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economic conditions continued to improve. These benefits were offset by Benelux and France, which were down by 6% and 5% respectively as activity slowed in these markets. Operating earnings excluding significant items were lower than the prior year and attributable to adverse mix, market conditions and increased investment in sales capability. Homapal continued to grow from FY17, especially in Asia and North America. Roof Tile Group’s gross revenue in local currencies decreased by 15% compared with FY17. This was due to continued soft economic conditions in Africa, volume declines in Japan, as a key customer moved to dual supply, poor weather, resulting in reduced activity in the USA, and softening demand in New Zealand. The division incurred $52 million of significant items related to the impairment of the carrying value of Roof Tile Group, following a review of the recoverable value as part of the divestment process. The division invested $61 million including $21 million in Formica Europe for the UK Redevelopment programme. FUTURE FOCUS In line with the new Fletcher Building strategy, we expect to divest Formica and Roof Tile Group during FY19. In the meantime, both businesses continue to operate under the leadership of chief executive Francisco Irazusta. Formica will continue to deliver cost- efficiency initiatives, particularly in Europe, as the investment in the UK redevelopment programme is completed in FY19. Formica (including Homapal) will also continue to focus on delivering profitable growth through innovation and new product development. Roof Tile Group will focus on improving its earnings by driving higher volume through its operating assets. Gross Revenue $1,177m 2017 $1,120m ▲ 5% EBIT before significant items $65m 2017 $79m ▼ 18% EBIT % 6% 2017 7% ▼ 1ppts
Formica and Roof Tile Group 3,800+ 5
DIVISIONAL PERFORMANCE OVERVIEW The Formica and Roof Tile Group division reported gross revenue of $1,177 million, an increase of 5% from FY17, which was driven by positive performances from Formica in North America and Asia. This was offset by difficult trading conditions in Formica Europe and a number of Roof Tile Group export markets, with operating earnings before significant items down 18% from FY17 to $65 million. Formica achieved gross revenue of $1,030 million, an increase of 8% from FY17, which translates to an increase of 4% in domestic currencies. Formica’s operating earnings before significant items were up by 1% to $75 million. Formica North America grew revenue in local currencies by 3% from FY17 through successful new product development, including the launch of anti-finger print laminate. Operating earnings excluding significant items were also up 3%, driven by continued improvements in operational efficiencies. In Formica Asia gross revenue in local currencies was up 8% from FY17, driven by strong growth in China, with the business benefiting from a focus on customer service, reliability and new product development. Revenue in the Association of Southeast Asian Nations (ASEAN) and Taiwan was flat year-on-year. Operating earnings excluding significant items increased by 24%, driven by revenue growth and improved manufacturing efficiencies, especially at the two manufacturing facilities in China. In Formica Europe, gross revenue in domestic currency was up by 1% from FY17, with Germany up 18% as the business continued to expand in the local market. Gross revenue in the UK was up by 4% as the business grew market share in the face of a declining construction market, while Spain grew by 6% as
The Formica and Roof Tile Group division employs over 3,800 people, designing, manufacturing and supplying laminates and other decorative surfaces and supplying pressed metal roof tiles. • Formica North America is based in the USA, Canada and Mexico and has two manufacturing sites and seven distribution centres. • Formica Asia is based in China, Taiwan and Thailand and sells high pressure laminate and Compact through four manufacturing sites and two distribution centres and 13 branches. • Formica Europe has an extensive presence across the region through five manufacturing sites and two distribution centres and a pan- European sales team supported by a local office network. • Homapal is based in Germany and provides metallic and decorative laminates used in furniture and public settings, such as hotels and showrooms. It supplies Germany, Austria and Switzerland directly; Formica and Laminex globally and also operates through a network of independent third party distributors. • Roof Tile Group is a supplier of pressed metal roof tiles in North America, Europe, New Zealand, Africa and Asia.
36 Fletcher Building Limited Annual Report 2018
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