Fletcher Building H1 2017 Results Announcement
• Revenue up 4% to $4,613m;
• Operating earnings before significant items up 12% to $310m;
• Operating earnings from the Distribution and International divisions both up more than 30%;
• Construction result impacted by losses on a major project;
• Net earnings before significant items up 18% to $187m;
• Interim dividend up 5% to 20 cents per share.
Auckland, February 22, 2017 – Fletcher Building today reported net earnings after tax of $176 million, a 2% increase
compared with $172 million in the prior corresponding period.
The result included a net loss from significant items of $11 million due to costs associated with site closures in Rocla
Products and Fletcher Insulation. Net earnings excluding significant items were 18% higher at $187 million.
Operating earnings (earnings before interest and tax and significant items) were $310 million, up 12% on the $278 million
reported in the prior corresponding period. This reflected a sustained improvement across almost all parts of the portfolio,
signalling the benefit that businesses are getting from a strong New Zealand economy, improved customer propositions,
operational efficiencies, cost reductions, and in some cases organisational restructuring.
Revenue for the period of $4,613 million was 4% higher, reflecting sales growth in the New Zealand businesses and the
acquisition of the Higgins contracting business which operates in New Zealand and the South Pacific and was effective from
29 July 2016.
An interim dividend of 20.0 cents per share will be paid on 12 April 2017, with full New Zealand tax credits attached. The
dividend reinvestment plan will be operative for this dividend payment.
Fletcher Building chief executive Mark Adamson said that the result was driven by an excellent performance by the
Distribution and International businesses which both reported increases in operating earnings in excess of 30% versus the
previous comparable period.
“The strength of the macroeconomic environment in New Zealand has helped the performance of the Distribution
businesses but it has also managed the mixed economic conditions in Australia to report operating earnings of $84 million
versus $64 million last year.”
“The International division is now starting to show the benefit of cost reductions, operational efficiencies, restructures and
new product initiatives across the Formica and Laminex group of companies. The 32% improvement in operating earnings
in the first half of this year was primarily driven by year on year improvements at Formica Europe and Formica Asia.”
“Across New Zealand we were pleased to see operating earnings excluding the performance of the Construction division
and divested and acquired businesses increase 20% year on year, indicating the positive impact of continued demand
across the residential building and infrastructure sectors.”
Construction operating earnings reduced due to the timing of earnings from certain projects being recognised, expensed bid
costs, a reduced contribution from Fletcher EQR, and losses incurred on a major construction project.
Consistent with guidance provided at the Annual Shareholders’ Meeting in October 2016, operating earnings (earnings
before interest, tax and significant items) for the 2017 financial year are expected to be in the range of $720 million to
$760 million.
NEWS RELEASE
FINANCIAL RESULTS FOR THE
SIX MONTHS ENDING 31 DECEMBER 2016
Comparisons are with the prior financial half year ended 31 December 2015.
Revenue
$4,613 million, up from $4,434 million
Net earnings
$176 million, up from $172 million
Net earnings before significant
items
$187 million, up from $159 million
Operating earnings (EBIT)
$294 million, up from $288 million
Operating earnings (EBIT)
before significant items
$310 million, up from $278 million
Cash flow from operations
-$67 million, down from $170 million
Basic earnings per share
before significant items
27.0 cents per share, up from 23.0 cents per share
Interim dividend
20.0 cents per share, fully imputed for New Zealand taxation purposes
Dividend payment dates
The dividend will be paid on 12 April 2017 to holders registered at 5.00pm
Friday 24 March 2017 (NZT)
The shares will be quoted on an ex-dividend basis from Thursday
23 March 2017 on the NZX and ASX
Dividend reinvestment plan
The dividend reinvestment plan will be operative for this dividend.
Applications to participate must be received by the registry before 5pm
Monday 27 March 2017.
Please refer to the Financial Statements for terms and definitions.
ENDS
For further information please contact:
Rodney Deacon Shannon Huse-Caldwell
Head of Investor Relations External Media Manager
Phone: +64 9 525 9043 Phone: +64 9 525 9085
Mobile: +64 21 631 074 Mobile: +64 27 807 2933
...
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1
Fletcher Building reports underlying net earnings growth of 18 per cent
Reported results Six months ended 31 December
NZ$m (except where noted) 2016 2015
Change
%
Total revenue 4,613 4,434 4%
Operating earnings before significant items
1
310 278 12%
Significant items
2
(16) 10 NM
Operating earnings (EBIT) 294 288 2%
Funding costs (52) (60) (13)%
Earnings before tax 242 228 6%
Tax expense (61) (52) 17%
Earnings after tax 181 176 3%
Non-controlling interests (5) (4) 25%
Net earnings 176 172 2%
Net earnings before significant items 187 159 18%
Basic earnings per share (cents) 25.4 24.9 2%
Basic earnings per share before significant items (cents) 27.0 23.0 17%
Dividends declared per share (cents) 20.0 19.0 5%
Capital expenditure 127 122 4%
1
Operating earnings before significant items is a non-GAAP measure used by management to assess the performance of the business
and has been derived from Fletcher Building Limited’s interim financial statements for the period ended 31 December 2016.
2
Details of significant items can be found in note 3 of the interim financial statements.
• Revenue for the period of $4,613 million was $179 million, or 4%, higher when compared with the prior
corresponding period;
• Operating earnings before significant items were $310 million, 12% higher than the prior corresponding
period;
• A charge of $16 million was recognised in significant items (2015: a gain of $10 million);
• Operating earnings of $294 million were $6 million, or 2%, higher than the prior corresponding period;
• Net earnings were $176 million, up 2%, from $172 million in the prior corresponding period;
• Net earnings before significant items were $187 million, up 18% on the prior corresponding period;
• Basic earnings per share were 25.4 cents, up from 24.9 cents;
• Interim dividend is 20.0 cents per share, a 5% increase on the interim dividend paid last year. The dividend is
fully imputed for New Zealand tax purposes.
2
Financial Results
Six months ended 31 December
Revenue
NZ$m 2016 2015 Change
Building Products
1,108 1,265 (12%)
International 1,005 1,080 (7%)
Distribution
1,644 1,610 2%
Residential and Land Development
163 108 51%
Construction
1,150 748 54%
Other
5 5 0%
Gross revenue 5,075 4,816 5%
less intercompany sales (462) (382) (21%)
Group external revenue 4,613 4,434 4%
Six months ended 31 December
Reported operating earnings
Operating earnings
before significant items
1
NZ$m 2016 2015 Change 2016 2015 Change
Building Products 114 142 (20%) 129 132 (2%)
International 70 53 32% 70 53 32%
Distribution 84 64 31% 84 64 31%
Residential and Land Development 30 24 25% 30 24 25%
Construction 24 36 (33%) 24 36 (33%)
Corporate
(28)
(31) (10%) (27) (31) (13%)
Total 294 288 2% 310 278 12%
Funding costs
(52)
(60) (13%)
(52)
(60) (13%)
Earnings before tax 242 228 6% 258 218 18%
Tax expense
(61) (52)
17%
(66)
(55) 20%
Earnings after tax 181 176 3% 192 163 18%
Non-controlling interests
(5) (4)
25%
(5)
(4) 25%
Net earnings 176 172 2% 187 159 18%
1
Operating earnings before significant items is a non-GAAP measure used by management to assess the performance of the business
and has been derived from Fletcher Building Limited’s interim financial statements for the period ended 31 December 2016.
2
Details of significant items can be found in note 3 of the interim financial statements.
3
Geographic segments
Six months ended 31 December
Gross revenue External revenue
NZ$m 2016 2015 Change 2016 2015 Change
New Zealand 3,015 2,600 16% 2,607 2,279 14%
Australia 1,419 1,575 (10%) 1,374 1,525 (10%)
Rest of World 641 641 0% 632 630 0%
Total 5,075 4,816 5% 4,613 4,434 4%
Geographic segments
Six months ended 31 December
Operating earnings before
significant items
1
NZ$m 2016 2015 Change
New Zealand 205 200 3%
Australia 52 54 (4%)
Rest of World 53 24 121%
Total 310 278 12%
Geographic segments in local currency
Six months ended 31 December
Gross Revenue External revenue
2016 2015 Change 2016 2015 Change
Australia (A$m) 1,352 1,440 (6%) 1,309 1,395 (6%)
Rest of World (US$m) 457 424 8% 450 417 8%
Geographic segments in local currency
Six months ended 31 December
Operating earnings before
significant items
1
2016 2015 Change
Australia (A$m) 50 49 2%
Rest of World (US$m) 38 16 138%
1
Operating earnings before significant items is a non-GAAP measure used by management to assess the performance of the business
and has been derived from Fletcher Building Limited’s interim financial statements for the period ended 31 December 2016.
2
Details of significant items can be found in note 3 of the interim financial statements.
Financial Results
continued
4
• External revenue of $4,613 million was $179 million or 4% higher than the prior corresponding period. New
Zealand revenue increased by $328 million, but was offset by lower revenue in Australia (primarily due to the
divestment of Rocla Quarries). In local currencies, revenue increased by 14% in New Zealand, declined by
6% in Australia and increased 8% in the Rest of World.
• Reported operating earnings before interest and tax of $294 million were 2% higher than the prior
corresponding period.
• Reported operating earnings include significant items of $16 million relating to:
• Costs of $15 million relating to site closures in Fletcher Insulation and Rocla Products; and
• Costs of $1 million associated with the acquisition of the Higgins business.
• Operating earnings before significant items were $310 million, 12% higher than the prior corresponding
period.
• In New Zealand, earnings benefited from continued demand across the residential building and
infrastructure sectors, as well as improved operational performance in specific business units. Excluding the
performance of the Construction division and divested and acquired businesses, earnings were up 20% on
the prior corresponding period.
• In Australia, market conditions were mixed, with robust activity in Eastern states offset by challenging trading
conditions in Western Australia and South Australia. Despite this, operating earnings before significant items
increased 22% in local currency when adjusted for the divestment of the Rocla Quarries business. This was
driven by improvements in Iplex Australia, Stramit, Laminex Australia, and Tradelink.
• In the Rest of World, earnings in local currency more than doubled driven by strong performances in
Formica’s Asian and European operations, alongside the Construction South Pacific business and
contributions from the Higgins Fiji operations acquired in July 2016.
• Funding costs of $52 million were 13% lower than the prior corresponding period, due to lower debt levels at
the beginning of the period, reduced borrowing costs following the refinancing of the USPP debt and the
impact of derivative valuations.
• The tax expense of $61 million represents an effective tax rate for the period of 25% (2015: 23%).
• Earnings per share were 25.4 cents, an increase of 2% from 24.9 cents per share in the prior corresponding
period.
• Earnings per share before significant items were 27.0 cents, an increase of 17% from 23.0 cents in the prior
corresponding period.
• A cash outflow from operations of $67 million, compared with an inflow of $170 million in the prior
corresponding period;
Financial Results
continued
5
Segmental Operational Review
The following sections provide commentary on individual division results for the period ended 31 December
2016.
Building Products
Concrete Pipes & Products; Cement & Aggregates; Building Materials; Plastic Pipes; JV Earnings and Other
Six months ended 31 December
NZ$m 2016 2015 Change Change %
Gross revenue
1,108 1,265 (157) (12)%
External revenue
859 1,021 (162) (16)%
Operating earnings before significant
items
1
129 132 (3) (2)%
Significant items
2
(15) 10 NM NM
Operating earnings
114 142 (28) (20)%
Funds
1,686 1,748 (62) (4)%
Six months ended 31 December
Operating earnings before
significant items
1
NZ$m
2016 2015 Change
Concrete Pipes & Products
26 27
(4)%
Cement and Aggregates
38 35
9%
Building Materials
53 48
10%
Plastic Pipes
7
2 NM
JV Earnings and Other
5 5
0%
Subtotal
129 117 10%
Divested Businesses
0 15
NM
Total
129 132 (2)%
1
Operating earnings before significant items is a non-GAAP measure used by management to assess the performance of the business
and has been derived from Fletcher Building Limited’s interim financial statements for the period ended 31 December 2016.
2
Details of significant items can be found in note 3 of the interim financial statements.
The Building Products division reported gross revenue of $1,108 million compared with $1,265 million in the prior
corresponding period, a reduction of 12%. Adjusting for divested businesses (Pacific Steel and Rocla Quarries)
and the impact of joint venture accounting (Altus), revenue increased by 1%.
The division’s operating earnings before significant items were $129 million, compared with $132 million in the
prior corresponding period. Adjusting for divested businesses, earnings rose 10% from $117 million to $129 million.
Significant items of $15 million were reported in the current period relating to the cost of site closures in Rocla
Products and Fletcher Insulation. This compared with a net gain of $10 million in the prior corresponding period,
primarily attributable to the profit on sale of two Rocla Quarries joint ventures.
Operating earnings before significant items for Concrete Pipes & Products were $26 million compared to $27
million in the prior corresponding period. In New Zealand, ready-mix concrete volumes increased by 4% and
concrete pipe volumes increased by 12% driven by higher civil work across almost all regions, however overall
volumes were impacted by slowing market activity in Canterbury and the rural sector. In Australia, revenue and
volumes were both flat year-on-year, partly due to exiting the market in Western Australia and the timing of
some key projects.
6
The Cement and Aggregates businesses lifted operating earnings before significant items by 9% to $38 million.
This was primarily driven by increases in New Zealand cement volumes, up 5% against the prior corresponding
period, offset in part by exit costs associated with the retirement of the MV Golden Bay ship, which has now
been replaced by the MV Aotearoa Chief. In Aggregates, performance was supported by a favourable
change in the mix of regional quarrying volumes, including a 19% increase in aggregate sales in the Auckland
region.
Building Materials operating earnings before significant items were $53 million, an increase of 10% on the prior
corresponding period. Plasterboard volumes were up 9% overall, with volumes of performance boards
increasing 11% in the period. The insulation businesses were also able to strengthen their position in markets in
both New Zealand and Australia as a result of improvements in service and their relative cost position.
The Plastic Pipes businesses reported $7 million operating earnings before significant items, a $5 million
improvement on the prior corresponding period. Volumes increased by 2% in Australia despite soft demand in
the civil and mining segments, including from coal seam gas projects. The impact of this was, however, more
than offset by efficiency gains and reductions in other operating costs. Earnings in the New Zealand Plastic Pipes
business remained stable notwithstanding weaker demand in rural markets and increasing competitive pressure
in the civil market segment.
7
International
Laminex; Formica; Roof Tile Group
Six months ended 31 December
NZ$m 2016 2015 Change Change %
Gross revenue 1,005 1,080 (75)
(7)%
Revenue 997 1,067 (70)
(7)%
Operating earnings 70 53 17
32%
Funds 1,948 2,041 (93) (5)%
Six months ended 31 December
Operating earnings
NZ$m 2016 2015 Change
Laminex 45 41
10%
Formica 34 16
NM
Roof Tile Group 2 6
(67)%
International divisional costs (11) (10)
10%
Total 70 53 32%
Operating earnings for the International division were $70 million, up 32% from $53 million in the prior
corresponding period. Gross revenue was down by 7%, largely due to the translation effect resulting from a
strengthening of the New Zealand dollar, against the Australian dollar, US dollar and the Euro.
Laminex operating earnings were $45 million, up by 10% from $41 million in the prior corresponding period. In
Australia, revenue in domestic currency was 5% lower, driven by reduced activity especially in Western Australia.
New Zealand revenue was up by 9% on the prior corresponding period as activity levels continued to strengthen
and market share improved. Competitive pressures remained strong and the business continued its programme
of cost reduction, operational efficiencies, restructuring and new product initiatives.
Operating earnings in the Formica businesses were $34 million, up from $16 million in the prior corresponding
period. Gross revenue was down by 7%, due to currency translation, but in domestic currencies was up by 2% on
the prior corresponding period.
In Formica North America, revenue in domestic currencies was up by 2% whilst operating earnings in domestic
currencies were down by 2% driven by softer margins from adverse channel mix and the impact of the much
weakened peso on Mexican margins.
In Formica Asia, revenue in domestic currencies was up by 7% due to improving activity levels in the major
markets. Performances in Thailand, Malaysia and Singapore were strong with revenue up by 12% on the prior
corresponding period. China revenue increased by 9% while in Taiwan revenue was down by 1%. Operating
earnings in local currencies were up by 52% on the prior corresponding period, due to sales growth across the
region coupled with continuing improvements in the operating facilities including increased utilisation at the
laminate factory in Jiujiang, China.
Gross revenue in Formica Europe in domestic currencies remained flat compared to the prior corresponding
period as improvements in Northern and Central Europe were offset by decreases in the UK and Spain. There
was a $14 million improvement in operating earnings on the prior corresponding period. This was due to an
improved operational performance at the North Shields factory in the UK along with efficiencies resulting from
overhead cost reductions.
In the Roof Tile Group business, earnings of $2 million were down on the prior corresponding period, principally
due to performance in the African market, where a decline in local activity levels has been compounded by a
strengthening of the New Zealand dollar against the US dollar. Performances in other key global markets were
varied, with New Zealand, Asia and Japan up on the prior corresponding period, while Europe and the US were
relatively flat.
Segmental Operational Review
continued
8
Distribution
NZ Building Supplies; NZ Steel Distribution; Australian Building Supplies; Australian Steel Distribution
Six months ended 31 December
NZ$m 2016 2015 Change Change %
Gross revenue
1,644
1,610 34
2%
External revenue
1,559
1,531 28
2%
Operating earnings 84 64 20
31%
Funds 1,039 1,049 (10) (1)%
Six months ended 31 December
Operating earnings
NZ$m
2016 2015 Change
NZ Building Supplies
47 39
21%
NZ Steel Distribution
25 17
47%
Australian Building Supplies
2 0 NM
Australian Steel Distribution
10 8
25%
Total
84 64 31%
The Distribution division reported operating earnings of $84 million, a 31% increase on the prior corresponding
period. The result reflects strong performance by the New Zealand businesses compared with the prior
corresponding period. While the Australian operations improved, the increase in New South Wales, Queensland
and Victoria was offset by market contractions in Western Australia and South Australia.
In New Zealand, residential demand declined in Christchurch following the peak of the earthquake rebuild.
However, this has been more than offset by positive activity growth in all other regions, especially Auckland and
surrounding regions.
In the NZ Building Supplies businesses, gross revenue of $765 million increased by 7%, with PlaceMakers delivering
record sales in the period. This was driven by growth in the small and medium enterprise (SME) and commercial
sectors and double-digit growth in core accounts. Mico also experienced strong growth, particularly in front of
wall sales, buoyed by strong customer value propositions and strategic marketing initiatives.
Operating earnings in the NZ Building Supplies businesses increased by 21% when compared to the prior
corresponding period. This comprised an 18% increase for PlaceMakers and a 50% increase for Mico as both
businesses continue to focus on profitable growth, including growing higher margin categories, leveraging costs
and realising synergies together. Currently there are 11 Mico sites co-located with either PlaceMakers or Humes,
with additional co-locations being planned.
The NZ Steel Distribution businesses reported a 47% increase in operating earnings, with healthy market activity
and share gains leading to volume growth of 14%, supported by operating efficiencies and overhead cost
synergies following the incorporation of Dimond earlier in 2016.
The Australian Building Supplies businesses reported operating earnings of $2 million, up from a break-even result
in the prior corresponding period. In the period, Tradelink has opened 16 new branches, improved gross
margins, launched a unique customer service proposition, driven targeted SME sector growth initiatives and
rationalised overhead cost structures to enable future top-line and earnings growth. This positive momentum
was, however, impacted by market declines in Western Australia and South Australia, which led to Tradelink’s
local currency revenues being flat year on year.
The Australian Steel Distribution division reported operating earnings up 25% at $10 million compared to $8
million in the prior corresponding period. In August 2016, Stramit launched a unique customer service
proposition driving a number of customer focussed improvement initiatives. Although impacted by the market
decline in Western Australia, earnings were driven by top line revenue growth together with continued focus on
operational efficiencies and strong cost controls.
Segmental Operational Review
continued
9
Residential and Land Development
NZ Residential; Land Development
Six months ended 31 December
NZ$m 2016 2015 Change Change %
Gross revenue 163 108 55
51%
External revenue 163 108 55
51%
Operating earnings 30 24
6 25%
Funds 477 295 182 62%
Six months ended 31 December
Operating earnings
NZ$m
2016 2015 Change
NZ Residential
25 24
4%
Land Development
5 0
NM
Total
30 24 25%
The Residential and Land Development division reported gross revenue of $163 million and operating earnings
of $30 million, increases of 51% and 25% respectively on the prior corresponding period.
NZ Residential reported gross revenue for the period of $156 million, up from $108 million in the prior
corresponding period, driven by an increase in the volume of units sold in both Auckland and Christchurch,
strong market pricing in the Auckland region, and the sale of a large residential block of land.
NZ Residential operating earnings were $25 million, 4% higher than the prior corresponding period. The reduction
in earnings from the completion of the Greenhithe development was offset by strong volumes at the existing
locations of Beachlands, Karaka and Hobsonville. In addition, new developments at Whenuapai, Ormiston and
Swanson delivered their first sales.
Land Development operating earnings were $5 million. This business comprises a combination of residential and
commercial land that is developed for sale to third parties. In the latest period earnings primarily comprise the
sale of the first lot at the Wiri North commercial sub-division. The Land Development business is forecast to report
at least $25 million of operating earnings per annum over the next five years.
Funds employed increased to $477 million from $355 million at 30 June 2016. Work-in-progress increased in the
period due to significant earthworks on previously acquired sites, an increase in apartment building at Atlas
Quarter in Christchurch and Tatua on Eden in Auckland, and an increase in the number of homes under
construction in both Auckland and Christchurch, with progress in scaling the business to deliver approximately
1,500 units per annum.
In addition, land holdings increased during the period as lots were purchased in Auckland, specifically at
Ormiston, Beachlands, Penihana, and Whenuapai. The purchase of raw land at Oruarangi Road, Auckland was
also completed and deposits paid on two additional blocks at Hobsonville.
Segmental Operational Review
continued
10
Construction
Construction New Zealand; Construction South Pacific
Six months ended 31 December
NZ$m 2016 2015 Change Change %
Gross revenue 1,150 748 402 54%
External revenue 1,035 707 328 46%
Operating earnings 24 36 (12) (33)%
Funds 366 (37) 403 NM
Six months ended 31 December
Operating earnings
NZ$m
2016 2015 Change
Construction New Zealand
1 26
NM
Construction South Pacific
23 10
NM
Total
24 36 (33%)
The Construction division reported operating earnings of $24 million compared with $36 million in the prior
corresponding period. Earnings include a contribution of $19 million from the Higgins contracting business
acquired in July 2016.
The reduction in operating earnings is due to a range of factors, notably: timing of earnings recognition for
major projects; bid costs incurred in the period; reduced contribution from Fletcher EQR as the Canterbury
earthquake home repair programme nears completion; and losses incurred on a major construction project.
The division achieved strong revenue growth, with gross revenue increasing by 54% to $1,150 million. Included in
the result was revenue from the Higgins business of $188 million; revenue growth excluding Higgins was 29%.
At 31 December 2016, the backlog of work for the division, being the value of contracted work awarded but
not completed, was $2.7 billion, compared with $3.3 billion as at 31 December 2015.
The New Zealand businesses continued to record strong activity levels with two major roading projects won
during the period as part of the New Zealand Transport Agency’s Roads of National Significance programme:
the 13 km Peka Peka to Otaki Expressway; and the 18.5 km Pūhoi to Warkworth motorway to extend Auckland’s
Northern Motorway, which has been procured as a PPP (Private Public Partnership), comprising Fletcher
Construction, Higgins and Acciona. Work on two other major road contracts, the Waterview tunnel in Auckland
and the MacKay’s to Peka Peka project north of Wellington, will be completed prior to 30 June 2017.
The South Pacific businesses reported earnings of $23 million, an increase from $10 million in the prior
corresponding period. The increase in earnings includes a contribution from Higgins’ Fijian operations, together
with the declaration of final margins on several key projects in Papua New Guinea and American Samoa. In Fiji,
work neared completion of the Momi Bay Resort, while further work was won on a hotel development in Papua
New Guinea.
Following its acquisition, the Higgins contracting business has been integrated into the Construction division and
has continued to operate very successfully under existing management while leveraging Fletcher Building’s
scale and structure. Higgins has an unprecedented confirmed backlog of work ahead with strong ongoing
demand for new projects, including participation in the North Canterbury Transport Infrastructure Rebuild
Alliance (NCTIR) in response to the Kaikoura earthquakes.
Segmental Operational Review
continued
11
Group Cash Flow
Six months ended 31 December
NZ$m 2016 2015 Change
Operating earnings before significant items[1] 310 278 32
Depreciation and amortisation 102 97 5
Less cash tax paid (69) (67) (2)
Less interest paid (54) (60) 6
Provisions, significant items and other (43) (40) (3)
Cash from operations before working capital movements 246 208 38
Land and developments (164) (85) (79)
Other working capital movements (149) 47 (196)
Cash flows from operating activities (67) 170 (237)
1
Operating earnings before significant items is a non-GAAP measure used by management to assess the performance of the business
and has been derived from Fletcher Building Limited’s interim financial statements for the period ended 31 December 2016. Details of
significant items can be found in note 3 of the interim financial statements.
Detailed disclosure of the above line items is included in Fletcher Building Limited’s interim financial statements
which have been released with this Management Commentary.
Cash flows from operating activities of $(67) million were $237 million lower than the prior corresponding period.
Cash flows from operations before working capital movements were $246 million, up from $208 million and
reflective of higher earnings. Working capital cash-flows declined in large part due to higher land and
developments investment of $79 million and a one-off inflow in the prior corresponding period of $56 million
following the closure of the Pacific Steel operations. The remaining difference largely related to timing of
contract payments and the build-up of stock in preparation for shutdowns and product launches in the second
half.
Capital expenditure
Six months ended 31
December
NZ$m 2016 2015 Change
Capital expenditure 127 122 5
Capital expenditure was $127 million, compared with $122 million in the prior corresponding period. Of this total,
$69 million was for stay-in-business capital projects and $58 million related to new growth initiatives.
For the financial year, capital expenditure is expected to be in the range of $275 million to $325 million.
Financial Review
12
Funding
Total available funding as at 31 December 2016 was $2,500 million. Of this, $310 million was undrawn and there
was an additional $229 million of cash on hand. Drawn debt facilities maturing within the next 12 months total
$246 million and a further $68 million of capital notes are subject to interest rate and term reset.
The group’s gearing
1
at 31 December 2016 was 35.4% compared with 32.8% at 31 December 2015. This has
increased following the acquisition of Higgins in July 2016 and is within the target range of 30-40%.
The group’s leverage
2
at 31 December 2016 was 2.5 times compared with 2.4 times at 31 December 2015. This is
within the target range of 2.0-2.5 times.
The average maturity of the debt is 5.1 years and the hedged currency split is 33% Australian dollar; 50% New
Zealand dollar; 11% US dollar; and 6% spread over various other currencies.
Approximately 47% of all borrowings have fixed interest rates with an average duration of 3.7 years and a rate of
6.0%. Inclusive of floating rate borrowings, the average interest rate on the debt is approximately 5.0%.
Interest coverage
3
for the year was 6.0 times compared with 4.6 times in the prior corresponding period.
1
Interest bearing net debt (including capital notes) to interest bearing net debt (including capital notes) and equity
2
Interest bearing net debt (including capital notes) to annualised EBITDA before significant items
3
EBIT before significant items to total interest paid including capital notes interest
Financial Review
continued
13
Dividend
The 2017 interim dividend is 20.0 cents per share. In line with the group’s tax crediting policy announced in
August 2016, both the interim and final dividend in 2017 will be fully imputed with New Zealand tax credits. The
interim dividend will be unfranked for Australian tax purposes. The imputed amount per share on the dividend is
7.7778 cents.
As a fully imputed dividend, a supplementary dividend is payable to non-New Zealand non-portfolio
shareholders and has the effect of removing or reducing the cost of New Zealand non-resident withholding tax
(NRWT). For most Australian resident shareholders receiving a supplementary dividend, the after tax return of
the fully imputed dividend is equivalent to receiving a 41% franked dividend.
The dividend will be paid on 12 April 2017 to holders registered as at 5.00 pm Friday 24 March 2017 (NZT). The
shares will be quoted on an ex dividend basis from 23 March 2017 on the NZX and ASX.
A dividend summary is provided overleaf.
Dividend Reinvestment Plan
Fletcher Building shareholders (excluding those in jurisdictions where the issue of shares is not permitted by law)
can participate in a Dividend Reinvestment Plan (“the Plan”), under which they have the opportunity to reinvest
their dividends in additional shares. The Plan will be operative for this dividend payment. There will be no
discount to the price applied to ordinary shares issued. Documentation for participation is available from the
share registry or the website www.fbu.com and must be received by the registry before 5.00 pm Monday 27
March 2017. The price used to determine entitlements under the Plan is the average of the individual daily
volume weighted average sale prices of price-setting trades of the company’s shares sold on the NZX on each
of the five business days from and including the ex-dividend date of 23 March 2017. The new shares will rank
equally with existing shares and will be issued on the dividend payment date of 12 April 2017.
Dividend Policy
Fletcher Building seeks to maintain dividends through economic cycles, and to progressively grow the dividend
over the medium term. The target dividend pay-out ratio, in the range of 50 to 75% of net earnings, is intended
to provide sufficient flexibility for dividends to be maintained despite variations in economic conditions.
Maintenance of a dividend in this range will be subject to there being no material adverse change in
circumstances or outlook. In determining a dividend for any year a number of factors are taken into
consideration, including current and forecast earnings and operating cash flows, capital requirements, and the
company's debt equity position.
Beyond dividends, Fletcher Building will consider other means of distribution, should cash flows and future
investment requirements allow.
Fletcher Building's policy on franking and imputation is to fully impute both the interim and final dividend with
New Zealand tax credits each year (or to the maximum extent possible) and fully frank the final dividend with
Australian tax credits where possible.
Fletcher Building expects to be able to impute both interim and final dividends for the current and at least the
two following years, subject to the overall financial performance of the group.
Financial Review
continued
14
2017 Interim Dividend Summary Table
1
NZ cents per share NZ
Residents
on Top
Marginal
Tax Rate
of 33%
Australian
Residents
on Top
Marginal
Tax rate of
49%
Australian
Residents
on 15%
Tax Rate
Other Non
Residents
8
Dividend declared 20.0000 20.0000 20.0000 20.0000
NZ imputation credits
2
7.7778
NZ supplementary dividend
3
3.5294 3.5294 3.5294
Australian franking credits
4
0.0000 0.0000
Gross dividend for NZ tax purposes 27.7778 23.5294 23.5294 23.5294
NZ tax (33%)
5
(9.1667)
NZ non-resident withholding tax (15%)
6
(3.5294) (3.5294) (3.5294)
Net cash received after NZ tax 18.6111 20.0000 20.0000 20.0000
Australian tax (49% and 15%)
7
(11.5294) (3.5294)
Reduced by offset for NZ non-resident withholding tax 3.5294 3.5294
Less Australian franking credit offset 0.0000 0.0000
Net cash dividend to shareholders after tax 18.6111 12.0000 20.0000 20.0000
Notes:
1. This summary is of a general nature and the tax rates used and the calculations are intended for guidance
only. As individual circumstances will vary, shareholders are advised to seek independent advice.
2. The dividend has imputation credits attached at a 28% tax rate.
3. A supplementary dividend is only payable to non-New Zealand shareholders and has the effect of
removing the cost of New Zealand non-resident withholding tax (NRWT). Non-resident shareholders with a
10% or greater direct shareholding are not eligible to receive supplementary dividends but are exempt from
NRWT.
4. There are no Australian franking credits attached to this dividend and the conduit foreign income
component is nil.
5. For all NZ resident shareholders who do not hold an exemption certificate, resident withholding tax (RWT) is
required to be deducted at 5% from the gross dividend which has been credited with imputation credits at
28 percent. Accordingly, for those shareholders, a deduction of 1.3889 cents per share will be made on the
date of payment from the dividend declared of 20.0 cents per share and forwarded to Inland Revenue.
Resident shareholders who have a tax rate less than 33% will need to file a tax return to obtain a credit for
the RWT deduction in excess of their marginal tax rate.
6. NZ non-resident withholding tax at the rate of 15% on the gross dividend for NZ tax purposes.
7. This summary uses two examples of the effect of tax in Australia. The first uses the top marginal tax rate of
49%, including the Medicare Levy and the Temporary Budget Repair Levy. The second example uses the
15% income tax rate applicable in Australia to complying superannuation funds, approved deposit funds
and pooled superannuation trusts. Different tax rates will apply to other Australian shareholders, including
individuals, depending on their circumstances.
The Australian tax is calculated as: 49% Rate 15% Rate
Gross dividend for NZ tax purposes 23.5294 23.5294
Plus franking credits 0.0000 0.0000
Gross dividend for Australian tax purposes 23.5294 23.5294
Australian tax 11.5294 3.5294
8. This illustration does not purport to show the taxation consequences of the dividend for non-residents of New
Zealand or Australia. Shareholders resident in other countries are encouraged to consult their own taxation
advisor.
Financial Review
continued
15
Update on Business Transformation Programme
Work has continued in the last six months to execute the Business Transformation Programme known as
Accelerate. There are three areas of opportunities to extract value from Fletcher Building’s business units:
• Commercial – revenue and product margin growth
• Cost – external expenditure and overhead costs
• Manufacturing and operational efficiency – including manufactured products, distribution costs and
construction delivered margin.
The Accelerate programme is on track to deliver its expected benefits. To date, this has translated to over 2,000
initiatives that have been put in train, of which a large proportion are expected to result in tangible benefits by
the end of FY18. Implementing the programme has led to a performance focus and delivery cadence that is
becoming entrenched in management discipline. Over the coming year it is expected that the programme will
transition to a business-as-usual activity embedded within routine management practice.
Outlook
The current strong macro-economic conditions in New Zealand are expected to continue to benefit Fletcher
Building throughout the 2017 financial year. This is likely to provide further opportunities to expand operating
margins in the Building Products and Distribution businesses due to a combination of volume improvements, cost
reductions and modest price increases in the absence of industry constraints. The Auckland market and
surrounding regions continue to show strong demand for new housing and, coupled with new national
infrastructure and commercial projects, elevated levels of residential, commercial and infrastructure
construction are likely to be sustained in the medium term.
In Australia, New South Wales construction activity looks to be maintaining a positive trajectory which is in
contrast to Western Australia where Fletcher Building has worked hard to digest the economic downturn. In
Residential Fletcher Building is principally exposed to stand-alone housing, which has so far proved resilient, while
the multi-dwelling segment shows signs of peaking. Commercial construction activity is still at elevated levels but
not exhibiting growth, whereas specific segments of civil infrastructure are showing more positive signs.
North American residential and commercial construction activity levels are expected to remain broadly
consistent with last year, with the impact of a new presidential administration uncertain at this point in time.
European conditions continue to be mixed with some growth in the UK being offset by weaker
continental
European markets. Asian markets are showing some signs of improving volumes but remain competitive.
Momentum in the Fletcher Building businesses gives us reason to reiterate guidance for operating earnings
(earnings before interest, tax and significant items) of $720 million to $760 million for the 2017 financial year. The
earnings from the acquired Higgins business will offset the impact of the divested businesses of Pacific Steel and
Rocla Quarry Products, and Fletcher EQR.
Business Transformation Update and Outlook
16
Specific divisional commentary in respect of 2017 full year earnings is provided as follows:
• Building Products:
• Improved operating performance from most businesses within the division, leading to higher operating
earnings than the prior year after adjusting for the divested businesses;
• No earnings contribution from the divested Rocla Quarries and Pacific Steel businesses, given the sale of
these businesses was completed in FY16.
• International:
• Formica’s European operations will return to profitability in FY17, and together with growth in Asia should
lead to material improvement in the year-on-year performance of the Formica operation;
• Both Laminex businesses are expected to report year-on-year earnings growth;
• Distribution:
• New Zealand distribution earnings are expected to show robust earnings growth in FY17 compared to
FY16, driven by consistent earnings growth across the business units;
• In Australia, the earnings of Stramit, Tasman Sinkware and Tradelink are all expected to improve on an
underlying basis compared to FY16.
• Residential and Land Development:
• Residential earnings for FY17 are expected to be higher than the prior year, with a similar weighting to
the second half of the year as was reported in FY16, due to the timing of delivery of residential housing
lots;
• Land Development earnings are expected to increase as a result of a number of new projects in the
Auckland area.
• Construction:
• FY17 earnings are expected to decline compared with earnings reported in FY16;
• A reduction in EQR earnings versus FY16 will be more than offset by eleven months of earnings from
Higgins.
17
Division Business Groupings Key Businesses
Building Products
Concrete Pipes & Products
Firth Concrete (NZ)
Humes Pipelines (NZ)
Rocla Products (AU)
Cement & Aggregates GBC Winstone (NZ)
Building Materials
Winstone Wallboards (NZ)
Tasman Insulation (NZ)
Fletcher Insulation (AU)
Plastic Pipes Iplex (NZ & Australia)
JV Earnings and other Joint ventures & other
Divested Businesses
Rocla Quarries (AU) (ceased in FY16)
Long Steel Manufacturing (ceased in FY16)
International
Formica
Formica Asia
Formica Europe
Formica North America
Laminex
Laminex New Zealand
Laminex Australia
Roof Tile Group
Gerard Roofing Systems (NZ / Asia / Europe)
DECRA Roofing Systems (USA)
Distribution
New Zealand Building Supplies
PlaceMakers
Mico Plumbing
Australian Building Supplies
Tradelink
Tasman Sinkware
New Zealand Steel Distribution
Pacific Coilcoaters
Easysteel
Fletcher Reinforcing
Dimond
Australian Steel Distribution Stramit
Residential and Land
Development
NZ Residential Fletcher Living
Land Development Land Development
Construction
Construction New Zealand
Fletcher Construction
Higgins Construction
Fletcher EQR
Construction South Pacific
Fletcher Construction South Pacific
Higgins Fiji
Divisions
18
Gross revenue
Building Products
Six months ended 31 December
Gross revenue (NZ$m) 2016 2015 Change
Concrete Pipes & Products
394 384 3%
Cement and Aggregates
202 190 6%
Building Materials 245 239 3%
Plastic Pipes 241 256 (6%)
Joint Ventures & Other 26 101 (74%)
Subtotal 1,108
1,170
(5)%
Divested Businesses 0 95 NM
Total 1,108 1,265 (12%)
International
Six months ended 31 December
Gross revenue (NZ$m) 2016 2015 Change
Laminex 469 502 (7%)
Formica 450 486 (7%)
Roof Tile Group 86 92 (7%)
Total 1,005 1,080 (7%)
Distribution
Six months ended 31 December
Gross revenue (NZ$m) 2016 2015 Change
NZ Building Supplies 765 717 7%
Australian Building Supplies 392 411 (5%)
NZ Steel Distribution 239 218 10%
Australian Steel Distribution 248 264 (6%)
Total 1,644 1,610 2%
Residential and Land
Development
Six months ended 31 December
Gross revenue (NZ$m) 2016 2015 Change
NZ Residential 156 108 44%
Land Development 7 0 NM
Total 163 108 51%
Construction
Six months ended 31 December
Gross revenue (NZ$m) 2016 2015 Change
Construction New Zealand
1,033
665 55%
Construction International 117 83 41%
Total 1,150 748 54%
Appendix:
Supplemental split of Divisional results
19
Local currency gross revenue
The following presents the divisional results in key currency components. These local currency amounts are
translated to New Zealand dollars to present the results on the previous page.
Building Products
Six months ended 31 December
Gross revenue 2016 2015 Change
New Zealand (NZ$m) 722 797 (9%)
Australia (A$m) 368 428 (14%)
International
Six months ended 31 December
Gross revenue 2016 2015 Change
New Zealand (NZ$m) 88 90 (2%)
Australia (A$m)
377 398 (5%)
Rest of World (US$m) 371 367 1%
Distribution
Six months ended 31 December
Gross revenue 2016 2015 Change
New Zealand (NZ$m) 1,005 936 7%
Australia (A$m) 607 615 (1%)
Residential and Land
Development
Six months ended 31 December
Gross revenue 2016 2015 Change
New Zealand (NZ$m) 163 108 51%
Construction
Six months ended 31 December
Gross revenue 2016 2015 Change
New Zealand (NZ$m) 1,033 665 55%
Rest of World (US$m) 83 55 51%
Appendix:
Supplemental split of Divisional results
20
External revenue
Building Products
Six months ended 31 December
External revenue (NZ$m) 2016 2015 Change
Concrete Pipes & Products
342 338 1%
Cement and Aggregates
109 100 9%
Building Materials 183 178 3%
Plastic Pipes 199 209 (5%)
Joint Ventures & Other 26 101 (74%)
Subtotal 859
926 (7%)
Divested Businesses 0 95 NM
Total 859 1,021 (16%)
International
Six months ended 31 December
External revenue (NZ$m) 2016 2015 Change
Laminex 460 491 (6%)
Formica 452 485 (7%)
Roof Tile Group 85 91 (7%)
Total 997 1,067 (7%)
Distribution
Six months ended 31 December
External revenue (NZ$m) 2016 2015 Change
NZ Building Supplies 740 693 7%
Australian Building Supplies 391 410 (5%)
NZ Steel Distribution 185 169 9%
Australian Steel Distribution 243 259 (6%)
Total 1,559 1,531 2%
Residential and Land
Development
Six months ended 31 December
External revenue (NZ$m) 2016 2015 Change
NZ Residential 156 108 44%
Land Development 7 0 NM
Total 163 108 51%
Construction
Six months ended 31 December
External revenue (NZ$m) 2016 2015 Change
Construction New Zealand 918 624 47%
Construction International 117 83 41%
Total 1,035 707 46%
Appendix:
Supplemental split of Divisional results
21
Local currency external revenue
The following presents the divisional results in key currency components. These local currency amounts are
translated to New Zealand dollars to present the results on the previous page.
Building Products
Six months ended 31 December
External revenue 2016 2015 Change
New Zealand (NZ$m) 512 596 (14%)
Australia (A$m) 331 389 (15%)
International
Six months ended 31 December
External revenue 2016 2015 Change
New Zealand (NZ$m) 88 88 0%
Australia (A$m)
377 397 (5%)
Rest of World (US$m) 366 361 1%
Distribution
Six months ended 31 December
External revenue 2016 2015 Change
New Zealand (NZ$m) 926 863 7%
Australia (A$m) 601 609 (1%)
Residential and Land
Development
Six months ended 31 December
External revenue 2016 2015 Change
New Zealand (NZ$m) 163 108 51%
Construction
Six months ended 31 December
External revenue 2016 2015 Change
New Zealand (NZ$m) 918 624 47%
Rest of World (US$m) 83 55 51%
Appendix:
Supplemental split of Divisional results
22
Operating earnings before significant items
1
Building Products
Six months ended 31 December
Operating earnings
1
(NZ$m) 2016 2015 Change
Concrete Pipes & Products
26 27 (4%)
Cement and Aggregates
38 35 9%
Building Materials 53 48 10%
Plastic Pipes 7 2 NM
Joint Ventures & Other 5 5 0%
Subtotal 129
117 10%
Divested Businesses 0 15 NM
Total 129 132 (2%)
International
Six months ended 31 December
Operating earnings
1
(NZ$m) 2016 2015 Change
Laminex 45 41 10%
Formica 34 16 NM
Roof Tile Group 2 6 (67%)
International divisional costs (11) (10) 10%
Total 70 53 32%
Distribution
Six months ended 31 December
Operating earnings
1
(NZ$m) 2016 2015 Change
NZ Building Supplies 47 39 21%
Australian Building Supplies 2 0 NM
NZ Steel Distribution 25 17 47%
Australian Steel Distribution 10 8 25%
Total 84 64 31%
Residential and Land
Development
Six months ended 31 December
Operating earnings
1
(NZ$m) 2016 2015 Change
NZ Residential 25 24 4%
Land Development 5 0 NM
Total 30 24 25%
Construction
Six months ended 31 December
Operating earnings
1
(NZ$m) 2016 2015 Change
Construction New Zealand 1 26 (96%)
Construction International 23 10 NM
Total 24 36 (33%)
1
Operating earnings before significant items is a non-GAAP measure used by management to assess the performance of the business
and has been derived from Fletcher Building Limited’s interim financial statements for the period ended 31 December 2016. Details of
significant items can be found in note 3 of the interim financial statements.
Appendix:
Supplemental split of Divisional results
23
Local currency results
The following presents the divisional results in key currency components. These local currency amounts are
translated to New Zealand dollars to present the results on the previous page.
Building Products
Six months ended 31 December
Operating earnings 2016 2015 Change
New Zealand (NZ$m) 125 119 5%
Australia (A$m) 4 12 (68%)
International
Six months ended 31 December
Operating earnings 2016 2015 Change
New Zealand (NZ$m) 8 8 0%
Australia (A$m)
33 32 3%
Rest of World (US$m) 19 7 NM
Distribution
Six months ended 31 December
Operating earnings 2016 2015 Change
New Zealand (NZ$m) 72 56 29%
Australia (A$m) 11 7 57%
Residential and Land
Development
Six months ended 31 December
Operating earnings 2016 2015 Change
New Zealand (NZ$m) 30 24 25%
Construction
Six months ended 31 December
Operating earnings 2016 2015 Change
New Zealand (NZ$m) 1 26 (96%)
Rest of World (US$m) 16 7 NM
1
Operating earnings before significant items is a non-GAAP measure used by management to assess the performance of the business
and has been derived from Fletcher Building Limited’s interim financial statements for the period ended 31 December 2016. Details of
significant items can be found in note 3 of the interim financial statements.
Appendix:
Supplemental split of Divisional results
---
Fletcher Building
Half Year Review December 2016
Working in our
communities
From neighbourhoods to nations
we take great pride in our
contribution to creating
built environments.
We are focussed on always
improving how we work in our
communities, how we act as a
responsible business and how we
can have a positive impact on the
wider social world in
which we operate.
Half year in review 02 Building Products 05 International 06
Distribution 07 Residential and land development 08 Construction 09
Financial review 10 Financial statements 12 Notes to the financial statements 21
Dividend information 28 Shareholder information 29
COVER PHOTOGRAPHY:
TOP IMAGE:
Stramit, Australia BELOW: Grey Josef Linen Formica.
02 Fletcher Building Half Year Review December 2016
Dear shareholders,
We are pleased to present Fletcher Building’s
unaudited interim results for the six months
ended 31 December 2016.
The group recorded net earnings after tax
of $176 million, a 2% increase compared with
$172 million in the prior corresponding period.
Reported earnings included significant items
of $11 million relating to costs associated with
site closures in Rocla Products and Fletcher
Insulation. The result for the prior corresponding
period included a net gain from significant items
of $13 million relating to the gain on sale of
certain Rocla Quarries assets, partly offset by
closure costs for three manufacturing plants.
Net earnings excluding these significant items
were 18% higher at $187 million.
Operating earnings (earnings before interest
and tax and significant items) were $310 million,
up 12% on the $278 million reported in the prior
corresponding period. This reflected a sustained
improvement across almost all parts of the
portfolio, signalling the benefit that businesses
are getting from a strong New Zealand economy,
improved customer propositions, operational
efficiencies, cost reductions, and in some cases
organisational restructuring.
Half year in review
Improvements across almost all parts
of the portfolio signals the benefit that
our businesses are getting from a strong
New Zealand economy, improved operational
efficiencies, cost reductions, and in some
cases organisational restructuring.
Revenue for the period of $4,613 million
was 4% higher, reflecting sales growth in the
New Zealand businesses and the acquisition
of the Higgins contracting business which
operates in New Zealand and the South Pacific
and was effective from 29 July 2016.
Earnings in our Distribution and Residential
and Land Development businesses increased
compared to the same period last year due
to the increased activity in the New Zealand
building sector, including higher demand for
housing and elevated levels of new building
consents being issued. PlaceMakers, Mico and
the NZ Steel Distribution businesses were the
stand out performers in the last six months,
all reporting material year on year improvements
in earnings.
International earnings were collectively up
32% compared to the previous comparable
period reflecting strengthening activity levels
and higher market share for Laminex NZ, an
improved operating performance and overhead
cost reductions in Formica Europe, and sales
growth plus operational improvements in
Formica Asia.
03 Fletcher Building Half Year Review December 2016
We experienced increased underlying earnings
from the Building Products division as the
demand for higher volumes of building
materials like cement, concrete, wallboards
and insulation grew. Excluding the earnings
that were made a year ago from the Rocla
Quarry Products and Pacific Steel businesses
that were divested in the year ended June
2016, the Building Products earnings were 10%
higher than the previous comparable period.
Construction earnings reduced due to a
range of factors, notably: timing of earnings
recognition for major projects; bid costs
incurred in the period; reduced contribution
from Fletcher EQR as the Canterbury
earthquake home repair programme nears
completion; and losses incurred on a major
construction project. During the period Higgins
was invited to join the consortium to rebuild
State Highway 1 between Picton and Kaikoura
in the South Island of New Zealand following
the earthquake of November 2016.
There was a net outflow of cash from
operations of $67 million compared to a
net inflow of $170 million in the previous
Snapshot
Revenue $m
$4,613
2016
:
4,434 ▲ 4%
Operating earnings before significant
items $m
$310
2016
:
278 ▲ 12%
Net earnings
$m
$176
2016
:
172 ▲ 2%
SIR RALPH NORRIS ChairmanMARK ADAMSON Chief Executive Officer
04 Fletcher Building Half Year Review December 2016
North American residential and commercial
construction activity levels are expected to
remain broadly consistent with last year, with
the impact of a new presidential administration
uncertain at this point in time. European
conditions continue to be mixed, with some
growth in the UK being offset by weaker
continental European markets. Asian markets
are showing some signs of improving volumes
but remain competitive.
Momentum in the Fletcher Building businesses
gives us reason to reiterate guidance for operating
earnings (earnings before interest, tax and
significant items) of $720 million to $760 million
for the 2017 financial year. The earnings from the
acquired Higgins business will offset the impact
of the divested businesses of Pacific Steel, Rocla
Quarry Products, and Fletcher EQR.
SIR RALPH NORRIS
—
Chairman
MARK ADAMSON
—
Chief Executive Officer
comparable period due to the timing of
construction contracts, an increased investment
in land and development of $79 million, and a
$56 million working capital release from Pacific
Steel in the first half of 2016.
Finally, the interim dividend of 20.0 cents per
share compared to 19.0 cents per share for
the same period last year, and is fully imputed.
The dividend reinvestment plan will be operative
for this dividend payment.
OUTLOOK
The current strong macro-economic conditions
in New Zealand are expected to continue to
benefit Fletcher Building throughout the 2017
financial year. This is likely to provide further
opportunities to expand operating margins
in the Building Products and Distribution
businesses due to a combination of volume
improvements, cost reductions and modest
price increases in the absence of industry
constraints. The Auckland market and
surrounding regions continue to show strong
demand for new housing and, coupled with
new national infrastructure and commercial
projects, elevated levels of residential,
commercial and infrastructure construction
are likely to be sustained in the medium term.
In Australia, New South Wales construction
activity looks to be maintaining a positive
trajectory which is in contrast to Western
Australia where Fletcher Building has worked
hard to digest the economic downturn. In
Residential, Fletcher Building is principally
exposed to stand-alone housing, which has
so far proved resilient, while the multi-dwelling
segment shows signs of peaking. Commercial
construction activity is still at elevated levels
but not exhibiting growth, whereas specific
segments of civil infrastructure are showing
more positive signs.
05 Fletcher Building Half Year Review December 2016
Building Products
Operating earnings before significant items for
Concrete Pipes & Products were $26 million
compared to $27 million in the prior corresponding
period. In New Zealand, ready-mix concrete
volumes increased by 4% and concrete pipe
volumes increased by 12% driven by higher civil
work across almost all regions, however overall
volumes were impacted by slowing market activity
in Canterbury and the rural sector. In Australia,
revenue and volumes were both flat year-on-
year, partly due to exiting the market in Western
Australia and the timing of some key projects.
The Cement and Aggregates businesses lifted
operating earnings before significant items by
9% to $38 million. This was primarily driven by
increases in New Zealand cement volumes, up
5% against the prior corresponding period, offset
in part by exit costs associated with the retirement
of the MV Golden Bay ship, which has now been
replaced by the MV Aotearoa Chief. In Aggregates,
performance was supported by a favourable
change in the mix of regional quarrying volumes,
including a 19% increase in aggregate sales in
the Auckland region.
Building Materials operating earnings before
significant items were $53 million, an increase
of 10% on the prior corresponding period.
Plasterboard volumes were up 9% overall,
with volumes of performance boards increasing
11% in the period. The insulation businesses were
also able to strengthen their position in markets
in both New Zealand and Australia as a result
of improvements in service and their relative
cost position.
The Plastic Pipes businesses reported $7 million
operating earnings before significant items, a
$5 million improvement on the prior corresponding
period. Volumes increased by 2% in Australia
despite soft demand in the civil and mining
segments, including from coal seam gas
projects. The impact of this was, however, more
than offset by efficiency gains and reductions
in other operating costs. Earnings in the
New Zealand Plastic Pipes business remained
stable notwithstanding weaker demand in rural
markets and increasing competitive pressure in
the civil market segment.
Concrete Pipes & Products (Firth, Humes, Roda
Products); Cement & Aggregates (GBC Winstone);
Building Materials (Winstone Wallboards, Tasman
Insulation, Fletcher Insulation); Plastic Pipes (Iplex
Pipelines (NZ & AU); JV Earnings and other.
The Building Products division
reported gross revenue of $1,108 million
compared with $1,265 million in the prior
corresponding period, a reduction of 12%.
Adjusting for divested businesses (Pacific
Steel and Rocla Quarries) and the impact
of joint venture accounting (Altus),
revenue increased by 1%.
The division’s operating earnings before
significant items were $129 million,
compared with $132 million in the prior
corresponding period. Adjusting for
divested businesses, earnings rose 10%
from $117 million to $129 million.
Significant items of $15 million were
reported in the current period relating to
the cost of site closures in Rocla Products
and Fletcher Insulation. This compared
with a net gain of $10 million in the
prior corresponding period, primarily
attributable to the profit on sale of
two Rocla Quarries joint ventures.
OPERATING EARNINGS*
$129m
2016
:
$132M ▼ 2%
*Before significant items
06 Fletcher Building Half Year Review December 2016
International
OPERATING EARNINGS
$70m
2016
:
$53M ▲ 32%
reduction, operational efficiencies, restructuring
and new product initiatives.
Operating earnings in the Formica businesses
were $34 million, up from $16 million in the prior
corresponding period. Gross revenue was down
by 7%, due to currency translation, but in
domestic currencies was up by 2% on the prior
corresponding period.
In Formica North America, revenue in domestic
currencies was up by 2% whilst operating
earnings in domestic currencies were down
by 2% driven by softer margins from adverse
channel mix and the impact of the much
weakened peso on Mexican margins.
In Formica Asia, revenue in domestic currencies
was up by 7% due to improving activity levels in
the major markets. Performances in Thailand,
Malaysia and Singapore were strong with revenue
up by 12% on the prior corresponding period.
China revenue increased by 9% while in Taiwan
revenue was down by 1%. Operating earnings
in local currencies were up by 52% on the prior
corresponding period, due to sales growth
across the region coupled with continuing
improvements in the operating facilities including
increased utilisation at the laminate factory in
Jiujiang, China.
Gross revenue in Formica Europe in domestic
currencies remained flat compared to the prior
corresponding period as improvements in
Northern and Central Europe were offset by
decreases in the UK and Spain. There was a $14
million improvement in operating earnings on the
prior corresponding period. This was due to an
improved operational performance at the North
Shields factory in the UK along with efficiencies
resulting from overhead cost reductions.
In the Roof Tile Group business, earnings of
$2 million were down on the prior corresponding
period, principally due to performance in the
African market, where a decline in local activity
levels has been compounded by a strengthening
of the New Zealand dollar against the US dollar.
Performances in other key global markets were
varied, with New Zealand, Asia and Japan up on
the prior corresponding period, while Europe
and the US were relatively flat.
The division comprises Formica, which
manufactures its products in Europe, Asia
and North America, Laminex which produces
decorative wood panels and laminate, particle
board, medium density fibre board and other
decorative products in New Zealand and
Australia, and the Roof Tile Group, which
supplies pressed metal roof tiles in North
America, Europe, New Zealand, Africa and Asia.
Operating earnings for the International
division were $70 million, up 32% from
$53 million in the prior corresponding
period. Gross revenue was down by 7%,
largely due to the translation effect
resulting from a strengthening of the
New Zealand dollar, against the Australian
dollar, US dollar and the Euro.
Laminex operating earnings were
$45 million, up by 10% from $41 million
in the prior corresponding period. In
Australia, revenue in domestic currency
was 5% lower, driven by reduced activity
especially in Western Australia. New Zealand
revenue was up by 9% on the prior
corresponding period as activity levels
continued to strengthen and market
share improved. Competitive pressures
remained strong and the business
continued its programme of cost
07 Fletcher Building Half Year Review December 2016
Distribution
double-digit growth in core accounts. Mico also
experienced strong growth, particularly in front
of wall sales, buoyed by strong customer value
propositions and strategic marketing initiatives.
Operating earnings in the NZ Building Supplies
businesses increased by 21% when compared to
the prior corresponding period. This comprised
an 18% increase for PlaceMakers and a 50%
increase for Mico as both businesses continue
to focus on profitable growth, including growing
higher margin categories, leveraging costs and
realising synergies together. Currently there
are 11 Mico sites co-located with either
PlaceMakers or Humes, with additional
co-locations being planned.
The NZ Steel Distribution businesses reported
a 47% increase in operating earnings, with
healthy market activity and share gains
leading to volume growth of 14%, supported
by operating efficiencies and overhead cost
synergies following the incorporation of
Dimond earlier in 2016.
The Australian Building Supplies businesses
reported operating earnings of $2 million,
up from a break-even result in the prior
corresponding period. In the period, Tradelink
has opened 16 new branches, improved gross
margins, launched a unique customer service
proposition, driven targeted SME sector growth
initiatives and rationalised overhead cost
structures to enable future top-line and earnings
growth. This positive momentum was, however,
impacted by market declines in Western Australia
and South Australia, which led to Tradelink’s local
currency revenues being flat year on year.
The Australian Steel Distribution division reported
operating earnings up 25% at $10 million compared
to $8 million in the prior corresponding period.
In August 2016, Stramit launched a unique
customer service proposition driving a number
of customer focussed improvement initiatives.
Although impacted by the market decline in
Western Australia, earnings were driven by top
line revenue growth together with continued
focus on operational efficiencies and strong
cost controls.
New Zealand Building Supplies (PlaceMakers &
Mico); Australian Building Supplies (Tradelink &
Tasman Sinkware); New Zealand Steel Distribution
(Pacific Coil Coaters, Easysteel, Fletcher Reinforcing
Dimond); Australian Steel Distribution (Stramit).
The Distribution division reported operating
earnings of $84 million, a 31% increase on
the prior corresponding period.
The result reflects strong performance
by the New Zealand businesses compared
with the prior corresponding period. While
the Australian operations improved, the
increase in New South Wales, Queensland
and Victoria was offset by market
contractions in Western Australia and
South Australia.
In New Zealand, residential demand
declined in Christchurch following the peak
of the earthquake rebuild, however, this has
been more than offset by positive activity
growth in all other regions, especially
Auckland and surrounding regions.
In the NZ Building Supplies businesses,
gross revenue of $765 million increased
by 7%, with PlaceMakers delivering record
sales in the period. This was driven by
growth in the small and medium enterprise
(SME) and commercial sectors and
OPERATING EARNINGS
$84m
2016
:
$64M ▲ 31%
08 Fletcher Building Half Year Review December 2016
Residential and
Land Development
OPERATING EARNINGS
$30m
2016
:
$24M ▲ 25%
The division comprises two business units –
NZ Residential (Fletcher Living) and Land
Development. Fletcher Living specialises in
building master-planned residential communities
in Auckland and Christchurch, being a vertically
integrated builder, encompassing design
through to sales. Land Development’s business
comprises a combination of residential and
commercial land developments for on sale
to third parties.
The Residential and Land Development
division reported gross revenue of
$163 million and operating earnings
of $30 million, increases of 51%
and 25% respectively on the prior
corresponding period.
NZ Residential reported gross revenue
for the period of $156 million, up from
$108 million in the prior corresponding
period, driven by an increase in the
volume of units sold in both Auckland
and Christchurch, strong market pricing
in the Auckland region, and the sale of
a large residential block of land.
NZ Residential operating earnings were
$25 million, 4% higher than the prior
corresponding period. The reduction in
earnings from the completion of the Greenhithe
development was offset by strong volumes at
the existing locations of Beachlands, Karaka and
Hobsonville. In addition, new developments at
Whenuapai, Ormiston and Swanson delivered
their first sales.
Land Development operating earnings
were $5 million. This business comprises
a combination of residential and commercial
land that is developed for sale to third parties.
In the latest period earnings primarily comprise
the sale of the first lot at the Wiri North commercial
sub-division. The Land Development business
is forecast to report at least $25 million of
operating earnings per annum over the next
five years.
Funds employed increased to $477 million from
$355 million at 30 June 2016. Work-in-progress
increased in the period due to significant
earthworks on previously acquired sites, an
increase in apartment building at Atlas Quarter
in Christchurch and Tatua on Eden in Auckland,
and an increase in the number of homes under
construction in both Auckland and Christchurch,
with progress in scaling the business to deliver
approximately 1,500 units per annum.
In addition, land holdings increased during
the period as lots were purchased in Auckland,
specifically at Ormiston, Beachlands, Penihana,
and Whenuapai. The purchase of raw land at
Oruarangi Road, Auckland was also completed
and deposits paid on two additional blocks
at Hobsonville.
09 Fletcher Building Half Year Review December 2016
Construction
At 31 December 2016, the backlog of work
for the division, being the value of contracted
work awarded but not completed, was
$2.7 billion, compared with $3.3 billion as
at 31 December 2015.
The New Zealand businesses continued to
record strong activity levels with two major
roading projects won during the period as part
of the New Zealand Transport Agency’s Roads of
National Significance programme: the 13 km Peka
Peka to Otaki Expressway; and the 18.5 km Pūhoi
to Warkworth motorway to extend Auckland’s
Northern Motorway, which has been procured
as a PPP (Private Public Partnership), comprising
Fletcher Construction, Higgins and Acciona.
Work on two other major road contracts, the
Waterview tunnel in Auckland and the MacKay’s
to Peka Peka project north of Wellington, will be
completed prior to 30 June 2017.
The South Pacific businesses reported earnings
of $23 million, an increase from $10 million in
the prior corresponding period. The increase in
earnings includes a contribution from Higgins’
Fijian operations, together with the declaration
of final margins on several key projects in Papua
New Guinea and American Samoa. In Fiji, work
neared completion of the Momi Bay Resort,
while further work was won on a hotel
development in Papua New Guinea.
Following its acquisition, the Higgins
contracting business has been integrated
into the Construction division and has
continued to operate very successfully under
existing management while leveraging Fletcher
Building’s scale and structure. Higgins has an
unprecedented confirmed backlog of work
ahead with strong ongoing demand for
new projects, including participation in the
North Canterbury Transport Infrastructure
Rebuild Alliance (NCTIR) in response to the
Kaikoura earthquakes.
OPERATING EARNINGS
$24m
2016
:
$36M ▼ 33%
The Construction division is a builder of
commercial buildings and infrastructure across
New Zealand and the South Pacific. Projects
range from New Zealand’s largest transport and
commercial building projects through to small
interior works and road improvements.
The Construction division reported
operating earnings of $24 million
compared with $36 million in the prior
corresponding period. Earnings include
a contribution of $19 million from the
Higgins contracting business acquired
in July 2016.
The reduction in operating earnings is
due to a range of factors, notably: timing
of earnings recognition for major projects;
bid costs incurred in the period; reduced
contribution from Fletcher EQR as the
Canterbury earthquake home repair
programme nears completion; and losses
incurred on a major construction project.
The division achieved strong revenue
growth, with gross revenue increasing by
54% to $1,150 million. Included in the result
was revenue from the Higgins business of
$188 million; revenue growth excluding
Higgins was 29%.
10 Fletcher Building Half Year Review December 2016
Financial Review
FUNDING
Total available funding as at 31 December 2016 was $2,500 million. Of this, $310 million was undrawn
and there was an additional $229 million of cash on hand. Drawn debt facilities maturing within the
next 12 months total $246 million and a further $68 million of capital notes are subject to interest rate
and term reset.
The group’s gearing1 at 31 December 2016 was 35.4% compared with 32.8% at 31 December 2015. This
has increased following the acquisition of Higgins in July 2016 and is within the target range of 30-40%.
The group’s leverage
2
at 31 December 2016 was 2.5 times compared with 2.4 times at 31 December 2015.
This is within the target range of 2.0-2.5 times.
The average maturity of the debt is 5.1 years and the hedged currency split is 33% Australian dollar;
50% New Zealand dollar; 11% US dollar; and 6% spread over various other currencies.
Approximately 47% of all borrowings have fixed interest rates with an average duration of 3.7 years
and a rate of 6.0%. Inclusive of floating rate borrowings, the average interest rate on the debt is
approximately 5.0%.
Interest coverage3 for the year was 6.0 times compared with 4.6 times in the prior corresponding period.
CASH FLOW
Cash flows from operating activities of $(67) million were $237 million lower than the prior corresponding
period. Cash flows from operations before working capital movements were $246 million, up from
$208 million and reflective of higher earnings. Working capital cash flows declined in large part due to
higher land and developments investment of $79 million and a one-off inflow in the prior corresponding
period of $56 million following the closure of the Pacific Steel operations. The remaining difference
largely related to timing of contract payments and the build-up of stock in preparation for shutdowns
and product launches in the second half.
Capital expenditure was $127 million, compared with $122 million in the prior corresponding period.
Of this total, $69 million was for stay-in-business capital projects and $58 million related to new
growth initiatives.
For the financial year, capital expenditure is expected to be in the range of $275 million to $325 million.
DIVIDEND
The 2017 interim dividend is 20.0 cents per share. In line with the group’s tax crediting policy announced
in August 2016, both the interim and final dividend in 2017 will be fully imputed with New Zealand tax
credits. The interim dividend will be unfranked for Australian tax purposes. The imputed amount per
share on the dividend is 7.7778 cents.
As a fully imputed dividend, a supplementary dividend is payable to non-New Zealand non-portfolio
shareholders and has the effect of removing or reducing the cost of New Zealand non-resident
withholding tax (NRWT). For most Australian resident shareholders receiving a supplementary dividend,
the after tax return of the fully imputed dividend is equivalent to receiving a 41% franked dividend.
The dividend will be paid on 12 April 2017 to holders registered as at 5.00 pm Friday 24 March 2017
(NZT). The shares will be quoted on an ex dividend basis from 23 March 2017 on the NZX and ASX.
[1] Interest bearing net debt (including capital notes) to interest bearing net debt (including capital notes) and equity
[2] Interest bearing net debt (including capital notes) to annualised EBITDA before significant items
[3] EBIT before significant items to total interest paid including capital notes interest
11 Fletcher Building Half Year Review December 2016
Financial highlights (unaudited)
Fletcher Building Group
Six months
Dec 2016
Six months
Dec 2015
Year ended
June 2016
Return on average funds employed (% annualised)
(1)
10.710.713.4
Return on average equity (% annualised)
(2)
9.49.312.4
Earnings per share (cents) 25.424.967.0
Dividends per share (cents)20.019.039.0
Gearing (%)
(3)
35.432.827.3
Leverage (times, annualised)
(4)
2.52.41.6
Interest cover (times)
(5)
6.04.65.9
(1) EBIT to average funds (net debt and equity less deferred tax assets).
(2) Net earnings attributable to shareholders to average shareholders’ funds.
(3) Interest bearing net debt (including capital notes) to interest bearing net debt (including capital notes) and equity.
(4) Interest bearing net debt (including capital notes) to EBITDA before significant items.
(5) EBIT before significant items to total interest paid including capital notes interest.
DIVIDEND REINVESTMENT PLAN
Fletcher Building shareholders (excluding those in jurisdictions where the issue of shares is not
permitted by law) can participate in a Dividend Reinvestment Plan (“the Plan”), under which they
have the opportunity to reinvest their dividends in additional shares. The Plan will be operative for
this dividend payment. There will be no discount to the price applied to ordinary shares issued.
Documentation for participation is available from the share registry or the website www.fbu.com and
must be received by the registry before 5.00 pm Monday 27 March 2017. The price used to determine
entitlements under the Plan is the average of the individual daily volume weighted average sale prices
of price-setting trades of the company’s shares sold on the NZX on each of the five business days
from and including the ex-dividend date of 23 March 2017. The new shares will rank equally with
existing shares and will be issued on the dividend payment date of 12 April 2017.
12 Fletcher Building Half Year Review December 2016
Consolidated income statement (unaudited)
For the six months ended 31 December 2016
Fletcher Building GroupNotes
Six months
Dec 2016
NZ$M
Six months
Dec 2015
NZ$M
Year ended
June 2016
NZ$M
Sales4,613 4,434 9,004
Cost of goods sold(3,498)(3,347)(6,767)
Gross margin1,115 1,087 2,237
Selling and marketing expenses(452)(477)(933)
Administration expenses (353)(332)(636)
Share of profits of associates and joint ventures8 8 12
Other gains/(losses) 5(8)(8)2
Significant items3(16)10 37
Earnings before interest and taxation (EBIT)294 288 719
Funding costs(52)(60)(115)
Earnings before taxation242 228 604
Taxation expense6(61)(52)(131)
Earnings after taxation181 176 473
Earnings attributable to non-controlling interests(5)(4)(11)
Net earnings attributable to the shareholders176 172 462
Net earnings per share (cents)
Basic 25.4 24.9 67.0
Diluted 25.2 24.4 65.4
Weighted average number of shares outstanding
(millions of shares)
Basic 693 690 690
Diluted 717 744 736
Dividends declared per share (cents) 20.0 19.0 39.0
The accompanying notes form part of and are to be read in conjunction with these interim financial statements.
13 Fletcher Building Half Year Review December 2016
Consolidated statement of comprehensive income (unaudited)
For the six months ended 31 December 2016
Fletcher Building Group
Six months
Dec 2016
NZ$M
Six months
Dec 2015
NZ$M
Year ended
June 2016
NZ$M
Net earnings attributable to shareholders176 172 462
Net earnings attributable to non-controlling interests5 4 11
Net earnings181 176 473
Other comprehensive income
Items that do not subsequently get reclassified to profit
or loss:
Movement in pension reserve2 5 (36)
2 5 (36)
Items that may be reclassified subsequently to profit or
loss in the future:
Movement in cash flow hedge reserve(2)9 15
Movement in currency translation reserve (33)(116)(186)
(35)(107)(171)
Income and expense recognised directly in equity(33)(102)(207)
Total comprehensive income for the period148 74 266
The accompanying notes form part of and are to be read in conjunction with these interim financial statements.
14 Fletcher Building Half Year Review December 2016
Consolidated balance sheet (unaudited)
As at 31 December 2016
Fletcher Building GroupNotes
Dec 2016
NZ$M
Dec 2015
NZ$M
June 2016
NZ$M
Assets
Current assets:
Cash and deposits229 221 356
Current tax assets17 68 2
Derivatives12 12 23
Debtors1,319 1,264 1,362
Inventories1,735 1,555 1,479
Assets held for sale105
Total current assets3,312 3,225 3,222
Non-current assets:
Property, plant and equipment2,139 2,034 1,983
Goodwill1,228 1,107 1,083
Intangible assets640 602 621
Investments in associates and joint ventures142 84 135
Other investments 42 68 43
Derivatives116 113 156
Deferred tax assets13 14 24
Total non-current assets4,320 4,022 4,045
Total assets7,632 7,247 7,267
On behalf of the Board,
22 February 2017
Sir Ralph Norris
Chairman of Directors
Mark Adamson
Managing Director
15 Fletcher Building Half Year Review December 2016
Fletcher Building GroupNotes
Dec 2016
NZ$M
Dec 2015
NZ$M
June 2016
NZ$M
Liabilities
Current liabilities:
Creditors and accruals1,270 1,105 1,342
Provisions69 73 67
Current tax liabilities21 24 26
Derivatives14 9 21
Construction contracts28 166 128
Borrowings7 314 461413
Liabilities held for sale22
Total current liabilities1,716 1,860 1,997
Non-current liabilities:
Creditors and accruals70 39 37
Provisions22 14 24
Retirement plan liabilities52 61 73
Deferred tax liabilities59 66 58
Derivatives29 31 26
Borrowings7 1,956 1,537 1,339
Total non-current liabilities2,188 1,748 1,557
Total liabilities3,904 3,608 3,554
Equity
Share capital2,659 2,633 2,650
Reserves1,048 986 1,041
Shareholders' funds3,707 3,619 3,691
Non-controlling interests 21 20 22
Total equity 3,728 3,639 3,713
Total liabilities and equity7,632 7,247 7,267
The accompanying notes form part of and are to be read in conjunction with these interim financial statements.
16 Fletcher Building Half Year Review December 2016
For the six months ended 31 December 2016
Fletcher Building GroupShare capitalRetained earningsShare-based payments reserveCash flow hedge reserveCurrency translation reservePension reserveTotalNon-controlling interestsTotal equity
NZ$MNZ$MNZ$MNZ$MNZ$MNZ$MNZ$MNZ$MNZ$M
Total equity at 30 June 2015 2,633 1,199 15 (10) (83) (71) 3,683 27 3,710
Total comprehensive income for
the period 172 9 (116)5 70 4 74
Movement in non-controlling
interests (11)(11)
Issue of shares13 1313
Dividends paid to shareholders of
the parent(131)(131)(131)
Movement in share-based
payment reserve(3)(3)(3)
Movement in treasury stock (13)(13)(13)
Total equity at 31 December 20152,633 1,240 12 (1)(199)(66)3,619 20 3,639
Total equity at 30 June 2015 2,633 1,199 15 (10) (83) (71) 3,683 27 3,710
Total comprehensive income for
the year 462 15 (186)(36)255 11 266
Movement in non-controlling
interests (16)(16)
Issue of shares27 27 27
Dividends paid to shareholders of
the parent(262)(262)(262)
Movement in share-based
payment reserve(2)(2)(2)
Movement in treasury stock (10)(10)(10)
Total equity at 30 June 20162,650 1,399 13 5 (269)(107)3,691 22 3,713
Total comprehensive income for
the period 176 (2)(33)2 143 5 148
Movement in non-controlling
interests (6)(6)
Issue of shares16 16 16
Dividends paid to shareholders of
the parent(139)(139)(139)
Movement in share-based
payment reserve3 3 3
Movement in treasury stock (7)(7)(7)
Total equity at
31 December 20162,659 1,436 16 3 (302)(105)3,707 21 3,728
The accompanying notes form part of and are to be read in conjunction with these interim financial statements.
Consolidated statement of movements in equity (unaudited)
17 Fletcher Building Half Year Review December 2016
Consolidated statement of cash flows (unaudited)
For the six months ended 31 December 2016
Fletcher Building Group
Six months
Dec 2016
NZ$M
Six months
Dec 2015
NZ$M
Year ended
June 2016
NZ$M
Cash flow from operating activities
Receipts from customers4,587 4,623 9,056
Dividends received5 6 10
Total received4,592 4,629 9,066
Payments to suppliers, employees and other4,536 4,332 8,191
Interest paid54 60 118
Income tax paid69 67 97
Total applied4,659 4,459 8,406
Net cash from operating activities(67)170 660
Cash flow from investing activities
Sale of property, plant and equipment7 53
Sale of investments40 1
Sale of subsidiaries/businesses205
Total received47 259
Purchase of property, plant and equipment and intangible
assets127 122 300
Purchase of subsidiaries/businesses305 7
Total applied432 122 307
Net cash from investing activities(432)(75) (48)
Cash flow from financing activities
Net debt drawdown506 53
Issue of capital notes10
Total received506 53 10
Net debt repayment196
Repurchase of capital notes15
Treasury stock purchased3 16 16
Distribution to non-controlling interests9 14 18
Dividends 123 118 235
Total applied135 148 480
Net cash from financing activities371 (95)(470)
Net movement in cash held(128)142
Add opening cash and liquid deposits356 228 228
Effect of exchange rate changes on net cash1 (7)(14)
Closing cash and deposits229 221 356
The accompanying notes form part of and are to be read in conjunction with these interim financial statements.
18 Fletcher Building Half Year Review December 2016
Reconciliation of net earnings to net cash from operating activities (unaudited)
For the six months ended 31 December 2016
Fletcher Building Group
Six months
Dec 2016
NZ$M
Six months
Dec 2015
NZ$M
Year ended
June 2016
NZ$M
Cash was received from:
Net earnings 176 172 462
Earnings attributable to non-controlling interests5 4 11
181 176 473
Adjustment for items not involving cash:
Depreciation, depletions and amortisation 10297194
Significant items13(20)(57)
Provisions and other adjustments(43)(30)(54)
Taxation(8)(15)34
(Gain)/loss on disposal of businesses and property,
plant and equipment1 (28)
Non-cash adjustments65 32 89
Cash flow from operations before net working capital
movements246 208 562
Net working capital movements(313)(38)98
Net cash from operating activities(67)170 660
Net working capital movements
Debtors74176 72
Inventories(76)(9)17
Land and developments(164)(85)(66)
Contracts(99)13 (22)
Creditors(48)(133)97
(313)(38)98
The accompanying notes form part of and are to be read in conjunction with these interim financial statements.
19 Fletcher Building Half Year Review December 2016
Breakdown of financial performance (unaudited)
Fletcher Building Group
Six months
Dec 2016
NZ$M
Six months
Dec 2015
NZ$M
Year ended
June 2016
NZ$M
Gross sales
Building Products1,108 1,265 2,449
International Businesses1,005 1,080 2,128
Distribution1,644 1,610 3,184
Residential & Land Development163 108 343
Construction1,150 748 1,648
Other5 5 9
Total5,075 4,816 9,761
Intercompany sales(462)(382)(757)
External sales per income statement4,613 4,434 9,004
External sales
Building Products859 1,021 1,969
International Businesses997 1,067 2,106
Distribution1,559 1,531 3,026
Residential & Land Development163 108 343
Construction1,035 707 1,560
External sales per income statement4,613 4,434 9,004
20 Fletcher Building Half Year Review December 2016
Fletcher Building Group
Six months
Dec 2016
NZ$M
Six months
Dec 2015
NZ$M
Year ended
June 2016
NZ$M
EBIT before significant items
Building Products129 132 274
International Businesses70 53 133
Distribution84 64 176
Residential & Land Development30 24 84
Construction24 36 78
Other(27)(31)(63)
Total310 278 682
Significant items(16)10 37
Earnings before interest and taxation (EBIT) per income
statement294 288 719
Funds*
Building Products1,686 1,748 1,581
International Businesses1,948 2,041 1,902
Distribution1,039 1,049 1,001
Residential & Land Development477 295 355
Construction366 (37)(18)
Other (including debt and taxation)(1,788)(1,457)(1,108)
Total3,728 3,639 3,713
* Funds represent the external assets and liabilities of the Group and are used for internal reporting purposes.
Breakdown of financial performance (unaudited) (continued)
21 Fletcher Building Half Year Review December 2016
1. BASIS OF PRESENTATION
The condensed consolidated interim financial
statements presented are those of Fletcher
Building Limited and its subsidiaries (the “group”).
Fletcher Building Limited is a company
domiciled in New Zealand, is registered under
the Companies Act 1993, and is a FMC Reporting
Entity under the Financial Markets Conduct Act
2013 under which the financial statements are
prepared. The group is a profit oriented entity.
The condensed consolidated interim financial
statements have been prepared in accordance
with Generally Accepted Accounting Practice
in New Zealand, which is the New Zealand
equivalent to International Financial Reporting
Standards (NZ IFRS). They comply with NZ IAS
34 Interim Financial Reporting and should be
read in conjunction with the 30 June 2016
annual report available on the group website
at www.fbu.com.
2. CHANGES IN ACCOUNTING POLICIES
There have been no changes in accounting
policies in the six months ended 31 December
2016, however, certain comparatives have been
re-presented to conform with the current
period’s presentation.
Notes to the consolidated financial statements
22 Fletcher Building Half Year Review December 2016
Notes to the consolidated financial statements continued
3. SIGNIFICANT ITEMS
Six months ended 31 December 2016
Fletcher Building Group
Business
acquisition
expenses
(1)
NZ$M
Site closure
costs
(2)
NZ$M
Total
NZ$M
Fletcher Insulation(10)(10)
Rocla Products(5)(5)
Corporate(1)(1)
Total significant items before taxation(1)(15)(16)
Tax benefit/(charge) on above items 5 5
Total significant items after taxation(1)(10)(11)
(1) On 29 July 2016, the group acquired Higgins Group Holdings Limited (“Higgins”). Costs of $1 million
associated with the transaction were incurred in the period.
(2) In the six months ended 31 December 2016 the group has recognised a charge of $15 million for
costs associated with site closures:
- $10 million relating to the closure of Fletcher Insulation’s Homebush site in New South Wales
announced in December 2016; and
- $5 million relating to two site closures in the Rocla Products business.
Six months ended 31 December 2015
Fletcher Building Group
Business
disposal income
and expenses
(1)
NZ$M
Site closure
costs
(2)
NZ$M
Total
NZ$M
Rocla Quarries 16 16
Iplex Australia (2)(2)
Rocla Pipes (4)(4)
Total significant items before taxation16 (6)10
Tax benefit/(charge) on above items 1 2 3
Total significant items after taxation17 (4)13
(1) On 18th August 2015, the Group entered into an agreement to sell the operations of Rocla Quarry
Products to Hanson Construction Materials Pty Limited. The transaction, which had been subject
to ACCC clearance, completed on 29 January 2016.
As part of the overall sale process, the group separately sold joint ventures of this business in the
period ended 31 December 2015 with total sale proceeds of $40 million. The net gain on sale in
the period amounted to $16 million.
(2) In the six months ended 31 December 2015 the group recognised a charge of $6 million for costs
associated with site closures:
- $2 million relating to the closure of two sites in the Iplex Australia business in July 2015; and
- $4 million relating to the closure of Rocla Pipes’ Atlantic Civil business in October 2015.
23 Fletcher Building Half Year Review December 2016
Year ended 30 June 2016
Fletcher Building Group
Business
acquisition /
disposal
income and
expenses
(1)
NZ$M
Site Closure
Costs
(2)
NZ$M
Impairment
(3)
NZ$M
Other
NZ$M
Total
NZ$M
Building Products90 (11)79
International(4)(26)(30)
Distribution (1)(1)
Corporate(5)(6)(11)
Total significant items before taxation85 (16)(26)(6)37
Tax benefit/(charge) on above items (1)5 1 2 7
Total significant items after taxation84 (11)(25)(4)44
2016
(1) On 18th August 2015, the group entered into an agreement to sell the operations of Rocla Quarry
Products to Hanson Construction Materials Pty Limited. The transaction, which had been subject
to ACCC clearance, completed on 29 January 2016.
The aggregate consideration received for the entire Rocla Quarry Products business was $212 million,
and $205 million after transaction costs. The gain on sale after tax amounted to $80 million.
On 2 February 2016, the group entered into an agreement to acquire the New Zealand road
construction and maintenance business Higgins Group Holdings Limited (“Higgins”) and other
related assets, together with Higgins’ Fiji contracting business. At 30 June 2016, the transaction
remained conditional on regulatory approval and accordingly the acquisition was not accounted
for in the year ended 30 June 2016. During July 2016 all relevant approvals had been obtained
and the transaction completed on 29 July 2016. Total consideration payable was $311 million,
subject to customary completion adjustments.
During the year ended 30 June 2016, expenses associated with the transaction were incurred
amounting to $5 million.
On 17 February 2016, the group entered into an agreement to create a 50-50 joint venture
between its Fletcher Aluminium windows and doors business and NALCO, the new entity being
Altus NZ Limited (previously known as Fanalco Limited). The transaction completed on 30 June
2016. As a result a $5 million gain before tax arose on divestment of the Fletcher Aluminium
business to the joint venture.
(2) The group recognised a charge of $16 million for costs associated with closing a number of sites:
- $2 million relating to the closure of two sites in Iplex Australia in July 2015;
- $9 million relating to the closure of Rocla Pipes’ operations in Western Australia and the
Atlantic Civil business;
- $4 million relating to the closure of a Formica Europe plant in Spain; and
- $1 million relating to the closure of a Dimond site in Palmerston North.
(3) A strategic review of the Formica India manufacturing business was completed during the year
ended 30 June 2016. The review identified that medium-term earnings prospects had deteriorated
and the group recorded an impairment expense of $26 million, comprising write-offs of goodwill,
property, plant and equipment and working capital to estimated recoverable values.
24 Fletcher Building Half Year Review December 2016
Notes to the consolidated financial statements continued
4. ACQUISITION OF SUBSIDIARY
On 29 July 2016, the group acquired the New Zealand road construction and maintenance business
Higgins Group Holdings Limited (‘Higgins’) and other related assets, together with Higgins’ Fiji
contracting business.
The acquisition will provide customers with a stronger proposition and level of capability in the
roading and infrastructure market, and provide further benefit for a number of group businesses
through operational synergies.
In the 5 months to 31 December 2016, the acquired Higgins businesses have contributed $198 million
of revenue and $21 million of EBIT to the group.
The fair values of the identifiable assets and liabilities at the date of acquisition were:
Fair value
recognised on
acquisition
NZ$M
Provisional
Assets
Property, Plant and Equipment124
Cash 4
Trade and other receivables58
Inventories12
Deferred tax asset2
200
Liabilities
Trade payables and other liabilities43
43
Total identifiable net assets at fair value157
Goodwill arising on acquisition154
Purchase consideration transferred311
Analysis of cash flow on acquisition:
Net cash acquired with the subsidiary (included in cash flows from investing activities) 4
Cash paid(311)
Net cash flow on acquisition(307)
The fair values above have been measured on a provisional basis. A formal fair value exercise of the
assets and liabilities of Higgins is underway, but will be completed prior to 30 June 2017. At present
the difference between the book value at acquisition and the purchase price has been recognised
as goodwill, representing the expected synergies to be achieved.
Acquisition related costs
The group incurred acquisition related costs of $1 million in the current period. These costs have
been included within significant items (June 2016: $5 million).
25 Fletcher Building Half Year Review December 2016
5. OTHER GAINS AND LOSSES
Fletcher Building Group
Six months
Dec 2016
NZ$M
Six months
Dec 2015
NZ$M
Year ended
June 2016
NZ$M
Other gains/(losses) include the following:
Sale of assets2 28
Redundancies and restructuring costs(7)(10)(20)
Other gains/(losses)(1)(6)
(8)(8)2
6. TAXATION EXPENSE
Fletcher Building Group
Six months
Dec 2016
NZ$M
Six months
Dec 2015
NZ$M
Year ended
June 2016
NZ$M
Earnings before taxation:242228604
Taxation at 28 cents per dollar 6864169
Adjusted for:
Higher/(lower) tax rate in overseas jurisdictions(1)(1)
Non assessable income(1)(6)(15)
Non deductible expenses1314
Utilisation of previous unrecognised tax losses(1)(34)
Tax in respect of prior years17
Tax losses not recognised5414
Other permanent differences(10)(13)(24)
6152131
Tax on earnings before significant items6655138
Tax benefit on significant items(5)(3)(7)
6152131
26 Fletcher Building Half Year Review December 2016
Notes to the consolidated financial statements continued
7. BORROWINGS
Fletcher Building Group
Dec 2016
NZ$M
Dec 2015
NZ$M
June 2016
NZ$M
Borrowings – current314 461413
Borrowings – non-current1,956 1,537 1,339
Carrying value of borrowings (as per balance sheet)2,270 1,998 1,752
Less impact of debt hedging activities (included within
derivatives)(79)(69)(84)
Borrowings after impact of hedging activities2,191 1,929 1,668
Less fair value hedge adjustment included in borrowings(1)(24)(52)
Borrowings excluding derivative adjustments2,190 1,905 1,616
Total available funding2,500 2,287 2,224
Unutilised banking facilities310 382 608
In addition the group had $229 million of cash on hand at 31 December 2016 (31 December 2015: $221 million; 30 June 2016:
$356 million).
Net Debt
Cash and cash equivalents229221356
Current borrowings(314)(461)(413)
Non-current borrowings(1,956)(1,537)(1,339)
Net Debt(2,041)(1,777)(1,396)
8. GOODWILL
The group performs a detailed impairment assessment annually and considers indicators of
impairment at each interim reporting date. At 31 December 2016, the group performed a review of
indicators of impairment for all significant cash-generating units. These reviews did not give rise to
any impairment charges.
27 Fletcher Building Half Year Review December 2016
9. FAIR VALUE MEASUREMENT
Financial instruments are measured at
fair value using the following fair value
measurement hierarchy:
(Level 1) Quoted prices (unadjusted) in
active markets for identical assets
or liabilities.
(Level 2) Inputs that are observable for the
asset or liability, either directly (as
prices) or indirectly (derived from
prices) other than quoted prices
included within level 1.
(Level 3) Inputs for the asset or liability that
are not based on observable market
data (unobservable inputs).
Financial instruments measured and recognised
at fair value are derivatives that are designated
in hedge relationships. The fair value of base
metal price swaps is based on the quoted
market prices of those instruments and are
measured under level 2. All other derivatives are
level 2 valuations based on accepted valuation
methodologies. Forward exchange fair value is
calculated using quoted forward exchange rates
and discounted using yield curves derived from
quoted interest rates matching maturity of the
contract. The fair value of electricity price swaps
are measured using a derived forward curve
and discounted using yield curves derived from
quoted interest rates matching the maturity
of the contract. Interest rate derivatives are
calculated by discounting the future principal
and interest cash flows at current market
interest rates that are available for similar
financial instruments.
Fair value disclosures
The fair values of borrowings used for disclosure
are measured by discounting future principal
and interest cash flows at current market
interest rates plus an estimated credit margin
that are available for similar financial instruments.
The interest rates across all currencies used to
discount future principal and interest cash flows
are between 1.62% and 7.48% (December 2015:
1.83% and 9.12%; June 2016: 1.42% and 8.79%)
including margins.
10. CONTINGENCIES AND COMMITMENTS
Provision has been made in the ordinary course
of business for all known and probable future
claims to the extent they can be reliably measured.
There have been no material movements in capital
expenditure commitments, lease commitments,
contingent liabilities or contingent assets to
those disclosed in the 2016 annual report.
11. SUBSEQUENT EVENTS
On 22 February 2017, the directors declared
a dividend of 20 cents per share, payable on
12 April 2017.
28 Fletcher Building Half Year Review December 2016
Notes to the consolidated financial statements continued
2017 INTERIM DIVIDEND SUMMARY TABLE
1
NZ cents per share
NZ Residents on
top marginal
tax rate of 33%
Australian
residents on
top marginal
tax rate of 49%
Australian
residents on
15% tax rate
Other non
residents
8
Dividend declared20.000020.000020.000020.0000
NZ imputation credits27.7778
NZ supplementary dividend33.52943.52943.5294
Australian franking credits40.00000.0000
Gross dividend for NZ tax purposes27.777823.529423.529423.5294
NZ tax (33%)5(9.1667)
NZ non-resident withholding tax (15%)6(3.5294)(3.5294)(3.5294)
Net cash received after NZ tax18.611120.000020.000020.0000
Australian tax (49% and 15%)7(11.5294)(3.5294)
Reduced by offset for NZ non-resident
withholding tax3.52943.5294
Less Australian franking credit offset0.00000.0000
Net cash dividend to shareholders after tax18.611112.000020.000020.0000
NOTES:
1 This summary is of a general nature and the tax rates used and the calculations are intended for guidance only. As individual
circumstances will vary, shareholders are advised to seek independent advice.
2 The dividend has imputation credits attached at a 28% tax rate.
3 A supplementary dividend is only payable to non-New Zealand shareholders and has the effect of removing the cost of
New Zealand non-resident withholding tax (NRWT). Non-resident shareholders with a 10% or greater direct shareholding
are not eligible to receive supplementary dividends but are exempt from NRWT.
4. There are no Australian franking credits attached to this dividend and the conduit foreign income component is nil.
5. For all NZ resident shareholders who do not hold an exemption certificate, resident withholding tax (RWT) is required to be
deducted at 5% from the gross dividend which has been credited with imputation credits at 28 percent. Accordingly, for
those shareholders, a deduction of 1.3889 cents per share will be made on the date of payment from the dividend declared
of 20.0 cents per share and forwarded to Inland Revenue. Resident shareholders who have a tax rate less than 33% will
need to file a tax return to obtain a credit for the RWT deduction in excess of their marginal tax rate.
6. NZ non-resident withholding tax at the rate of 15% on the gross dividend for NZ tax purposes.
7. This summary uses two examples of the effect of tax in Australia. The first uses the top marginal tax rate of 49%, including
the Medicare Levy and the Temporary Budget Repair Levy. The second example uses the 15% income tax rate applicable in
Australia to complying superannuation funds, approved deposit funds and pooled superannuation trusts. Different tax
rates will apply to other Australian shareholders, including individuals, depending on their circumstances.
The Australian tax is calculated as:49% Rate15% Rate
Gross dividend for NZ tax purposes23.529423.5294
Plus franking credits0.00000.0000
Gross dividend for Australian tax purposes23.529423.5294
Australian tax11.52943.5294
8 This illustration does not purport to show the taxation consequences of the dividend for non-residents of New Zealand or
Australia. Shareholders resident in other countries are encouraged to consult their own taxation advisor.
Dividend Information
Shareholder Information
Notice pursuant to clause 30 of Schedule 4
of the Financial Markets Conduct Act 2013
Pursuant to clause 30 of Schedule 4 of the
Financial Markets Conduct Act 2013 (the FMCA),
Fletcher Building Limited notifies its security
holders that it has transitioned to the FMCA with
effect from 1 December 2016. Accordingly, from
1 December 2016, the requirements of the FMCA
will apply to Fletcher Building Limited.
Shareholder enquiries
Changes of address, payment instructions
and investment portfolios can be viewed
and updated online: investorcentre.com/nz
Enquiries may be addressed to the Share
Registrar, Computershare Investor Services:
New Zealand
Computershare Investor Services Limited
Private Bag 92 119
Auckland 1142
New Zealand
Level 2, 159 Hurstmere Road
Takapuna, Auckland 0622
New Zealand
T. +64 9 488 8777
F. +64 9 488 8787
E. enquiry@computershare.co.nz
Australia
Computershare Investor Services Pty Limited
GPO Box 3329
Melbourne, VIC 3001, Australia
Yarra Falls, 452 Johnston Street
Abbotsford, VIC 3067, Australia
T. 1800 501 366 (within Australia)
T. +61 3 9415 4083 (outside Australia)
F. +61 3 9473 2500
insight
creative.co.nz
FLE064
Other investor enquiries
Fletcher Building Limited
Private Bag 92 114
Auckland 1142, New Zealand
T. +64 9 525 9000
E. moreinfo@fbu.com
Other information
www.fbu.com
Registered offices
New Zealand
Fletcher Building Limited
Private Bag 92 114
Auckland 1142
New Zealand
Fletcher House
810 Great South Road
Penrose, Auckland 1061
New Zealand
T. +64 9 525 9000
Australia
Fletcher Building Australia
Locked Bag 3501
North Ryde BC
NSW 1670, Australia
68 Waterloo Road
Macquarie Park
NSW 2113, Australia
T. +61 2 8986 0900
ARBN 096 046 936
---
Appendix 1 (Rule 10.3)
Preliminary Half Year Report
1
PRELIMINARY ANNUAL REPORT ANNOUNCEMENT
Reporting period
Previous reporting period
Revenue from ordinary activities
Profit from ordinary activities after tax
attributable to security holders
Net profit attributable to security holders
Interim dividend
Record date
Dividend payment date
Comments
Imputed amount per security
NZ 20.0 cpsNZ 7.7778 cps
24 March 2017
Refer News Release
12 April 2017
Amount per security
Amount NZ$millionPercentage change
FLETCHER BUILDING LIMITED
6 Months to 31 December 2016
6 Months to 31 December 2015
Results for announcement to the market
Half year ended 31 December 2016
4,6134%
1762%
1762%
Appendix 1 (Rule 10.3)
Preliminary Half Year Report
2
PRELIMINARY ANNUAL REPORT ANNOUNCEMENT
2.1. Preliminary half annual report on results for the half year ended 31 December 2016 (including the comparative results for the half year ended 31 December
2015) in accordance with Listing Rule 10.3.1
The amounts as presented have been prepared in accordance with Generally Accepted Accounting Practice in New Zealand which is
the New Zealand equivalent to International Financial Reporting Standards (NZIFRS). They also comply with International Financial
Reporting Standards. The amounts presented are based on unaudited accounts.
2.3 (a) Income Statement
Refer to Financial Statements.
2.3 (b) Balance Sheet
Refer to Financial Statements.
2.3 (c) Statement of Cash flows
Refer to Financial Statements.
2.3 (d and e) Dividends
Interim dividend
Amount per
per security
Interim dividend, payable 12 April 2017:NZ 20.0 cps
Record date for determining entitlement to the dividend:24 March 2017
New Zealand tax credits were attached to this dividend.
No Australian franking credits were attached to this dividend.
Dividends recognised and paid
Details of the interim dividend for the 2017 financial year are provided above.
Distributions recognised
Final dividend for 2016 financial year on Ordinary shares139 20
Distributions paid
Final dividend for 2016 financial year on Ordinary shares139 20
2.3 (f) Net Tangible Assets per security
Dec 2016Dec 2015
Net tangible assets per ordinary security (NZ$)2.652.77
The Dividend Reinvestment Plan will be operative for this dividend payment. There will be no discount to the price applied to
ordinary shares issued. Documentation for participation is available from the share registry or the website at www.fbu.com and must
be received by the registry before 5pm Monday 27 March 2017.
The price used to determine entitlements under the Plan is the average of the individual daily volume weighted average sale prices of
price-setting trades of the company’s shares sold on the NZX on each of the five business days from and including the ex-dividend date
of 23 March 2017. The new shares will rank equally with existing shares and will be issued on the dividend payment date of 12 April
2017.
For Half Year Ended 31 December 2016
(referred to in this report as the "current year")
$NZ millions
NZ Cents per
share
Appendix 1 (Rule 10.3)
Preliminary Half Year Report
3
2.3 (g) Control of Entities gained or lost during year
Control gained:
Name of subsidiary or group of subsidiaries
Contribution to operating earnings for the period
Date from which such contribution has been calculated
Control Lost:
Name of subsidiary or group of subsidiaries
Date from which control lost
Contribution to operating earnings for the period / previous period
2.3 (h) Associates and joint ventures
Fletcher Building has an interest in the following principal associates / joint ventures:
Dec 2016Dec 2015
Altus NZ Limited (previously Fanalco Limited)50.0%
Hexion Australia Pty Ltd50.0%50.0%
Regional Resources NW Pty Ltd50.0%50.0%
Sims Pacific Metals Limited50.0%50.0%
Wespine Industries Pty Limited50.0%50.0%
Dongwha Pattina NZ Limited20.0%20.0%
Name of Associate / Joint Venture
(ordinary shares, units, etc)
Percentage of ownership interest
$21 million
29-Jul-16
None
Higgins Group Holdings Limited
---
APPENDIX 7 – NZSX Listing Rules
Number of pages including this one
(Please provide any other relevant
NZSX Listing Rule 7.12.2. For rights, NZSX Listing Rules 7.10.9 and 7.10.10. details on additional pages)
For change to allotment, NZSX Listing Rule 7.12.1, a separate advice is required.
Full name
of Issuer
Name of officer authorised to
Authority for event,
make this notice
e.g. Directors' resolution
Contact phone
Contact fax
numbernumber
Date
Nature of event
BonusIf ticked,
Rights Issue
Tick as appropriate
Issue
state whether:Taxable
/ Non TaxableConversionInterestRenouncable
Rights IssueCapital
CallDividend
If ticked, stateFull
non-renouncable
change
x
whether:
Interim
x
YearSpecialDRP Applies
x
EXISTING securities affected by this
If more than one security is affected by the event, use a separate form.
Description of theISIN
class of securities
If unknown, contact NZX
Details of securities issued pursuant to this eventIf more than one class of security is to be issued, use a separate form for each class.
Description of theISIN
class of securities
If unknown, contact NZX
Number of Securities toMinimum
Ratio, e.g
be issued following eventEntitlement
1 for 2 for
Conversion, Maturity, Call
Treatment of Fractions
Payable or Exercise Date
Tick if
provide an
pari passu
ORexplanation
Strike price per security for any issue in lieu or date
of the
Strike Price available.
ranking
Monies Associated with Event
Dividend payable, Call payable, Exercise price, Conversion price, Redemption price, Application money.
Source of
Amount per security
Payment
(does not include any excluded income)
Excluded income per security
(only applicable to listed PIEs)
Supplementary
Amount per security
Currencydividendin dollars and cents
details -
NZSX Listing Rule 7.12.7
Total monies
TaxationAmount per Security in Dollars and cents to six decimal places
In the case of a taxable bonusResident
Imputation Credits
issue state strike priceWithholding Tax(Give details)
Foreign
FWP Credits
Withholding Tax(Give details)
Timing
(Refer Appendix 8 in the NZSX Listing Rules)
Record Date 5pmApplication Date
For calculation of entitlements -Also, Call Payable, Dividend /
Interest Payable, Exercise Date,
Conversion Date. In the case
of applications this must be the
last business day of the week.
Notice DateAllotment Date
Entitlement letters, call notices,For the issue of new securities.
conversion notices mailedMust be within 5 business days
of application closing date.
OFFICE USE ONLY
Ex Date:
Commence Quoting Rights:Security Code:
Cease Quoting Rights 5pm:
Commence Quoting New Securities:Security Code:
Cease Quoting Old Security 5pm:
EMAIL: announce@nzx.com
Notice of event affecting securities
Fletcher Building Limited
Charles BoltDirectors resolution
09 525 918809 525 90302222017
Fletcher Building Ordinary SharesNZFBUE0001S0
In dollars and cents
Retained Earnings
$0.200
Enter N/A if not
applicable
$$0.091667$0.077778
$0.035294$0.000000
NZD$0.352940
$138,797,057
Date Payable
12 April, 2017
24 March, 201712 April, 2017
12 April, 2017
---
Working with you
Half Year Resultsto 31 December 2016
Fletcher BuildingHalf Year Results Presentation 2017MARK ADAMSON—
Chief Executive Officer
BEVAN MCKENZIE—
Chief Financial Officer
22 February 2017
1
Disclaimer
Fletcher Building Half Year Results Presentation | © February 2017
2This Half Year Results presentation dated 22 February 2017 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 given in that commentary.
Contents•
Results Overview
•
Industry Context
•
Divisional Performances
•
Financial Results
•
Strategy Update
•
Outlook
•
Appendix
Fletcher Building Half Year Results Presentation | © February 2017
3
Working with you
Results Overview
Fletcher Building Half Year Results Presentation 2017
Results overview
Fletcher Building Half Year Results Presentation | © February 2017
5
Operating earnings before significant items$310
m
12%
Net earnings before significant items$187
m
18%
Revenue
$
4,613
m
4%
Dividend per share
20c
5 %
Basic earnings per share before
significant items
27.0c
17%
Highlights6
Distribution:•
Tot al EBIT +31%
•
NZ Steel Distribution EBIT +47%
•
NZ Building Supplies EBIT +21%
•
AU Steel Distribution EBIT +25%
•
Strong NZ performance, AU improvements
International:•
Tot al EBIT +32%
•
Formica EBIT +113%
•
Laminex EBIT +10%
•
Laminex performing well in both NZ and Australia
•
All Formica regions seeing positive momentum –growth in local currencies was higher than reported NZD growth
Fletcher Building Half Year Results Presentation | © February 2017
Highlights7
Good progress on business turnarounds & Higgins integration:•
Formica Europe EBIT +$14m
•
Higgins EBIT $21m in first 5 months, ahead of plan
•
Iplex AU and Tradelink both ahead of HY 16
New Zealand:•
Tot al EBIT
1
(excluding Construction, divestments/
acquisitions) +20%
•
Volume improvements: Steel +14%, Plasterboard +9%, Concrete Pipe +12%, Cement +5%, Ready Mix +4%
•
Residential and Land Development EBIT +25%
•
Construction result impacted by one-off factors
•
Corporate costs beginning to decline
Fletcher Building Half Year Results Presentation | © February 2017
1. Before significant items
Results overviewRevenue
Fletcher Building Half Year Results Presentation | © February 2017
8
•
Reported revenue $179m or 4% higher than HY16
REVENUE GROWTH RATESGeographic segments
Reported
Local Currency
New Zealand
14%
14%
Australia
(10)%
(6)%
Rest of World
0%
8%
Revenue$
4,613
m
4%
Results overviewOperating earnings
Fletcher Building Half Year Results Presentation | © February 2017
9
Operating earnings$
294
m
2%
•
Reported operating earnings (EBIT) up 2%
•
Operating earnings before significant items up 12%
•
Significant items primarily due to site closure costs at Fletcher Insulation and RoclaProducts
Operating earnings before significant items$
310
m
12%
EBIT (before significant items) GROWTH RATESGeographic segments
Reported
Local Currency
New Zealand
3%
3%
Australia
(4)%
2%
Rest of World
121%
138%
Stronger performance from Rest of World reflected in increased EBIT contribution
Fletcher Building Half Year Results Presentation | © February 2017
10
1. Before significant items
57%
29%
14%
External Revenue Geographic
Split H1 17
(H1 16 in brackets)
(14%)
(52%)
(34%)
66%
17%
17%
EBIT¹ Geographic Split H1 17
(H1 16 in brackets)
(9%)
(72%)
(19%)
Results overviewNet earnings
Fletcher Building Half Year Results Presentation | © February 2017
11
Net earnings $
176
m
2%
•
Net earnings before significant items were up 18% to $187m
•
Funding costs down 13%
•
Effective tax rate 25%, slightly higher
EARNINGS PER SHAREEarnings per share
25.4 cents
+2%
Earnings per share(before significant items)
27.0 cents
+17%
Net earnings before significant items $
187
m
18%
Results overviewCash flow from operations
Fletcher Building Half Year Results Presentation | © February 2017
12
Cashflow from operations $
(67)
m
•
Cash outflow from operations of $67m compared to $170m inflow in HY16
•
Decrease mainly due to:
–
$56m Pacific Steel working capital release in HY16
–
$79m increased investment in land and development
–
Timing of Construction contract payments
•
Cashflow from operations before working capital movements were $246m (versus $208m in HY 16)
Results overviewDividend
Fletcher Building Half Year Results Presentation | © February 2017
13
Dividend per share20
c
5%
•
Interim dividend fully imputed for NZ taxation purposes
•
Dividend Reinvestment Plan will be operative for this dividend
•
Expect to fully impute interim and final dividends in FY17, FY18 and FY19
DIVIDENDInterim dividend per share
20 cents
Working with you
Industry Context
Fletcher Building Half Year Results Presentation 2017
New Zealand residential consents up 10%, supported by high net migration
15
Source: Statistics NZ, Infometrics1 – Twelve months rolling
-20,000
0
20,000
40,00060,000
80,000
Jun-04
Jun-05
Jun-06
Jun-07
Jun-08
Jun-09
Jun-10
Jun-11
Jun-12
Jun-13
Jun-14
Jun-15
Jun-16
Net migration 12 month rolling
Fletcher Building Half Year Results Presentation | © February 2017
Auckland represents 34% of all consents in the 12 months to December 16
-20,000
0
20,000
40,00060,000
80,000
Dec-03
Dec-04
Dec-05
Dec-06
Dec-07
Dec-08
Dec-09
Dec-10
Dec-11
Dec-12
Dec-13
Dec-14
Dec-15
Dec-16
Net Migration 12 month rolling
10%
7%
-9%
24%
-20%
-10%
0%
10%
20%
30%
NZ
Auckland
Canterbury Rest of NZ
Change % Year on Year
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
Dec-10
Dec-11
Dec-12
Dec-13
Dec-14
Dec-15
Dec-16
Total residential consents
1
Long term average (2001-2015)Peak (2004)
New Zealand Infrastructure and Commercial backlog strong
Fletcher Building Half Year Results Presentation | © February 2017
16
0
2,0004,0006,0008,000
10,00012,00014,00016,000
2010
2011
2012
2013
2014
2015
2016
Value of work done (NZm)
New Zealand Infrastructure and
Commercial Work
Infrastructure
Commercial
8%
21%
0%
5%
-5%
0%5%
10%15%20%25%
New Zealand
Auckland
Canterbury
Rest of New
Zealand
NZ Infrastructure and Commercial Work
Put in Place Change Year-on-Year
Source: NZ Statistics, Infometrics – Calendar years
Source
: NZ Statistics, Infometrics – CY2016 growth on CY2015
0
50
100150200250300
2010
2011
2012
2013
2014
2015
2016
'000s
Australian Residential Approvals
Standalone houses
Other dwelling types
0
50
100150200250300350
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
Migration (000)
Net migration 12 month rolling
Australian residential activity impacted by WA, standalone approvals remain resilient
17
Source: BIS – Calendar years
Fletcher Building Half Year Results Presentation | © February 2017
Net migration 12 month rollingAustralian Residential Approvals Change Year-on-Year*
Australian Residential Approvals
-4%
2%
-3%
2%
-27%
4%
-30%-25%-20%-15%-10%
-5%
0%5%
10%
Australia
NSW
VIC + QLD
SA
WA
Rest of Aus
Source: BIS – Change from CY15 to CY16
Australian Infrastructure and Commercial work has slowed in most states
Fletcher Building Half Year Results Presentation | © February 2017
18
0
20,00040,00060,00080,000
100,000120,000140,000160,000180,000
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Value of work done (AUDm)
Australian Infrastructure and Commercial Work
Infrastructure
Non residential
Source: BIS Shrapnel
-11%
4%
-19%
1%
-15%
-4%
‐
20%
‐
15%
‐
10%
‐
5%0%5%
10%
Australia
NSW
VIC + QLD
SA
WA
Rest of Aus
Australian Infrastructure and Commercial
Work Change Year-on-Year 2016
Working with you
DivisionalPerformances
Fletcher Building Half Year Results Presentation 2017
19
Divisional operating earnings overview
Fletcher Building Half Year Results Presentation | © February 2017
20
EBIT¹NZ$m
132
53
64
24
36
(31)
129
70
84
30
24
(27)
Building Products
Internationa
l
Distribution
Residential and
Land
Development
Construction
Corporate
HY 2016
HY 2017
1. Before significant items
(2)%
+32%
+31%
+25%
(33)%
+13%
+10% excluding divestments
278
263
310
(15)
12
17
20
6
(12)
4
180200220240260280300320340
H1 16 Actual
Discontinued
H1 16 adjusted
Building
Products
International
Distribution
Residential &
Land
Construction
Corporate
H1 17 reported
H1 2017 vs H1 2016 EBIT Bridge
Fletcher Building Half Year Results Presentation | © February 2017
21
EBIT¹NZ$m
1. Before significant items
Fletcher Building Half Year Results Presentation | © February 2017
22
Building ProductsResult
NZ$m
Dec 2015
6 months
Dec 2016
6 months
%
change
Gross Revenue
1,265
1,108
(12)%
External Revenue
1,021
859
(16)%
EBITDA¹
172
167
(3)%
EBIT¹
132
129
(2)%
Concrete Pipes & Products
27
26
(4)%
Cement & Aggregates
35
38
9%
Building Materials
48
53
10%
Plastic Pipes
2
7
NM
Joint Ventures & Other
5
5
0%
Divested businesses
15
0
NM
Funds Employed
1,748
1,686
(4)%
EBITDA¹/gross revenue %
14
15
EBIT¹/gross revenue %
10
12
ROFE %
15
15
Concrete Pipes & ProductsReady-mix concrete volumes +4%NZ concrete pipe volumes +12%Australia concrete product volumes flatCement & AggregatesNew Zealand cement volumes +5%New Zealand Aggregate volumes +24%Building MaterialsPlasterboard volumes +9%Plastic PipesIplex Australia volumes +2%EBIT +$5m
1.
Before significant items
Fletcher Building Half Year Results Presentation | © February 2017
23
International Result
NZ$m
Dec 2015
6 months
Dec 2016
6 months
%
change
Gross Revenue
1,080
1,005
(7)%
External Revenue
1,067
997
(7)%
EBITDA
87
104
20%
EBIT
53
70
32%
Formica
16
34
108%
Laminex
41
45
10%
Roof Tile Group
62(67)%
Funds Employed
2,041
1,948
(5)%
EBITDA/gross revenue %
810
EBIT/gross revenue %
57
ROFE %
57
Formica3% volume growth in both North America & AsiaAsia revenue
1
growth of +7%, operating
earnings
1
+4%
Europe: operating earnings up $14mLaminexRevenue growth in New Zealand +9%Underlying EBIT growth:
– New Zealand +75%–Australia +3%
Roof Tile GroupRevenue down 7% and EBIT down $4m due mainly to sales decline in Africa
1.
Local currency
DistributionResult
Fletcher Building Half Year Results Presentation | © February 2017
24
NZ$m
Dec 2015
6 months
Dec 2016
6 months
%
change
Gross Revenue
1,610
1,644
2%
External Revenue
1,531
1,559
2%
EBITDA
79
96
22%
EBIT
64
84
31%
NZ Building Supplies
39
47
21%
NZ Steel Distribution
17
25
47%
AU Building Supplies
02NM
AU Steel Distribution
81025%
Funds Employed
1,049
1,039
(1)%
EBITDA/gross revenue %
56
EBIT/gross revenue %
45
ROFE %
12
16
New Zealand Building SuppliesOperating earnings +21%PlaceMakers revenue growth +7%Mico revenue growth +7%New Zealand Steel DistributionOperating earnings +47% Significant volume growth at Pacific Coilcoaters, Easysteel and ReinforcingAustralia Building SuppliesRevenue flat in AUD due to weakness in Western and South AustraliaTradelink continues to focus on its core trade plumber customers16 new Tradelink stores opened in HY17Australia Steel DistributionOperating earnings +25%New customer service proposition launched
Fletcher Building Half Year Results Presentation | © February 2017
25
Residential and Land DevelopmentResult
NZ$m
Dec 2015
6 months
Dec 2016
6 months
%
change
Gross Revenue
108
163
51%
External Revenue
108
163
51%
EBITDA
24
30
25%
EBIT
24
30
25%
NZ Residential
24
25
4%
Land Development
05NM
Funds Employed
295
477
62%
EBITDA/gross revenue %
22
18
EBIT/gross revenue %
22
18
ROFE %
16
13
NZ Residential Continued new developments coming onlineSolid sales in Beachlands, Karaka and HobsonvilleSignificant progress in securing land for future development over the next few yearsCurrent pipeline of over 4,000 lotsLand DevelopmentExpect to earn $25m+ per annum over the next 5 years from land developed for resale
Fletcher Building Half Year Results Presentation | © February 2017
26
ConstructionResult
NZ$m
Dec 2015
6 months
Dec 2016
6 months
%
change
Gross Revenue
748
1,150
54%
External Revenue
707
1,035
46%
EBITDA
40
35
(13)%
EBIT
36
24
(33)%
Construction NZ
1
26
1(96)%
Construction South Pacific
10
23
141%
Funds Employed
(37)
366
NM
EBITDA/gross revenue %
5
3
EBIT¹/gross revenue %
5
2
New ZealandRevenue +29% (excluding Higgins)Backlog of work as at 31 December 2016 was $2.7bnOperating earnings significantly impacted by:•
Timing of major projects
•
Bid costs
•
Reduced contribution from Fletcher EQR
•
Isolated underperformance in one area of the business
Higgins ahead of plan and invited to join NCTIR consortium for rebuild of State Highway 1 post Kaikoura earthquakeSouth PacificEBIT +$13m
1.
Includes Fletcher EQR
Working with you
Financial Results
Fletcher BuildingHalf Year Results Presentation 2017
Profit & Loss18% increase in net earnings before significant items
NZ$m (except EPS)
Reported Results
Change
Dec 2015
6months
Dec 2016
6months
Revenue
4,434
4,613
4%
Operating earnings before significant items
278
310
12%
Operating margin
6.3%
6.6%
5%
Significant items
10
(16)
NM
Operating earnings (EBIT)
288
294
2%
Funding costs
(60)
(52)
(13)%
Tax
(52)
(61)
17%
Non-controlling interests
(4)
(5)
25%
Net earnings
172
176
2%
Net earnings before significant items
159
187
18%
Earnings per share before
significant items (EPS – cents)
23.0
27.0
17%
Fletcher Building Half Year Results Presentation | © February 2017
28
Operating cash flow
NZ$m
Dec 2015
6 months
Dec 2016
6 months
Change
Operating earnings before significant items
278
310
12%
Depreciation and amortisation
97
102
5%
Less cash tax paid
(67)
(69)
3%
Less interest paid
(60)
(54)
(10)%
Provisions, significant items and other
(40)
(43)
8%
Results from operations before working capital adjustments
208
246
18%
Land and developments
(85)
(164)
93%
Other working capital movements
47
(149)
NM
Cash flows from operating activities
170
(67)
NM
Fletcher Building Half Year Results Presentation | © February 2017
29
Capital expenditure in FY17 expected to be in the range of $275m to $325m
Fletcher Building Half Year Results Presentation | © February 2017
30
NZ$m
Dec 2015
6 months
Dec 2016
6 months
%
change
Stay-in-business
77
69
(10)%
Growth
45
58
29%
Total Capex
122
127
4%
Acquisitions
305
NM
Depreciation/ Amortisation
97
102
5%
•
Depreciation & Amortisation forecast to be $210-220m in FY17
173
194
275
201
194
210
2015
2016
2017
Growth
106
325
2017 Forecast Capital
105
Stay-in-business
Depreciation
Expenditure
NZ$m
2017 Forecast Depreciation
220
Net debt higher due to investments in working capital, land and Higgins
Fletcher Building Half Year Results Presentation | © February 2017
31
149
164
58
69
305
42
3
123
9
1,396
2,072
(31)
2,041
(246)
Opening Net Debt
Cash from operations
(pre working capital)
Other working capital
Investment in land
and developments
Growth capex
Stay in business capex
Acquisitions
Finance lease addition
Treasury stock purchase
Dividends
Minority distribution
Closing net debt
before hedging/FX
Hedging/FX on debt
Closing net debt
NZ$m
Debt profile
Undrawn credit lines of $310m and cash of $229mAverage maturity of debt is 5.1 yearsApproximately 47% of all borrowings have fixed interest ratesAverage interest rate on debt is 5.0%Mix of currency (hedged)
−
NZ$
50%
−
AU$
33%
−
US$
11%
−
Other 6%
Fletcher Building Half Year Results Presentation | © February 2017
32
173
206
466
279
131
164
148
377
246
10
300
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
June Years
Funding and Maturity Profile31 December 2016
Drawn
Committed Undrawn Debt Facilities
Capital management settingsFletcher Building will continue to targ
et strong ‘BBB’ credit characteristics
Gearing:
•
Target of Net Debt to Net Debt + Equi
ty (including Capital Notes) of 30-40%
•
As at 31 December 2016: 35.4%
Leverage:
•
Target Net Debt to EBITDA of 2.0 to 2.5 times
•
As at 31 December 2016: 2.5 times
Dividend pay-out:
•
Target ratio of 50% to 75% of net earnings (before significant items)
•
For H1 17: 74%
Fletcher Building Half Year Results Presentation | © February 2017
33
Key ratios
Fletcher Building Half Year Results Presentation | © February 2017
34
-27
51
9
-3
11
51
Jun-12
Jun-13
Jun-14
Jun-15
Jun-16
Dec-16
Total Shareholder Return (TSR)Percentage
1
37
33
32
32
27
35
Jun-12
Jun-13
Jun-14
Jun-15
Jun-16
Dec-16
Debt/Debt Plus Equity
Percentage
10.2
10.8
12.3
12.5
12.7
13.2
Jun-12
Jun-13
Jun-14
Jun-15
Jun-16
Dec-16
Return on Average FundsPercentage
2
2.62
2.27
1.99
2.02
1.59
2.48
Jun-12
Jun-13
Jun-14
Jun-15
Jun-16
Dec-16
Net Debt/EBITDA
Times
1. Returns for previous 12 months2. Earnings before interest, tax an
d significant items / average funds
Working with you
Strategy Update
Fletcher BuildingHalf Year Results Presentation 2017
People and performance culture
Targeted investmentsPrudent portfolio managementTurnaround capabilityFocus on shareholder value
Strategy summary
36
Fletcher Building Half Year Results Presentation | © February 2017
$
Performance culture embedded through Accelerate
37
Fletcher Building Half Year Results Presentation | © February 2017
•
Weekly cadence
•
Balance of revenue, cost and efficiency
•
Rigorous tracking of benefits and returns
Identify
Ideas
Value identification
Value capture
L2
L3
L4
L5
L1
Track
Plan
Implement
Validate
Realise
Value
Number of initiatives at each layer
1
1,876
1,794
1,692
1,182
618
•
Continuous renewal of initiative pipeline
•
Annualised benefits realised by end of FY18
1. Total EBIT initiatives
(80)(60)(40)(20)
‐
20406080
Yr
0Yr
1Yr
2Yr
3
Combined EBIT ($m)
Turnaround capability established
38
Fletcher Building Half Year Results Presentation | © February 2017
•
FB management is developing a track record of turning around underperforming businesses
•
Improved performance reflects a mixture of improved pricing, product offering, customer service, operational efficiencies and cost-out delivery
•
Current turnarounds in Australia and Europe being executed despite the backdrop of subdued market activity
Turnaround businesses:
•
Formica North America
•
Iplex AU
•
Mico
•
Fletcher Insulation
•
Formica Europe
•
Tradelink
1.
Combined EBIT of FBU businesses before significant items
Collective Turnaround of Selected FBU Businesses
1
Targeted Investments
39
Fletcher Building Half Year Results Presentation | © February 2017
•
>$700m invested in Residential and Higgins
•
Additional c. $100m per annum in fast payback capital projects
•
Major investments aligned with structural drivers
Auckland Housing Shortage
(5,000)05,00010,00015,00020,00025,00030,00035,00040,000
1,0001,1001,2001,3001,4001,5001,600
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Dwellings
Population
Dwellings needed to keep pace with population growth
Estimated dwellings built
Cumulative shortage of dwellings
Estimated Auckland Population
NZ Infrastructure Pipeline
Source: Infometrics
-
1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000 9,000
10,000
2010
2011
2012
2013
2014
2015
2016
2017F
2018F
2019F
2020F
2021F
NZ$m
Roading
Telecoms
Water Works
Electricity
Ports & Airports
Other Transport
Irrigation
Irrigation 1%
Electricity
13%
Telecoms
16%
Other
Transport 2%
Roading 49%
Water Works
13%
Ports &
Airports 6%
NZ Infrastructure 2016-2025
Prudent Portfolio Management
40
Fletcher Building Half Year Results Presentation | © February 2017
•
Divestment of Rocla Quarries an
d acquisition of Higgins high
lights positive return on
incremental capital employed
Business Unit
Investment/
Proceeds
EBIT
1
ROFE
Rocla Quarries
$205m
$18m
2
c.9%
Higgins
$307m
$40m - $45m
3
c.15%
Net
$102m
$22m - $27m
22% - 25%
1. Before significant items2. Last full year of earnings reported in FY153. Estimated annualised earnings
Focus on shareholder value
41
Fletcher Building Half Year Results Presentation | © February 2017
Underlying
Earnings Growth
Disciplined Capital
Management
Superior
Value-Creation
Strong
Cash
+=
Market Growth
&
Share Gains
Net Price > COGS
Inflation
SG&A Control
Sustain Capex:
$186m
M & A
or Buybacks
2
:
$107m
EPS Growth:
17%
Post-tax Operating
Cash-flow:
$568m
Organic Growth
Investment
1
:
$119m
Dividend Yield
3
:
5%
Dividends
5
:
$209m
Net Working
Capital
ROFE:
+0.4% pts
22%
1. Includes purchase of land for residential development.2. Divestment of Rocla Quarries comple
ted January 2016 and acquisition of Higgins
completed in July 2016.
3. Yield reflects fully imputed dividend for NZ tax-resident investor4. Net of distribution maintained in
lieu of shares issued under DRP
+
Results for last 12 month period (ie CY 2016)
Working with you
Outlook
Fletcher BuildingHalf Year Results Presentation 2017
42
Outlook FY17
New Zealand•
Strong macro-economic conditions expect
ed to continue to benefit FY17 and
provide opportunities to expand Building
Products and Distribution operating
margins
•
Elevated levels of residential, commerc
ial and infrastructure construction are
likely to be sustained in the medium term
Australia•
NSW still looking positive but WA
downturn has been tough to digest
•
Standalone housing proved resilient to da
te, multi-dwellings showing signs of
peaking but some segments of civil
infrastructure look more positive
•
Underlying earnings of Tradelink, Stramit and Tasman Sinkware to improve
Rest of World•
Asia: showing signs of improving volumes but remain competitive
•
North America: impact of new presidential administration uncertain to date
•
Europe: mixed outlook with growth in
UK offset by weaker Continental Europe
•
Further improvement to come from Formica businesses
Fletcher Building Half Year Results Presentation | © February 2017
43
Financial Outlook FY17
44
FY17 operating earnings (EBIT bef
ore significant items) expected to
be in the range of $720m to $760mEarnings from Higgins acquisitio
n should offset the impact of
discontinued operations:
•
Pacific Steel
•
Rocla Quarry Products
•
Fletcher EQR
Capex forecast to be $275-325m versus $300m in FY16 Depreciation forecast to be $210-220m versus $194m in FY16
Fletcher Building Half Year Results Presentation | © February 2017
Working with you
Q&A
Fletcher BuildingHalf Year Results Presentation 2017
Appendix: New Zealand construction market has a strong pipeline
46
Fletcher Building Half Year Results Presentation | © February 2017
Value of all NZ Construction Work Put in PlaceNZ$bn
Source: Infometrics
•
Forecasts suggest medium term peak for residential construction but ‘stronger for longer’ infrastructure construction pipeline
$0$5
$10$15$20$25$30$35$40
2002
2004
2006
2008
2010
2012
2014
2016
2018f
2020f
Residential
Commercial
Infrastructure
Total
106%
26%
Appendix: Sectoral exposureExposures based on revenues
47
Fletcher Building Half Year Results Presentation | © February 2017
Geographical Exposure by Sector¹
Residential
(New/A&A)*
Commercial
Infrastructure
Other
New Zealand
44%
29%
12%
15%
Australia
55%
22%
10%
13%
Rest of World
44%
49%
0%
7%
Total Manufacturing
49%
30%
9%
12%
New Zealand
79%
18%
0%
3%
Australia
49%
51%
0%
0%
Total Distribution
69%
29%
0%
2%
New Zealand
13%
45%
41%
1%
Rest of World
0%
37%
63%
0%
Total Construction & Residential
12%
44%
43%
1%
1. Excludes business sold or closed during the year* A&A – Additions and Alterations
Appendix: Building consent data
48
Fletcher Building Half Year Results Presentation | © February 2017
Dec 2015
12 months
Dec 2016
12 months
16/15
% Mvmt
New ZealandResidential Consents
27,129
29,967
+10%
Non Res WPIP ($m)
6,202
7,144
+15%
Infrastructure WPIP ($m)
6,594
6,703
+2%
Australia
Source: Infometrics
Residential Consents
- Standalone houses
118,997
117,056
(2)%
- Multi residential and
other dwelling types
120,074
113,258
(6)%
-Total
239,071
230,314
(4)%
Non Res WPIP (A$bn)
36.7
36.3
(1)%
Infrastructure WPIP (A$bn)
111.6
91.0
(18)%
US (Billions of US$) Calendar Years
Source: BIS
Residential Consents (US$bn)
525
538
+2%
Non Res WPIP (US$bn)
465
481
+3%
Infrastructure WPIP (US$bn)
311
306
(2)%
Source: HIS Global Insight
-
5,000
10,000 15,000 20,000 25,000 30,000 35,000 40,000 45,000 50,000
NSW
VIC
QLD
WA
2015 House
2015 Total Dwellings excl Houses
2016 House
2016 Total Dwellings excl Houses
Appendix: Strongest growth in NSW; Western Australia experience a significant decline in approvals
49
Fletcher Building Half Year Results Presentation | © February 2017
Dec 2015
12 months
Dec 2016
12 months
%
Change
Stand-alone
118,997
117,056
(2)%
Multi + other Residential
120,074
113,258
(6)%
Total
239,071
230,314
(4)%
Change in housing approvals – by state12 months ended 31 Dec 2016 vs 2015
Source: HIS Global Insight
Appendix: Group Structure
50
Fletcher Building Half Year Results Presentation | © February 2017
Building Products:
Matt Crockett
International:
Francisco Irazusta
Distribution:
Dean Fradgley
Residential & Land
Development:
Steve Evans
Construction:
Graham Darlow
•
GBCWinstone (NZ) including Higgins Aggregates
•
Firth (NZ)
•
Humes (NZ)
•
Rocla Pipelines (Aus)
•
WinstoneWallboards/Tasman Insulation (NZ)
•
Fletcher Insulation (Aus)
•
Iplex (NZ & Aus)
•
Sims Pacific Metals (NZ)
•
Altus (NZ)
•
Formica Asia
•
Formica Europe
•
Formica North America
•
Laminex (NZ & Aus)
•
Roof Tile Group (NZ; Africa; Asia; Europe; USA)
•
PlaceMakers (NZ)
•
Mico (NZ)
•
EasySteel (NZ)
•
Pacific Coilcoaters(NZ)
•
Fletcher Reinforcing (NZ)
•
Tradelink (Aus)
•
Stramit (Aus)
•
Tasman Sinkware (Aus)
•
Fletcher Living (NZ)
•
Land Development
•
Property
•
Innovation
•
Infrastructure (NZ)
•
Fletcher EQR (NZ)
•
South Pacific
•
Higgins Contracting (NZ & Fiji)
•
Building + Interiors (NZ)
Supported by Fletcher Building Corporate Services:
People and Communications – Kate Daly, Ch
ief People and Communications Officer
Strategy, Marketing and Finance – Bevan McKenzie, Chief Financial Officer
Group Technology – John Bell, Chief Information Officer
Governance – Charles Bolt, Compan
y Secretary and General Counsel
Procurement, Shared Services, Operatio
ns Excellence and Transformation - Lee
Finney, Chief Transformation Officer
Data sourced from publicly available filings. Our datasets may not be complete. Automated analysis can produce errors. If you believe any data on this page is incorrect, please contact us at hello@nzxplorer.co.nz. For informational purposes only. Not investment advice.