FLE122 Annual Report 2018

Our Year in Review Strategy

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ongoing implementation of our Protect safety programme and the introduction of a new real-time risk and incident management tool, RADAR. People engagement In FY18 we were pleased to see an increase in our people engagement score from 67% to 70%, which is on-par with our peer group. In future years we will seek to drive engagement above 80%, which will put us in the upper quartile of our industry. Customer satisfaction It was pleasing to see an increase in our Net Promoter Score (NPS) over the last year, which is a measure of how satisfied our customers are with our business, from 26 in 2017 to 33 in 2018. Our aim for future years is to drive to a best-in-class NPS of greater than 55. Sustainability and Innovation We see sustainability and innovation as critical drivers of our performance and through the next financial year we will refine our strategies and targets in both areas, to provide more detailed reporting on our year-on-year progress in the future. OUTLOOK As we outlined at the launch of our new strategy in June 2018, we expect Group earnings to be stable in FY19 and then growing from FY20. In FY19 we will remain focussed on our building materials and distribution businesses; divesting Formica and Roof Tile Group; stabilising the Construction division, by progressively closing out our remaining B+I projects; and embedding our new strategy and structure in Australia, while continuing our turnaround momentum. We expect to provide detailed FY19 guidance at the 2018 annual shareholders’ meeting. I thank our shareholders, people, customers and suppliers for their continued support of Fletcher Building and I look forward to updating you on our progress during FY19 and beyond.

In FY18 we reported total revenues of $9,471 million, a 1% increase on FY17. Group operating earnings before interest and tax (EBIT) excluding B+I and significant items was $710 million, in the top half of our guidance range of $680 million to $720 million. B+I losses were contained to the projected $660 million announced in February 2018. In New Zealand our Residential and Development division performed strongly, growing revenue and earnings and significantly increasing the volume of units sold. We also realised revenue gains in Distribution, Building Products, Concrete and Steel; however, this was offset in certain areas by input cost pressures and the need to invest in our supply chain ahead of planned timelines to meet increased market demand. In Construction, outside B+I, while we saw continued strong earnings growth in Higgins, the timing of major projects in the Infrastructure and South Pacific businesses reduced earnings across the division. In Australia market conditions were mixed. The residential market softened, while the Eastern Seaboard infrastructure pipeline grew. While many of our Australian businesses made progress against their turnaround strategies, particularly Iplex Australia and Tradelink, earnings across the division were impacted by increased input costs, particularly in energy and resins. Internationally, a positive performance by Formica in North America and Asia was offset by difficult trading conditions in Formica Europe and a number of our Roof Tile Group export markets. OUR BALANCED SCORECARD Beyond our financial performance we remain focussed on continuous improvement across our balanced scorecard. Safety The health and safety of our people is paramount, so it was pleasing to see that our total recordable injury frequency rate (TRIFR) reduced from 6.9 in FY17 to 5.1 in FY18 and serious incidents reduced from 33 in FY17 to 21 in FY18. This is an encouraging trend but still too high. We remain focussed on driving TRIFR below five across all our businesses and we have made good headway, with the

As a result of the equity raising, our balance sheet has been strengthened; we have agreed a permanent solution with our banking syndicate in relation to the breaches of the covenants; and we confirmed our US private placement (USPP) debt facilities in line with our target terms, with no redemption required. • Launch of new Group strategy We announced a new Group strategy to the market on 21 June 2018. Our vision is for Fletcher Building to be the undisputed leader in New Zealand and Australian building solutions – with products and distribution at our core. In New Zealand we will grow our building products and distribution businesses and leverage our strong positions in the concrete value chain and residential construction. Alongside this we will return Construction to sound operating performance by completing the remaining B+I projects In Australia our focus is on improving the operating and financial performance of our current businesses. In time, we will seek to grow our market share and expand our portfolio as we have done in New Zealand through targeted acquisitions. As a result of our decision to focus on the New Zealand and Australian markets, it was logical to then begin a process to divest our international businesses, Formica and Roof Tile Group. We expect to complete both of these transactions during FY19. With our strategy decided we then implemented a new operating model, which has reduced corporate costs by $30 million per annum. The new operating model included a new divisional structure and the reorganisation of our individual businesses into seven divisions. It went live on 1 July 2018. FY18 PERFORMANCE During a year of significant change, our divisions and businesses remained focussed on delivering on their commitments. within provisions and profitably growing our infrastructure and roading businesses.

Ross Taylor CEO

09 Fletcher Building Limited Annual Report 2018

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