What is different about - Fletcher Building...What is different about Fletcher Building?...

What is different about Fletcher Building?Construction

10%80%

10%

Concrete DistributionLaminates &

PanelsBuildingProducts

• 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 shares

• Control of the distribution channels is the key to these market shares

Mark BinnsChief Executive, Construction

Analysts BriefingSeptember 2004

Construction Division

http://www.dempseymorton.co.nz/

http://www.winstonehomes.co.nz/

http://www.spaceline.co.nz/

http://www.fyfe.co.nz/

http://www.kingsleyhomes.co.nz/

http://www.astonmarsh.co.nz/

http://www.nzh-homes.co.nz/

The Fletcher Construction Company

• Backlog: $200m plus UOA Business School ($130m)

say $330m

• Turnover FY04 $350m

• Employees 437

• Major Projects: Universities, Sky City / Grand Hotel, Northlands

NZ COMMERCIAL BUILDING

• Backlog $183m


• Employees 383

• Major Projects Ports, Bridges, Roading

CIVIL & INDUSTRIAL INFRASTRUCTURE

• Backlog $86m


• Employees 1249

• Major Projects Ports, Bridges, Commercial, Hotels

BUILDING & ENGINEERING IN THE SOUTH PACIFIC

• 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

DOMESTIC BUILDER

All Building Consents

0

2,000

4,000

6,000

8,000

10,000

12,000

1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

June Year End

$mill

ions NON RESIDENTIAL

RESIDENTIAL (INCLUDING APARTMENTS)

WHERE WE HAVE BEEN

ALL BUILDING CONSENTS

Source: NZ Statistics

ForecastNew Zealand value of work done

?

Non Residential

A & A

Residential

NZ$ million

0

2000

4000

6000

8000

10000

12000

14000

97 98 99 00 01 02 03 04 05 06

+17% +5%-5%

+10% +10%+18%

+10% +14%

+8%+22% +5%

-7%+25% -3%

-24%

Infra-structure

Non-Residential

A&A

Residential

VALUE OF WORK DONE

FORECASTS

Source: INFOMETRICS

• Margins will soften – off historic highs.

• Solid demand is expected to continue

for well-located product.

• The key issue is land-delivery.

RESIDENTIAL

IMPLICATIONS FOR HOUSING

• 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

affect outlook.

IMPLICATIONS FOR COMMERCIAL BUILDING

$2.8 billion

IMPLICATIONS FOR COMMERCIAL BUILDING

$1billion

Private developers Private developers -- commercialcommercial

Public sector infrastructure

Source: Fletcher Construction estimates

Projects >$25m with 2005-06 start

• Roading dominates

• $4.3 billion Transit spend over next decade.

• $2.3 billion in Auckland

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

IMPLICATIONS FOR CIVIL & INDUSTRIAL INFRASTRUCTURE

Power

• Fiji resurgence based on growth in tourism.

• 30% of work sought is aid-funded

FUTURE WORK IN THE SOUTH PACIFIC

NZ remains a ‘land of opportunity’.

• Strong market

• South Island office for Engineering

• Building under-represented in

some areas.

GROWTH ASPIRATIONS

Auckland Region Residential Sections Average Sale Price Vs No. of Sales

June 1990 - December 2003

-

200

400

600

800

1,000

1,200

1,400

1,600

Jun-9

0Dec

-90Ju

n-91

Dec-91

Jun-9

2Dec

-92Ju

n-93

Dec-93

Jun-9

4Dec

-94Ju

n-95

Dec-95

Jun-9

6Dec

-96Ju

n-97

Dec-97

Jun-9

8Dec

-98Ju

n-99

Dec-99

Jun-0

0Dec

-00Ju

n-01

Dec-01

Jun-0

2Dec

-02Ju

n-03

Dec-03

Date

Tota

l No.

of S

ales

$-

$50,000

$100,000

$150,000

$200,000

$250,000

Sale

Pric

e

No. Sales

Weighted Av.

Auckland land is constrained

RESIDENTIAL

DOMESTIC GROWTH

Source: Seagar & Co Valuers

Lunn Ave opportunity

• Stage 2. Balance of residential lots and option on

apartment land for 4-5 blocks in negotiation.

RESIDENTIAL

DOMESTIC GROWTH

Lunn Ave opportunity

• Stage 2. Land supplied 2005 - 2011

RESIDENTIAL

DOMESTIC GROWTH

• Jacks Point, Queenstown

RESIDENTIAL

DOMESTIC GROWTH

Growth in NZ-based employees

People

DELIVERING GROWTH – KEY ISSUES

2002645

2003780

2004887

Construction GroupNumber of NZ Employees

500

550

600

650

700

750

800

850

900

30-Jun-02 30-Jun-03 30-Jun-04

Continued industry leadership

• University recruitment

• School leavers

• Cadetships


Continued industry leadership

• Environment

• Drugs & alcohol


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!

Analysts BriefingSeptember 2004

Ralph WatersChief Executive Officer

Andrew RedingChief Executive, Building Products

Results RecordJune* June* June* June June2001 2002 2003 2004 2004

$m's Pro-forma excl. Tasman incl. Tasman

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 FWP & SPH to Laminates and Panels** excludes inter-company revenue*** Pro Forma return based on full 12 months of Tasman

2Presentation to Analysts – September 2004

Revenue

619

137

638

145927

186

0

200

400

600

800

1000

1200

2002 2003 2004

Revenue External vs Internal

External Internal


How we have done it?Organic growth

Competent management

Focus on performance

EBIT, Funds, CashKPI’s (i.e. OEE, IFOTIS)

Strong market

Cont…


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)


• 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 and Asia.

100 105

121136

40

60

80

100

120

140

Volu

mes

2001 2002 2003 2004

Year

Domestic Plasterboard Volumes (indexed to 2001)Domestic Market Share - Imported board

01234567

2001 2002 2003 2004

Year

%

Market share


• 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 pending).


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 both housing and light commercial applications.

New Zealand• Leading New Zealand manufacturer of glasswool insulation, foil laminates and

building papers, with plants in Auckland and Christchurch.• Record sales and production levels achieved in 2004 financial year.• The 2 year old PinkFitTM installation service grew to 14 franchisees nationally and

installed 17% of pink batt sales.• Synergies realisation has led to closure of Tasman Foil plant and consolidation

into FBL’s existing Duroid operation. Now reporting to TINZ.


Insulation sales volumes -Australasia

100 112

130

152

40

60

80

100

120

140

160

Vol

umes

2001 2002 2003 2004

Year

Glasswool Volumes (indexed to 2001)


100

132156

177

0

50

100

150

200

2001 2002 2003 2004

Sink sales Volumes (indexed to 2001)

• Second largest manufacturer of sinkware in Australia.

• Record exports in 2004, particularly to the USA.

• No. 1 in Australia of Access flooring systems.


The Pacific Steel Group value chain

37 kt

260ktscrap Mesh

35 kt68 kt

Other Domestic

91 kt

Exports(ferrous & non-ferrous)

Exports

Customers

Sims50:50 JV

PacificSteel

(EAF and rolling mill)

Pacific Wire

FletcherReinforcing


Pacific Steel GroupPacific Steel

Gross Domestic Reinforcing Bar Selling Prices

800

850

900

950

1,000

1,050

1,100

1,150

1,200

1999 2000 2001 2002 2003 Q1 04 Q2 04 Q3 04 Q4 04

Delivered per annum 99-03, List per quarter 2004

NZ

$/

ton

ne

Sims HMS Standard Scrap Price5 Year Trend by Quarter

0

50

100

150

200

250

300

350

Mar-99

Jun-99

Sep-99

Dec-99

Mar-00

Jun-00

Sep-00

Dec-00

Mar-01

Jun-01

Sep-01

Dec-01

Mar-02

Jun-02

Sep-02

Dec-02

Mar-03

Jun-03

Sep-03

Dec-03

Mar-04

Jun-04

Jul-04

US$

/tonn

e

-

50

100

150

200

250

300

350

400

450

500

NZ$

/tonn

e

USD/t NZ$/t

Innovation

• Electro-Magnetic wiping

• Zinc Aluminium wire

• Coloured wire

• Reid Bar

• Galvanised Rebar


• 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 distribution facilities contributed to improved warehousing and freight costs per tonne.

Freight Cost Per Tonne

12 Month Period

$ / T

onne

Warehousing Cost Per Tonne

12 Month Period

$ / T

onne

03-04 Trend90

Average 02-03100

03-04 Trend85

Average 02-03100


• 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.

100 9586 81

0

20

40

60

80

100

2001 2002 2003 2004

Zinc Pick up rates (indexed to 2001)

10089 86 83

0

20

40

60

80

100

2001 2002 2003 2004

Average labour cost per tonne (indexed to 2001)


• 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 (65m) for longest roof ever manufactured in NZ.


• A new R&D facility to develop new products for new market niches is under construction and will be commissioned in February 2005.

• Focused on flexible small run manufacturing offering minimum of a house lot of a single colour.

• Leading manufacturer of pre-painted metal products used in the manufacture of both residential and commercial roofing, cladding, and rainwater systems.

Shop Order Analysis

0

1

2

3

4

5

6

7

2002 2003 2004

Ave

rage

Sho

p O

rder

Siz

e (M

T)

Local MT/Shop Order Export MT/Shop OrderTotal MT/Shop Order


• 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 and in new locations.

• Growth of metal tile sales has been significant.

100 97114

134

020406080

100120140

2001 2002 2003 2004

Metal Roof Tile Volumes (indexed to 2001) Export margins - NZ$

0

10

20

30

40

50

2001 2002 2003 2004

Year

% m

argi

n


Key issues going forward

Sustainable growth in earnings.

Reducing volatility by decreasing exposure to NZ residential cycle.


Key StrategiesBe 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 products and technologies.


Operational excellence – e.g. Aluminium

Extrusion OEE 2001 - 2004

0%

10%

20%

30%

40%

50%

60%

70%

80%

Jul-0

1Aug

-01Sep

-01Oct-

01Nov

-01Dec

-01Ja

n-02

Feb-02

Mar-02

Apr-02

May-02

Jun-0

2Ju

l-02

Aug-02

Sep-02

Oct-02

Nov-02

Dec-02

Jan-0

3Feb

-03Mar-

03Apr-

03May

-03Ju

n-03

Jul-0

3Aug

-03Sep

-03Oct-

03Nov

-03Dec

-03Ja

n-04

Feb-04

Mar-04

Apr-04

May-04

Jun-0

4

Total IFOTIS, % - Financial Year

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

1999-2000 2000-2001 2001-2002 2002-2003 2003-2004Fiancial Year

IFO

TIS

Total IFOTIS, %


Where the Tasman Acquisition fits

Insulation Insulation AHI DecraNZ Australia Roofing Roofing

Infill opportunity

Industry rationalisation

Technology

Product champion


Some examples of technology and product champion plays


Fiberock

50/50 JV established to commercialise this technology in Asia, Australia and New Zealand.

Specialist uses complement plasterboard.

0

50

100

150

200

250

300

Dec 03 Jun 04 Dec 04 Jun 05

6 month periods, ending

Sale

s Vo

lum

e In

dex

Sales Forecast

Acoustic floor underlay and impact resistant wall linings being released in New Zealand, Hong Kong, Singapore, Australia and then Japan.

Powerscape Fiberock Products


EMWElectro Magnetic Wiping is a process of controlling the zinc coat weight on wire.Advantages:

Zinc savingsProductivity, higher line speedsQuality improvement

Gas Gravel controlled zinc application

The characteristics of EMW has lead to savings of up to 25% in zinc usage,

EMW controlled zinc application


Product Champion – Metal Roof tiles

Value proposition defined by market:

LightweightRe-roof costs, construction flexibility, faster to install

Strengthearthquake, hail

Product performanceFade resistance, weather tightness

AestheticsColour, profiles.


FBL PlantsLicence Plants

Ex-Licence PlantsGLOBALGLOBALOPERATIONSOPERATIONS

AHI Sales Offices

Los Angeles

Auckland

Chile

DenmarkBelgium

Indonesia

Malaysia

South Africa

AlgeriaMiddle East

England

SloveniaSwitzerland

Argentina

Japan

Africa

Australia


Metal Roof tiles

Optimal plant believed to be between 9-11m tiles.

Expanding to meet demand.

Huge untapped market.


Presentation to Analysts - 8th September 2004

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 Fletcher Building Limited in November 2002 and subsequently integrated with the existing Scott Panel and Hardware and Fletcher Wood Panels operations.

LEADING BRANDS

LEADING MARKET POSITIONS

High Pressure Laminate 65%Decorated MDF 70%Decorated Particleboard 44%

Raw MDF 26%Raw Particleboard 21%

Market Shares

VERTICAL INTEGRATION

Forest Waste and Thinnings

Sawmill Waste

Board Plant

Low Pressure Laminate Plant

High Pressure Laminate PlantSales & Distribution Centre

(Metro)

Branch (Regional)

Customer

Major Sales & Distribution Sites

Major Manufacturing Facilities

MAJOR LOCATIONSMAJOR LOCATIONS

Revenue Growth 96/97 – 03/04 $NZm

0100200

300400500600700

800900

1000

96/97 97/98 98/99 99/00 00/01 01/02 02/03 03/04

Acquisition of Formica Sept 1999

Acquisition of Wesfi Feb 2001

Inclusion of FWP & SPH

into TLG from 1/7/03

Note 1

Note 1: Underlying sales in $A were 5.5% above 01/02 but appreciation of the $NZ against the $A in 02/03 has the effect of reducing revenue on conversion to $NZ. Sales are converted from $A to $NZ at average exchange rates each year

1997Laminex Industries

EBIT

1998 Formica

EBIT

205

2001 Wesfi Ltd

EBIT

2003 FWP & SPH

EBIT

10

95

14

EBIT Growth June 1997 - June 2004$NZm

NOTES:

1. FWP & SPH = Fletcher Wood Panels and Scott Panel and Hardware

2. Australian EBIT’s converted to $NZ for Laminex Industries, Formica and Wesfi Ltd

46

Synergies/ Growth/Other

2004 TLG EBIT

Revenue by Segment 2003/04

Export8%

Residential28%

Commercial34%

Alterations & Additions30%

Revenue by Product 2003/04

Exports (Mainly Raw MDF)8%

High Pressure Decorative Laminate

15%

Low Pressure Decorative Laminate

28%White/Raw MDF12%

White/Raw Particleboard19%

Other Products18%

Revenue by Major Region 2003/04

Exports8%

New Zealand24%

W.A.13%

QLD15%

VIC/TAS18%

NSW/ACT17%

S.A.5%

Customer Size Review

Active Customers grouped by annualised sales

157 62 11 5 7 11 1 3

10,955

-

2,000

4,000

6,000

8,000

10,000

< 0.5 0.5 -1 1-2 2-3 3-4 4-5 5-10 10-15 15-20Annualised Sales ($NZm)

# of

cus

tom

ers

12,000

Competitor Capability

TLG

Aus/NZ

CHH

Aus/NZ

Parbury

Aus/NZ

Nelson Pine

Aus/NZ

D&R

Henderson Australia

Borg

Australia

Duropal

Australia

Prime Panels

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

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

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

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

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 releases, management

commentary and analysts presentations, including those relating to the 2004

annual results, are all available on the company’s website and contain additional

information about matters which could cause Fletcher Building’s performance to

differ from any forward looking statements in this presentation. Please read this

presentation in the wider context of material previously published by Fletcher

Building.

What is different about - Fletcher Building...What is different about Fletcher Building?...

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