Fletcher Building Limited · NZX:FBU
Fletcher Building — H1 2006 Earnings Presentation
48 slides from Fletcher Building's earnings presentation, Feb 15, 2006
Slide 1: Fletcher Building Limited Half Year Results 2006
Fletcher Building Limited Half Year Results 2006 15 February 2006
Slide 2: Disclaimer
Disclaimer This Half Year Results presentation dated 15 February 2006 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 t
Slide 3: Highlights
3 Highlights NPAT $190 million Geographic and product diversification delivers improved earnings despite softer markets EPS 40.9 cps Increased Returns Interim dividend increased to 19 cps To Shareholders TSR of 13% for the six months Progress With $200m committed and in progress Growth Projects Half
Slide 4: Summary of Results
4 Summary of Results Dec Dec Jun 2005 2004 2005 $m 6 Mths 6 Mths 12 Mths Sales 2764 2159 4636 EBITDA 406 354 742 EBITA 335 299 614 EBIT 335 299 612 Net Earnings 190 172 347 EPS (cents) 40.9 39.2 77.6 Dividend cps 19.0 15.0 32.0 Half Year Results – February 2006
Slide 5: Geographic Diversity
5 Geographic Diversity Operating Earnings $NZ 6 Months Dec 05 6 Months Dec 04 Other Other 4% 4% Australia 21% Australia 30% NZ 66% NZ 75% Half Year Results – February 2006
Slide 6: Market Diversity
6 Market Diversity Operating Earnings $NZ 6 Months Dec 05 6 Months Dec 04 Distribution 11% Distribution 14% Building Products 34% Building Products 41% Infrastructure 26% Infrastructure 37% Laminates & Panels Laminates & 18% Panels 19% Half Year Results – February 2006
Slide 7: Segmental EBIT
7 Segmental EBIT Dec Dec Jun 2005 2004 2005 $m 6 Mths 6 Mths 12 Mths Building Products 115 125 227 Distribution 36 42 81 Infrastructure 125 77 196 Laminates & Panels 62 58 107 Corporate/Unallocated -3 -3 1 EBIT 335 299 612 Half Year Results – February 2006
Slide 8: Building Products
Building Products
Slide 9: Building Products Results
9 Building Products Results Dec ³ Dec Jun ¹ 2005 2004 2005 $m 6 Mths 6 Mths 12 Mths Sales 876 575 1324 EBIT 115 125 227 Margin 13.1% 21.7% 17.1% Funds 916 601 905 Return on Funds (annualised) 25.1% 41.6% 27.1% ² 1 Includes 4 months of Amatek 2 Proforma returns based on 12 months of Amatek 3. Include
Slide 10: Building Products: Plasterboard
10 Building Products Plasterboard Market share maintained Volumes down on pcp due to slowdown in residential but EBIT maintained at 98% of pcp Performance boards now 46% of volume New distribution centre supporting site delivery in Auckland Half Year Results – February 2006
Slide 11: Building Products: Insulation
11 Building Products Insulation Demand has held up well in Australia and New Zealand Initially some market share loss in Australia as a result of the merger, but now being regained Lost Rooty Hill plant for four weeks – required product to be shipped from Victoria and New Zealand Some synerg
Slide 12: Building Products: Rollforming
12 Building Products Rollforming All business units – Stramit, Dimond and Pacific Coilcoaters benefited from strong markets with Stramit and Dimond ahead of pcp New BlueScope and New Zealand Steel supply agreements completed Stramit IT implementation proceeding to plan with minimal business di
Slide 13: Building Products: Metal Roof Tiles
13 Building Products Metal Roof Tiles Good demand in all markets Malaysian and U.S. plants upgraded New Zealand earnings impacted by strong NZ$ as 60% of sales are exported U.S. earnings down NZ$4 million on pcp as last year had exceptional ‘hailstorm related’ upside Half Year Results – Febr
Slide 14: Building Products: Long Steel Products
14 Building Products Long Steel Products Good volumes in most markets Prices volatile but trending downward which impacted earnings – down NZ$16 million on pcp Wire products still under pressure from low rural demand and import price pressure Rolling mill inoperative for one month while “Tem
Slide 15: Building Products: Other Businesses
15 Building Products Other Businesses Steel Distribution, Fletcher Aluminium, Tasman Sinkware and Access Flooring all performed well albeit in a subdued market Steel Distribution earnings impacted by effect of steel price decline on stock holdings Sinkware volumes aided by strong growth in exp
Slide 16: Distribution
Distribution
Slide 17: Distribution Results
17 Distribution Results Dec Dec Jun 2005 2004 2005 $m 6 Mths 6 Mths 12 Mths Sales 493 472 920 EBIT 36 42 81 Margin 7.3% 8.9% 8.8% Funds 128 109 116 Return on Funds (annualised) 56.3% 77.1% 69.8% Half Year Results – February 2006
Slide 18: Distribution
18 Distribution Strong sales up 4% on pcp in a more subdued residential market Some market share gain, but more from price increases Some margin pressure due to increased competition Cost pressure on labour, facilities and other fixed costs Excellent returns achieved despite competitive pr
Slide 19: Infrastructure
Infrastructure <S \ \\ oA. es qj AN >
Slide 20: Infrastructure Results
20 Infrastructure Results Dec ³ Dec Jun ¹ 2005 2004 2005 $m 6 Mths 6 Mths 12 Mths Sales 889 617 1441 EBIT 125 77 196 Margin 14.1% 12.5% 13.6% Funds 704 425 666 Return on Funds (annualised) 35.5% 36.2% 33.9%² 1 Includes 4 months of Amatek 2 Proforma returns based on 12 months of Amatek 3. Includes 6
Slide 21: Infrastructure: Golden Bay Cement
21 Infrastructure Golden Bay Cement Strong domestic demand Cement kiln upgraded to 2300 tpd - next increase to 2500 tpd still on track for July On completion, total cost circa $100 million and total EBITDA benefit up to +$25 million pa Half Year Results – February 2006
Slide 22: Infrastructure: Firth
22 Infrastructure Firth Readymix volumes similar to last year despite residential decline Paving and masonry volumes down 10% Earnings at 93% of pcp as a result of reduced demand in masonry products Half Year Results – February 2006
Slide 23: Infrastructure: Winstone Aggregates
23 Infrastructure Winstone Aggregates Record volumes on the back of strong roading market Improved margins from better operational performance and some price movement Hunua and Whitehall upgrades completed Half Year Results – February 2006
Slide 24: Infrastructure: Humes and Stresscrete
24 Infrastructure Humes Strong demand and margin improvement over pcp led to substantial earnings lift Market prospects for next year remain strong Stresscrete Steady performance on the back of strong construction demand Good backlog of work Half Year Results – February 2006
Slide 25: Infrastructure: Rocla Quarries & Pipeline Products
25 Infrastructure Rocla Quarries & Pipeline Products Good results despite the softer Australian market Quarry expansions in NSW and WA Growth in non-pipeline products (e.g. railway sleepers and lighting poles) is expected Half Year Results – February 2006
Slide 26: Infrastructure: International
26 Infrastructure International Fiji Small operation tracking well up on pcp Peru Another small operation trading well up on pcp Exit of both these operations is the preferred course If opportunity arises Half Year Results – February 2006
Slide 27: Infrastructure: Construction
27 Infrastructure Construction Exceptionally strong market Favourable billing period for contracts Major projects underway include Auckland University Business School Pohukura Gas Treatment Plant Central Motorway Junction Northern Busway Wellington Hospital Backlog $840 million at
Slide 28: Infrastructure: Residential
28 Infrastructure Residential House sales up slightly on last year and earnings 20% up on pcp Demand still holding Good land positions key to future earnings Building will commence at Lunn Avenue, Auckland and Jack’s Point, Queenstown in Q2 2006 Half Year Results – February 2006
Slide 29: Laminates & Panels
Laminates & Panels
Slide 30: Laminates & Panels Results
30 Laminates & Panels Results Dec Dec Jun 2005 2004 2005 $m 6 Mths 6 Mths 12 Mths Sales 505 494 948 EBIT 62 58 107 Margin 12.3% 11.7% 11.3% Funds 835 842 826 Return on Funds (annualised) 14.9% 13.8% 12.9% Half Year Results – February 2006
Slide 31: Laminates & Panels
31 Laminates & Panels Strong performance despite adverse currency for exports Improved earnings in Australia through operational improvements and margin management New Zealand results in line with pcp A number of new product initiatives Half Year Results – February 2006
Slide 32: Laminates & Panels: Joint Ventures and Growth Projects
32 Laminates & Panels Joint ventures – Wespine and Dynea performed in line with pcp Growth projects underway in Particleboard capacity expansion Componentry Resin Wespine sawmill capacity expansion Half Year Results – February 2006
Slide 33: Earnings After Tax
33 Earnings After Tax Dec Dec Jun ¹ 2005 2004 2005 $m 6 Mths 6 Mths 12 Mths EBIT 335 299 612 Interest -45 -33 -77 Tax -90 -82 -166 Minority Interests -10 -12 -22 Net Earnings 190 172 347 1. Restated for IFRS Half Year Results – February 2006
Slide 34: Simplified Balance Sheet
34 Simplified Balance Sheet Dec Jun¹ 2005 2005 NZ$m NZ$m Assets Current Assets 1445 1433 Fixed Assets 1417 1392 Intangibles & Goodwill 520 514 Provision for Deferred Taxation 45 86 Investments 126 119 Total Fletcher Building Assets 3553 3544 Liabilities Current Liabilities & Provisions 939 977 Net D
Slide 35: Key Ratios: Total Shareholder Return
35 Key Ratios Total Shareholder Return (TSR)2 % 70 61 60 50 43 40 33 30 24 20 13 10 6 0 Jun 01¹ Jun 02 Jun 03 Jun 04 Jun 05 Dec 05 (6 mths) 1. June 01 is the return for the 3 months from separation date 2. TSR calculated ((Gross Dividend Paid + Movement in Share Price)/Opening Share Price) Half Year
Slide 36: Key Ratios: Debt/Debt Plus Equity
36 Key Ratios Debt/Debt Plus Equity % 80 70 60 53.2 49.2 49.9 48.4 50 47.2 43.1 44.4 40.2 40.9 40 30 20 10 0 Jun Dec Jun Dec Jun Dec Jun Jun Dec 01 01 02 02 03 03 04 05¹ 05 1. Restated for IFRS Half Year Results – February 2006
Slide 37: Key Ratios: Return on Average Equity
37 Key Ratios Return on Average Equity¹ % 40 29.5 26.0 30 23.0 24.3 20 16.9 10 0 Jun 01 Jun 02 Jun 03 Jun 04 Jun 05² Dec 05 -10 -20 -30 -40 -50 -43.8 1. Net earnings after capital notes interest/shareholders funds 2. Restated for IFRS Half Year Results – February 2006
Slide 38: Key Ratios: Return on Average Funds
38 Key Ratios Return on Average Funds¹ 30 % 29.3 26.5 24.4 24.7 25 23.1 20 15 10 5 0 Jun 01 Jun 02 Jun 03 Jun 04 Jun 05² Dec 05 -5 1. EBIT/(Average net debt+equity+capital notes) - deferred tax asset -10 -8.6 2. Restated for IFRS Half Year Results – February 2006
Slide 39: Key Ratios: Interest Cover
39 Key Ratios Interest Cover¹ 12 (times) 10.6 9.6 10 8.8 9.0 7.6 7.8 8 7.3 5.8 6 4.6 4 3.1 2 0 Jun Dec Jun Dec Jun Dec Jun Dec Jun Dec 01 01 02 02 03 03 04 04 05 05 1. EBITDA pre unusuals/interest paid including capital note interest Half Year Results – February 2006
Slide 40: Net Debt Movement
NZ$ m 300 350 400 450 500 550 600 650 700 750 800 850 900 950 1000 Opening Debt 793 Cash from ops (331) Working capital 80 Half Year Results – February 2006 Capex 108 Divestments (6) Dividends 64 Minority 16 Distribution Net Term Debt Movement Capital Notes/Equity (34) FX on AUD Debt (4) Actual YTD
Slide 41: Operational & Strategic Update
Operational & Strategic Update
Slide 42: Strategic Agenda
42 Strategic Agenda Earnings Reliability Internal Growth External Growth Half Year Results – February 2006
Slide 43: Earnings Reliability
43 Earnings Reliability Our earnings reliability strategy has passed a major test in the period Company outlook should be cognizant of both the product and geographic diversity For New Zealand - Infometrics estimate of total work commenced For Australia – BIS estimate of total market Half Ye
Slide 44: New Zealand Value of Work Commenced
44 New Zealand Value of Work Commenced Forecast 20000 +7% 18000 +7% +4% -2% 16000 -3% +8% 14000 +8% +7% +12% +13% 12000 NZ$m 10000 +4% +2% -7% -4% -2% +2% 8000 +2% +2% +18% 0% +2% 6000 +1% 4000 0% -3% -12% +12% +11% 2000 0 01 02 03 04 05 06 07 08 09 10 Residential A&A Non-residential Infrastructure
Slide 45: Australia Value of Work Commenced
45 Australia Value of Work Commenced $b 120 Engineering construction 6% 1% 9% 100 Non-residential 12% 80 Residential 18% 18% 13% 3% 60 14% 15% 9% 1% 40 20 5% -2% -2% -3% 0 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 f f f Year ended June - current prices Source : BIS Shrapnel Buildin
Slide 46: Internal Growth Opportunities
46 Internal Growth Opportunities Significant capex spend to continue into 2006/7 – up to $100m more than depreciation Many smaller growth opportunities underway or for consideration Cement upgrade (2300-2500 tpd) Particle board upgrades – Kumeu & Dardanup Resin JV Componentry HPL Met
Slide 47: External Growth Opportunities
47 External Growth Opportunities We have the financial capacity Limited opportunities in total Our acquisition criteria narrows that further We continue to seek and evaluate options Half Year Results – February 2006
Slide 48: Outlook
48 Outlook As previously forecast Residential in New Zealand and Australia will soften further Non-residential outlook is strong for next one to two years Infrastructure spend will also be strong for at least the next three years, particularly in New Zealand where we are stronger EBIT of $63