what is different about - fletcher building...what is different about fletcher building?...
TRANSCRIPT
What is different about Fletcher Building?Construction
10%80%
10%
Concrete DistributionLaminates &
PanelsBuildingProducts
• A building materials manufacturer with two special channels to market
• We own high portions of the value chain for our product markets
• All businesses have high market shares
• Control of the distribution channels is the key to these market shares
Mark BinnsChief Executive, Construction
Analysts BriefingSeptember 2004
Construction Division
The Fletcher Construction Company
• Backlog: $200m plus UOA Business School ($130m)
say $330m
• Turnover FY04 $350m
• Employees 437
• Major Projects: Universities, Sky City / Grand Hotel, Northlands
NZ COMMERCIAL BUILDING
• Backlog $183m
• Turnover FY04 $134m
• Employees 383
• Major Projects Ports, Bridges, Roading
CIVIL & INDUSTRIAL INFRASTRUCTURE
• Backlog $86m
• Turnover FY04 $55m
• Employees 1249
• Major Projects Ports, Bridges, Commercial, Hotels
BUILDING & ENGINEERING IN THE SOUTH PACIFIC
• With approx 400 homes per year = NZ’s largest home builder.
• But this represents only 4% of stand-alone homes in Auckland
• Average sale price per home $395,000 (incl. GST)
• Employees - 57
• 7 divisions – all in Auckland
• EBIT up x 5 on FY01
RESIDENTIAL
DOMESTIC BUILDER
All Building Consents
0
2,000
4,000
6,000
8,000
10,000
12,000
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
June Year End
$mill
ions NON RESIDENTIAL
RESIDENTIAL (INCLUDING APARTMENTS)
WHERE WE HAVE BEEN
ALL BUILDING CONSENTS
Source: NZ Statistics
ForecastNew Zealand value of work done
?
Non Residential
A & A
Residential
NZ$ million
0
2000
4000
6000
8000
10000
12000
14000
97 98 99 00 01 02 03 04 05 06
+17% +5%-5%
+10% +10%+18%
+10% +14%
+8%+22% +5%
-7%+25% -3%
-24%
Infra-structure
Non-Residential
A&A
Residential
VALUE OF WORK DONE
FORECASTS
Source: INFOMETRICS
• Margins will soften – off historic highs.
• Solid demand is expected to continue
for well-located product.
• The key issue is land-delivery.
RESIDENTIAL
IMPLICATIONS FOR HOUSING
• Workload will remain high
• Low participation in apartment market which may decline.
• Public infrastructure will remain strong.
• 50% of current backlog is in public sector infrastructure.
• Increasing building costs / interest rates unlikely to materially
affect outlook.
IMPLICATIONS FOR COMMERCIAL BUILDING
$2.8 billion
IMPLICATIONS FOR COMMERCIAL BUILDING
$1billion
Private developers Private developers -- commercialcommercial
Public sector infrastructure
Source: Fletcher Construction estimates
Projects >$25m with 2005-06 start
• Roading dominates
• $4.3 billion Transit spend over next decade.
• $2.3 billion in Auckland
IMPLICATIONS FOR CIVIL & INDUSTRIAL INFRASTRUCTURE
• Roading dominates
• $4.3 billion Transit spend over next decade.
• $2.3 billion in Auckland
• BUT there is also growth in other sectors
IMPLICATIONS FOR CIVIL & INDUSTRIAL INFRASTRUCTURE
Power
• Fiji resurgence based on growth in tourism.
• 30% of work sought is aid-funded
FUTURE WORK IN THE SOUTH PACIFIC
NZ remains a ‘land of opportunity’.
• Strong market
• South Island office for Engineering
• Building under-represented in
some areas.
GROWTH ASPIRATIONS
Auckland Region Residential Sections Average Sale Price Vs No. of Sales
June 1990 - December 2003
-
200
400
600
800
1,000
1,200
1,400
1,600
Jun-9
0Dec
-90Ju
n-91
Dec-91
Jun-9
2Dec
-92Ju
n-93
Dec-93
Jun-9
4Dec
-94Ju
n-95
Dec-95
Jun-9
6Dec
-96Ju
n-97
Dec-97
Jun-9
8Dec
-98Ju
n-99
Dec-99
Jun-0
0Dec
-00Ju
n-01
Dec-01
Jun-0
2Dec
-02Ju
n-03
Dec-03
Date
Tota
l No.
of S
ales
$-
$50,000
$100,000
$150,000
$200,000
$250,000
Sale
Pric
e
No. Sales
Weighted Av.
Auckland land is constrained
RESIDENTIAL
DOMESTIC GROWTH
Source: Seagar & Co Valuers
Lunn Ave opportunity
• Stage 2. Balance of residential lots and option on
apartment land for 4-5 blocks in negotiation.
RESIDENTIAL
DOMESTIC GROWTH
Lunn Ave opportunity
• Stage 2. Land supplied 2005 - 2011
RESIDENTIAL
DOMESTIC GROWTH
• Jacks Point, Queenstown
RESIDENTIAL
DOMESTIC GROWTH
Growth in NZ-based employees
People
DELIVERING GROWTH – KEY ISSUES
2002645
2003780
2004887
Construction GroupNumber of NZ Employees
500
550
600
650
700
750
800
850
900
30-Jun-02 30-Jun-03 30-Jun-04
Continued industry leadership
• University recruitment
• School leavers
• Cadetships
DELIVERING GROWTH – KEY ISSUES
Continued industry leadership
• Environment
• Drugs & alcohol
DELIVERING GROWTH – KEY ISSUES
OUTLOOK TO FY07
• Workload will remain strong.
• People constraint is the major issue / opportunity.
• Any fall-off in private-sector will be compensated
by infrastructure growth.
• Focus on quality – not on quantity!
Analysts BriefingSeptember 2004
Ralph WatersChief Executive Officer
Andrew RedingChief Executive, Building Products
Results RecordJune* June* June* June June2001 2002 2003 2004 2004
$m's Pro-forma excl. Tasman incl. Tasman
Operating Revenue** 642 619 638 712 927
EBIT 50 77 102 133 164
Margin 8% 12% 16% 19% 18%
Total Funds Employed 333 322 296 287 560
EBIT/Funds 15% 24% 34% 46% 31% ***
* restated to transfer FWP & SPH to Laminates and Panels** excludes inter-company revenue*** Pro Forma return based on full 12 months of Tasman
2Presentation to Analysts – September 2004
Revenue
619
137
638
145927
186
0
200
400
600
800
1000
1200
2002 2003 2004
Revenue External vs Internal
External Internal
3Presentation to Analysts – September 2004
How we have done it?Organic growth
Competent management
Focus on performance
EBIT, Funds, CashKPI’s (i.e. OEE, IFOTIS)
Strong market
Cont…
4Presentation to Analysts – September 2004
How we have done it?Acquisitions
Tasman Building Products (Oct 03)Colorflo rainwater systems (Feb 03)
Divestments/Closures
Cyclone (Nov 01)Aluminium - Solution Centres, Australian Shapes distribution (Jul 01 & Aug 02) Backbone (Jun 03)
5Presentation to Analysts – September 2004
• New Zealand’s sole manufacturer of Plasterboard. Two manufacturing plants (Auckland and Christchurch)
• Highest annual volume of board and plaster ever manufactured or sold in NZ driven by very high building activity
• Launched Fiberock JV with USG to build a market for Fiberock in NZ, Australia and Asia.
100 105
121136
40
60
80
100
120
140
Volu
mes
2001 2002 2003 2004
Year
Domestic Plasterboard Volumes (indexed to 2001)Domestic Market Share - Imported board
01234567
2001 2002 2003 2004
Year
%
Market share
6Presentation to Analysts – September 2004
• Designer and manufacturer of premium architectural window and door systems and other aluminium products to both domestic and international customers.
• Continued productivity gains.
• Launch of innovative product solutions including patented bi-fold door systems and trackless sliding doors (patent pending).
7Presentation to Analysts – September 2004
Australia• Only Australian company to manufacture the three main insulation products
(glasswool, polyester and reflective foil).• Record sales performance and record output from both Rooty Hill and Minto
plants.• State acceptance of Federal BCA recommendations increasing the use of
insulation in both housing and light commercial applications.
New Zealand• Leading New Zealand manufacturer of glasswool insulation, foil laminates and
building papers, with plants in Auckland and Christchurch.• Record sales and production levels achieved in 2004 financial year.• The 2 year old PinkFitTM installation service grew to 14 franchisees nationally and
installed 17% of pink batt sales.• Synergies realisation has led to closure of Tasman Foil plant and consolidation
into FBL’s existing Duroid operation. Now reporting to TINZ.
8Presentation to Analysts – September 2004
Insulation sales volumes -Australasia
100 112
130
152
40
60
80
100
120
140
160
Vol
umes
2001 2002 2003 2004
Year
Glasswool Volumes (indexed to 2001)
9Presentation to Analysts – September 2004
100
132156
177
0
50
100
150
200
2001 2002 2003 2004
Sink sales Volumes (indexed to 2001)
• Second largest manufacturer of sinkware in Australia.
• Record exports in 2004, particularly to the USA.
• No. 1 in Australia of Access flooring systems.
10Presentation to Analysts – September 2004
The Pacific Steel Group value chain
37 kt
260ktscrap Mesh
35 kt68 kt
Other Domestic
91 kt
Exports(ferrous & non-ferrous)
Exports
Customers
Sims50:50 JV
PacificSteel
(EAF and rolling mill)
Pacific Wire
FletcherReinforcing
11Presentation to Analysts – September 2004
Pacific Steel GroupPacific Steel
Gross Domestic Reinforcing Bar Selling Prices
800
850
900
950
1,000
1,050
1,100
1,150
1,200
1999 2000 2001 2002 2003 Q1 04 Q2 04 Q3 04 Q4 04
Delivered per annum 99-03, List per quarter 2004
NZ
$/
ton
ne
Sims HMS Standard Scrap Price5 Year Trend by Quarter
0
50
100
150
200
250
300
350
Mar-99
Jun-99
Sep-99
Dec-99
Mar-00
Jun-00
Sep-00
Dec-00
Mar-01
Jun-01
Sep-01
Dec-01
Mar-02
Jun-02
Sep-02
Dec-02
Mar-03
Jun-03
Sep-03
Dec-03
Mar-04
Jun-04
Jul-04
US$
/tonn
e
-
50
100
150
200
250
300
350
400
450
500
NZ$
/tonn
e
USD/t NZ$/t
Innovation
• Electro-Magnetic wiping
• Zinc Aluminium wire
• Coloured wire
• Reid Bar
• Galvanised Rebar
12Presentation to Analysts – September 2004
• Easysteel is a leading stockist and distributor of long and flat sheet products across 13 nationwide locations, servicing 10,000 customers across the whole NZ economy.
• Revenue up 16% on last year, earnings up 46%.
• New facilities planned for five branches and Christchurch RDC.
• New Penrose distribution facilities contributed to improved warehousing and freight costs per tonne.
Freight Cost Per Tonne
12 Month Period
$ / T
onne
Warehousing Cost Per Tonne
12 Month Period
$ / T
onne
03-04 Trend90
Average 02-03100
03-04 Trend85
Average 02-03100
13Presentation to Analysts – September 2004
• Hot-dip galvanising of a range of products located in Auckland and Christchurch.
• Growth focuses on new galvanising technologies that can be commercialised around the world.
100 9586 81
0
20
40
60
80
100
2001 2002 2003 2004
Zinc Pick up rates (indexed to 2001)
10089 86 83
0
20
40
60
80
100
2001 2002 2003 2004
Average labour cost per tonne (indexed to 2001)
14Presentation to Analysts – September 2004
• The leading NZ supplier of metal purlins, roofing, cladding and composite flooring systems with 12 sales centres throughout NZ.
• Rationalised operating footprint around major regional factories to service customer needs better.
• Launched Dimondek 630, on-site roll-forming system with NZ record (65m) for longest roof ever manufactured in NZ.
15Presentation to Analysts – September 2004
• A new R&D facility to develop new products for new market niches is under construction and will be commissioned in February 2005.
• Focused on flexible small run manufacturing offering minimum of a house lot of a single colour.
• Leading manufacturer of pre-painted metal products used in the manufacture of both residential and commercial roofing, cladding, and rainwater systems.
Shop Order Analysis
0
1
2
3
4
5
6
7
2002 2003 2004
Ave
rage
Sho
p O
rder
Siz
e (M
T)
Local MT/Shop Order Export MT/Shop OrderTotal MT/Shop Order
16Presentation to Analysts – September 2004
• Largest manufacturer of steel roof tiles world wide with plants in Auckland and California, licensees in Europe, Chile and Indonesia and sales offices in Europe, Japan, China and the Middle East.
• Both plants capacity constrained, currently looking at options for expansion both on existing sites and in new locations.
• Growth of metal tile sales has been significant.
100 97114
134
020406080
100120140
2001 2002 2003 2004
Metal Roof Tile Volumes (indexed to 2001) Export margins - NZ$
0
10
20
30
40
50
2001 2002 2003 2004
Year
% m
argi
n
17Presentation to Analysts – September 2004
Key issues going forward
Sustainable growth in earnings.
Reducing volatility by decreasing exposure to NZ residential cycle.
18Presentation to Analysts – September 2004
Key StrategiesBe operationally excellent in support of business unit market strategies.
Acquire operations whose product ranges and activities complement those already offered.
Realise offshore potential of product champions.
Develop our Australasian market position to introduce new products and technologies.
19Presentation to Analysts – September 2004
Operational excellence – e.g. Aluminium
Extrusion OEE 2001 - 2004
0%
10%
20%
30%
40%
50%
60%
70%
80%
Jul-0
1Aug
-01Sep
-01Oct-
01Nov
-01Dec
-01Ja
n-02
Feb-02
Mar-02
Apr-02
May-02
Jun-0
2Ju
l-02
Aug-02
Sep-02
Oct-02
Nov-02
Dec-02
Jan-0
3Feb
-03Mar-
03Apr-
03May
-03Ju
n-03
Jul-0
3Aug
-03Sep
-03Oct-
03Nov
-03Dec
-03Ja
n-04
Feb-04
Mar-04
Apr-04
May-04
Jun-0
4
Total IFOTIS, % - Financial Year
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
1999-2000 2000-2001 2001-2002 2002-2003 2003-2004Fiancial Year
IFO
TIS
Total IFOTIS, %
20Presentation to Analysts – September 2004
Where the Tasman Acquisition fits
Insulation Insulation AHI DecraNZ Australia Roofing Roofing
Infill opportunity
Industry rationalisation
Technology
Product champion
21Presentation to Analysts – September 2004
Some examples of technology and product champion plays
22Presentation to Analysts – September 2004
Fiberock
50/50 JV established to commercialise this technology in Asia, Australia and New Zealand.
Specialist uses complement plasterboard.
0
50
100
150
200
250
300
Dec 03 Jun 04 Dec 04 Jun 05
6 month periods, ending
Sale
s Vo
lum
e In
dex
Sales Forecast
Acoustic floor underlay and impact resistant wall linings being released in New Zealand, Hong Kong, Singapore, Australia and then Japan.
Powerscape Fiberock Products
23Presentation to Analysts – September 2004
EMWElectro Magnetic Wiping is a process of controlling the zinc coat weight on wire.Advantages:
Zinc savingsProductivity, higher line speedsQuality improvement
Gas Gravel controlled zinc application
The characteristics of EMW has lead to savings of up to 25% in zinc usage,
EMW controlled zinc application
24Presentation to Analysts – September 2004
Product Champion – Metal Roof tiles
Value proposition defined by market:
LightweightRe-roof costs, construction flexibility, faster to install
Strengthearthquake, hail
Product performanceFade resistance, weather tightness
AestheticsColour, profiles.
25Presentation to Analysts – September 2004
FBL PlantsLicence Plants
Ex-Licence PlantsGLOBALGLOBALOPERATIONSOPERATIONS
AHI Sales Offices
Los Angeles
Auckland
Chile
DenmarkBelgium
Indonesia
Malaysia
South Africa
AlgeriaMiddle East
England
SloveniaSwitzerland
Argentina
Japan
Africa
Australia
26Presentation to Analysts – September 2004
Metal Roof tiles
Optimal plant believed to be between 9-11m tiles.
Expanding to meet demand.
Huge untapped market.
27Presentation to Analysts – September 2004
Presentation to Analysts - 8th September 2004
The Laminates and Panels Division of Fletcher Building Limited is comprised solely of The Laminex Group.
The Laminex Group was formed in 2002 after the acquisition and integration of Formica (September 1999) and Wesfi Limited (February 2001) with Laminex Industries.
The Laminex Group was acquired by Fletcher Building Limited in November 2002 and subsequently integrated with the existing Scott Panel and Hardware and Fletcher Wood Panels operations.
LEADING BRANDS
LEADING MARKET POSITIONS
High Pressure Laminate 65%Decorated MDF 70%Decorated Particleboard 44%
Raw MDF 26%Raw Particleboard 21%
Market Shares
VERTICAL INTEGRATION
Forest Waste and Thinnings
Sawmill Waste
Board Plant
Low Pressure Laminate Plant
High Pressure Laminate PlantSales & Distribution Centre
(Metro)
Branch (Regional)
Customer
Major Sales & Distribution Sites
Major Manufacturing Facilities
MAJOR LOCATIONSMAJOR LOCATIONS
Revenue Growth 96/97 – 03/04 $NZm
0100200
300400500600700
800900
1000
96/97 97/98 98/99 99/00 00/01 01/02 02/03 03/04
Acquisition of Formica Sept 1999
Acquisition of Wesfi Feb 2001
Inclusion of FWP & SPH
into TLG from 1/7/03
Note 1
Note 1: Underlying sales in $A were 5.5% above 01/02 but appreciation of the $NZ against the $A in 02/03 has the effect of reducing revenue on conversion to $NZ. Sales are converted from $A to $NZ at average exchange rates each year
1997Laminex Industries
EBIT
1998 Formica
EBIT
205
2001 Wesfi Ltd
EBIT
2003 FWP & SPH
EBIT
10
95
14
EBIT Growth June 1997 - June 2004$NZm
NOTES:
1. FWP & SPH = Fletcher Wood Panels and Scott Panel and Hardware
2. Australian EBIT’s converted to $NZ for Laminex Industries, Formica and Wesfi Ltd
46
Synergies/ Growth/Other
2004 TLG EBIT
Revenue by Segment 2003/04
Export8%
Residential28%
Commercial34%
Alterations & Additions30%
Revenue by Product 2003/04
Exports (Mainly Raw MDF)8%
High Pressure Decorative Laminate
15%
Low Pressure Decorative Laminate
28%White/Raw MDF12%
White/Raw Particleboard19%
Other Products18%
Revenue by Major Region 2003/04
Exports8%
New Zealand24%
W.A.13%
QLD15%
VIC/TAS18%
NSW/ACT17%
S.A.5%
Customer Size Review
Active Customers grouped by annualised sales
157 62 11 5 7 11 1 3
10,955
-
2,000
4,000
6,000
8,000
10,000
< 0.5 0.5 -1 1-2 2-3 3-4 4-5 5-10 10-15 15-20Annualised Sales ($NZm)
# of
cus
tom
ers
12,000
Competitor Capability
TLG
Aus/NZ
CHH
Aus/NZ
Parbury
Aus/NZ
Nelson Pine
Aus/NZ
D&R
Henderson Australia
Borg
Australia
Duropal
Australia
Prime Panels
NZ
HPL
Substrate
PB
MDF
PB
MDF
PB
MDF
PB
MDF
PB
MDF
PB
MDF
PB
MDF
PB
MDF
Colour Board
White Board
Raw Board
Manufactured
Imported Purchased Locally
2003/04 Priorities
• NZ Integration• Sydney/Adelaide Distribution Centres• New State based customer service centres• Formica/Formex product and brand rationalisation• Minimise impact of high $A on export business• Improve safety
2004/05 Priorities
• Brisbane Distribution Centre• Improve NZ manufacturing performance• Upgrade branch network – Canberra, Townsville• Establish resin manufacturing on east coast Australia• Develop Asian strategy
Key Messages
1. Attractive industry structure
2. Vertical integration
3. High barriers to entry
4. Capitalising on Australia’s and NZ’s natural wood resource
DISCLAIMER
This presentation contains not only a review of operations, but also some
forward looking statements about Fletcher Building and the environment in which
the company operates. Because these statements are forward looking, Fletcher
Building’s actual results could differ materially. Media releases, management
commentary and analysts presentations, including those relating to the 2004
annual results, are all available on the company’s website and contain additional
information about matters which could cause Fletcher Building’s performance to
differ from any forward looking statements in this presentation. Please read this
presentation in the wider context of material previously published by Fletcher
Building.