Fletcher Building Limited · NZX:FBU
Fletcher Building — Investor Day (September 2004)
70 slides from Fletcher Building's investor day presentation, Sep 8, 2004
Slide 1: o)) = x) = ea)
o)) = x) = ea)
Slide 2: What is different about Fletcher Building?
What is different about Fletcher Building? Building Laminates & Construction Concrete Products Panels Distribution 10% 10% 80% • A building materials manufacturer with two special channels to market • We own high portions of the value chain for our product markets • All businesses have high market s
Slide 3: Analysts Briefing September 2004 - Construction
Analysts Briefing September 2004 Mark Binns Chief Executive, Construction
Slide 4: Construction Division
<o FietcherBuilding Construction Division | | | LZ Fletcher L FLETCHER RESIDENTIAL CONSTRUCTION FLETCHER Dempsey = Morton
Slide 5: The Fletcher Construction Company
The Fletcher Construction Company
Slide 6: NZ Commercial Building
NZ COMMERCIAL BUILDING • Backlog: $200m plus UOA Business School ($130m) say $330m • Turnover FY04 $350m • Employees 437 • Major Projects: Universities, Sky City / Grand Hotel, Northlands
Slide 7: Civil & Industrial Infrastructure
CIVIL & INDUSTRIAL INFRASTRUCTURE • Backlog $183m • Turnover FY04 $134m • Employees 383 • Major Projects Ports, Bridges, Roading
Slide 8: Building & Engineering in the South Pacific
BUILDING & ENGINEERING IN THE SOUTH PACIFIC • Backlog $86m • Turnover FY04 $55m • Employees 1249 • Major Projects Ports, Bridges, Commercial, Hotels
Slide 9: Domestic Builder Residential
DOMESTIC BUILDER • With approx 400 homes per year = NZ’s largest home builder. • But this represents only 4% of stand-alone homes in Auckland • Average sale price per home $395,000 (incl. GST) • Employees - 57 • 7 divisions – all in Auckland • EBIT up x 5 on FY01 RESIDENTIAL
Slide 10: All Building Consents
All Building Consents ALL BUILDING CONSENTS 12,000 10,000 8,000 $millions NON RESIDENTIAL 6,000 RESIDENTIAL 4,000 (INCLUDING APARTMENTS) 2,000 0 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 June Year End Source: NZ Statistics WHERE WE HAVE BEEN
Slide 11: Value of Work Done
VALUE OF WORK DONE New Zealand value ofForecast work done NZ$ million 14000 +5% +17% -5% 12000 +10% +10% Infra- +18% structure ? 10000 8000 +10% +14% Non- +8% Non +22% +5% Residential Residential 6000 A&A - A&A 4000 7 +25% -3% % -24% Residential Residential 2000 0 97 98 99 00 01 02 03 04 05 06 Sourc
Slide 12: Implications for Housing
IMPLICATIONS FOR HOUSING • Margins will soften – off historic highs. • Solid demand is expected to continue for well-located product. • The key issue is land-delivery. RESIDENTIAL
Slide 13: Implications for Commercial Building
IMPLICATIONS FOR COMMERCIAL BUILDING • Workload will remain high • Low participation in apartment market which may decline. • Public infrastructure will remain strong. • 50% of current backlog is in public sector infrastructure. • Increasing building costs / interest rates unlikely to materially aff
Slide 14: Implications for Commercial Building
IMPLICATIONS FOR COMMERCIAL BUILDING $1billion Private developers - commercial $2.8 billion Public sector infrastructure Source: Fletcher Construction estimates Projects >$25m with 2005-06 start
Slide 15: Implications for Civil & Industrial Infrastructure
IMPLICATIONS FOR CIVIL & INDUSTRIAL INFRASTRUCTURE • Roading dominates • $4.3 billion Transit spend over next decade. • $2.3 billion in Auckland
Slide 16: Implications for Civil & Industrial Infrastructure
IMPLICATIONS FOR CIVIL & INDUSTRIAL INFRASTRUCTURE • Roading dominates • $4.3 billion Transit spend over next decade. • $2.3 billion in Auckland • BUT there is also growth in other sectors Power
Slide 17: Future Work in the South Pacific
FUTURE WORK IN THE SOUTH PACIFIC • Fiji resurgence based on growth in tourism. • 30% of work sought is aid-funded
Slide 18: Growth Aspirations
GROWTH ASPIRATIONS NZ remains a ‘land of opportunity’. • Strong market • South Island office for Engineering • Building under-represented in some areas.
Slide 19: Domestic Growth
DOMESTIC GROWTH Auckland land is constrained Auckland Region Residential Sections Average Sale Price Vs No. of Sales June 1990 - December 2003 1,600 $250,000 1,400 $200,000 1,200 Total No. of Sales 1,000 $150,000 Sale Price No. Sales 800 Weighted Av. $100,000 600 400 $50,000 200 - $- Source: Seagar
Slide 20: Domestic Growth: Lunn Ave opportunity
DOMESTIC GROWTH Lunn Ave opportunity • Stage 2. Balance of residential lots and option on apartment land for 4-5 blocks in negotiation. RESIDENTIAL
Slide 21: Domestic Growth: Lunn Ave opportunity
DOMESTIC GROWTH Lunn Ave opportunity • Stage 2. Land supplied 2005 - 2011 RESIDENTIAL
Slide 22: Domestic Growth: Jacks Point, Queenstown
DOMESTIC GROWTH • Jacks Point, Queenstown RESIDENTIAL
Slide 23: Delivering Growth – Key Issues: People
DELIVERING GROWTH – KEY ISSUES People Construction Group Number of NZ Employees 2004 900 887 850 2003 800 780 750 700 2002 650 645 600 550 500 30-Jun-02 30-Jun-03 30-Jun-04 Growth in NZ-based employees
Slide 24: Delivering Growth – Key Issues
DELIVERING GROWTH – KEY ISSUES Continued industry leadership • University recruitment • School leavers • Cadetships
Slide 25: Delivering Growth – Key Issues
DELIVERING GROWTH – KEY ISSUES Continued industry leadership • Environment • Drugs & alcohol
Slide 26: Outlook to FY07
OUTLOOK TO FY07 • Workload will remain strong. • People constraint is the major issue / opportunity. • Any fall-off in private-sector will be compensated by infrastructure growth. • Focus on quality – not on quantity!
Slide 27: Analysts Briefing September 2004 - Building Products
Analysts Briefing September 2004 Andrew Reding Chief Executive, Building Products Ralph Waters Chief Executive Officer
Slide 28: Results Record
Results Record June* June* June* June June 2001 2002 2003 2004 2004 $m's Pro-forma excl. T asman i ncl . T asman Operating Revenue** 642 619 638 712 927 EBIT 50 77 102 133 164 Margin 8% 12% 16% 19% 18% Total Funds Employed 333 322 296 287 560 EBIT/Funds 15% 24% 34% 46% 31% *** * restated to transfer
Slide 29: Revenue
Revenue Revenue External vs Internal 1200 186 1000 800 137 145 600 927 619 638 400 200 0 2002 2003 2004 External Internal Presentation to Analysts – September 2004 3
Slide 30: How we have done it?
How we have done it? Organic growth Competent management Focus on performance EBIT, Funds, Cash KPI’s (i.e. OEE, IFOTIS) Strong market Cont… Presentation to Analysts – September 2004 4
Slide 31: How we have done it? Acquisitions and divestments
How we have done it? Acquisitions Tasman Building Products (Oct 03) Colorflo rainwater systems (Feb 03) Divestments/Closures Cyclone (Nov 01) Aluminium - Solution Centres, Australian Shapes distribution (Jul 01 & Aug 02) Backbone (Jun 03) Presentation to Analysts – September 2004 5
Slide 32: Plasterboard Volumes
• New Zealand’s sole manufacturer of Plasterboard. Two manufacturing plants (Auckland and Christchurch) • Highest annual volume of board and plaster ever manufactured or sold in NZ driven by very high building activity • Launched Fiberock JV with USG to build a market for Fiberock in NZ, Australia a
Slide 33: Aluminium window and door systems
• Designer and manufacturer of premium architectural window and door systems and other aluminium products to both domestic and international customers. • Continued productivity gains. • Launch of innovative product solutions including patented bi-fold door systems and trackless sliding doors (patent
Slide 34: Insulation Australia and New Zealand
Australia • Only Australian company to manufacture the three main insulation products (glasswool, polyester and reflective foil). • Record sales performance and record output from both Rooty Hill and Minto plants. • State acceptance of Federal BCA recommendations increasing the use of insulation in
Slide 35: Insulation sales volumes - Australasia
Insulation sales volumes - Australasia Glasswool Volumes (indexed to 2001) 152 160 130 140 100 112 Volumes 120 100 80 60 40 2001 2002 2003 2004 Year Presentation to Analysts – September 2004 9
Slide 36: Sinkware and access flooring
Sink sales Volumes (indexed to 2001) • Second largest manufacturer of 177 200 sinkware in Australia. 156 132 150 • Record exports in 2004, particularly 100 to the USA. 100 50 0 2001 2002 2003 2004 • No. 1 in Australia of Access flooring systems. Presentation to Analysts – September 2004 10
Slide 37: The Pacific Steel Group value chain
The Pacific Steel Group value chain Other Domestic Customers 91 kt Pacific 37 kt Sims Steel Pacific 50:50 JV (EAF and rolling Wire 260kt mill) scrap Mesh Exports Exports Fletcher (ferrous & non-ferrous) 68 kt 35 kt Reinforcing Presentation to Analysts – September 2004 11
Slide 38: Pacific Steel Group
Pacific Steel Group Pacific Steel Sims HMS Standard Scrap Price 5 Year Trend by Quarter Gross Domestic Reinforcing Bar Selling Prices 350 500 1,200 450 300 1,150 400 250 350 1,100 300 200 1,050 US$/tonne NZ$/tonne NZ$/tonne 250 150 1,000 200 150 950 100 100 900 50 50 850 0 - Mar- Jun- Sep- Dec- Mar-
Slide 39: Easysteel distribution
• Easysteel is a leading stockist and distributor of long and flat sheet products across 13 nationwide locations, servicing 10,000 customers across the whole NZ economy. • Revenue up 16% on last year, earnings up 46%. • New facilities planned for five branches and Christchurch RDC. • New Penrose dis
Slide 40: Hot-dip galvanising
• Hot-dip galvanising of a range of products located in Auckland and Christchurch. • Growth focuses on new galvanising technologies that can be commercialised around the world. Zinc Pick up rates (indexed to 2001) Average labour cost per tonne (indexed to 100 95 2001) 100 86 81 100 89 100 86 83 80 8
Slide 41: Metal purlins, roofing and cladding
• The leading NZ supplier of metal purlins, roofing, cladding and composite flooring systems with 12 sales centres throughout NZ. • Rationalised operating footprint around major regional factories to service customer needs better. • Launched Dimondek 630, on-site roll-forming system with NZ record (
Slide 42: Pre-painted metal products
• Leading manufacturer of pre-painted metal products used in the manufacture of both residential and commercial roofing, cladding, and rainwater systems. Shop Order Analysis • A new R&D facility to develop 7 new products for new market 6 niches is under construction 5 Average Shop Order Size (MT) an
Slide 43: Metal roof tiles
• Largest manufacturer of steel roof tiles world wide with plants in Auckland and California, licensees in Europe, Chile and Indonesia and sales offices in Europe, Japan, China and the Middle East. • Both plants capacity constrained, currently looking at options for expansion both on existing sites
Slide 44: Key issues going forward
Key issues going forward Sustainable growth in earnings. Reducing volatility by decreasing exposure to NZ residential cycle. Presentation to Analysts – September 2004 18
Slide 45: Key Strategies
Key Strategies Be operationally excellent in support of business unit market strategies. Acquire operations whose product ranges and activities complement those already offered. Realise offshore potential of product champions. Develop our Australasian market position to introduce new product
Slide 46: Operational excellence – e.g. Aluminium
Operational excellence – e.g. Aluminium Total IFOTIS, % - Financial Year 90% 80% 70% 60% 50% IFOTIS Total IFOTIS, % 40% 30% 20% 10% Extrusion OEE 2001 - 2004 0% 80% 1999-2000 2000-2001 2001-2002 2002-2003 2003-2004 Fiancial Year 70% 60% 50% 40% 30% 20% 10% 0% Ap 2 Ap 3 Ap 4 D 1 Ju 2 D 2 Ju 3 D 3 Ju
Slide 47: Where the Tasman Acquisition fits
Where the Tasman Acquisition fits Insulation Insulation AHI Decra NZ Australia Roofing Roofing Infill opportunity Industry rationalisation Technology Product champion Presentation to Analysts – September 2004 21
Slide 48: Examples of technology and product champion plays
Some examples of technology and product champion plays Presentation to Analysts – September 2004 22
Slide 49: Fiberock
Fiberock 50/50 JV established to commercialise this technology in Asia, Australia and New Zealand. Specialist uses complement plasterboard. Powerscape Fiberock Products Acoustic floor underlay 300 Sales Volume Index and impact resistant wall 250 200 linings being released in 150 100 New Zealan
Slide 50: EMW
EMW Electro Magnetic Wiping is a process of controlling the zinc coat weight on wire. Advantages: Zinc savings Productivity, higher line speeds Quality improvement The characteristics of EMW has lead to savings of up to 25% in zinc usage, Gas Gravel controlled zinc application EMW controll
Slide 51: Product Champion – Metal Roof tiles
Product Champion – Metal Roof tiles Value proposition defined by market: Lightweight Re-roof costs, construction flexibility, faster to install Strength earthquake, hail Product performance Fade resistance, weather tightness Aesthetics Colour, profiles. Presentation to Analysts – S
Slide 52: Global Operations
FBL Plants GLOBAL Licence Plants OPERATIONS Ex-Licence Plants AHI Sales Offices Denmark England Belgium Switzerland Slovenia Algeria Japan Los Angeles Middle East Africa Malaysia Indonesia Australia Chile South Africa Argentina Auckland Presentation to Analysts – September 2004 26
Slide 53: Metal Roof tiles
Metal Roof tiles Optimal plant believed to be between 9-11m tiles. Expanding to meet demand. Huge untapped market. Presentation to Analysts – September 2004 27
Slide 54: Presentation to Analysts - 8th September 2004
Presentation to Analysts - 8th September 2004
Slide 55: The Laminates and Panels Division
The Laminates and Panels Division of Fletcher Building Limited is comprised solely of The Laminex Group. The Laminex Group was formed in 2002 after the acquisition and integration of Formica (September 1999) and Wesfi Limited (February 2001) with Laminex Industries. The Laminex Group was acquired by
Slide 56: Leading Brands
THE lamMINexX Group LEADING BRANDS THE laminex Group Ei, Laminex’ © FORMICA MELTECA Inspire your space”
Slide 57: Leading Market Positions
LEADING MARKET POSITIONS Market Shares High Pressure Laminate 65% Decorated MDF 70% Decorated Particleboard 44% Raw MDF 26% Raw Particleboard 21%
Slide 58: Vertical Integration
VERTICAL INTEGRATION Forest Waste and Sawmill Waste Thinnings Board Plant Low Pressure Laminate Plant High Pressure Laminate Plant Sales & Distribution Centre (Metro) Branch (Regional) Customer
Slide 59: Major Locations
MAJOR LOCATIONS Major Sales & Distribution Sites Major Manufacturing Facilities
Slide 60: Revenue Growth 96/97 – 03/04
Revenue Growth 96/97 – 03/04 $NZm Inclusion of FWP & SPH Acquisition of into TLG Wesfi Feb 2001 from 1/7/03 1000 900 800 Acquisition of Note 1 Formica Sept 1999 700 600 500 400 300 200 100 0 96/97 97/98 98/99 99/00 00/01 01/02 02/03 03/04 Note 1: Underlying sales in $A were 5.5% above 01/02 but appr
Slide 61: EBIT Growth June 1997 - June 2004
EBIT Growth June 1997 - June 2004 $NZm 46 95 10 14 NOTES: 5 1. FWP & SPH = Fletcher 20 Wood Panels and Scott Panel and Hardware 2. Australian EBIT’s converted to $NZ for Laminex Industries, Formica and Wesfi Ltd 1997 1998 2001 2003 Synergies/ 2004 Laminex Industries Formica Wesfi Ltd FWP & SPH Growt
Slide 62: Revenue by Segment 2003/04
Revenue by Segment 2003/04 Export 8% Alterations & Additions 30% Residential 28% Commercial 34%
Slide 63: Revenue by Product 2003/04
Revenue by Product 2003/04 Exports (Mainly Raw Other Products MDF) 18% 8% High Pressure Decorative Laminate 15% White/Raw Particleboard 19% Low Pressure Decorative Laminate White/Raw MDF 28% 12%
Slide 64: Revenue by Major Region 2003/04
Revenue by Major Region 2003/04 S.A. Exports 5% 8% NSW/ACT 17% New Zealand 24% VIC/TAS 18% W.A. 13% QLD 15%
Slide 65: Customer Size Review
Customer Size Review Active Customers grouped by annualised sales 12,000 10,000 # of customers 8,000 10,955 6,000 4,000 2,000 157 62 11 5 7 11 1 3 - < 0.5 0.5 -1 1-2 2-3 3-4 4-5 5-10 10-15 15-20 Annualised Sales ($NZm)
Slide 66: Competitor Capability
Competitor Capability TLG CHH Parbury Nelson Pine D&R Borg Duropal Prime Henderson Panels Aus/NZ Aus/NZ Aus/NZ Aus/NZ Australia Australia Australia NZ HPL Substrate PB MDF PB MDF PB MDF PB MDF PB MDF PB MDF PB MDF PB MDF Colour Board White Board Raw Board Manufactured Imported Purchased Locally
Slide 67: 2003/04 Priorities
2003/04 Priorities • NZ Integration • Sydney/Adelaide Distribution Centres • New State based customer service centres • Formica/Formex product and brand rationalisation • Minimise impact of high $A on export business • Improve safety
Slide 68: 2004/05 Priorities
2004/05 Priorities • Brisbane Distribution Centre • Improve NZ manufacturing performance • Upgrade branch network – Canberra, Townsville • Establish resin manufacturing on east coast Australia • Develop Asian strategy
Slide 69: Key Messages
Key Messages 1. Attractive industry structure 2. Vertical integration 3. High barriers to entry 4. Capitalising on Australia’s and NZ’s natural wood resource
Slide 70: Disclaimer
DISCLAIMER This presentation contains not only a review of operations, but also some forward looking statements about Fletcher Building and the environment in which the company operates. Because these statements are forward looking, Fletcher Building’s actual results could differ materially. Media r