FBU ASM documents, CEO announcement and earnings guidance

Building communities,
building lives.
Fletcher Building
Annual Shareholders’ Meeting 2017
2017 Annual
Shareholders’ Meeting
25 October 2017

Building communities,
building lives.
Fletcher Building
Annual Shareholders’ Meeting 2017
Sir Ralph Norris
Chairman

Directors
Sir Ralph Norris (Chairman)
John Judge
Dr Alan Jackson
Bruce Hassall
Tony Carter
Cecilia Tarrant
Steve Vamos
3
Fletcher Building Annual Shareholders’ Meeting 2017

Meeting agenda
FY17 review
•Overview of FY17 financial performance
•Construction Division update
•Board actions
•FY17 performance by Division
•Progress on turnaround strategies
FY18 outlook
•CEO appointment
•Strategic review
•FY18 outlook and earnings guidance
ASM procedures
•Voting on resolutions
•Q&A
4
Fletcher Building Annual Shareholders’ Meeting 2017

Building communities,
building lives.
Fletcher Building
Annual Shareholders’ Meeting 2017
2017 Performance
Overview

2017 financial performance overview
Fletcher Building Annual Shareholders’ Meeting 2017
6
Operating earnings before significant items
$525
m
Net earnings before significant items
$321
m
23%
23%
4%
24%
Revenue
$9,399m
Total dividend per share
39c
Flat YoY
Basic earnings per share before significant items
46.3c

Divisional performances
Fletcher Building Annual Shareholders’ Meeting 2017
7
EBIT¹
NZ$m
252²
133
176
84
78
(63)
267
169
193
130
(204)
(30)
Building ProductsInternationalDistributionResidential & Land
Development
ConstructionCorporate
FY 2016FY 2017
1.Before significant items
2.FY2016 Building Products EBIT adjusted for divestment of Rocla Quarries and Pacific Steel
Stripping out B+I, Group EBIT was up 20% YoY
and NZ EBIT was up c30%
+6%
+27%
+10%
+55%

Building communities,
building lives.
Fletcher Building
Annual Shareholders’ Meeting 2017
Construction Division
Update

Construction in context
Fletcher Building Annual Shareholders’ Meeting 2017
9
LOCAL AND GLOBAL INDUSTRY
CHALLENGES
•Catch up following historical
underinvestment in infrastructure
and population growth creating
buoyant conditions in many
markets
•Skill and labour scarcity
•Transfer of risk from client to
contractor
•Thin profit margins, providing little
room for error
•Poor productivity
FLETCHER CONSTRUCTION
CHALLENGES
•Large growth in project pipeline
in short space of time
•Core capability failings in B+I
•Inconsistent approach to risk
management and pricing in bid
phase
•Project management resource
stretched with growth in projects
•Increased complexity of project
design and engineering not
managed effectively

What we said we would do, and what we have done
10
Fletcher Building Annual Shareholders’ Meeting 2017
Improve business and
project governance
Improve commercial and
construction expertise
1
2
→New financial management system in place for B+I, Infrastructure and South Pacific,
with project reporting now standardised
→Monthly reviews of all projects by Construction Leadership Team (CLT)
→Monthly reviews of all major projects by the CEO and Executive
→FB Board undertakes regular operational review meetings with the CLT
→Recruitment of Board Director with deep construction and contracting experience
→Chief Executive Michele Kernahan–strong commercial expertise, led the
Christchurch rebuild
→B+I General Manager David Kennedy 30+ years experience in construction + Balfour
Beatty UK
→Highly experienced CLT, all internally appointed:
→Significant recruitment in 2017 to lift skill base and augment capability –focus on
project management/delivery/operations, risk and commercial management
oDavid Geor, Infrastructure
oBrent Leach, South Pacific
oKen Lotu-I’iga, Higgins

What we said we would do, and what we have done
11
Fletcher Building Annual Shareholders’ Meeting 2017
Introduce more
commercial rigour
around bids
Focus on key sectors
and clients
3
4
→Revised bidding process has been in place since the start of 2017
→Bid criteria established –focussed on what we can win and what will deliver/exceed
bid margins in today’s environment
→Stage gate approval process –improved oversight of risks and mitigations
→Board now appoints a Subcommittee to review and make recommendations on
major projects
→Better coordinated approach across FB businesses on key construction clients
→Focus on specific industry sectors and clients –strength of relationship and
acceptable risk profiles

Fletcher Building Annual Shareholders’ Meeting 2017
12
KPMG review findings: key projects
→Highly challenging project with significant remaining risks
→High staff turnover has had major adverse impact
→New, stable leadership team is improving organisation and morale
→Forecast outcome materially worse than previously expected
→Significant ongoing judgment required to account for unknown and unquantifiable risk
InternationalConvention Centre
/ Hobson Street Hotel
(B+I)
→Well-run project, forecast outcome consistent with FB expectation
→Many complex technical aspects successfully worked through
→High percentage of subcontracting work contracted
Commercial Bay
(B+I)
→Well-run projects, strong partners
→Relatively early-stage, major earthworks to be undertaken over next two years –
dependent on weather and terrain
→Forecast outcomes broadly consistent with FB expectation
Puhoi to Warkworth
& Hamilton City Edge
Expressway
(Infrastructure)

Fletcher Building Annual Shareholders’ Meeting 2017
13
→Need to implement standardised approach to tender process, project management,
control environment, design management, and risk and opportunity management
across B+I
→Increased use of “design & build” contracts and design novation underscores
importance of tendering and design management expertise
→Deficiencies in processes and project controls have been key contributors to NZICC
issues –new team addressing issues, but will take time to embed
→Opportunities to better-integrate JDE into project management
→Opportunities to adopt areas of good practice observed on Infrastructure projects
Building + Interiors
→Governance and management processes, systems and controls are robust,
clearly-defined and comprehensive
Infrastructure
KPMG review findings: project governance

Construction Division –future focus
Fletcher Building Annual Shareholders’ Meeting 2017
14
TALENT
DELIVERY
BIDDING
SYSTEMS
SAFETY
Attracting and retaining the best people in the industry,
investment in leadership and capability
All our people going home safe every day
Strengthened project management talent, robust governance,
clear accountabilities, client focus
Disciplined approach to winning new work, strengthened governance
and a focus on long-term profitable growth
Stronger finance and IT systems improving our ability to forecast,
manage and control performance

Building communities,
building lives.
Fletcher Building
Annual Shareholders’ Meeting 2017
Board
Actions

Board actions
→Board resolved to reduce all Directors fees by 20%, effective immediately
→Maintain existing requirement for Directors to acquire a holding of at least
20,000 shares as a condition of their appointment –not common amongst
largest listed companies in NZ and ensures financial alignment between Board
and shareholders
Fletcher Building Annual Shareholders’ Meeting 2017
16
Board renewal
1
→Appointment of a Director with deep construction and contracting experience
will strengthen Board and Audit and Risk Committee
→Additional Director will be appointed as part of standard renewal process
Director fee
freeze
2
Best-practice
communications
3
→Updated Shareholder Communications Policy, reflecting industry best practice
→Continue to provide timely and relevant information to all shareholders

66
67
69
85
F B F Y 1 6F B F Y 1 7I N D U S T R Y
N O R M *
F B T O P 2 5 % * *
We have strong foundations
Fletcher Building Annual Shareholders’ Meeting 2017
17
People engagement
3,000+
Leadership capability
Leadership program participants FY14-FY17
Results of FBuSay employee engagement survey
Employee engagement index
* Industry norm = composite of Manufacturing, Heavy Building Products and Retail sectors
** FB Top 25% = the top 25% of FB teams with the highest engagement

We have strong foundations
Fletcher Building Annual Shareholders’ Meeting 2017
18
Safety performance
Total reportable injury
frequency rate has reduced
from 57.5 in 2006 to 6.8 in
2017.
Major new safety initiative
launched in 2017 –Protect.
* Total reportable injury frequency rate, measured as the sum of lost time and medical treatment hours, per million employee and contractor hours
TRIFR*
YEARS

Building communities,
building lives.
Fletcher Building
Annual Shareholders’ Meeting 2017
FY17
Performance by
Division

Fletcher Building’s divisional structure
Fletcher Building Annual Shareholders’ Meeting 2017
20

Building Products Division
Fletcher Building Annual Shareholders’ Meeting 2017
21
Chief Executive: Matt Crockett
Approx. 3,900 people employed
Over 80 manufacturing sites in
NZ and AU
Local investment and
high quality standards a
competitive advantage
HIGHLIGHTS
→Increased volumes, revenues and EBIT in NZ concrete and aggregates
value chain
→Solid growth in demand for plasterboard and increased price for
insulation
→Good EBIT improvement in plastic pipes, turnaround in Australia
→Looking for further opportunities to achieve price increases

Distribution Division
Fletcher Building Annual Shareholders’ Meeting 2017
22
Chief Executive: Dean Fradgley
Approx. 6,000 people employed
Over 330 retail sites in
NZ and AU
Customer leading focus a
competitive advantage
HIGHLIGHTS
→Very good result across NZ building supplies, and NZ and AU steel
distribution businesses –EBIT more than 20% higher than FY16
→PlaceMakers and Micobenefiting from heightened levels of activity in
the NZ building and construction markets
→Turnaround in Tradelink gaining some momentum, but still a long way
from achieving acceptable returns

International Division
Fletcher Building Annual Shareholders’ Meeting 2017
23
Interim Chief Executive:
Mitch Quint
Approx. 5,500 people employed
Operations across Europe, North
America and Asia
Significant focus on innovation
for competitive advantage
HIGHLIGHTS
→Formica group hitting $88m of EBIT, including a $21m positive swing
in EBIT of Formica Europe
→First time there has been positive momentum in all three Formica
regions
→Laminex NZ and AU proved to be a robust performer in all regions
except Western Australia

Residential and Land Development Division
Fletcher Building Annual Shareholders’ Meeting 2017
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Chief Executive: Steve Evans
11 developments* in Auckland
5 developments* in Canterbury
Aspiration to deliver 1,000
homes per year
HIGHLIGHTS
→Increase in residential units sold following investment in land and
builds
→Still very strong demand for new houses in Auckland, while
Christchurch market is well supplied
→Significant profits derived from the Land Development business,
mainly due to sale of large James Fletcher Drive site
* Sales or construction underway

Construction Division
Fletcher Building Annual Shareholders’ Meeting 2017
25
Chief Executive:
Michele Kernahan
Approx. 4,400 people employed
Higgins delivered 15% ROFE
in its first year post acquisition
Significant government focus on
infrastructure investment
in NZ and AU
HIGHLIGHTS
→Infrastructure benefitted from completion of Waterview Tunnel plus
MacKay’s to Peka Pekaroad
→Higgins had very successful first year delivering $39m of EBIT, joining
Kaikourarebuild alliance and being integrated into Construction division
→Strong year for South Pacific with 18% improvement in EBIT after
completing a number of large contracts

Turnaround strategies progress
Fletcher Building Annual Shareholders’ Meeting 2017
26
→AUSTRALIA
→$27m turnaround over last two years due to restructured product offering,
manufacturing site improvements and cost overhead reductions
→Further upside now reliant on improved industry dynamics
→AUSTRALIA
→Early stages of improving revenue trend centred around new store rollout,
regaining share of SME wallet and stocking and delivering the right products
→Significantly impacted by weakness in Western Australia and losses in
market share
→EUROPE
→$21m swing to positive EBIT in FY17 due to growth in local currency revenue,
operational improvements of North Shields plant and overhead reductions

Building communities,
building lives.
Fletcher Building
Annual Shareholders’ Meeting 2017
CEO Appointment

Introducing Ross Taylor
Fletcher Building Annual Shareholders’ Meeting 2017
28
→Starts 22 November 2017
→Impressive career in construction, real estate, manufacturing and engineering
sectors
→Worked across our core markets of NZ and Australia, plus Europe, Asia and USA
→Most recently CEO of UGL, an international engineering, services, construction
and product manufacturing business, acquired by CIMIC in early 2017
→Prior to this Managing Director and CEO of Tenix, and before that various senior
positions with Lend Lease
→Proven experience leading business turnarounds and improving performance
and shareholder returns
→Direct experience across a range of our core sectors –housing, manufacturing
and construction
→Focus on people and culture, safety performance, client and customer
satisfaction and sustainability

Building communities,
building lives.
Fletcher Building
Annual Shareholders’ Meeting 2017
Strategic Review

Strategic review
Fletcher Building Annual Shareholders’ Meeting 2017
30
→CEO to lead review of Fletcher Building strategy, alongside Executive Team and Board
→Executive Team and Board have commenced a review of current business performance
and the competitive landscape to assist this process
→We continually review our portfolio to ensure we are allocating capital in a way that
delivers the most value to our shareholders

Building communities,
building lives.
Fletcher Building
Annual Shareholders’ Meeting 2017
FY18
Outlook and
Earnings
Guidance

Fletcher Building Annual Shareholders’ Meeting 2017
32
FY18 outlook
New Zealand
→Overall market remains robust, but with low-growth –impacted by resource constraints, unusually wet weather in
Q1, and anticipation of new government policy
→Building materials and distribution businesses recording flat to low single-digit YoY growth
→Strained supply chains creating some cost headwinds
→House prices in Auckland have softened slightly, though in line with expectations and sales volumes are solid –full-
year volume dependent on consent and development timelines
Australia
→Overall market flat to slightly down –eastern seaboard solid, WA still struggling
→Turnarounds are key to full-year performance: Tradelink, Fletcher Insulation, Rocla, Iplex
→Cost headwinds on energy
Rest of World
→Modest growth in local currency terms, Formica trading to plan

Earnings guidance
Fletcher Building Annual Shareholders’ Meeting 2017
33
Given the uncertainty in estimating the final outcomes of the major B+I projects, and the resulting impact on in-year
earnings, Fletcher Building is separating guidance of the B+I business from the remainder of the Group’s earnings.
FY18 earnings before interest & tax (EBIT)
(1)
:
Fletcher Building excl. B+I: $680m to $720m
B+I: Estimated loss of $160m
Fletcher Building will provide regular updates to shareholders on performance of the B+I business and progress on
key projects. Updates to take place at half-year results (February), May, full-year results (August), and Annual
Shareholders’ Meeting (October).
Fletcher Building will maintain its standard disclosure obligations on the FY18 earnings guidance for the Group
excluding B+I.
(1) EBIT is pre-significant items

Building communities,
building lives.
Fletcher Building
Annual Shareholders’ Meeting 2017
Electronic voting
instructions

Handset instructions –inserting your smartcard
•The smartcard should be inserted into your
handset
•If the smartcard is not inserted into your handset
please do so now
•Make sure the chip at the bottom of the
smartcard is inserted and facing you
•A welcome message will briefly appear when the
card is inserted correctly
•You will then be returned to the holding screen
where your name will now appear at the top of
the display
Fletcher Building Annual Shareholders’ Meeting 2017
35

Handset instructions –casting your vote
•When the chairman opens the poll, instructions will appear in
the device screen.
•Use the red triangle, green square and blue track ball to
select/navigate through the screens.
Fletcher Building Annual Shareholders’ Meeting 2017
36

Handset instructions –casting your vote
•Voting options will appear on the screen. Press:
Button 1 to vote for
Button 2 to vote against
Button 3 to withhold your vote
•Confirmation that your vote has been received will appear on
the screen.
Fletcher Building Annual Shareholders’ Meeting 2017
37

Handset instructions –casting your vote
•Confirmation that your vote has been received will appear on
the screen
•To change your vote, simply enter your new choice (1, 2 or 3)
to overwrite your previous selection
•If you wish to cancel your vote, press the ‘X’ button
Fletcher Building Annual Shareholders’ Meeting 2017
38

Voting via Lumi AGM app
Fletcher Building Annual Shareholders’ Meeting 2017
39
•A voting icon will appear on the navigation bar
•Select one of the options to cast your vote

Fletcher Building Annual Shareholders’ Meeting 2017
40
ASM voting

Fletcher Building Annual Shareholders’ Meeting 2017
41
Resolution 1:
Election of Bruce
Hassall as a director
of the company

Fletcher Building Annual Shareholders’ Meeting 2017
42
Resolution 2:
Re-election of
Cecilia Tarrant as a
director of the
company

Fletcher Building Annual Shareholders’ Meeting 2017
43
Resolution 3:
Auditor’s
remuneration

Building communities,
building lives.
Fletcher Building
Annual Shareholders’ Meeting 2017
Q&A

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FLETCHER BUILDING LIMITED


Annual Shareholders’ Meeting 2017


Chairman Speech

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Annual Shareholders’ Meeting 2017

Chairman Speech


CHAIRMAN

Welcome

Good morning ladies and gentlemen and welcome to the 2017 Annual
Shareholders’ Meeting of Fletcher Building Limited. My name is Ralph Norris, and I
am the Chairman of the Fletcher Building Board of Directors.

I advise that a quorum is present and the meeting is duly constituted.

We are in a beautiful and significant building for today’s meeting. Auckland
Museum is a non-smoking venue. Please exit the building if you wish to smoke. In
the unlikely event of an emergency, please follow the instructions of Museum hosts,
who will get you out the exits and to safety.

This year, as part of our ongoing commitment to making our meetings accessible to
as many shareholders as possible, we are pleased to extend a warm welcome to
those participating online through our virtual meeting provided by our share
registrar Computershare.

Before commencing the business of the meeting, I’d be grateful if those joining us
in person could please make sure your phone is on silent and that you use the Lumi
AGM app purely for voting and asking questions. This will allow more people to use
it to view the meeting remotely and not tie up bandwidth at the venue here today.

There will be opportunities for shareholders to ask questions later in the
proceedings. If you are using the Lumi AGM app on your phone, tablet or desktop
PC, you can ask questions by clicking on the question icon in the navigation bar at
the bottom of the screen. You will receive confirmation that your message has been
received. Please note that due to time constraints we may not be able to address
all questions today. Questions sent via the Lumi AGM app will also be moderated
to avoid repetition, and if questions are particularly lengthy we may need to
summarise them, for reasons of brevity. In the event that we are unable to address
your question in the time available today, your question will be answered by email
or post after the meeting.

For further instructions please refer to the Virtual Meeting Guide that has been sent
to shareholders and is also available on the info screen in the Lumi AGM app.

If you are sitting in the room and want to use the Lumi AGM app on your
smartphone to vote and you haven’t already downloaded the app then you should
do so now according to the instructions distributed at the entrance. There are also
people in the room that will be able to provide you with any assistance.

Directors

Before commencing the business of the meeting, let me introduce my fellow
directors.

On my immediate right is John Judge. John has considerable executive experience
in Australasian business including most recently as the Chief Executive of Ernst &

P a g e | 3

Young New Zealand. He is Chairman of the ANZ Bank New Zealand and the
Auckland Arts Festival Trust, a director of The New Zealand Initiative, and a
member of the Otago University Business School Board of Advisors. John will be
retiring from the Board at the end of this meeting, having served 9 years on the
Board.

Next to John is Alan Jackson, who was appointed to the board in 2009. A Civil and
Construction Engineer in his earlier career, Alan holds a PHD in Civil Engineering
and is a Fellow of Engineering New Zealand. He has been an international
consultant since 1987 and was until 2009 the Australasian Chairman and a director
of The Boston Consulting Group. He has proven experience at the most senior
levels of international and government business. He is a director of Delegat Group
and Chairman of New Zealand Thoroughbred Racing.

Next to Alan is Bruce Hassall, who was appointed to the board in March this year. He
was the CEO and a Senior Partner of PwC New Zealand until mid-2016 when he
ended his 30 year career with the company. He is an Independent Non-Executive
Director of the Bank of New Zealand, Chairman of The Farmers Trading Company
and Non- Executive Director of Prolife Foods and Fletcher Building Industries
Limited. He serves as a member of the Advisory Board at the University of Auckland
Business School and was a founding board member of the New Zealand China
Council.

Next to Bruce is Tony Carter, who joined the board in 2010. Tony trained as a
chemical engineer, was previously Managing Director of Foodstuffs Auckland and
Foodstuffs New Zealand and has extensive experience in retailing, including as a
previous director and later Chairman of Mitre 10 New Zealand. Tony is currently
Chairman of Fisher & Paykel Healthcare, Air New Zealand, and the Auckland Blues,
and is a director of ANZ Bank New Zealand and Avonhead Mall.

On my left is Charles Bolt, our Company Secretary and General Counsel.

Next to Charles is Cecilia Tarrant, who joined the board in 2011. She has over 20
years' experience in international banking and finance, as both a lawyer and an
investment banker, in the United States and Europe. Cecilia is a director of SEEKA
and Payments NZ, chairman of the Government Superannuation Fund Authority, a
member of the University of Auckland Council and a trustee of the University of
Auckland Foundation. Cecilia is also an executive-in-residence at The University of
Auckland Business School.

Next to Cecilia is Steve Vamos, who joined the board in 2015. He has more than
thirty years’ experience in the Information Technology and online media industry
and has lived and worked in Australia, the USA and Asia. Steve currently serves as
a non-executive Director of Telstra and is a member of the Advisory Board of the
University of Technology Sydney Business School.

Meeting agenda

We are here today to be accountable to our shareholders, to keep you informed
about what is happening across the business, and to update you about further
losses we have incurred in the Building + Interiors business unit of our Construction
Division, as announced to the market this morning.

These losses, which I will go into in detail shortly, have been reflected in our
earnings guidance for 2018. Today we will provide further transparency about how
these issues occurred, the remedial action we have taken, and the risk profile that

P a g e | 4

remains across our legacy projects.

Please be assured that a considerable amount of remedial action has taken place
in the last year by the Board, the Executive Team and the Construction Leadership
Team.

We have improved business and project governance; improved systems and
processes; improved the construction and commercial capability of the Construction
Division; and introduced more commercial rigour around the bidding process.

I strongly believe that these actions will address the issues we have experienced
over the long term by ensuring our approach to bidding for, contracting and
managing future projects is greatly enhanced.

However, these measures will only go so far in altering the trajectory of our legacy
projects that commenced some time ago.

I understand many of you will want to understand how these issues arose in the
first place, and I will go through this in detail soon.

At this point I want to offer my personal apology to our shareholders. Mistakes have
been made and responsibility ultimately rests with the Board. As we stated at our
full year results briefings, we fully accept this responsibility.

Our focus now is on delivering these legacy projects to the highest quality for our
clients, and mitigating future losses. We recognise our shareholders will want
transparency over the remaining risk profile attached to our Building + Interiors
project pipeline.

Construction is a dynamic and sometimes volatile business. Some of our projects
are complex and will take a number of years to complete. During that time, as the
projects develop, risks can materialise that negatively impact our financial position.
Equally, upside opportunities can present themselves.

Furthermore, accounting standards require construction losses to be recognised as
soon as they become probable.

And as I have said before, estimating losses on large, complex projects is difficult,
and requires significant judgment based on the best information available at the
time.

To provide as much clarity as possible we will report guidance in a different way
this year. We will isolate Building + Interiors, and then report guidance for the
remainder of the Fletcher Building business separately. We are also committing
today to provide more regular updates to shareholders on the progress of the B+I
projects as they are completed.

Our aim is to help our shareholders better understand the performance of the
Building + Interiors business, as well as the underlying strength of our broader
portfolio of businesses.

I will go through this in detail later in the proceedings.

Turning now to the agenda on slide 4.

I will shortly provide an overview of the company’s financial performance for the

P a g e | 5

year ended 30 June 2017 and an update on the progress we have made in the
Building + Interiors business unit of the Construction Division, which I have touched
on briefly now. I will then share with you the actions that the Board is proposing to
take to further improve the Division, and to respond to recent feedback from our
shareholders.

I will then move on to the performance of our Divisions in 2017 and the progress we
are making on our turnaround strategies.

As you would have seen from our market disclosure this morning, we are very
pleased to have secured a high calibre CEO appointment in Ross Taylor, who will
provide strong leadership to Fletcher Building in the future. Later in the agenda I will
take some time to share more about Ross’s background and expertise.

I will then outline the strategic review he will undertake upon commencement, and
move on to our 2018 outlook and earnings guidance.

We will then go through the formal proceedings, which this year comprise three
resolutions, as outlined in the Notice of Meeting. The resolutions will be decided by
poll, based on votes cast in the room here today via the Lumi handsets and by
shareholders here and online using the Lumi AGM app. Questions on a resolution
will be taken before it is voted on.

Please note that voting on the resolutions is now open. For those using Lumi
handsets, the resolutions should appear on your screen. For those using the Lumi
AGM app on your smart phone or PC, the voting icon will appear on the navigation
bar at the bottom of your screen. Once you click on this, the resolutions will appear
on your screen, along with the voting options. I will talk in more detail about using
the voting technology when we come to formal consideration of the resolutions later
in the meeting. For those of you already familiar with the technology, if you wish you
can vote any time during the proceedings until I declare the voting closed after all
resolutions have been considered and voted on. You can also change your vote at
any time throughout the proceedings, until voting is closed. I will give you a clear
prompt later in the meeting to warn of the close in voting.

At the conclusion of voting we will then take the opportunity for general business
questions and discussion, which incorporates questions from in the room and online.
You can start submitting questions online now, which we will address later in the
proceedings.

2017 financial performance overview

Now I would like to turn your attention to slide 6 which provides an overview of our
financial performance in 2017.

Fletcher Building reported operating earnings before significant items of $525
million, which was a 23% decrease on financial year 2016. This was driven solely by
the losses of the Building + Interiors business, which I will discuss shortly.

Revenue of $9.4 billion was 4% higher, while net earnings before significant items
were also down 23% to $321 million.

Earnings per share before significant items were 46 cents and the final dividend of
19 cents per share was paid on 11th October and took the total dividend for the year
to 39 cents per share. This corresponded to a pay-out ratio of 84%.

P a g e | 6

Divisional performances

Turning now to slide 7 and you can see here the detail of the performance last year
by each of our divisions.

The losses in the Construction division were incredibly disappointing and amounted
to a $282 million reversal on the prior year’s result. B+I was the sole driver of this, as
our Higgins, Infrastructure and South Pacific businesses performed well.

Elsewhere, the four other divisions in the Group all posted healthy improvements in
earnings. In fact, excluding the losses incurred in the Building + Interiors business,
the Group’s earnings increased by approximately 20%, and earnings from the New
Zealand businesses increased around 30%.

Highlights included the performance of the International and Distribution divisions,
which I will talk to in more detail a little later on, while the Residential and Land
Development business also reported a large earnings improvement on last year,
although this was mainly due to the sale of a large commercial property.

Construction Division update

I would now like to spend more time discussing the Construction Division.

As outlined, the situation with regard to the Building + Interiors business unit has
worsened since the full year results and I will address this shortly when discussing the
findings from our latest review of the B+I projects, including the findings from the
independent KPMG review, which has looked in detail at the two biggest B+I projects.

First I would like to share with you the work that has been undertaken to ensure we do
not find ourselves in this position again in the future.

With the Fletcher Building Executive Team, the Construction Division’s Chief Executive
Michele Kernahan and her leadership team, we have identified what went wrong and
we are working assiduously to fix it.

We do not seek to diminish our responsibility, but to understand why this happened it is
important to understand the environment in which it occurred. Slide 9 provides some
context for what we are experiencing, based on widely-reported evidence.

Our country is undergoing one of the largest infrastructure and housing booms in its
history.

We operate in a globalised industry, meaning we compete with a range of international
markets for the best talent.

A scarcity of skills and talent is affecting construction companies in NZ and around the
world. The Ministry of Business, Innovation and Employment says that New Zealand
needs 56,000 more construction staff to meet demand.

Inflation is running much higher in construction than in the wider economy, and our
sector is incredibly competitive, resulting in much thinner margins that provide little
room for error.

And like other contractors locally and globally, we are experiencing an increasing
transfer of risk from client to contractor, as well as having to tender against
international-style contracts, which are more complex and onerous than in the past. In

P a g e | 7

commercial construction, “design & build” contracts and design novation are becoming
more prevalent than in the past, posing particular challenges around tendering and
design management. The size and scale of new projects is also attracting large
international competitors.

It is within that broader context that our own internal challenges created the issues we
experienced in 2017.

Our project pipeline in Building + Interiors grew rapidly in a short space of time,
especially the number of large projects being undertaken at the same time.

As the pipeline grew there were a number of failings within the core capabilities of the
Building + Interiors business, across a range of projects.

This included bid strategy, project planning and resourcing, commercial judgment
around the pricing of risk, and the management of consultants.

Our project management resources became stretched, impacted by the labour scarcity
of the broader sector and our own rapid growth. This was compounded by projects that
presented highly complex design and engineering challenges, which were not
managed or priced effectively by stretched teams.

Similar to what has happened globally, these failings occurred despite there being
deep construction experience within the Building + Interiors business and the
leadership of the Construction Division, across a range of complex and successful
projects.

Our key learning from this is that in addition to having high-quality bid and project
teams we must ensure we have more robust systems and processes which ensure an
appropriate level of testing and challenge on major projects at key intervals.

As I will explain now, we are introducing these systems and processes, and in doing
so, we are strengthening our ability to make effective judgements and decisions,
particularly on major projects.

What we said we would do, and what we have done

Turning now to slide 10, it is important our people, our shareholders and our
customers can trust us to do what we say we are going to do. We have made a
number of commitments to you all, and our actions since then will demonstrate that
we remain focussed on delivering on each and every one of them.

We said we would improve business and project governance and we have.

We have made significant enhancements, which will ensure our future projects are set
up for success from the outset.

We have implemented new financial management systems for the Building + Interiors,
Infrastructure and South Pacific businesses. Our project reporting has been
standardised; detailed monthly reviews of all projects are conducted by the
Construction Leadership Team; and monthly reviews of all major projects are
conducted by the CEO and Executive.

The Board undertakes regular operational review meetings with the Construction
Leadership Team, ensuring ongoing oversight of our pipeline and delivery.

P a g e | 8

We said we would improve the commercial and construction expertise of the
business, and we have.

We appointed a new chief executive of the Construction Division, Michele Kernahan.
Michele has worked for Fletcher Building since 1998 and understands the Company
intimately. She led EQR during the Christchurch rebuild – an incredibly complex task.

Michele has greatly enhanced the commercial expertise of the Division and is
providing strong leadership as the Building + Interiors business continues its
turnaround.

Michele has appointed a new General Manager of the Building + Interiors business,
David Kennedy. David is a highly experienced construction expert, with over 30 years’
in the industry across multiple markets. He comes to Fletcher Building from Balfour
Beatty, which is one of the UK’s largest infrastructure development and construction
firms.

Our broader Construction Leadership Team is also highly experienced and we are
proud to say all General Managers were internally appointed. We have David Geor
leading Infrastructure, Brent Leach leading our South Pacific business, and Ken Lotu-
I’iga leading our highly successful acquisition Higgins.

Outside our leadership team we have undertaken recruitment in 2017 to lift our skill
base and augment existing capability – with a strong focus on project management,
project delivery and project operations, as well as risk and commercial management.

On to slide 11 now. We said we were going to introduce more commercial rigour
around our bids, and we have.

A revised bidding and bid review process has been in place since the start of 2017,
which now ensures tighter commercial rigour, increased profit expectations and
deeper scrutiny and challenge by the Construction Division’s leadership. We are
focussed on what we can win, pricing risk and determining what will deliver or exceed
our margin expectations.

We have improved our oversight of risks and our ability to mitigate them through a
stage gate approval process. We will not bid for projects where our criteria are not
met, and this increased rigour has already resulted in the business not tendering for
some projects due to the risk transfer being proposed.

And the Board now also appoints a sub-committee to review and make
recommendations on bids for major projects, ensuring oversight at the highest level of
the Company.

We said we would focus on key sectors and clients, and we have.

While we don’t intend to share the intimate detail of our commercial strategy for our
competitors to benefit from, we are focussed on pursuing projects where we have a
strong relationship with the client, and where the project presents acceptable risk
profiles.

We are also getting better coordinated across all Fletcher Building businesses, to
ensure our construction clients receive the best possible service we can provide.

This has been a substantial program of work implemented over the last 10 months.

P a g e | 9

There is no silver bullet. Instead we have systematically reviewed the total
performance of the business and strengthened our governance, processes, systems
and talent across the board.

We expect this to have a positive impact on the way we win and manage projects in
the future. As I said earlier, however, these measures will only go so far in altering the
trajectory of projects that commenced some time ago.

Which brings me to the current position of our Building + Interiors business.

Before we look at the outcomes of the KPMG review, and while it is already widely
known, I would like to confirm for you today that the two major projects on which we
have incurred the majority of our losses are the Justice Precinct in Christchurch and
New Zealand International Convention Centre in Auckland.

We have not named them previously because we have strict confidentiality clauses in
our contracts, and we take our obligations to our clients very seriously.

Unilaterally deciding to ignore our contractual requirements would simply put at risk
our client relationships and our ability to win work in the future – which is not in the
best interests of our shareholders.

However, in the face of these extenuating circumstances and shareholder demand,
we have been able to gain agreement from our clients to make an exception in this
instance.

I will stress now that this is an exception to the rule, and we will continue to uphold our
contractual requirements for confidentiality on all other matters pertaining to our
projects, both now and in the future.

KPMG review findings

Turning now to slide 12 and I will share with you the key findings of the KPMG review.

To augment our existing governance processes, which I have just outlined, we
commissioned KPMG to review our two largest projects in both the Building + Interiors
business unit and our Infrastructure business unit.

In Building + Interiors this comprised the Convention Centre and Commercial Bay and
in Infrastructure, the Puhoi to Warkworth motorway project and Hamilton City Edge
Expressway.

The KPMG review is an internal management document and we will not be releasing
the detail of the report, however I would like to speak to some of the review’s key
findings.

I am pleased to say that three out of the four projects reviewed by KPMG are currently
on track, including Commercial Bay and the two projects in our Infrastructure
business.

On these projects, KPMG has identified that both risks and opportunities exist, but that
the projects are well-run with forecast outcomes broadly consistent with the position
taken by Fletcher Building.

The key issues identified in the KPMG review relate to the project that has already
been identified as a major contributor to our losses, the Convention Centre. KPMG

P a g e | 10

has highlighted that:

 It is a highly challenging project with significant remaining risks;

 High staff turnover throughout the first two years of the project has had a major
adverse impact on performance, knowledge retention in the project, and the
ability to accurately estimate the final outcome;

 The new leadership team that was recently put in place is improving project
organisation morale, and site performance;

 Significant ongoing judgment is required to account for unknown and
unquantifiable risks on the project.

You may have seen comments made by the CEO of Sky City last week, pointing to
the fact that Building + Interiors “have put in place a very experienced team to work on
our project and we are seeing a definite, positive shift in momentum.” KPMG has also
highlighted this improvement in its report. We remain aware, however, of the
significant complexity associated with this project, and hence there remains a large
degree of uncertainty over the final outcome.

This information has informed our earnings guidance, which we will discuss shortly.

Turning now to slide 13. The KPMG review also outlined a series of findings and
recommendations regarding project governance.

KPMG noted the governance and management processes, systems and controls in
our Infrastructure business unit are robust, clearly-defined and comprehensive.

KPMG then made a series of recommendations regarding project governance for our
Building + Interiors business.

This includes implementing a standardised approach to the tender process, project
management, the control environment, design management, and risk and opportunity
management across the business unit.

KPMG noted that the increased use of “design & build” contracts and design novation,
which we discussed earlier today, underscores the importance of tendering and
design management expertise.

KPMG also noted that the new Convention Centre team is addressing the deficiencies
in processes and project controls that have been key contributors to the issues we
have experienced on the project, but it will take time for the team to embed itself.

KPMG then highlighted further opportunities to better-integrate JDE into project
management and to adopt areas of good practice observed on Infrastructure projects.

These recommendations align with our own internal assessments and will support our
efforts to improve the performance of Building + Interiors.

Construction Division future focus

Turning now to slide 14. With stronger foundations our Construction Division has
clear priorities for 2018.

Safety remains our number one priority at all times – ensuring all our people get home

P a g e | 11

safely every day is simply table-stakes.

Delivery is paramount. With the right talent, robust governance, clear accountabilities,
and in partnership with our clients, we are firmly focussed on delivering our project
pipeline to the highest quality.

The Division remains focussed on further strengthening its talent pipeline and
investing in the capability of its people; taking a disciplined approach to winning new
work; and leveraging its stronger finance and IT systems to improve its ability to
forecast, manage and control performance.

Board actions

Turning now to slide 16. We have engaged widely with our shareholders, both large
and small, across multiple markets. We have listened to concerns and feedback. In a
number of recent meetings with shareholders that I attended, we heard that after the
events of this year and a change in CEO, shareholders want stability in the leadership
of the Company.

But more construction expertise is desirable, while maintaining diversity of experience,
gender and skill-sets amongst the Board members.

As announced on September 20, John Judge will be retiring as a Director of the Board
at the conclusion of today’s meeting, following the completion of his nine year tenure.
Kate Spargo retired on September 20, after being appointed to the Board of CIMIC
Group Limited – one of the world’s leading international contractors.

As a result of John Judge’s retirement we have appointed Bruce Hassall as Chair of
the Audit & Risk Committee. Bruce has considerable experience in auditing, M&A and
strategic advisory from a career spanning more than 30 years in professional services.

With these two retirements we have the opportunity to now refresh the Board with two
new appointments.

One of these appointments will be a director with deep construction and contracting
experience, which we believe will enhance the expertise of the Board and our Audit &
Risk Committee. This process is well underway and we will make an announcement
as soon as an appointment has been made.

We acknowledge that the issues with the Company’s performance have impacted our
shareholders’ investments. Accordingly, the Board has resolved to reduce all Directors
fees by 20% for the next 12 months, with immediate effect.

We will continue to require all Directors to hold at least 20,000 shares as a condition
of their appointment. This requirement is not common amongst the largest listed
companies in New Zealand, and we believe it ensures the appropriate financial
alignment of interests between the Board and shareholders.

Finally, we have listened to feedback from our retail shareholders regarding our
communications, and we have updated our Shareholder Communications Policy to
better highlight the range of communications channels the Company uses to
communicate with all of its shareholders, as well as outlining new initiatives introduced
in FY17.

We take our responsibility to communicate with all shareholders, large and small, very
seriously, and we are always willing to hear feedback on how we can improve our

P a g e | 12

communications initiatives.

During the year we have strengthened the resourcing of the Fletcher Building
Communications function, which will further support these efforts.

Strong foundations

Turning now to slide 17. I would like to reassure shareholders that the changes we
are making to improve performance are building on an already strong foundation.

We have been investing for many years in organisational culture, which has seen
people engagement continue to improve over time. Our annual engagement survey
has an incredibly high participation rate of 92%. When you consider we employ over
20,000 people, across more than 35 businesses in markets across the globe, this is
an incredible result. Our people want to have a say and want to work with us to
continually improve our culture.

We increased engagement in FY17, despite the challenging year we experienced. As
you can see we are now very close to the industry norm of 69, which is a composite of
the Manufacturing, Heavy Building Products and Retail sectors. Our top 25% most
highly engaged teams have engagement levels much higher than the industry norm,
at 85.

Since 2014 we have invested in the leadership capability of over 3,000 people across
our Company. We are continually building the skills of our people and investing in our
talent pipeline.

And most importantly, on slide 18 you will see that over the last decade we have
radically improved our safety performance. The total reportable injury frequency rate
has reduced from 57.5 in 2006 to 6.8 in 2017.

Of course even one injury is one too many, and our focus on safety will always be a
priority – because we can always do better. In 2017 we launched a major new safety
initiative across all Fletcher Building businesses called Protect – to ensure our journey
of continual improvement continues.

Highly engaged people, highly capable people, and people who go home safe every
day, are the backbone of our business. And we will remain focussed on these
fundamentals into the future.

Fletcher Building’s divisional structure

Turning now to slide 20, it is important to remember the diversity of the Fletcher
Building’s business. We are not only a construction company. We operate over 30
businesses across five key divisions – Building Products, Distribution, International,
Construction and Residential and Land Development.

And the majority of our Divisions and businesses are performing to plan – in fact
many had record years in 2017.

Building Products

On slide 21 we overview the Building Products Division, which is led by Chief
Executive Matt Crockett, has over 80 manufacturing sites across New Zealand and
Australia and employs approximately 3,900 people.

P a g e | 13

Its operations span concrete, cement and aggregates, concrete and plastic piping,
insulation and plasterboard. Through this Division we are one of the largest
investors in local manufacturing in New Zealand. In fact we are the only local
manufacturer of cement.

Although Building Products headline operating earnings before significant items
were down 3% to $267 million, as we have seen in a previous slide, when adjusting
for the divestment of Rocla Quarries and Pacific Steel this was actually up 6% on
last year.

The Firth and GBC Winstone businesses had a good year in 2017 with domestic
volumes up around 3-4% and having a positive flow through to revenue and EBIT
growth.

The 10% increase in Building Products operating earnings was driven by
improvements in plasterboard and performance board volumes at Winstone
Wallboards, while Tasman Insulation’s EBIT more than doubled due to price
increases and improvements in the production facilities.

For the first time since 2014, Iplex Australia reported positive EBIT, and in New
Zealand Iplex earnings benefited from a 4% improvement in volumes.

Given the continued high level of demand for our manufactured building products
and cost increases we are endeavouring to seek price increases wherever possible
to at least offset inflationary pressures.

Distribution

Turning now to slide 22. The Distribution Division, led by Chief Executive Dean
Fradgley, includes 330 retail sites in New Zealand and Australia, employing over
6,000 people.

Its operations include PlaceMakers and Mico in New Zealand and Tradelink in
Australia, as well as steel distribution businesses in both countries.

As I mentioned earlier, the Distribution result in FY17 was one of the highlights
across the group.

Our PlaceMakers and Mico building supplies businesses benefited from the very
high levels of activity in the New Zealand housing and construction markets and
collectively reported operating earnings up 22% on last year. This reflected market
share gains, revenue at both PlaceMakers and Mico increasing 6% year on year,
improved gross margins and controlled operating costs.

The Steel Distribution businesses in New Zealand increased operating earnings by
23% on the back of market share gains across all businesses plus a firm control on
costs.

In Australia, Tradelink continues to show improvement in trading, particularly
targeting SME customers. It opened 20 new stores in FY17, and will open a similar
number in FY18.

It has some recent momentum and has started posting year on year growth in store
revenues, but it is still some way from producing what we would consider to be
acceptable returns. At the end of the last financial year, Tradelink’s carrying value
was written down by $153 million, reflecting the large goodwill and intangible assets

P a g e | 14

included within its asset base previously.

International

On slide 23 we overview the International Division, which is led by Interim Chief
Executive Mitch Quint and employs approximately 5,500 people who work across
North America, Europe and Asia.

Its core brands include Formica and Laminex, which specialise in high pressure and
low pressure laminate surfaces.

Formica had a strong year with its EBIT increasing 42% to $88 million, mainly on the
back of the $21 million swing in Formica Europe earnings and the 35% increase in
Formica Asia EBIT.

It was the first time since Formica was acquired in 2007 that all three of the Formica
regions – Europe, Asia and North America – posted gains in their operating
earnings results.

Laminex’s EBIT grew 13% in FY17 on the back of improvement across both sides of
the Tasman and improved share in decorated board in New Zealand. Western
Australia remained a challenging market for Laminex Australia due to declining
activity levels.

Residential and Land Development

Turning now to slide 24. Our Residential and Land Development Division is led by
Chief Executive Steve Evans, and is currently delivering 11 housing developments
in Auckland and 5 in Canterbury. Our aspiration is to deliver 1,000 homes per year,
depending on market conditions and the availability of suitable land.

The Fletcher Living business posted a 3% increase in EBIT in FY17 based on
selling 499 houses and sections in the Auckland and Christchurch regions.

The number of houses sold was lower than expected due to the timing of land
purchases, constraints around obtaining building consents, weather delays and a
slowing of the Auckland market in the last quarter of the year.

There is still strong demand for houses in the Auckland market within key price
brackets, and in FY18 the number of houses and sections sold is expected to be a
material increase on FY17.

The Land Development operating earnings of $54 million were positively impacted
in the second half of the year by the sale of James Fletcher Drive, which
represented the majority of Land Development earnings for FY17.

As total funds employed in the Residential and Land Development Division have
now increased to over $500 million, the focus continues to be on profitable growth in
houses delivered to market, and at least $25 million per annum over the next 5
years in Land Development earnings.

Construction

Slide 25 overviews our Construction Division, which is led by Chief Executive
Michele Kernahan and comprises four business units – Building + Interiors,
Infrastructure, South Pacific and Higgins.

P a g e | 15


We have already talked at some length about the result in the Construction Division
but it is worth mentioning the performance of the businesses outside of Building +
Interiors.

Infrastructure had a good year on the back of the completion of the Waterview
Tunnel plus the McKays to Peka Peka road north of Wellington, but is likely to
produce a lower EBIT in FY18 due to major new projects being at an early stage.

The recently acquired Higgins business had a strong contribution of $39 million in its
first year of Fletcher Building ownership, representing a 15% return on its carrying
value.

The South Pacific performance was also strong but will return to more historic
averages in FY18 as the backlog has significantly reduced, with a very short
average duration of projects to be completed.

Turnaround strategies progress

Turning now to slide 26, I would like to touch on the progress we are making
against our turnaround strategies in Australia and Europe.

The Board and I would like to acknowledge the impact prior acquisitions have had
on the performance of the Company over many years.

Five years ago we commenced a process of divesting poor performing and non-core
assets, and identifying potential high-quality acquisitions. This saw the divestment of
several businesses, notably the Pacific Steel business in New Zealand and the
Rocla Quarries business in Australia. In addition, we have taken a far more
disciplined approach to acquisitions. Higgins is the only major deal completed in
recent times and has delivered solid results in its first year under our ownership.
We have also implemented turnaround strategies within businesses we believe can
still deliver shareholder value over the medium to long term.

To this end, FY17 was marked by the progress of the turnaround in Iplex Australia
and Formica Europe.

Iplex has improved its EBIT by $27m over the last two years by addressing a
number of fundamental issues, including its product offering and operational
efficiency of manufacturing plants.

Formica Europe has started to regain the market share it lost a few years ago when
it wasn’t able to manufacture and deliver products to its customers in a timely way
and to specification. This has been corrected by investment in the North Shields
site, the reduction in overheads and benefiting from the cost advantage of a lower
pound sterling post-Brexit.

Tradelink in Australia is currently early in its turnaround, with year-on-year growth of
revenues recently being reported since the start of FY18. It has committed to
opening new stores, refreshing its offering to trade plumbers and significantly
improving its efficiency in delivering the right products in full and on time. It has been
significantly impacted in the past two years by the weak Western Australia market,
where it has a number of stores.

P a g e | 16

CEO appointment

Turning to slide 28, I would now like to share more about our new CEO.

Following an extensive search I am pleased to confirm Ross Taylor will join Fletcher
Building as Chief Executive Officer on 22 November 2017.

Ross has spent an impressive career in the construction, real estate, manufacturing
and engineering sectors internationally, with direct experience across much of the
sector value chain. He has worked extensively across our core markets of New
Zealand and Australia, as well as Europe, Asia and the USA.

Ross was most recently CEO of UGL, an international engineering, services,
construction and product manufacturing business. UGL operates across the rail,
transport and technology systems, power, resources, water and defence sectors and is
headquartered in Australia. It was recently acquired by CIMIC, a major international
construction company.

Prior to this he was Managing Director and CEO of Tenix, a privately held engineering
and construction services company that was acquired by Downer in 2014. Prior to
Tenix he held various senior leadership roles at Lend Lease across a 23 year period.

The Board was impressed with Ross’s proven experience leading business
turnarounds and improving performance and shareholder returns, and his direct
experience across a range of Fletcher Building’s core sectors – including housing,
manufacturing and construction.

To remark on just a few of his achievements, during his time as CEO and Managing
Director of both UGL and Tenix he returned both loss-making businesses to
profitability. At UGL he doubled the share price in two years.

As Chief Operating Officer and Board Director of Lend Lease he was responsible for
all operating businesses globally. He reset the strategic direction of Lend Lease’s
construction business and restored results after successive years of
underperformance.

He is also a leader who is very firmly focussed on people and culture, safety
performance, client and customer satisfaction and sustainability, which are the
foundations of any successful company.

The Board and I are confident that Ross has the experience, expertise and leadership
capability to lead Fletcher Building into a new phase of growth and opportunity, and we
look forward to introducing him to shareholders in due course.

I would like to take the opportunity now to offer a personal thank you to Francisco
Irazusta, who has been serving as Interim CEO since July.

It is no easy task to act in an interim capacity, and Francisco has done so ably since
he stepped into the role in July.

He is an exceptional leader who has provided a steady hand for the business during
this transition and the Board and I thank him for this contribution.

We look forward to continuing to work with Francisco in his capacity as Chief
Executive of our International Division.

P a g e | 17

Strategic review

Turning now to slide 30.

Upon Ross’s commencement he will work with the Executive team and the Board to
review Fletcher Building’s strategy.

The Executive team and the Board have commenced the work necessary to assist
this process, including a review of current business performance and the competitive
landscape across our portfolio.

Fletcher Building is a diversified, portfolio business. We continually review our portfolio
to ensure we are allocating capital in a way that delivers the most value to our
shareholders.

The Board is looking forward to working with Ross and his Executive team to ensure
we continue to position the company for long-term, sustainable growth.

2018 Outlook

Turning to slide 32, I would like to now spend a little bit of time talking about the
outlook for the group and the approach we have decided to take to providing earnings
guidance to the market.
In New Zealand, we are still expecting to see robust levels of activity in the residential
and infrastructure construction markets in FY18, and potentially beyond.
Overall activity levels are being constrained to a degree by resource constraints across
the industry, unusually wet weather in the first quarter, and also anticipation around the
election result and new government policy.
In the first quarter of FY18, our building materials and distribution businesses recorded
flat to low single-digit year-on-year growth, with strained supply chains creating cost
headwinds in some areas.
Although there are some recent signs of the Auckland housing market cooling, we still
believe the significant shortage of housing underpins demand and our volumes
delivered year-to-date are in line with expectations. Here too industry capacity
constraints, both in terms of the consenting and building of developments, may have
an impact on the volume of houses being built in Auckland and full-year sales volumes
for our Fletcher Living residential business.
Infrastructure spending in both Australia and New Zealand remains robust.
In Australia, growth in the overall market is flat to slightly down, which is in line with our
expectations. The eastern seaboard remains solid but is offset by continued
challenges in Western Australia.
Turnarounds are key to our FY18 performance in Australia, with cost headwinds on
energy also a factor.

For our Formica business we expect modest growth in local currency terms for the
laminates markets in Europe, Asia and North America.

And we continue to face headwinds in our Building + Interiors business relating to our
legacy projects.

P a g e | 18

Earnings Guidance

Turning now to guidance on slide 33.

We have increasingly found ourselves talking to shareholders about expectations
around future earnings in two categories: for our Building + Interiors business, and the
rest of the company.

While the performance of the Group outside Building + Interiors is solid, there remains
significant uncertainty in estimating the final outcomes of the major Building + Interiors
projects, especially the Convention Centre. The KPMG Review has reinforced this
point.

It is for this reason that Fletcher Building is issuing guidance for the Group excluding
the Building + Interiors business.

For the Group excluding Building + Interiors, we estimate earnings before interest, tax
and significant items for FY18 to be in the range of $680 million to $720 million.

For Building + Interiors, given the deterioration of the major projects, in particular the
Convention Centre but also some additional costs being incurred on other projects
such as the Justice Precinct, we expect losses in Building + Interiors in FY18 to be
$160 million.

This is based on a balanced view across the portfolio of Building + Interiors projects.

We are aware that further downside risk and uncertainty exists in Building + Interiors,
and are cognisant of wanting to provide the market with as much transparency around
these risks as possible.

For this reason, Fletcher Building will be providing more detailed updates to
shareholders on the performance of the Building + Interiors business and the progress
and provisioning on key projects. We will provide the next update at the half-year
results announcement, and will do so again in May, at the full-year results in August,
and the Annual Shareholders Meeting in October. We will provide these updates until
the last of the major B+I projects is completed in the second-half of calendar year
2019.

End

---

Fletcher Building announces FY18 earnings guidance

Auckland, October 25 2017: Fletcher Building has announced earnings guidance for FY18 in the Chairman’s address
at its 2017 Annual Shareholders’ Meeting.

Given the uncertainty in estimating the final outcomes of the major Buildings and Interiors (B+I) projects, and the
resulting impact on in-year earnings, Fletcher Building has separated guidance of the B+I business from the remainder
of the Group’s earnings.

FY18 Earnings before interest and tax excluding significant items (EBIT):

 Fletcher Building excluding B+I: $680 million to $720 million
 B+I: estimated loss of $160 million

Commenting on the earnings guidance Chairman Sir Ralph Norris said: “A considerable amount of remedial action has
taken place in the past year by the Board, the Executive Team and the Construction Leadership Team to address the
issues we have experienced in our B+I business. We have improved business and project governance; improved
systems and processes; improved the construction and commercial capability of the Division; and introduced more
commercial rigour around the bidding process.

“I strongly believe that these actions will address the issues we have experienced over the long term by ensuring our
approach to bidding for, contracting and managing future projects is greatly enhanced. However, these measures will
only go so far in altering the trajectory of our legacy projects that commenced some time ago.

“I want to offer my personal apology to our shareholders. Mistakes have been made and responsibility ultimately rests
with the Board. As we stated at our full year results briefings, we fully accept this responsibility.

“Our focus now is on delivering these legacy projects to the highest quality for our clients, and mitigating future losses.
We recognise our shareholders will want transparency over the remaining risk profile attached to our B+I project
pipeline.”

Earnings guidance for the B+I business reflects an updated management review of the portfolio of B+I projects. The
estimated loss of $160 million in FY18 comprises additional provisions of approximately $125 million for expected B+I
project losses and approximately $35 million of expected B+I overhead costs in the current year.

The provision for additional B+I project losses has been informed, in part, by a report by KPMG, which was recently
commissioned by management to augment existing governance processes in the Construction Division. The KPMG
review covered two B+I projects, New Zealand International Convention Centre (NZICC) and Commercial Bay, and two
Infrastructure projects, Puhoi to Warkworth and Hamilton City Edge Expressway.

In three out of the four projects reviewed, being Commercial Bay and the two projects in the Infrastructure business,
KPMG’s forecast outcome is broadly in line with management’s expectations – risks and opportunities exist on each
project, however final margins in all three cases are expected to be positive. The key issues identified relate to the
NZICC project, which has already been identified as a major contributor to the Company’s losses in FY17.

The expected additional losses on NZICC, plus further costs being incurred in the close out of the Justice Precinct
project, represent approximately 80% of the $125 million provision announced today.

There is acknowledgement that there is uncertainty with respect to large B+I projects that still have some time to
complete. In recognition of this, Fletcher Building intends to provide regular updates to shareholders on performance
of the B+I business and progress on the key projects.

Earnings guidance for the remainder of the Group is informed by trading results across all of Fletcher Building’s
divisions for the first quarter of FY18, and the current outlook for the remainder of the financial year.

Compared to FY17, the Company expects the key differences in earnings to be: normalisation of corporate costs from
$29 million in FY17 to between $50 million and $60 million in FY18; a reduction of Land Development earnings from
$54 million in FY17 to more towards the previously stated target of $25 million per annum; and lower earnings for the
Construction Division excluding B+I, notably due to a limited backlog in South Pacific and major projects in the
Infrastructure business being at an early stage of completion. The impact of the lower earnings from South Pacific and
Infrastructure will be felt particularly in the first half of FY18 and may result in a decline in first half earnings for the
Group (excluding B+I) versus the prior comparable period.

Teleconference
Fletcher Building Chairman Sir Ralph Norris will host a teleconference call for all investors and analysts at 3.30pm NZ
time today (1.30pm AEST) to provide some more detail on this announcement. Dial in details are set out at the bottom
of the document.

Q&A

Q. Which projects have been responsible for the majority of Fletcher Building’s losses in Building + Interiors?
A. The two major projects on which we have incurred the majority of our losses are the Justice Precinct in Christchurch
and New Zealand International Convention Centre (NZICC) in Auckland. We have not named them previously because
we have strict confidentiality clauses in our contracts, and we take our obligations to our clients very seriously.
Unilaterally deciding to ignore our contractual requirements would simply put at risk our client relationships and our
ability to win work in the future – which is not in the best interests of our shareholders.

However, in the face of these extenuating circumstances and shareholder demand, we have been able to gain
agreement from our clients to make an exception in this instance. This is an exception to the rule, and we will continue
to uphold our contractual requirements for confidentiality on all other matters pertaining to our projects, both now
and in the future.

Losses on NZICC and the Justice Precinct represented approximately two-thirds of the $292m EBIT loss recorded by
B+I in FY17. Additional expected losses on these projects comprise approximately 80% of the additional $125m
provision announced today.

Q. Why did you not review the Justice Precinct project as part of the KPMG review?
A. We asked KPMG to review the two largest B+I projects that still have a significant amount of work left to complete,
namely NZICC and Commercial Bay. We considered that any recommendations coming out of the KPMG review would
be most useful on projects that still had a significant amount of time left to run.

Q. Why did you not review every project in B+I?
A. KPMG reviewed the NZICC and Commercial Bay projects as combined they represent approximately 60% of the
current B+I backlog, and given their size and timing of delivery, reflect the key areas of risk in the portfolio. The
remaining 40% of the backlog represents approximately 60 other, mainly smaller projects, which have a more limited
risk profile.

Q. Are you going to make the KPMG report public?
A. No, the KPMG report will not be made public. The report is an internal management document and formed one of
a number of inputs into the Board’s decision around setting earnings guidance.

Q. Why were the issues leading to the revised guidance not identified in August when the FY17 results were
reported?
A. Since August there has been an improvement in the information provided to management on the status and the
key issues on the NZICC project, which is strongly linked to the new project team put in place in recent months. This

has enabled an improved quantification of the likely project outcomes, though uncertainty remains given the large
size of the project and the time that is left to run on it. There have also been close-out issues on the Justice Precinct
project as it is taking longer than anticipated to commission the new building.

Q. When do you expect to next update to the market on your guidance?
A. We expect the next update to be at the FY18 interim results on 21 February 2018. The updates on the B+I business
are likely to be done on an approximately quarterly basis and until the last of the major B+I projects is completed in
the second-half of calendar year 2019.

Q. How has the business outside of B+I been trading in the first quarter of FY18?
A. Overall trading in Q1 has been broadly in line with expectations. Activity levels in New Zealand remain elevated,
though with growth rates slightly lower than expected. The Company’s building materials and distribution businesses
in New Zealand recorded flat to low single-digit revenue growth in Q1, impacted to a degree by industry resource
constraints and unusually wet weather. In addition, strained supply chains are creating some cost headwinds. House
prices in the key Auckland market have softened slightly, though in line with expectations, and sales volumes remain
solid. In Australia the overall market is flat to slightly down, consistent with expectations, and energy costs are a key
cost headwind. Formica is experiencing modest growth in local currency terms.

Teleconference Details

3.30pm NZT, Wednesday 25 October 2017
Passcode: 508929

Australia Toll Free: 1 800 558 698 Hong Kong: 800 966 806
Australia Local: +61 2 9007 3187 Japan: 0053 116 1281
New Zealand Toll Free: 0800 453 055 Singapore: 800 101 2785
NZ Local (Auckland): +64 9 929 1687 UAE: 8000 3570 2705
NZ Local (Wellington): +64 4 974 7738 United Kingdom: 0800 051 8245
NZ Local (Christchurch): +64 3 974 2632 United States: (855) 881 1339

You can pre-register for the call, which enables a quicker entry to the teleconference when dialing in:
https://services.choruscall.com.au/diamondpass/fletcher-508929-invite.html

#Ends

For further information please contact:

Leela Gantman Rodney Deacon
Head of Communications Head of Investor Relations
+64 27 541 6338 +64 21 631 074
Leela.gantman@fbu.com Rodney.deacon@fbu.com

---

Fletcher Building announces Ross Taylor as Chief Executive Officer

Auckland, October 25 2017: Fletcher Building Chairman Sir Ralph Norris today announced the appointment of Ross
Taylor as Chief Executive Officer (CEO), effective 22 November 2017.

Mr Taylor was most recently CEO of UGL, an international engineering, services, construction and product
manufacturing business, operating across the rail, transport and technology systems, power, resources, water and
defence sectors, and headquartered in Australia. UGL was acquired by the international construction and contracting
company, CIMIC, in early 2017.

Prior to this he was Managing Director and CEO of Tenix, a privately held engineering and construction services
company, and before that held various senior leadership roles at Lend Lease across a 23 year period.

Chairman Sir Ralph Norris said: “Following an extensive search I am pleased to confirm Ross Taylor as the new Chief
Executive Officer of Fletcher Building.

“Ross has spent an impressive career in the real estate, construction, manufacturing and engineering sectors
internationally, with direct experience across much of the sector value chain. He has worked extensively across our
core markets of New Zealand and Australia, as well as Europe, Asia and the USA.

“He has proven experience leading business turnarounds and improving performance and shareholder returns, and
has direct experience across a range of Fletcher Building’s core sectors – including housing, manufacturing and
construction.

“During his time as CEO and Managing Director of both UGL and Tenix he returned loss-making businesses to
profitability, doubling the UGL share price in two years. As Chief Operating Officer and Board Director of Lend Lease
he was responsible for all operating businesses globally. He reset the strategic direction of Lend Lease’s construction
business and restored results after successive years of underperformance.

“Importantly he is a leader focused on people and culture, safety performance, client and customer satisfaction and
sustainability, which are the foundations of any successful company.”

Sir Ralph said that upon his commencement Mr Taylor would lead the development of a new strategy for Fletcher
Building, to deliver increased focus and ensure capital allocation that delivers the most value to shareholders.

“The Board and I congratulate Mr Taylor on his appointment and look forward to working with him to lead Fletcher
Building into a new phase of growth and opportunity.”

Sir Ralph paid tribute to Interim CEO Francisco Irazusta, who has ably led the business during the leadership
transition.

“Francisco is an exceptional leader who has provided a steady hand for the business during this transition. The Board
and I thank him for his contribution and look forward to continuing to work with him in his capacity as Chief
Executive of our International Division.”

#Ends

For further information please contact:
Leela Gantman Rodney Deacon
Head of Communications Head of Investor Relations
+64 27 541 6338 +64 21 631 074
Leela.gantman@fbu.com Rodney.deacon@fbu.com

Ross Taylor Curriculum Vitae

Bachelor Engineering Civil (Hons) – University of Queensland

UGL Managing Director and CEO (Sydney) 2014 to 2017
UGL is a leading provider of end-to-end outsourced engineering, asset management and maintenance services with a
diversified end-market exposure across the core sectors of rail, transport and technology systems, power, resources,
water and defence. The business has annual revenue of $2.5 billion, employing over 9,000 people across Australia,
New Zealand and South East Asia.

Tenix Managing Director and CEO (Sydney) 2009 to 2014
Tenix was a privately held Engineering and Construction services company operating across the power, gas, water,
resources, mining, and traffic infringement processing sectors. Tenix offered a full spectrum of services covering
design, construction, operations and maintenance. It employed approximately 2,300 people across Australia, New
Zealand, the Pacific and USA. It was acquired by Downer in 2014.

Lend Lease, Various Roles and Locations 1988 to 2009
At the time Lend Lease was an Australian listed international property company with 13,000 employees. While
operations spanned some 40 countries the focus was in Australia, Singapore, UK, parts of Europe and the USA. Lend
Lease’s businesses spanned funds management ($11b FUM), property development ($60b pipeline), privatisation,
construction ($13b revenue p.a.) and facilities management.

Group Chief Operating Officer and Board Director (Sydney) 2007 to 2009
Global CEO – Property Development and Board Director (Sydney) 2005 to 2007
CEO Asia Pacific – Funds/Development/Construction (Sydney) 2003 to 2005
Global CEO – Construction (London) 1998 to 2003
CEO Australia and Asia – Construction (Sydney) 1995 to 1998
CEO Singapore – Construction/Development (Singapore) 1991 to 1995
Various Project Roles (Brisbane and Melbourne) 1988 to 1990

Nico Constructions Project Manager (London) 1987 to 1988

Lend Lease Site Engineer (Brisbane) 1985 to 1987

JWP Civil and Structural Design Engineer (Brisbane) 1983 to 1985

Key terms of employment for Fletcher Building Chief Executive Officer

1. Appointee: Ross Taylor
2. Contract duration: Indefinite term
3. Commencement date: 22 November 2017
4. Remuneration: Base salary of $2,000,000 p.a.
Executive Short Term Incentive target value 100% of base salary,
subject to performance criteria. Potential uplift to 150% for
out-performance of targets.
Executive Long Term Share Scheme at maximum value of 100% base
salary, subject to performance criteria.
Benefits – health insurance and company contributions to
KiwiSaver.
5. Termination: Resignation requires six months’ notice
6. Redundancy or no fault termination: 12 months base salary
7. Other terms: The employment agreement also includes standard terms covering
confidentiality, restraint upon termination of employment, conflicts
of interest, leave provisions and external appointments.