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Concrete Financial Summary
Concrete FY18 Revenue Weighted Sector Exposure
Year ended 30 June
2018 NZ$m
2017 NZ$m
Change NZ$m
Change %
Gross revenue
812
781
31
4%
32%
External revenue
545
507
38
7%
42%
90
113
(23)
(20%)
EBIT before significant items 1
Funds
628
621
7
1%
Trading cashflow
128
142
(14)
(10%)
26%
1 EBIT before significant items is a non-GAAP measure used by management to assess the performance of the business and has been derived from Fletcher Building Limited’s financial statements for the year ended 30 June 2018.
Residential Non-residential Infrastructure/other
an impairment of a previously mothballed quarry.
DIVISIONAL PERFORMANCE OVERVIEW The Concrete division reported gross revenue of $812 million compared with $781 million in the prior year. The 4% increase has resulted from improved sales volumes across all business units. Aggregates revenue grew through a mix of pricing and volume growth, albeit weighted towards a lower margin product mix. Investment continued to develop the existing quarry footprint to meet current and future demand. Cement revenue was consistent with the prior year driven by domestic sales where volumes grew 4% on the prior year. This was supported by a 3% increase in manufacturing volumes to set a new production record, and market share continued to be strong. While the ready-mix market was flat during the year, revenue increased by 6% on FY17, driven by a 2% increase in sales volumes and pricing gains. Ready-mix market share is estimated to have grown 1% in the period. Operating earnings before significant items were $90 million, down 20% from FY17. When excluding the prior year gain of $12 million on the sale of a Firth property, divisional earnings reduced by 11%, which was driven by a contraction in gross margin. The contraction in gross margin was caused by increased energy and supply chain costs across all businesses, particularly in GBC and Firth. Strong price competition prevented these cost increases from being fully passed on. Costs associated with commissioning the new Firth ready-mix and masonry plants and higher-than-anticipated demand for aggregates led to additional costs incurred to alleviate capacity constraints and support the increased volumes. The division recognised a $17 million charge to significant items during the year, as a strategic review identified
The Concrete division comprises Fletcher Building’s aggregate, cement and concrete businesses. These businesses have a proud history of serving the New Zealand construction and infrastructure markets, some for more than 100 years. • Winstone Aggregates has over 150 years’ experience in manufacturing and supplying aggregates, and operates 18 quarries nationally. This includes a mixture of hard rock, alluvial (a mixture of sand, gravel and tonnes into the ready-mix, roading and general contracting markets. • Golden Bay Cement (GBC) is over 100 years old and is New Zealand’s only manufacturer of clinker and cement. With national distribution capabilities, GBC supplies over sediments) and sand quarries supplying nearly eight million 900,000 tonnes per year for domestic and export markets. A short supply chain provides full control of the end-to-end process, from the cement rock quarries, manufacturing and multi-modal distribution into customer silos. • Firth Industries is comprised of three major businesses: Certified Concrete (readymix), masonry (concrete blocks and pavers) and Dricon (bagged dry concrete). It operates 70 concrete plants, eight masonry plants and two dry bagged product plants. This comprehensive nationwide network allows Firth to supply its products into all segments of the construction industry.
During the year the division invested $62 million across its businesses. This included investment to improve customer service and competitiveness, including the launch of new digital applications for order tracking in Firth, the opening of a new $30 million Firth masonry plant in Auckland, a new Firth ready-mix plant in Manukau and substantial quarry development projects, including further development of the Hunua quarry, south of Auckland. FUTURE FOCUS The division remains focussed on investing in its core assets and customer engagement to position its businesses to meet increasing demand for aggregates and cement off the back of sustained infrastructure investment across the country. The division will also pursue improvements in the sustainability and efficiency of its operations. GBC is progressing an alternative fuels strategy, and planning a new project that is jointly funded by the Ministry for the Environment, aimed at substituting a further 20% of GBC’s coal requirement through the use of end-of-life tyres. If successful, this project will help to address a major waste problem in New Zealand, while improving the sustainability of GBC's energy sources. As part of the project GBC would reuse up to 3.1 million disposed tyres per annum, which is up to half of New Zealand’s annual tyre waste, excluding stockpile.
Firth
29 Fletcher Building Limited Annual Report 2018
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