Fletcher Building Limited · NZX:FBU
Fletcher Building — FY2006 Earnings Presentation
52 slides from Fletcher Building's earnings presentation, Aug 9, 2006
Slide 1: Fletcher Building Limited Annual Results 2006
Fletcher Building Limited Annual Results 2006 9 August 2006
Slide 2: Disclaimer
Disclaimer This annual results presentation dated 9 August 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 that
Slide 3: Highlights
3 Highlights NPAT $379 million Geographic and product market diversification continue to deliver improved earnings despite softer EPS 81.3 cps markets Increased Returns Total dividend increased 25% to To Shareholders 40 cps. TSR of 40% for the 12 months Progress With $100m+ committed and in progress
Slide 4: Summary of Results
4 Summary of Results June June % 2006 2005 YOY $m 12 Mths 12 Mths Change Revenue 5520 4636 +19 EBITDA 819 742 +10 EBIT 675 612 +10¹ Net Earnings 379 347 +9 EPS (cents) 81.3 77.6 +5 Dividend cps 40.0 32.0 +25 1 If EBIT was adjusted for full year of Amatek in 2005, the YOY change becomes +3% Annual Re
Slide 5: Geographic Diversity
5 Geographic Diversity Operating Earnings 12 Months June 06 12 Months June 05 Other Other 4% 4% Australia Australia 31% 22% NZ NZ 65% 74% Annual Results – August 2006
Slide 6: Market Diversity
6 Market Diversity Operating Earnings 12 Months June 06 12 Months June 05 Distribution Distribution 11% 13% Infrastructure Infrastructure 37% 33% Laminates Laminates & Panels & Panels 17% 17% Building Products Building Products 35% 37% Annual Results – August 2006
Slide 7: Strong Earnings In All Divisions
7 Strong Earnings In All Divisions 300 June-05 June-06 250 200 EBIT $m 150 255 227 235 100 196 50 107 116 81 75 0 Building Products Distribution Infrastructure Laminates & Panels Annual Results – August 2006
Slide 8: Building Products
Building Products
Slide 9: Building Products Results
9 Building Products Results June June ¹ % 2006 2005 YOY $m 12 Mths 12 Mths Change Revenue 1711 1324 +29 EBIT 235 227 +4 Margin 13.7% 17.1% -20 Funds 972 883 +10 Return on Funds 24.2% 27.7% ² -13 1 Includes 4 months of Amatek 2 Proforma returns based on 12 months of Amatek Annual Results – August 200
Slide 10: Building Products: Plasterboard
10 Building Products Plasterboard Volumes down 5% on pcp due to New Zealand residential slowdown but EBIT maintained at 97% of pcp. Market share maintained and performance boards held at 46% of volume. New $10 million distribution centre in Auckland with planning underway for a similar centre
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 merger, but now being regained. Synergies being realised ahead of original plan. New Zealand earnings ahead of pcp. Annual Results – August 2006
Slide 12: Building Products: Rollforming
12 Building Products Rollforming A very pleasing result with Stramit, Dimond and Pacific Coil Coaters all well up on pcp. Stramit IT implementation completed successfully. Annual Results – August 2006
Slide 13: Building Products: Metal Roof Tiles
13 Building Products Metal Roof Tiles Good demand in export markets with New Zealand earnings up on pcp. US earnings down NZ$5m on pcp as last year had exceptional ‘hailstorms related’ upside. Good strong export demand. Malaysian plant operating well. Annual Results – August 2006
Slide 14: Building Products: Long Steel Products
14 Building Products Long Steel Products Good volumes in all markets. Still subject to price volatility. Production impacted by installation of Tempcore and electricity outage. Results down $12m on pcp but earnings still above WACC. Annual Results – August 2006
Slide 15: Building Products: Other Businesses
15 Building Products Other Businesses Steel distribution, Fletcher Aluminium, Tasman Sinkware and Access Floors all performed well in tighter markets and collectively were 90% of pcp. Standout performance from Sinkware which was ahead of pcp in a very tough Australian residential market. Annual
Slide 16: Distribution
Distribution
Slide 17: Distribution Results
17 Distribution Results June June % 2006 2005 YOY $m 12 Mths 12 Mths Change Gross Revenue 956 920 +4 EBIT 75 81 -7 Margin 7.8% 8.8% -11 Funds 132 116 +14 Return on Funds 56.8% 69.8% -19 Annual Results – August 2006
Slide 18: Distribution
18 Distribution Very pleasing result with earnings only 7% behind exceptional pcp in a very competitive New Zealand residential market. Market share gain offset margin and cost pressures. New stores opened / In progress Seaview (refit) ▪ Papakura (Jul) Kerikeri ▪ Wanaka (Aug) Invercargil
Slide 19: Infrastructure
Infrastructure <S \ \\ oA. es qj AN >
Slide 20: Infrastructure Results
20 Infrastructure Results June June ¹ % 2006 2005 YOY $m 12 Mths 12 Mths Change Revenue 1823 1441 +27 EBIT 255 196 +30 Margin 14.0% 13.6% +3 Funds 766 660 +16 Return on Funds 33.3% 34.2% ² -3 1 Includes 4 months of Amatek 2 Proforma returns based on 12 months of Amatek Annual Results – August 2006
Slide 21: Infrastructure: Golden Bay Cement
21 Infrastructure Golden Bay Cement Strong domestic demand with EBIT up 11% on pcp despite disruption from expansion project. Cement kiln upgrade programme to be completed in September 2006. On completion, total cost circa $100m with EBITDA benefits of $25m+ pa. Final stage Gas Train Modific
Slide 22: Infrastructure: Firth
22 Infrastructure Firth Ready mix volumes similar to last year despite residential slowdown. Paving and masonry volumes were down. Earnings 94% of pcp due to reduced demand in masonry. Annual Results – August 2006
Slide 23: Infrastructure: Winstone Aggregates
23 Infrastructure Winstone Aggregates Record volumes on back of strong roading market. Improved results from better quarry management and price increase. Upgrades completed at Hunua, Whitehall and Helensville. Annual Results – August 2006
Slide 24: Infrastructure: Humes and Stresscrete
24 Infrastructure Humes Strong margin management led to substantial lift over pcp. Good prospects remain. Stresscrete Disappointing performance during period. Solid backlog of work. Annual Results – August 2006
Slide 25: Infrastructure: Rocla Quarries & Pipeline Products
25 Infrastructure Rocla Quarries & Pipeline Products Overall, pleasing results ahead of pcp in a softer Australian market. Quarry expansions in NSW. Growth in non-pipeline products and A$116 million railway sleeper contract obtained. Annual Results – August 2006
Slide 26: Infrastructure: International
26 Infrastructure International Fiji Small operation well up on pcp. Peru A good performance on the back of a strong mining sector and well up on pcp. Exit is the preferred course for both of these operations Annual Results – August 2006
Slide 27: Infrastructure: Construction
27 Infrastructure Construction Excellent results in a strong market. Results benefited from the close out of some major projects. Major projects underway at 30 June: Auckland University Business School Central Motorway Junction North Shore Busway Wellington Hospital Stamford Plaza Up
Slide 28: Infrastructure: Construction (cont.)
28 Infrastructure Construction (cont.) Backlog $800m+ at June 2006. UK land sales contributed $10m EBIT during the period. Annual Results – August 2006
Slide 29: Infrastructure: Residential
29 Infrastructure Residential House sales similar to last year but earnings up 14% on pcp. Demand still holding. Commenced building on Lunn Avenue, Auckland and Queenstown. Good land positions key to future earnings. Annual Results – August 2006
Slide 30: Laminates & Panels
Laminates & Panels
Slide 31: Laminates & Panels Results
31 Laminates & Panels Results June June % 2006 2005 YOY $m 12 Mths 12 Mths Change Revenue 1027 948 +8 EBIT 116 107 +8 Margin 11.3% 11.3% Funds 920 789 +17 Return on Funds 12.6% 13.6% -7 Annual Results – August 2006
Slide 32: Laminates & Panels
32 Laminates & Panels Strong performance despite generally difficult market conditions. Overall improved earnings despite many input cost increases in both Australia and New Zealand. Acquired O’Briens in May 2006. New products introduced throughout the year. New wood fibre agreement conclu
Slide 33: Laminates & Panels: Growth Projects
33 Laminates & Panels Sawmilling and resin manufacturing joint ventures performed well and in line with pcp. Growth projects underway include: Particle board capacity expansion Componentry Resin manufacture Wespine sawmill capacity expansion. Annual Results – August 2006
Slide 34: Earnings After Tax
34 Earnings After Tax June December June¹ 2006 2005 2005 $m 12 Mths 6 Mths 12 Mths EBIT 675 335 612 Interest -88 -45 -77 Tax -189 -90 -166 Minority Interests -19 -10 -22 Profit After Tax 379 190 347 1. Restated for IFRS Annual Results – August 2006
Slide 35: Simplified Balance Sheet
35 Simplified Balance Sheet June June ¹ 2006 2005 NZ$m NZ$m Assets Current Assets 1650 1433 Fixed Assets 1569 1392 Intangibles & Goodwill 597 514 Provision for Deferred Taxation 29 86 Investments 129 119 Total Fletcher Building Assets 3974 3544 Liabilities Current Liabilities 1113 977 Net Debt 1061
Slide 36: Key Ratios: Total Shareholder Return
36 Key Ratios Total Shareholder Return (TSR)2 % 70 61 60 50 43 40 40 33 30 24 20 10 6 0 June 01¹ June 02 June 03 June 04 June 05 June 06 1. June 01 is the return for the 3 months from separation date 2. TSR calculated ((Gross Dividend Paid + Movement in Share Price)/Opening Share Price) Annual Resul
Slide 37: Key Ratios: Debt/Debt Plus Equity
37 Key Ratios Debt/Debt Plus Equity 60 49.2 49.9 50 43.1 44.4 40.2 40 37.1 30 20 10 0 June 01 June 02 June 03 June 04 June 05¹ June 06 1. Restated for IFRS Annual Results – August 2006
Slide 38: Key Ratios: Return on Average Equity
38 Key Ratios Return on Average Equity¹ % 40 29.5 24.6 30 24.3 23.0 20 16.9 10 0 June 01 June 02 June 03 June 04 June 05² June 06 -10 -20 -30 -40 -50 -43.8 1. Net earnings after capital notes interest/shareholders funds 2. Restated for IFRS Annual Results – August 2006
Slide 39: Key Ratios: Return on Average Funds
39 Key Ratios Return on Average Funds¹ 35 % 30 29.3 26.1 24.4 24.7 25 23.1 20 15 10 5 0 June 01 June 02 June 03 June 04 June 05² June 06 -5 -10 -8.6 1. EBIT/(Average net debt+equity+capital notes) - deferred tax asset 2. Restated for IFRS Annual Results – August 2006
Slide 40: Key Ratios: Interest Cover
40 Key Ratios Interest Cover¹ 12 (times ) 10 9.6 9.3 7.8 8 7.3 5.8 6 4 3.1 2 0 June 01 June 02 June 03 June 04 June 05 June 06 1. EBITDA pre unusuals/interest paid including capital note interest Annual Results – August 2006
Slide 41: Net Debt Movement
NZ$ m 0 500 1000 1500 Opening Debt 1140 Cash from ops (639) Annual Results – August 2006 80 Working capital Capex 266 Divestments (6) Net Debt Movement Dividends 128 Minority 26 Distribution FX on AUD Debt 66 Year End Debt 1061 41
Slide 42: Operational & Strategic Update
Operational & Strategic Update
Slide 43: Strategic Agenda
43 Strategic Agenda Earnings Reliability Internal Growth External Growth Annual Results – August 2006
Slide 44: Earnings Reliability
44 Earnings Reliability Company outlook should be cognisant of both the product and geographic diversity. For New Zealand – Infometrics estimate of total volume of work commenced. For Australia – BIS estimate of total volume of work commenced. Annual Results – August 2006
Slide 45: New Zealand Value of Work Commenced
45 New Zealand Value of Work Commenced Forecast +5% 20000 +6% +8% 18000 0% 0% +6% 16000 +6% +7% 14000 +4% +5% 12000 +9% NZ$m 0% 10000 +1% -3% -8% +2 8000 0% +5% +2% +9% +6% 6000 4000 +18% +11% -11% +3% -3% 2000 0 01 02 03 04 05 06 07 08 09 10 11 Residential A&A Non-residential Infrastructure Source
Slide 46: Australia Value of Work Commenced
46 Australia Value of Work Commenced $b 120 3% 6% Engineering construction 15% 100 Non-residential 12% Residential 3% 80 12% 28% 19% 60 8% 3% 19% 15% 40 20 6% 1% -1% 3% 0 Year ended June 01 02 03 04 05 06 e 07 f 08 f Source : BIS Shrapnel Building in Australia Update Annual Results – August 2006
Slide 47: Internal Growth
47 Internal Growth Significant capex to continue in 2007 – up to $150m more than depreciation 350 300 250 158 200 144 150 105 100 122 147 50 109 0 2005 2006 2007F Stay in Business Growth & Productivity Annual Results – August 2006
Slide 48: Internal Growth Opportunities
48 Internal Growth Opportunities Whilst there has been no major acquisitions this year, we have continued to invest significantly in existing operations. Significant capex spend continues into 2006/07. Projects include: Completion of cement upgrade Particle board upgrades at Kumeu & Dardan
Slide 49: External Growth Opportunities
49 External Growth Opportunities We are still keen to grow through acquisition of companies within the building materials sector, with the objective of strengthening our existing operations, expanding our product portfolio and improving our geographic diversity. We are continually evaluating opp
Slide 50: Outlook
50 Outlook New Zealand residential and non residential markets are forecast to soften over the next two years, offset in part by additions and alterations and infrastructure activity. The surprise for New Zealand will be the strength of the A&A market as a result of increased spend on ‘weather t
Slide 51: Outlook
51 Outlook Both Queensland and Western Australia are forecasting strong overall activity going forward. Infrastructure spend will also be strong for at least the next three years, particularly in New Zealand where we are strongest. Expect on balance to have another satisfactory full year resul
Slide 52: o)) = x) = ea)
o)) = x) = ea)