steel Distribution Infrastructure Laminates & Panels Half Year Results – February 2007
Slide 8: Building Products
Building Products
Slide 9: Building Products Results
9 Building Products Results Dec Dec Jun 2006 2005 2006 $m 6 Mths 6 Mths 12 Mths Sales 344 326 629 EBIT 72 77 142 Margin % 20.9 23.6 22.6 Funds 557 477 511 Return on Funds % 27.8 1 32.3 27.8 1. Proforma returns based on 6 months of acquisitions Half Year Results – February 2007
Slide 10: Building Products: Plasterboard
10 Building Products Plasterboard Volumes down slightly. Margin pressure with high NZ$ and slowdown in NZ residential markets. Performance boards increased to 48% of sales. Market share maintained at 94%. Half Year Results – February 2007
Slide 11: Building Products: Insulation
11 Building Products Insulation Volumes down in Australia and New Zealand. Margin pressure from imports. Market share loss in Australia during industry rationalisation. Good progress being made in Australia on recovering performance post the integration of the two businesses. Furnace repla
Slide 12: Building Products: Metal Roof Tiles
12 Building Products Metal Roof Tiles Sales ahead of last year NZ domestic sales equivalent to pcp Export up 24% with strong European demand US sales also ahead of pcp. Despite strong NZ$, with 60% of sales exported, the financial results are ahead of last year. Half Year Results – Februar
Slide 13: Building Products: Forman
13 Building Products Forman Distribution and installation of ceiling and wall systems and industrial insulation. Acquired on 1 December. Integration progressing well. Half Year Results – February 2007
Slide 14: Building Products: Other Businesses
14 Building Products Other Businesses FAL had good sales volumes but disappointing financial results from strong currency and increases in LME pricing for aluminium billet. Tasman Sinkware had an excellent six months. Despite soft Australian residential market, performance is ahead of pcp on the
Slide 15: Steel
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Slide 16: Steel Results
16 Steel Results Dec Dec Jun 2006 2005 2006 $m 6 Mths 6 Mths 12 Mths Sales 602 550 1082 EBIT 46 38 93 Margin % 7.6 6.9 8.6 Funds 474 439 461 Return on Funds % 19.4 17.3 20.2 Half Year Results – February 2007
Slide 17: Steel: Rollforming
17 Steel Rollforming Stramit, Dimond and Pacific Coilcoaters benefited from strong demand with both Stramit and Pacific Coilcoaters ahead of pcp. Stramit’s new IT platform now fully implemented. Half Year Results – February 2007
Slide 18: Steel: Long Steel Products
18 Steel Long Steel Products Financial results reflect more favourable pricing environment, although results varied across the product range, with competition in ‘cut and bend’ quite intense and wire products still under price pressure from imports. Transformer at Pacific Steel Mill failed in Oc
Slide 19: Steel: Other Businesses
19 Steel Other Businesses EasySteel – the steel distribution business, performed well and delivered improved financial results. CSP Galvanising performed consistently. Half Year Results – February 2007
Slide 20: Distribution
Distribution
Slide 21: Distribution Results
21 Distribution Results Dec Dec Jun 2006 2005 2006 $m 6 Mths 6 Mths 12 Mths Sales 518 493 956 EBIT 39 36 75 Margin % 7.5 7.3 7.8 Funds 149 128 132 Return on Funds % 52.3 56.3 56.8 Half Year Results – February 2007
Slide 22: Distribution
22 Distribution Strong sales up 5% on pcp in a softer residential market. Again some share gains, but also impact of price increases. Margin and cost pressures continue, but excellent earnings improvement. Funds increase due to branch refurbishments, acquisition of Maddrens and some working
Slide 23: Infrastructure
Infrastructure
Slide 24: Infrastructure Results
24 Infrastructure Results Dec Dec Jun 2006 2005 2006 $m 6 Mths 6 Mths 12 Mths Sales 962 889 1823 EBIT 122 125 255 Margin % 12.7 14.1 14.0 Funds 769 704 766 Return on Funds % 31.7 35.5 33.3 Half Year Results – February 2007
Slide 25: Infrastructure: Golden Bay Cement
25 Infrastructure Golden Bay Cement Good results on domestic sales which were down on pcp. Kiln upgrade now completed and kiln throughput up to 2500 tpd. Upgrade was delayed by a month, which together with commissioning issues, had a detrimental impact on production volumes and earnings. Half
Slide 26: Infrastructure: Firth
26 Infrastructure Firth Readymix volumes similar to last year despite softer market. Masonry and paving sales continue to be below last year’s levels. Earnings same as pcp. Half Year Results – February 2007
Slide 27: Infrastructure: Winstone Aggregates
27 Infrastructure Winstone Aggregates Volumes impacted by delays in major roading projects but improved volumes on North Shore Busway project offset the majority of this. Better quarry management and cost control held results at same level as pcp. Half Year Results – February 2007
Slide 28: Infrastructure: Humes and Stresscrete
28 Infrastructure Humes Strong margin management held earnings at pcp level. Good prospects for second half. Stresscrete Disappointing performance due to project management issues resulting in $3m reduction in earnings on pcp. Good backlog of work. Half Year Results – February 2007
Slide 29: Infrastructure: Rocla Quarries & Pipeline Products
29 Infrastructure Rocla Quarries & Pipeline Products Excellent results despite soft NSW housing starts and demand for sand. Quarries acquired in Cowra with JV partner. Pipeline benefited from increased subdivisional work and bridge sales. Sleeper sales were up 20% on pcp. Results ahead of pc
Slide 30: Infrastructure: International
30 Infrastructure International Fiji Small operation and down on pcp as a result of the political uncertainty. Peru Small contribution, but down 40% on pcp. Exit strategy for both operations progressing. Half Year Results – February 2007
Slide 31: Infrastructure: Construction
31 Infrastructure Construction Excellent results in a good market Construction ahead of pcp through workload Residential behind pcp due to timing of house completions Major projects underway at 30 June Auckland University Business School North Shore Busway Wellington Hospital Stamfor
Slide 32: Laminates & Panels
Laminates & Panels
Slide 33: Laminates & Panels Results
33 Laminates & Panels Results Dec Dec Jun 2006 2005 2006 $m 6 Mths 6 Mths 12 Mths Sales 553 505 1027 EBIT 65 62 116 Margin % 11.8 12.3 11.3 Funds 869 835 920 Return on Funds % 15.0 14.9 12.6 Half Year Results – February 2007
Slide 34: Laminates & Panels
34 Laminates & Panels Maintained volumes in softer markets. Export prices improving however volumes down as result of Taupo fire. Good contributions from JVs (Wespine & Dynea) although down on pcp. Overall earnings improvement on pcp despite input cost increases. Recently acquired O'Brien'
Slide 35: Net Earnings
35 Net Earnings Dec Dec Jun 2006 2005 2006 $m 6 Mths 6 Mths 12 Mths EBIT 340 335 675 Interest 45 45 88 Tax 92 90 189 Minority Interests 10 10 19 Net Earnings 193 190 379 Half Year Results – February 2007
Slide 36: Simplified Balance Sheet
36 Simplified Balance Sheet Dec Jun 2006 2006 NZ$m NZ$m Assets Current Assets 1668 1616 Fixed Assets 1534 1569 Intangibles & Goodwill 624 597 Provision for Deferred Taxation -3 29 Investments 135 129 Total Fletcher Building Assets 3958 3940 Liabilities Current Liabilities 1075 1079 Net Debt 1070 106
Slide 37: Key Ratios: Total Shareholder Return
37 Key Ratios Total Shareholder Return (TSR)2 Percentage 61 43 40 33 24 24 6 Jun 01¹ Jun 02 Jun 03 Jun 04 Jun 05 Jun 06 Dec 06 (6 mths) 1. June 01 is the return for the 3 months from separation date 2. TSR calculated ((Gross Dividend Paid + Movement in Share Price)/Opening Share Price) Half Year Res
Slide 38: Key Ratios: Debt/Debt Plus Equity
38 Key Ratios Debt/Debt Plus Equity Percentage 49.2 49.9 44.4 43.1 40.2 37.1 37.1 Jun 01 Jun 02 Jun 03 Jun 04 Jun 05¹ Jun 06 Dec 06 1. Restated for IFRS (6 mths) Half Year Results – February 2007
Slide 39: Key Ratios: Return on Average Equity
39 Key Ratios Return on Average Equity¹ Percentage 29.5 24.6 21.8 23.0 24.3 16.9 Jun 01 Jun 02 Jun 03 Jun 04 Jun 05² Jun 06 Dec 06 (6 mths) -43.8 1. Net earnings after capital notes interest/shareholders funds 2. Restated for IFRS Half Year Results – February 2007
Slide 40: Key Ratios: Return on Average Funds
40 Key Ratios Return on Average Funds¹ Percentage 29.3 26.1 24.5 24.4 24.7 23.1 Jun 01 Jun 02 Jun 03 Jun 04 Jun 05² Jun 06 Dec 06 (6 mths) 1. EBIT/(Average net debt+equity+capital notes) - deferred tax asset -8.6 2. Restated for IFRS Half Year Results – February 2007
Slide 41: Key Ratios: Interest Cover
41 Key Ratios Interest Cover¹ Times 9.6 9.3 9.3 7.8 7.3 5.8 3.1 Jun 01 Jun 02 Jun 03 Jun 04 Jun 05 Jun 06 Dec 06 (6 mths) 1. EBITDA pre unusuals/interest paid including capital note interest Half Year Results – February 2007
Slide 42: Net Debt Movement
NZ$m 400 600 800 1000 1200 Opening Debt 1,061 Cash from ops (324) Working capital 97 Half Year Results – February 2007 Capex 115 Acquis less divest 73 Net Debt Movement 80 Dividends Min Distn 16 FX on AUD Debt 48 Actual YTD Debt 1,070 42
Slide 43: Strategic Update
=Jillellatems Strategic Update
Slide 44: Strategic Agenda
44 Strategic Agenda Earnings Reliability Internal Growth External Growth Half Year Results – February 2007
Slide 45: Earnings Reliability
45 Earnings Reliability Company outlook should be cognisant of both product and geographic diversity. For New Zealand – Infometrics November estimate of total volume of work commenced. For Australia – BIS December estimate of total volume of work commenced. Half Year Results – February 2007
Slide 46: New Zealand Volume of Work Commenced
46 New Zealand Volume of Work Commenced 15 Forecast +3% +1% -4% +5% -6% +5% +4% +5% 10 -2% +3% NZ$b -9% +3% +2% +1% -2% 5 +3% 0% -2% +1% +3% -2% +9% +3% -1% -16% 0 01 02 03 04 05 06 07 08 09 10 11 Residential A&A Non-residential Infrastructure Source : Infometrics in constant 1995/96 prices Half Yea
Slide 47: Australia Volume of Work Commenced
47 Australia Volume of Work Commenced A$b 120 Engineering construction Non-residential 10% 1% 0% -1% 100 Residential 80 25% -1% -1% -8% 60 11% 9% -3% -10% 40 13% 20 -5% -4% 2% 0 Year ended June 2001 2002 2003 2004 2005 2006 2007 f 2008 f 2009 f Source : BIS Shrapnel Building in Australia Update in c
Slide 48: Internal Growth
48 Internal Growth Significant capex to continue in 2007 – up to $180m more than depreciation $million 180 144 105 165 109 122 2005 2006 2007F Stay in Business Growth & Productivity Half Year Results – February 2007
Slide 49: Internal Growth Opportunities
49 Internal Growth Opportunities Significant capex spend continues. Projects include: Completion of cement capacity upgrade Particle board capacity upgrade in NZ and Australia Resin JV Kitchen componentry Australian quarry expansion Wespine capacity upgrade Steel mill transformer a
Slide 50: External Growth Opportunities
50 External Growth Opportunities Acquisitions within the building sector, with the objective of strengthening our existing operations, expanding our product portfolio and improving our geographic diversity. Recent acquisitions: Forman Group – ceiling and wall systems, insulation Maddrens – h
Slide 51: Outlook
51 Outlook Residential markets in Australia and New Zealand continue to soften. Growth in non-residential and infrastructure markets. Still comfortable with the analysts’ November consensus net earnings forecast of approximately $388 million excluding resolution of Taupo MDF Mill and Pacific S
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