Fletcher Building : 2020 Annual Results Presentation

Fletcher Building

Full Year Results to 30 June 2020

ROSS TAYLOR

- Chief Executive Officer

BEVAN MCKENZIE

- Chief Financial Officer

19 August 2020

Important Information

This presentation has been prepared by Fletcher Building Limited and its group of companies ("Fletcher Building") for informational purposes. This disclaimer applies to this document and the verbal or written comments of any person presenting it.

This presentation provides additional comment on the Annual Financial Results 2020 dated 19 August 2020. As such, it should be read in conjunction with and subject to the explanations and views given in that document. Unless otherwise specified, all information is for the year ended 30 June 2020.

In certain sections of this presentation, Fletcher Building has chosen to present certain financial information exclusive of the impact of significant items and/or the results of the businesses divested in the year ended 30 June 2019. For the 12 months ended 30 June 2020, the Group's financial statements are prepared in accordance with the new lease accounting standard NZ IFRS 16, adopted from 1 July 2019. In prior periods, lease costs were fully reported in EBIT. Under NZ IFRS 16, the two components of lease costs are reported separately: (1) the depreciation of right-of-use assets is reported in EBIT and (2) the deemed interest portion of the lease liability is reported in lease interest expense. Financial tables in this presentation (where indicated) show both the reported result for the prior period, as well as a pro forma restatement of the prior period to illustrate the impact of NZ IFRS 16 had it been applied and to allow for a like-for- like comparison. A number of non-GAAP financial measures are used in this presentation which are used by management to assess the performance of the business and have been derived from Fletcher Building's financial statements for the 12 months ended 30 June 2020. You should not consider any of these statements in isolation from, or as a substitute for the information provided in the Financial Statements for the 12 months ended 30 June 2020, which are available at www.fletcherbuilding.com.

The information in this presentation has been prepared by Fletcher Building with due care and attention, however, neither Fletcher Building nor any of its directors, employees, shareholders nor any other person given any representations or warranties (either express or implied) as to the accuracy or completeness of the information and to the maximum extent permitted by law, no such person shall have any liability whatsoever to any person for any loss (including, without limitation, arising from any fault or negligence) arising from this presentation or any information supplied in connection with it.

This presentation may contain forward looking statements, that is statements related to future, not past, events or other matters. Forward looking statements may include statements regarding our intent, belief or current expectations in connection with our future operating or financial performance, or market conditions. Such forward looking statements are based on current expectations, estimates and assumptions and are subject to a number of risks and uncertainties, including material adverse events, significant one-off expenses and other unforeseeable circumstances. There is no assurance that results contemplated in any of these projections and forward looking statements will be realised. Actual results may differ materially from those projected. Except as required by law, or the rules of any relevant stock exchange or listing authority, no person is under any obligation to update this presentation at any time after its release or to provide further information about Fletcher Building.

The information in this presentation does not constitute financial product, legal, financial, investment, tax or any other advice or a recommendation.

2 Fletcher Building Full Year Results Presentation | © August 2020

Agenda

1.	Results Overview	Ross Taylor
2.	Positioning for FY21	Ross Taylor
3.	Financial Results	Bevan McKenzie
4.	Strategy and Outlook	Ross Taylor

Fletcher Building

Full Year Results Presentation 2020

Navigated COVID-19 impacts, business set up for FY21, and maintained momentum on key strategies and focus areas

FY20

• Responded quickly to COVID-19 impacts
• Focus on health and safety of our people
• Strong customer service performance
• Cash and balance sheet remain strong

FY21 set-up		FY21 and beyond

•	Positioned the		•	Strategy and growth
	business cost base for			ambitions remain
	reduced activity in			unchanged
•	FY21		•	Ongoing focus on
Accelerated key			profitability and
•	ecommerce activities		•	operational excellence
Ensured debt lines		Complete Australia
	and liquidity remain			portfolio
	strong and available		•	rationalisation
			Clear historical
				Construction projects

4 Fletcher Building Full Year Results Presentation | © August 2020

COVID-19 response to NZ lockdown and Australia restrictions focused on health and safety, customer service, costs and cash

Actions

• Safely shut down and restarted NZ businesses and dealt with Australia restrictions
• Maintained customer service and performance
• COVID-19Support Hub App launched, downloaded by 7,000 of our people, financial hardship fund in place
• Bridging Pay Programme implemented (govt supported)
• Strong focus on costs and cash:
• • Capex reduced
  • Board, Execs and GM remuneration reduced, no STI bonuses
  • Debtors / Creditors well managed
  • Negotiated reductions in both NZ property lease costs and other key supply agreements, all discretionary spend stopped
  • Interim dividend cancelled, share buyback programme suspended

FY20 Results

• Serious injuries reduced by over 60% year-on- year
• COVID-19impact resulted in Q4 operating earnings of c$50m, a c$200m reduction on expected Q4 earnings
• Strong operating cash flows of $410m
• Balance sheet strength preserved, liquidity $1.6b, net debt $0.5b

5 Fletcher Building Full Year Results Presentation | © August 2020

While the Construction division continued to progress and finish historical projects, the provision envelope has increased

• Well through the historical Construction work book
• Additional $150m provisions in Buildings and Infrastructure businesses due to:
• • COVID-19disruptions and productivity impacts, both in FY20 and ongoing (50%)
  • Issues on historically completed projects (20%)
  • Prudent risk provision across portfolio of legacy work (30%)
• c$600m legacy work to complete, down from $2.2b at HY18
• c$175m of legacy project losses remaining to incur as cash outflows

6 Fletcher Building Full Year Results Presentation | © August 2020

Setting up for likely lower market activity in FY21 required permanent reductions to our cost base and workforce

Actions

• Reductions to operating footprint, supply chain costs and general costs
• Workforce size will be reduced by c12% (over 1,500 people) matched to probable future market activity
• Australia portfolio rationalisation continuation
• Renegotiated debt covenants to preserve liquidity and retired a further USD$300m of our most expensive debt lines, saving c$40m of future interest payments
• Capex envelope reduced until market outlook more certain

Impact

• Actions expected to achieve a permanent reduction in cost base in FY21 of c$300m p.a.
• FY20 significant items of $276m:
• • Right-sizingof the cost base $187m
  • Rocla asset impairments $59m
  • Debt restructuring resulted in one-off Make Whole payment $30m
• FY21 significant items of c$90m as final cost- out actions completed
• Significant items (FY20 and FY21) are expected to be c55% cash/45% non-cash

7 Fletcher Building Full Year Results Presentation | © August 2020

FY20 - Financial results

Revenue		EBIT1		Net Earnings/(Loss)		EPS
$7,309m		$160m		($196m)		(23.5c )
FY2019 $8,308m		FY2019 $549m		FY2019 $246m		FY2019 28.8c

Cash flows from		Leverage ratio		EBIT margin		Dividend
operating activities		0.9x		2.2%		nil
$410m
	Target range: 1.0-2.0x		FY2019: 6.6%		FY2019: 23cps
FY2019 $153m

8 Fletcher Building Full Year Results Presentation | © August 2020

Note: All metrics are for continuing operations except cash flow from operating activities. RTG and Formica were sold in FY19

1 Measures before significant items are non-GAAP measures used by management to assess the performance of the business and have been derived from Fletcher Building's financial statements for the 12 months ended 30 June 2020. Details of significant items can be found in note 2 of the financial statements

FY20 - Division performance summary

Building

Products

Distribution

Concrete

Residential and Development

Construction

Australia

Gross Revenue

$1,173m

FY19: $1,314m

$1,471m

FY19: $1,596m

$740m

FY19 $802m

$466m

FY19: $639m

$1,318m

FY19: $1,702m

$2,802m

FY19: $3,024m

EBIT1

$87m

FY19: $167m

$85m

FY19: $115m

$74m

FY19: $89m

$65m

FY19: $137m

($147m)

FY19: $51m

$33m

FY19: $77m

• Good performance in finishing trades, early stage civil and infrastructure softer
• Steel market remained challenging
• Growth in line with market
• Strategic digital and automation investment
• Year-on-yearmargin expansion (pre-COVID-19)
• Market share gains in Firth and cement
• Price gains in aggregates and ready-mix
• Housing market demand remained strong and prices supportive
• COVID-19delayed land development and housing settlements now moved into FY21
• Lockdown significantly affected paving, civil and building works programmes
• Provisions of $150m, $600m legacy work to go
• Strong order book of $2.4b with good wins
• Good momentum in Laminex and Insulation
• Tradelink/Stramit poor 2nd half - few larger projects
• Rocla/Iplex loss c$15m - few large projects, lower volumes, Rocla industrial action as sites closed

9 Fletcher Building Full Year Results Presentation | © August 2020

1 FY19 has been adjusted for proforma IFRS16 to allow for a like-for-like comparison (12 months FY19 reported +IFRS16 proforma adjustment) Measures before significant items are non-GAAP measures used by management to assess the performance of the business and has been derived from Fletcher Building's financial statements for the 12 months ended 30 June 2020. Details of significant items can be found in note 2 of the financial statements

FY20 - Balanced scorecard metrics: safety and sustainability

Safety

Safety

Total Recordable Injury

Frequency Rate1

6.9	5.1	5.0	5.7
FY17	FY18	FY19	FY20

Serious injuries2

33
	21	20
			8
FY17	FY18	FY19	FY20

• Group-wide'Protect' programme reset well underway, Protect now one of our core values
• Our aim is to have zero injuries every day
• Significant improvement in serious injuries from 20 in FY19 to 8 in FY20
• FY20 focus on critical risks but continue to target TRIFR under 5.0

SustainabilitySustainability

Carbon (CO2 ) Emissions

(thousand Tonnes)3

1,238

1,147

1,132

FY18

FY19

FY20

• Committed to reduce carbon emissions by 30% by 2030, first building and construction company in Australasia to set a Science-based Target for carbon reduction
• Aligns with aims to limit global warming to below 2oC
• Carbon emissions remained c8% below FY18 levels, through market activity and permanent reductions from our focus on carbon emissions and operating efficiencies
• Favourable outcomes on footprint rationalisation - cost out and sustainability

1. TRIFR = Total no. of recorded injuries per million man hours worked. Does not include Restricted Work Injuries.
2. Serious Injury include immediate treatment as an in-patient at hospital for more than 24 hours or immediate treatment for a serious injury or illness as defined by Safe Work Australia.
3. Carbon data excludes emissions from the International division which was divested in FY19.

10 Fletcher Building Full Year Results Presentation | © August 2020

FY20 - Balanced scorecard metrics: engagement and customer

EngagementEngagement

Employee Engagement Rating1

66%	67%	70%	71%
FY16	FY17	FY18	FY19

• Significant engagement through COVID-19 Support Hub App
• Group values refreshed: Protect, Be Bold, Customer Leading, Better Together
• Continue to drive employee engagement >80% (top quartile)

Customer

Net Promoter Score 2

		39	39
26	28
FY17	FY18	FY19	FY20

Customer

• NPS result improvements continue to be underpinned by high product quality and reliability, and professional customer service
• Rollout and embed customer service promises across all businesses
• Drive to a best in class net promoter score of >55

1. Next employee engagement survey planned for FY21
2. Net Promoter Score calculated as % Promoters (9 - 10) minus % Detractors (0 - 6). Prior years have been restated to reflect inclusion of all Business Units in NPS programme.

11 Fletcher Building Full Year Results Presentation | © August 2020

Agenda

1.	Results Overview	Ross Taylor
2.	Positioning for FY21	Ross Taylor
3.	Financial Results	Bevan McKenzie
4.	Strategy and Outlook	Ross Taylor

Fletcher Building

Full Year Results Presentation 2020

FY21 - Positioned for reduced activity

Focus on preserving profitability and balance sheet position

• Business reset for market downturn of c25% in NZ and c20% in Australia

Market • Expect stronger first half compared to second half as economies slow, unemployment rises

• Remains very uncertain - we will monitor closely and continue to adjust as necessary

		Preserve	• Suite of cost-out actions already implemented to preserve profitability
		profitability,	• Benefit of a c$300m cost reduction in FY21, though offset by market decline
		cost base
		• Further work on cost out (property and supply chain) planned for FY21
		reset
			• Targeted capital investment over last 5 years allows us to sensibly restrict base capex to
		Capex	c$150m in FY21, plus $50m for next phase of WWB plant
		• Preserving investment in key strategic projects, esp. sustainable manufacturing and digital
			platforms
			• Ongoing focus on cash flows and working capital, good disciplines established over past 3 years
		Cash flow
		and	• Liquidity of $1.3b post-repayment of USPP 2012 notes
		liquidity	• Funding costs reduced by $20m to c$60m in FY21

Market	• Relentless focus on customer
• Target to increase market share through downturn
positions
• Stay very attuned to opportunities in our existing segments and logical adjacencies

13 Fletcher Building Full Year Results Presentation | © August 2020

Market outlook

Positioning NZ businesses for overall market downturn of c25%

NZ Historical and Forecast

Residential Consents (#)

33k	35k	37k	-32%
			25k	23k
FY18	FY19	FY20	FY21F	FY22F

Value of Commercial and Infrastructure work put in place

(Nominal $m)

8,342	8,403	8,688	-10%	7,819	8,210
7,636	8,687	9,118	-15%7,750	7,595
FY18	FY19	FY20F				FY21F	FY22F
Key:		Commercial				Infrastructure

Overall

• Outlook is uncertain, influenced by unemployment, govt. spending, inward migration and COVID-19 clusters

Residential

• 46% of NZ revenue, key driver of NZ profitability
• FBU base case is for residential consents to decline c30% in FY21 and a further 10% in FY22
• Returning residents, low interest rates, government stimulus remain supportive

Commercial / Non-residential

• 30% of NZ revenue
• FBU base case is for commercial work put in place to decline c15% in FY21, then stabilise in FY22, weighted to downside

Infrastructure

• 24% of NZ revenue
• FBU base case is for infrastructure work put in place to decline c10%, then to grow steadily, solid outlook

14	Fletcher Building Full Year Results Presentation | © August 2020	Source: Infometrics, FB Management Estimates. These are our base case estimates for FY21, though we acknowledge that there
is a lot of uncertainty over the outlook and that actual activity levels may be materially different.

Building Products

Focus on margins, product innovation and sustainable manufacturing

		• Ongoing focus on pricing disciplines and holding margins
	Finishing	• c$400m new WWB Tauranga, commence 6 months later
	• Driving growth through new products e.g. GIB products, TINZ building
	Products
		wraps, expanded product range in Laminex
	(WWB, TINZ,
	•	Continue to launch new products and deliver superior customer service
	Laminex)
		• Digital initiatives to improve efficiency and customer experience
			through WWB customer app and new Laminex website
						GIB Weatherline
		•	COVID-19 resulted in further footprint and cost
	Steel		rationalisation to drive margin improvements in FY21
	• Continue to drive product innovation and customer service
			e.g. through Dimond mobile roll-to-roof system
		• Footprint rationalised, continue to drive improvements
			in Humes, inventory reduced
	Pipes	•	Deliver Iplex revenue and margin growth through
	(Humes, Iplex)		expanded product range
		•	Mobile extrusion plant commissioned and fully	CSP lighting poles and barriers
			operational

15 Fletcher Building Full Year Results Presentation | © August 2020

Concrete

Focus on margins, sustainability and operational footprint

• Ongoing momentum in pricing disciplines and market share gains achieved in FY20

Operating efficiency and pricing

• Firth new ready-mix concrete plant in Mt Maunganui driving efficiencies
• Acquisitions delivering - Tamahere quarry acquired in Mar'19 delivering strong EBIT return

• Quarry and ready-mixnetworks right-sized Firth new ready-mix concrete plant in Mt Maunganui

• Masonry further manufacturing footprint rationalisation

		•	Firth digital connectivity to improve customer experience in
	Ecommerce,
	digitisation and		FY21
	automation	•	Upsurge in switch to digital dockets

	• GBC tyre-derived fuel cost and carbon reduction initiative
Sustainability	going live in FY21
• GBC innovation on pozzolans continues
and Product
• Environmental Product Declarations for Golden Bay cement,
Innovation
an Australasian first in cement

• Masonry new sized paving options

16 Fletcher Building Full Year Results Presentation | © August 2020

Distribution

Focus on network efficiency and digital offer to customers

	•	Ongoing focus on pricing disciplines
Network	•	Regional hub structures introduced in Auckland and Christchurch, closed
efficiency		underperforming stores

• Workforce optimisation programme
• Distribution digital transformation providing 24x7 omnichannel experience in PlaceMakers

Ecommerce and	>	70% of branch transactions now digitised
digitisation	>	Trade App launched in April
	>	Shop.PlaceMakers launched
	>	Accelerating trade portal plans and estimation transformation

• Transforming transport

	capability
Product	>	Efficiency improved through
	own vehicle delivery
Innovation and
>	Service levels enhanced
Customer

Service	through uber-style "track
your truck"

• "Skip the counter" enabling seamless in-branch experience

17 Fletcher Building Full Year Results Presentation | © August 2020

Residential and Development

Strongly positioned to expand, leveraging off-site manufacturing

Residential and Development

• #2 house builder in New Zealand
• New home sales mainly priced $600-900k
• Strong operating disciplines and customer focus
• c4,000 future lots under control, >4 years' supply
• Clever Core new manufacturing plant, global innovation into NZ to evolve the way we build houses, 40 produced in FY20 since Oct-19 opening, FY21 external sales planned
• Intend to scale apartment business

Fletcher Living Waiata Shores

Fortnightly House Sales, strong sales post lockdown

80	# Conditional Agreements
	Christmas	Level 4
			Lockdown
60
40
20
0
Jul'19	Oct'19	Jan'20	Apr'20	Jul'20

Rolling fortnightly 2 Jul'19 to 27 Jul'20

Average fortnightly over FY20

FY21

• Targeting c700-800 unit sales for FY21
• Land Development $25m p.a. run-rate but will be higher in FY21 due to delayed FY20 settlements

18 Fletcher Building Full Year Results Presentation | © August 2020

Construction

Strengthened future order book

Significant progress made on two fronts since HY18

Work to Complete ($b)

0.7

2.4

2.2

0.6

HY18FY18FY19FY20

	Lower-risk smaller jobs,		High-risk, lump sum D&C
	maintenance contracts

1. Completed significant number of legacy jobs, risk reduced
2. New work won with materially better margin outlook and significantly lower and more appropriate risk profile

Strong future pipeline

• Winning the right work with the right customers eg Watercare, AIA runway, strong pipeline of pavement and maintenance
• Securing new work in line with targeted balanced portfolio and better risk profile:
• • 1/3rd Lump Sum / D&C
  • 1/3rd Alliance / Measure & Value
  • 1/3rd Maintenance
• $2.4b of non-legacy work provides base for future years:
• • c $850m for delivery in FY21
  • c $500m for delivery in FY22
  • c $1.1b for delivery in FY23+
• Expect non-legacy work to deliver 3-5% EBIT margins

Note: The part of the NZICC rebuild funded by insurance is included in $2.4b FY20 order book

19 Fletcher Building Full Year Results Presentation | © August 2020

Market outlook

Positioning Australia businesses for market downturn of c20%

AU Historical and Forecast

Residential Approvals (#)

232k
	188k	169k	-24%
			129k	129k
FY18	FY19	FY20	FY21F	FY22F

Value of Commercial and Infrastructure work done

(A$b)

110	92	95	-9%	86	98
44	46	48	-15%	41	41
FY18	FY19	FY20F				FY21F	FY22F
Key:		Commercial				Infrastructure

Overall

• Outlook is uncertain, influenced by unemployment, govt. spending, inward migration and COVID-19 clusters

Residential

• 57% of AU revenue, key driver of AU profitability
• FBU base case is for residential approvals to decline c25% in FY21, then stabilise in FY22
• Low interest rates, government stimulus remain supportive, WFH driving renovation activity

Commercial / Non-residential

• 29% of AU revenue
• FBU base case is for commercial work put in place to decline c15% in FY21, weighted to downside, then stabilise in FY22

Infrastructure

• 14% of AU revenue
• FBU base case is for infrastructure work put in place to decline c10% but most resilient sector, then to

grow steadily

20	Fletcher Building Full Year Results Presentation | © August 2020	Source: Bis Oxford, FB Management Estimates. These are our base case estimates for FY21, though we acknowledge that there
is a lot of uncertainty over the outlook and that actual activity levels may be materially different.

Australia

Laminex, Fletcher Insulation turnaround momentum; margin focus

• Continue momentum in Laminex through customer traction on refreshed product range, Compact

			decorative surface launched
	Laminex and	•	Well-positioned for online trading amid pandemic with Laminex digital delivering online volume growth,
	Fletcher		>$100m sales transacted through ecommerce in <12 months
	Insulation	•	Fletcher Insulation improving earnings through targeted segmental performance and operating efficiencies
		• Insulation single site manufacturing and focus on lowest cost to manufacture delivering efficiencies
		• Automation and capability improvements in manufacturing businesses
		• Key growth initiatives including continued SME growth, civil expansion momentum
	Tradelink	• SME focus has driven 3% share growth over past 3 years in network plumber / builder segments
	•	Footprint optimised, store/showroom upgrades continue
		• Oliveri bathroom product range expanded
		• Investing in backbone and customer-facing systems
		• Product ranges extended - Infiniti and SharpLine
	Stramit	•	Good momentum in sheds
		• New website driving customer visits
		•	Iplex project delivery and manufacturing efficiency	Tradelink virtual renovation consultation
			remains market-leading

Pipes	• Rocla Emu Plains and Gailes site closures
	• Rocla divestment recommenced, expect this to be completed through FY21

21 Fletcher Building Full Year Results Presentation | © August 2020

Agenda

1.	Results Overview	Ross Taylor
2.	Positioning for FY21	Ross Taylor
3.	Financial Results	Bevan McKenzie
4.	Strategy and Outlook	Ross Taylor

Fletcher Building

Full Year Results Presentation 2020

Income statement

Profit impacted by COVID-19, provisions and restructuring costs

Reported results	Jun 2019	Jun 2020	Change
NZ$m	12 months	12 months	$m
Revenue	8,308	7,309	(999)
EBITDA	723	530	(193)
EBIT before significant items from continuing operations	549	160	(389)
Significant items	(94)	(276)	(370)
EBIT from continuing operations	455	(116)	(571)
Lease interest expense	-	(69)	(69)
Funding costs	(116)	(80)	36
Tax (expense)/benefit	(80)	81	161
Non-controlling interests	(13)	(12)	1
Net earnings from discontinued operations net of tax	(82)	-	82
Net earnings/(loss)	164	(196)	(360)
Basic earnings per share (EPS - cents)	19.2	(23.5)	(42.7)cps
Dividends declared per share (EPS - cents)	23.0	-	(23.0)cps

23 Fletcher Building Full Year Results Presentation | © August 2020

Significant items

Major restructuring programme to respond to market slowdown

FY20-21 restructuring programme

Significant items
NZ$m	FY20	FY21F	Total
Right-sizing cost base	187	90	277
Rocla	59		59
USPP Make Whole	30		30
Total	276	90	366
Cash flow timing
NZ$m	FY20	FY21F	Total
Right-sizing cost base	59	101	160
Rocla	4	12	16
USPP Make Whole	-	30	30
Total	63	143	206

Key Focus Areas

• Right-sizingcost base:
• • 1,500 redundancies
  • Operational footprint and office space rationalised
• Rocla restructuring and impairment of assets on closed sites
• USPP Make Whole: cost of early USPP 2012 exit
• Cash costs mainly consist of redundancies, site exits (onerous leases, make good), USPP Make Whole payment

Benefits

• Gross cost-out benefit in FY21 c$300m, split evenly between COGS and SG&A
• Rapid payback on c$160m cash costs
• Cost-outbenefits offset by expected market decline
• Closed Rocla sites to be developed and sold in FY21-22
• USPP 2012 exit reduces interest by c$17m p.a.

24 Fletcher Building Full Year Results Presentation | © August 2020

Cash flow

Strong cash flows delivered despite challenging trading conditions

	Jun 2019	Jun 2020	Change
NZ$m	12 months	12 months	$m
EBIT from continuing operations before significant items	549	160	(389)
Depreciation and amortisation	174	370	196
Lease principal and interest payments	-	(240)	(240)
Provisions and other	(42)	182	224
Trading cash flow before working capital movements	681	472	(209)
Working capital movements	(96)	93	189
Trading cash flow from continuing ops excl. legacy Construction and significant items	585	565	(20)
Discontinued operations	14	-	(14)
Legacy Construction cash flow	(270)	(186)	84
Significant items	(20)	(63)	(43)
Trading cash flow	309	316	7
Add: Lease principal payments	-	171	171
Less: cash tax paid	(28)	-	28
Less: funding costs paid	(128)	(77)	51
Cash flows from operating activities	153	410	257
Free Cash Flow from continuing operations excluding legacy Construction	269	269	-

25	Fletcher Building Full Year Results Presentation | © August 2020	Note: Legacy Construction cash flow includes Building and Infrastructure projects
Free Cash Flow = Trading cash flow less capex less cash tax, excluding M+A activities

Working capital

Cash flow supported by close management of working capital

Cash Flow Working Capital Movements (NZ$m)

Cash flow working capital movements continuing ops excl. legacy
Construction and significant items	Jun 2019	Jun 2020	Change
NZ$m	12 months	12 months	$m
Residential and Development	(27)	50	77
Construction excluding legacy	(6)	16	22
Debtors	28	95	67
Inventories	(54)	(1)	53
Creditors	(37)	(67)	(30)
Cash flow working capital movements	(96)	93	189

Key Working Capital Metrics - Materials and Distribution Total Cycle (days)

	As at	As at	Change
Key working capital metrics (days)	Jun 2019	Jun 2020	(days)
Debtor Days	40.7	39.0	1.7
Inventory Days	74.2	75.1	(0.9)
Payables Days	47.9	46.9	(1.0)
Materials and Distribution total cycle	67.0	67.2	(0.2)

26 Fletcher Building Full Year Results Presentation | © August 2020

Capex

Reduced spend but ongoing focus on key areas of strategy

Capex by Markets (NZ$m)

FY20 Capex

8

65

$232m

32

3

124

• FY20 capex spend reduced by $70m as a cash preservation measure through COVID-19
• Capex programme focused on enabling investments for strategy, especially digital, manufacturing efficiency and operating capacity, product & service innovation, sustainability, eg:
• • PlaceMakers digital programme
  • Firth ready-mix trucks and plant replacement
  • Quarry and Cement heavy mobile-equipment
  • WWB land secured in Tauranga

FY21 Capex

NZ Core		Residential and		Construction
				Development
			Australia		Corporate

• FY21 capex c$175-200m, includes $50m for next phase of WWB plant
• Prudent reduction is mainly in maintenance capex, leveraging solid investments in prior years
• Preserving investment in key strategic projects, esp. sustainable manufacturing and digital

27 Fletcher Building Full Year Results Presentation | © August 2020

Net debt

Strong trading cash flows supporting net debt position

Net Debt: Jun-19 to Jun-20 (NZ$m)

							77	47	565
						240
					186
					147				63
				128
			44							497
	218
	Net Debt	Reclassification	FY19 final	Repurchase of Legacy projects	Capex	Funding costs	Other2	Trading cash Significant items	Net Debt
	Jun-19	1	to lease liabilities	dividend	shares				cash	Jun-20

payment

28	Fletcher Building Full Year Results Presentation | © August 2020	1 Opening debt restated from $325m to now include debt hedging activities
2 Other includes Minority distribution of $9m and Hedging/FX on debt of $15m, make whole adjustment of $30m, partly

offset by divestments/asset disposals of $6m

Leverage

Leverage of 0.9x is below bottom end of target range

Leverage (Net Debt / EBITDA)1

2.0x
Target
range
1.0x
	0.9x
0.4x
FY19 1	FY20

• Good cash flow performance means leverage ratio (Net Debt / EBITDA) remains below target range of 1.0x-2.0x
• Includes impact of construction provisions, which increased Jun-20 leverage by 0.2x
• Expect to remain at lower end of leverage range, continued preference for conservative balance sheet metrics

29	Fletcher Building Full Year Results Presentation | © August 2020	1. Due to material impact of FX movements on balance sheet value of debt in recent months, the Group will use hedged
value of debt in its leverage calculation - i.e. Net Debt includes impact of CCIRS derivatives. FY19 has not been restated

as historic impact of debt hedging on leverage ratio has been relatively limited (c0.1x).

Funding

Strong maturity profile $1.3b liquidity after USPP payment

Debt Maturity Profile at Jun-20 (NZ$m)

14

400

525

459

13						149
100	100
				16
	FY21	FY22		FY23	FY24-25	FY26+
		Capital Notes		USPP1			Bank Syndicate		Other

• Chart does not include $350m USPP debt repaid post balance date

	Facilities		Drawings
NZ$m	30 Jun 20		30 Jun 20
Syndicate	925		400
USPP	809		809
Capital Notes	365		365
Other	27		27
Total	2,126		1,601

• Undrawn credit lines of $525m and cash of $1.1b as at 30 June 2020
• $350m USPP debt repaid in Jul-20 (interest $17m lower p.a.)
• Syndicated banking facility renegotiated in 1H20, establishing new 3 and 5-year tenor
• Lender amendments enable more favourable terms for covenant testing to the end of calendar 2021 if required

30	1 Includes CCIRS component and excludes fair value hedge component
Fletcher Building Full Year Results Presentation | © August 2020

Summary

Strong balance sheet and cash flows, focused on margin

Balance Sheet

• $1.3b liquidity
• 0.9x leverage ratio
• Gross debt reduced by $1.0b1 since Jun-18 (incl. USPP 2012 exit)
• Exit of high-cost USPP debt and other debt reduces interest costs c$20m
• Strong tenor in funding lines
• Covenant waivers provide certainty through to Dec-21

Cash Flow

• Operating cash flows strong, despite COVID-19 impact on earnings
• Focus on working capital delivering ongoing cash release
• Working capital cycle reduced from 71.3 days to 67.0 days since Jun-17
• Capex rapidly and sensibly reduced while maintaining key investments

Margin

• At HY20, Concrete and core Building Products delivering year-on-year margin expansion
• Moved decisively to reset costs in anticipation of reduced market activity, well organised and continue to remain vigilant to market movements
• FY21 focus on margin through:
• • Locking in benefits of cost reset
  • Pricing discipline
  • Cost to serve / segment profitability
  • Additional property and supply chain savings

31	1 Excludes $400 million syndicate drawn in March 20 recognised in cash balances to support liquidity
Fletcher Building Full Year Results Presentation | © August 2020

Agenda

1.	Results Overview	Ross Taylor
2.	Positioning for FY21	Ross Taylor
3.	Financial Results	Bevan McKenzie
4.	Strategy and Outlook	Ross Taylor

Fletcher Building

Full Year Results Presentation 2020

FY21 and beyond - strategy and focus remain unchanged Remain well positioned to execute strategy

1. Strengthen and grow the NZ core
2. Profitable growth in Residential and Development
3. Stabilise Construction
4. Turnaround and grow Australia

• Continued focus on operational excellence and driving profitability
• Complete the fix of underperforming businesses
• Market share growth through customer service performance, product innovation and adding logical adjacencies
• Continued performance across residential business
• Progressively build apartment capability and volumes
• Grow Clever Core adding external customers and a broader product range
• Pipeline of industrial land development supporting a minimum of c$25m p.a. ongoing profits
• Complete the historical Construction order book
• Continue to build out the "go forward" lower risk/higher margin order book across all Construction business units
• Continue to upskill the business and improve overall operating disciplines and consistency
• Portfolio rationalisation and associated business sales
• Strong focus on driving top line growth, operational performance and margin improvements
• Market share growth through customer service performance, product innovation and adding logical adjacencies

33 Fletcher Building Full Year Results Presentation | © August 2020

FY21 outlook

• Business reset for market downturn of c25% in NZ and c20% in Australia
• Expect stronger first half compared to second half as economies slow, unemployment rises
• However, the year remains very uncertain
• Sharpened focus and ready to act, vigilant to macro factors, market activity and how forecasts evolve
• We have a strong balance sheet and a resilient business reset to withstand market pressures
• We remain well-positioned to implement our strategy

34 Fletcher Building Full Year Results Presentation | © August 2020

Appendix

Fletcher Building

Full Year Results Presentation 2020

Industry context New Zealand and Australia

NZ Historical

Residential Consents (#)

			33k	35k	37k
	29k	30k
	FY16	FY17	FY18	FY19	FY20
Key:	Houses		Apartments	Retirement	Townhouses
	Units

Value of Commercial and Infrastructure work put in place

(Nominal $m)

	6,200	8,342	8,403	8,688
6,022
6,627	7,318	7,636	8,687	9,118
FY16	FY17	FY18		FY19	FY20F
Key:		Commercial			Infrastructure

AU Historical

Residential Approvals (#)

239k	222k	232k
			188k	169k
FY16	FY17	FY18	FY19	FY20
Key:	Houses	Apartments		Townhouses

Value of Commercial and Infrastructure work done

(A$b)

95	88	110	92	95
38	38	44	46	48
FY16	FY17	FY18		FY19	FY20F
Key:		Commercial			Infrastructure

36	Fletcher Building Full Year Results Presentation | © August 2020	Source: Statistics NZ, Infometrics, Bis Oxford

Group revenue by market

FBU Revenue by Market (%)

	AU
AU	Infrastructure	NZ
Commercial	5%	Residential
		10%	30%
AU	20%
Residential

15%	20%
NZ
NZ
Commercial
Infrastructure

37 Fletcher Building Full Year Results Presentation | © August 2020

Building Products Results overview

	Jun 2019	Jun 2019
	12 months	12 months	Jun 2020
NZ$m	Reported	pro forma1	12 months
Gross Revenue	1,314	1,314	1,173
EBITDA2	177	214	140
EBIT2	160	167	87
Trading Cash Flow2	157	157	125
ROFE3 %	22%	24%	13%
Capex	55	55	53
Cash Conversion4	64%	61%	83%
Building Products (ex Steel) EBIT2	127	132	101
Steel EBIT2	33	35	(14)
Domestic board volumes (m2)			-4%
Domestic laminate sales (m2)			-10%
Pipe volumes (t)			-11%
Steel volumes (t)			-15%

• Strong volumes and operating performance in plasterboard, insulation and laminates outside of the NZ lockdown period
• Pipes volumes and performance impacted by subdued infrastructure activity, aggressive competition and wet first quarter
• Steel challenging trading conditions exacerbated by NZ lockdown period and declining global steel prices impacting inventory valuations
• Divisional cash flow lower but cash conversion was 83%, up from 61% in FY19
• Capex spend includes $22m on new WWB plant at Tauranga

Divisional Exposure	Resi, 42%		Com, 28%	Infra, 30%
38 Fletcher Building Full Year Results Presentation | © August 2020	1 Jun 2019 12 months pro forma is Jun 2019 12 months reported adjusted for IFRS 16
2 Before significant items

3 EBIT/Closing Funds

4 Cash conversion = FCF/EBIT

Distribution Results overview

		Jun 2019	Jun 2019
		12 months	12 months		Jun 2020
NZ$m	Reported	pro forma1	12 months
Gross Revenue	1,596	1,596	1,471
EBITDA2	114	161	132
EBIT2	104	115	85
Trading Cash Flow2	98	98	117
ROFE3 %	35%	46%	41%
Capex	23	23	21
Cash Conversion4	72%	65%	113%
PlaceMakers revenue			-7%
Mico revenue			-8%
Divisional Exposure		Resi, 79%			Com, 21%

• Revenue growth before and after NZ lockdown, some key stores open during lockdown but minimal activity
• Good growth in most geographical segments prior to lockdown, Auckland and Christchurch lower post lockdown
• PlaceMakers Antigua Street and Helensville sites closed
• Cash flow higher on reduced working capital, with tight inventory and debtor management
• Continued focus on digital transformation programme and property upgrades

39	Fletcher Building Full Year Results Presentation | © August 2020	1 Jun 2019 12 months pro forma is Jun 2019 12 months reported adjusted for IFRS 16
2 Before significant items

3 EBIT/Closing Funds

4 Cash conversion = FCF/EBIT

Concrete Results overview

	Jun 2019	Jun 2019
	12 months	12 months	Jun 2020
NZ$m	Reported	pro forma1	12 months
Gross Revenue	802		802	740
EBITDA2	134		164	148
EBIT2	84		89	74
Trading Cash Flow2	136		136	100
ROFE3 %	13%		14%	12%
Capex	65		65	50
Cash Conversion4	85%		80%	68%
Aggregates sales volumes				-13%
Domestic cement volumes				-5%
Ready-mix volumes				-9%
Divisional Exposure
Resi, 44%		Com, 29%	Infra, 27%

• Revenue growth across all business units outside of NZ lockdown period with strong resurgence in volumes post lockdown
• Price gains in aggregates and ready-mix
• Higher market share in Firth
• New customers in GBC, following reduced number of competitors
• Capex investments in further quarry resource development, additional heavy mobile equipment for both quarries and cement operations, ready-mix trucks and plant replacement in Firth

40	Fletcher Building Full Year Results Presentation | © August 2020	1 Jun 2019 12 months pro forma is Jun 2019 12 months reported adjusted for IFRS 16
2 Before significant items

3 EBIT/Closing Funds

4 Cash conversion = FCF/EBIT

Residential and Development

Results overview

	Jun 2019	Jun 2019
	12 months	12 months	Jun 2020
NZ$m	Reported	pro forma1	12 months

Gross Revenue	639		639	466	• Market demand strong Oct-Mar and post NZ
					lockdown, continued strength in key $600k-
EBITDA2	137		139	68
					$900k pricing category
EBIT2	137		137	65
	• Residential EBIT lower due to timing of
Trading Cash Flow2	95		95	118
	settlements and lockdown taking place
ROFE3 %	21%		21%	11%	during key selling period (post-COVID-19
					sales flowing through into FY21)
Capex	7		7	3
	• 666 (627 dwellings and 39 sections) units
Cash Conversion4	64%		64%	177%
	sold vs 755 (735 dwellings and 20 sections)
					in FY19
Residential EBIT2	84		84	63	• Land development EBIT includes first of two
					sale transactions of a Penrith site, second
Land Development EBIT2	56		56	6
					site sale delayed until FY21
Clever Core EBIT2	(3)		(3)	(4)
	• Cash flow supported by receipts from FY19
					Land Development transaction and delays in
					land purchases
					• >4 years' supply of lots under control, of
					which c67% are on balance sheet
41 Fletcher Building Full Year Results Presentation | © August 2020	1 Jun 2019 12 months pro forma is Jun 2019 12 months reported adjusted for IFRS 16
2 Before significant items

3 EBIT/Closing Funds

4 Cash conversion = FCF/EBIT

Construction Results overview

	Jun 2019	Jun 2019
	12 months	12 months	Jun 2020
NZ$m	Reported	pro forma1	12 months
Gross Revenue	1,702	1,702	1,318
EBITDA2	68	89	(107)
Underlying EBIT2	47	51	3
Buildings and Infrastructure Provisions	-	-	(150)
EBIT2	47	51	(147)
Trading Cash Flow2	(210)	(210)	(148)
ROFE3 % (ex Buildings)	15%	17%	(50%)
Capex	31	31	32
Cash Conversion4	NM	NM	NM
Revenue backlog	1,445	1,445	2,929

• Paving, earthworks, civil works halted through Level 4 lockdown impacting revenues
• EBIT also impacted by wet first quarter, reducing bitumen and asphalt volumes in Higgins
• Buildings and Infrastructure provisions of $150m mainly from COVID-19 shutdowns and productivity impacting both FY20 and beyond
• Cash flow driven by Buildings projects outflow of $213m as key projects near completion
• Profile of work shifting to more balanced portfolio with $2.4b of revenue backlog that has a better margin outlook and lower and more appropriate risk profile

42	Fletcher Building Full Year Results Presentation | © August 2020	1 Jun 2019 12 months pro forma is Jun 2019 12 months reported adjusted for IFRS 16
2 Before significant items

3 EBIT/Closing Funds

4 Cash conversion = FCF/EBIT

Australia Results overview

		Jun 2019		Jun 2019
		12 months	12 months		Jun 2020
NZ$m	Reported	pro forma1		12 months
Gross Revenue	3,024	3,024		2,802
EBITDA2	119	208		168
EBIT2	57	77		33
Trading Cash Flow2	57	57		49
ROFE3 %	3%	5%		2%
Capex	91	91		65
Cash Conversion4	NM		NM			NM
Building Products Aus. EBIT2	40	47		26
Distribution Aus. EBIT2	8	15		7
Steel Aus. EBIT2	11	16		5
Divisional costs	(2)	(1)		(5)
Divisional Exposure		Resi, 57%		Com, 29%		Infra, 14%

• Revenue held well relative to market decline, increase in Steel revenue, better trading in May and June
• Building Products: strong turnaround momentum in Laminex (new product range and digital offering) and Insulation with earnings growth achieved despite subdued market activity. This performance was offset by c$15m of losses in Rocla and Iplex as project work did not eventuate, general volumes dropped
• Stramit and Tradelink both had poor 2H20 as larger project volumes dropped significantly
• Trading cash flow supported from improved inventory management and debtor collections but impacted by restructuring costs
• Divisional costs movement mainly due to one- off pension valuation benefit of $2m received in FY19

43	Fletcher Building Full Year Results Presentation | © August 2020	1 Jun 2019 12 months pro forma is Jun 2019 12 months reported adjusted for IFRS 16
2 Before significant items

3 EBIT/Closing Funds

4 Cash conversion = FCF/EBIT