Fletcher Building making investments in the wood sector

Fletcher Building Limited, Private Bag 92114, Auckland 1142, 810 Great South Road, Penrose, Auckland 1061, New Zealand

Fletcher Building making investments in the wood sector

Auckland, 16 December 2022: Fletcher Building Limited (“Fletcher Building”)
confirms two strategic investments in the wood sector. Wood products is an
attractive sector in which Fletcher Building is currently underrepresented. The
sector is supported by strong macro trends relating to modern building methods
and contributes to New Zealand’s goal of a low-carbon circular economy.

As previously announced at its Investor Day in June 2022, Fletcher Building will
proceed with building a new wood panels plant at its current Laminex site in
Taupo with a capital cost of approximately $275 million. The investment
involves building a new wood panel production and processing line using
innovative technology that is well suited to serve New Zealand market
opportunities but is equally flexible to supply export markets. The new process
will supersede the current particleboard production line by producing cost
competitive and superior products that have diverse applications in furniture,
joinery, and the broader construction sector. All appropriate consents for this
project have been granted and initial civil works will commence in early 2023.
The project is expected to take around 2.5 years to complete, with FY26
expected to be the first year of operations. After a ramp-up period, the
investment is expected to generate mid-cycle EBIT of approximately $40 million
and return on funds employed (ROFE) at or above 15%.

In addition, Fletcher Building has agreed to acquire Waipapa Pine Limited and
Renewable Wood Fuels Limited (together, “Waipapa”) for a consideration of
approximately $97 million (including land and buildings but excluding earn out).
Waipapa produces a range of sawn timber products, including industrial and
structural grades, and includes a renewable fuels business. It is geographically
advantaged by being in Kerikeri (sawmill) and Whangarei (timber treatment
plant), close to the supply of high-quality logs and servicing its highly valued
customers from the Far North to Hamilton. Fletcher Building intends to continue
to serve these customers and expand production capability to strengthen
Waipapa’s ability to support the market.

Fletcher Building Limited, Private Bag 92114, Auckland 1142, 810 Great South Road, Penrose, Auckland 1061, New Zealand
The Waipapa business is well-run and is testament to the vendors’ commitment
to the business over the last ten years. Waipapa forecasts revenue of $50 million
and EBIT of $14.5 million for the 12 months ended 31 December 2022. It is
expected to generate mid-cycle EBIT earnings of over $20 million and ROFE
greater than 15% within two years of Fletcher Building ownership, after earnout-
linked efficiency gains and additional capacity expansion plans are completed.

The acquisition will be funded from Fletcher Building’s existing debt facilities and
is incremental to the Company’s previously announced capex investments. It is
anticipated that the acquisition, which is conditional on Overseas Investment
Office approval, will be completed in the final quarter of FY23.

Fletcher Building’s Chief Executive Ross Taylor said: “Together, these
investments represent our first major expansion steps in the wood products
sector and nicely complement our already strong positions in Steel and
Concrete. Both investments are based on mid-cycle activity levels and are
targeting ROFEs at or above 15%. Wood products is a highly attractive sector
with significant growth opportunities giving both these investments a favourable
long-term position. In addition, increased utilisation of wood resources fits within
New Zealand’s broader sustainability goals through carbon storage and
contributing to our international climate change targets.”
#Ends

Authorised by:
Chris Reid
Company Secretary

For further information please contact:

MEDIA
Christian May
General Manager – Corporate Affairs
+64 21 305 398
Christian.May@fbu.com
INVESTORS AND ANALYSTS
Aleida White
Head of Investor Relations
+64 21 155 8837
Aleida.White@fbu.com

Fletcher Building Limited, Private Bag 92114, Auckland 1142, 810 Great South Road, Penrose, Auckland 1061, New Zealand

About Waipapa Pine Limited and Renewable Wood Fuels Limited (Waipapa)

Waipapa produces a range of sawn timber products including industrial and structural grades
with a sawmill located in Kerikeri and a timber treatment plant in Whangarei. The well-
established and complete structural sawmill is set up to optimise structural timber yield and has
associated operational equipment to cut large diameter logs, kiln dry, plane and treat timber for
structural and outdoor applications. It also includes a renewable wood fuels business which
supports Fletcher Building’s commitment to sustainability and carbon reduction and provides
further opportunity for growth. Waipapa currently processes approx. 84,000m
3
of timber and
structural timber. The cost-effective plant is located in close proximity to high quality logs within
easy reach to service its highly-valued customer base spanning from the far north to Hamilton.
The business employs approximately 90 people across its two sites in Kerikeri and Whangarei.


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