Fletcher Building Limited · NZX:FBU
Fletcher Building — H1 FY2016 Earnings Presentation
47 slides from Fletcher Building's earnings presentation, Feb 17, 2016
Slide 1: Fletcher Building Half Year Results to 31 December 2015
Fletcher Building Half Year Results to 31 December 2015 MARK ADAMSON Chief Executive Officer GERRY BOLLMAN Chief Financial Officer 17 February 2016
Slide 2: Disclaimer
Disclaimer This Half Year Results presentation dated 17 February 2016 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
Slide 3: Agenda
Agenda Results Overview Geographic & Sectoral Analysis Divisional Performances Financial Results Strategy Update Outlook Appendix 3 Fletcher Building Half Year Results Presentation | © February 2016
Slide 4: Results Overview
Fletcher Building Half Year Results Presentation 2016 Results Overview Construction GREAT NORTH ROAD INTERCHANGE, AUCKLAND
Slide 5: Results overview
Results overview Net earnings Revenue $4,434m $ 172 m 2% Dividend per share 51% Operating earnings 19c 6% $ 288 m Earnings per share 24.9c 29% 50% 5 Fletcher Building Half Year Results Presentation | © February 2016
Slide 6: 51% increase in net earnings; operating earnings before significant items 4% lower
Results overview 51% increase in net earnings; operating earnings before significant items 4% lower Reported Results Dec 2014 Dec 2015 % NZ$m (except EPS and DPS) 6 months 6 months change Revenue 4,327 4,434 +2 Operating earnings before significant items 290 278 -4 Significant items (66) 10 NM Opera
Slide 7: Half year highlights
Half year highlights Building Products EBIT • Rocla Pipelines 25% • Aluminium 100% • Golden Bay Cement 21% • Insulation AU & NZ 107% • Winstone Wallboards 17% Distribution EBIT • NZ Building Supplies 34% • Steel Distribution NZ 13% • Steel Distribution AU 67% International EBIT • Laminex 11% • Roof
Slide 8: Results overview: Revenue
Results overview Revenue • Reported revenue $107m higher or 2% than HY15 Revenue REVENUE GROWTH RATES $4,434m Geographic segments in local currency New Zealand +6% 2% Australia -5% Rest of World -11% • Adjusting for business divestments, revenue grew 5% year-on-year 8 Fletcher Building Half Year Res
Slide 9: Results overview: Operating earnings
Results overview Operating earnings • Operating earnings before significant Operating earnings items down 4% • Result impacted by lower Residential $288m and Construction earnings 29% • Reported operating earnings (EBIT) up 29% SIGNIFICANT ITEMS Significant items related to site closures and sale of
Slide 10: Results overview: Net earnings
Results overview Net earnings • Net earnings before significant items down 7% to $159m Net earnings • Prior period significant expense items $172m of $66m EARNINGS PER SHARE 51% Earnings per share 24.9 cents +50% Earnings per share 23.0 cents -8% (before significant items) Net earnings $159m before
Slide 11: Results overview: Dividend
Results overview Dividend • Dividend not franked for Australian tax purposes or imputed for New Dividend per share Zealand tax purposes 19c6% • Dividend Reinvestment Plan will be operative for this dividend KEY DIVIDEND DATES Dividend paid 13 April 2016 Shares quoted ex dividend 22 March 2016 11 Fle
Slide 12: Results overview: Cashflow from operations
Results overview Cashflow from operations • Cashflow from operations $170m increased by $24m from HY15 Cashflow from operations ($146m) $170m • Increase is due to: 16% – Reduced general working capital – Partly offset by increased expenditure on residential land 12 Fletcher Building Half Year Result
Slide 13: Geographic & Sectoral Analysis
Fletcher Building Half Year Results Presentation 2016 Geographic & Sectoral Analysis Construction ST JOHN GUISE STADIUM, PNG
Slide 14: New Zealand operating earnings flat half on half, Australia up 10%
New Zealand operating earnings were flat half on half, while Australia increased 10% EBIT¹ NZ$m 200 200 49 54 41 24 New Zealand Australia Rest of World 6 months to 31 Dec 14 6 months to 31 Dec 15 1. Before significant items 14 Fletcher Building Half Year Results Presentation | © February 2016
Slide 15: Geographic earnings mix reflects strength of NZ market
Geographic earnings mix reflects strength of NZ market External Revenue EBIT¹ (6 months to 31 December 2015) (6 months to 31 December 2015) 14 9 19 51 35 72 New Zealand Australia Rest of World New Zealand Australia Rest of World 1. Before significant items 15 Fletcher Building Half Year Results Pres
Slide 16: New Zealand residential consents up 10% to 27,132
New Zealand residential consents up 10% to 27,132 driven by growth in Auckland Total residential consents¹ Change % year on year Peak (2004) 30% 20% 30,000 10% 0% -10% 25,000 -20% Christchurch Auckland Rest of NZ NZ Long term average (2001-2015) Auckland and Christchurch represent 58% of total conse
Slide 17: Australian residential consents rose to record levels
Australian residential consents rose to record levels over past 12 months Total residential consents¹ Dec 2014 Dec 2015 % 120,000 12 months 12 months change Stand-alone 114,690 116,549 +2 110,000 Multi 89,090 108,737 +22 100,000 Residential Total 203,780 225,286 +11 90,000 80,000 • Multi residential
Slide 18: Divisional Performances
Fletcher Building Half Year Results Presentation 2016 Divisional Performances Residential & Land Development STONEFIELDS
Slide 19: Divisional operating earnings
Divisional operating earnings Strong performance from Building Products and Distribution divisions EBIT¹ NZ$m 132 114 61 64 53 56 46 36 33 24 Building Products International Distribution Residential & Land Construction Development 6 months to 31 Dec 14 6 months to 31 Dec 15 1. Before significant ite
Slide 20: Building Products Result
Building Products Result Cement & Aggregates Dec 2014 Dec 2015 % NZ$m 6 months 6 months change Operating earnings increased 13% Gross Revenue 1,320 1,265 -4 New Zealand cement volumes up 3% External Revenue 1,069 1,021 -4 Concrete Pipes & Products EBITDA¹ 172 Ready-mix concrete volumes increased 8%
Slide 21: International Result
International Result Formica Dec 2014 Dec 2015 % NZ$m 6 months 6 months change Revenue growth in North America Gross Revenue 1,001 1,080 +8 Lower revenues and volumes in Asia and Europe External Revenue 990 1,067 +8 Restructuring costs in Europe EBITDA 92 87 -5 Laminex 11% growth in operating earnin
Slide 22: Distribution Result
Distribution Result New Zealand Building Supplies Dec 2014 Dec 2015 % NZ$m 6 months 6 months change Revenue up with growth in all trade Gross Revenue related segments 1,650 1,674 +1 Operating earnings up 34% External Revenue 1,535 1,531 - New Zealand Steel Distribution EBITDA¹ 72 79 +10 Operating ea
Slide 23: Residential and Land Development Result
Residential and Land Development Result NZ Residential Development Dec 2014 Dec 2015 % NZ$m 6 months 6 months Change Increased revenue driven by strong New Zealand market Gross Revenue 101 108 +7 Reduced sales from Stonefields, partly External Revenue 101 108 +7 offset by increased sales elsewhere i
Slide 24: Construction Result
Construction Result New Zealand Construction Dec 2014 Dec 2015 % NZ$m 6 months 6 months change Gross revenue increased 17% driven by increased construction activities Gross Revenue 640 748 +17 Operating earnings lower due to the External Revenue 632 707 +12 timing of projects EBITDA¹ 50 40 -20 Total
Slide 25: Financial Results
Fletcher Building Half Year Results Presentation 2016 Financial Results Building Products CSP PACIFIC
Slide 26: Operating cashflow
Operating cashflow Dec 2014 Dec 2015 % NZ$m 6 months 6 months change Operating earnings before significant items 290 278 -4 Depreciation and amortisation 103 97 -6 Less cash tax paid (29) (67) NM Less interest paid (63) (60) -5 Provisions, significant items and other (19) (40) NM Results from operat
Slide 27: Net debt movement
Opening net debt 1,726 NZ$m Cash from operations (pre working capital) (208) Working capital (47) Investment in land 85 Growth capex 45 77 Stay in business capex 27 Fletcher Building Half Year Results Presentation | © February 2016 Divestments (47) Underlying net debt stable Dividends 118 Distributi
Slide 28: Capital expenditure
Capital expenditure NZ$m 325 Dec 2014 Dec 2015 % NZ$m 6 months 6 months change Stay-in-business 72 77 +7 275 Growth 44 45 +2 Total Capex 116 122 +5 Depreciation 103 97 44 103 45 97 72 77 HY15 HY16 FY16 Stay in Business Depreciation Growth 2016 Forecast Capital Expenditure • For FY16, Capital expendi
Slide 29: Key ratios
Key ratios Total Shareholder Return (TSR) Debt/Debt Plus Equity Percentage Percentage 51 37 33 33 9 32 32 Jun-12 Jun-13 Jun-14 Jun-15 Dec-15 -3 -6 Jun-12 Jun-13 Jun-14 Jun-15 Dec-15 -27 Return on Average Funds Net Debt/EBITDA Percentage¹ Times 12 13 11 2.62 10 10 2.27 2.37 1.99 2.02 Jun-12 Jun-13 Ju
Slide 30: Debt profile
Debt profile Funding and Maturity Profile December 2015 Undrawn credit lines of $382m and cash of $221m 178 Average maturity of debt is 3.7 years Approximately 54% of all borrowings have fixed interest rates 372 204 Average interest rate on debt is 5.3% 297 Mix of currency (hedged) 257 − NZ$ 36% 210
Slide 31: 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 31 December 2015: 33% Leverage • Target Net Debt to EBITDA of 2.0 to 2.5 times • As at 31 December 2
Slide 32: Strategy Update
Fletcher Building Half Year Results Presentation 2016 Strategy Update Construction NGAURANGA TO AOTEA UPGRADE, WELLINGTON
Slide 33: Fletcher Building strategy is built on 4 Pillars
Fletcher Building strategy is built on 4 Pillars People • Safety Create a great place to work • Leadership, Capability and Change Agility • High-Performance Culture Customers • Digital Leadership Deliver what they value • Pricing & Cost-to-Serve • Innovation and Solutions Efficiency • Operations Exc
Slide 34: Our aspiration: top-quartile shareholder value creation
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 35: Update on strategic growth agenda
Update on strategic growth agenda Portfolio clarity • Rocla Quarries assets divested • Conditional purchase of Higgins • JV of Fletcher Aluminium windows and doors business with NALCO Driving efficiency • Appointment of Chief Transformation Officer • Transformation office established • Further inves
Slide 36: New divisional structure will support greater focus
New divisional structure will support greater focus on business performance Building Products: International: Distribution: Residential & Land Construction: Matt Crockett Francisco Irazusta Dean Fradgley Development: Graham Darlow Steve Evans • GBCWinstone (NZ) • Formica Asia • PlaceMakers (NZ) • Fl
Slide 37: Group Transformation Office established
Group Transformation Office established to concentrate growth & efficiency functions Chief Transformation Officer Centres of Excellence Growth Initiatives Cost Reduction Initiatives Manufacturing Commercial: Working Capital: Supply Chain • Price dispersion and leakage Accounts payable – standardise
Slide 38: Outlook
Fletcher Building Half Year Results Presentation 2016 Outlook Construction HIGGINS
Slide 39: Outlook FY16
Outlook FY16 New Zealand • Residential construction activity expected to continue at above average levels • Net migration and Auckland housing demand key drivers • Commercial construction activity is tracking the upward trend in consents • Government infrastructure spending expected to remain at or
Slide 40: Outlook FY16
Outlook FY16 North America • Activity levels in residential and commercial should remain broadly consistent with prior year Europe • Continued mixed conditions expected with a weak economic outlook Asia • Further growth in South-East Asia, China to likely remain highly competitive 40 Fletcher Buildi
Slide 41: Financial Outlook FY16
Financial Outlook FY16 Guidance given at Annual Shareholder’s Meeting reaffirmed: • Earnings before interest, tax and significant items expected to be in the range of $650 million to $690 million • Excludes expected post-tax gain of $85 million from sale of Rocla Quarries assets 41 Fletcher Building
Slide 42: Fletcher Building Half Year Results to 31 December 2015
Fletcher Building Half Year Results to 31 December 2015 MARK ADAMSON Chief Executive Officer GERRY BOLLMAN Chief Financial Officer 17 February 2016
Slide 43: Appendix: NZ construction activity expected at record levels
Appendix: New Zealand construction activity expected to continue at record levels Value of all construction (historic and forecast) NZ$bn Source: Statistics NZ/BRANZ/Pacifecon 43 Fletcher Building Half Year Results Presentation | © February 2016
Slide 44: Appendix: Australian consents by state
Appendix: Australian consents by state Change in housing approvals – by state Consents 12 months ended 31 Dec 2015 vs 2014 40,000 250,000 35,000 200,000 30,000 25,000 150,000 20,000 100,000 15,000 10,000 50,000 5,000 0 0 Sep-14 Dec-14 Sep-13 Sep-15 Jun-13 Dec-13 Mar-14 Jun-14 Dec-15 Mar-15 Jun-15 NS
Slide 45: Appendix: Sectoral exposure
Appendix: Sectoral exposure Exposures based on revenues Residential Geographical Exposure by Sector¹ (New/A&A)* Commercial Infrastructure Other New Zealand 44% 29% 14% 13% Australia 51% 28% 9% 12% Rest of World 44% 49% 0% 7% Total Manufacturing 47% 33% 9% 11% New Zealand 80% 18% 0% 2% Australia 59%
Slide 46: Appendix: Building consent data
Appendix: Building consent data Dec 2013 Dec 2014 Dec 2015 15/14 NZ$m 12 months 12 months 12 months % Mvmt New Zealand Residential Consents 21,290 24,717 27,132 +10 Non Res WPIP ($m) 4,890 5,811 6,505 +12 Infrastructure WPIP ($m) 7,494 7,182 7,087 -1 Australia Source: Infometrics/Statistics NZ Resid
Slide 47: Appendix: Formica earnings impacted by challenges in Europe
Appendix: Formica earnings impacted by challenges in Europe Dec 2014 Dec 2015 % EBIT (NZ$m) 6 months 6 months change North America 20 21 +5 Asia 11 12 +9 Europe (2) (17) NM Formica EBIT pre-corporate costs 29 16 -45 Formica corporate costs (9) (10) +11 Total EBIT 20 6 -70 47 Fletcher Building Half Y