2001ANNUAL REPORT the separation is behind us there are many opportunities to enhance returns our prime focus is operational improvement 2 Chairman’s review 4 Chief executive’s review 6 Building Products 8 Concrete 10 Construction 11 Distribution Contents 12 People & safety 13 Environment & community 14 Fletcher Building’s profile 16 Fletcher Building directors 18 Corporate governance 21 Fletcher Building management 22 Financial review 24 Financial statements 56 Audit report 57 Statutory disclosure 59 Shareholder information 61 Investor information www.fletcherbuilding.com Fletcher Building is committed to a high level of customer service. As part of this commitment, we recently launched a significantly upgraded internet site. The new site displays information on Fletcher Building’s operations and highlights our well established, powerful brands. 01 Chairman’s review A new beginning As your Chairman, I am pleased to report, on behalf of the Board of Directors, on the results and progress of our new company – Fletcher Building Limited. On 23 March this year, Fletcher Building Net earnings before unusual items were Limited acquired the operations, assets $22 million in the June period (compared and liabilities previously attributed to to $12 million for the rest of the year), Fletcher Challenge Limited – Building and cash flow from operations was Operations, completed the separation $159 million in the June period ($92 process from the former parent company million in the rest of the year). This and began a new stand-alone corporate strong recent improvement stands the existence. company in good stead as we move into the current year. This resolved an extended period of uncertainty about the future of the business. During this time, its future A difficult full year ownership and the value that might be It has been a complex year for Fletcher achieved were very much in question, Building. Not only was demand sharply and much forbearance was asked of the down compared to the previous year, shareholders. The Directors of Fletcher but the process of separation from Building are very conscious of the faith Fletcher Challenge was very disruptive. shareholders have invested in them and Initially, the Fletcher Challenge Board of the company, and will use their best Directors was prepared to consider a endeavours to ensure that the investment sale of Fletcher Building as an alternative is justified. to transferring it to existing Fletcher Challenge shareholders. This necessitated a Thus the results for this new company number of potential acquirers conducting are only for the period 24 March to 30 due diligence to enable them to formulate June, which will be the normal year end offers, and this was demanding and for Fletcher Building. In that limited distracting for management. In the end, trading period, improved operating the Fletcher Challenge Board rejected performance and some recovery in the sale option, believing that higher demand led to significant increases in value would be created if Fletcher earnings and cash flow when compared Building was transferred to shareholders. to the approximately nine months period In that context, it is particularly pleasing prior to separation. to note the recent lift in operating 02 performance and the improved share Fletcher Building Share Price 23 March to 11 September 2001 2.80 2.70 2.60 2.50 2.40 2.30 2.20 2.10 2.00 6 JUL 01 7 SEP 01 1 JUN 01 8 JUN 01 6 APR 01 3 AUG 01 4 MAY 01 13 JUL 01 20 JUL 01 27 JUL 01 15 JUN 01 22 JUN 01 29 JUN 01 13 APR 01 20 APR 01 20 APR 01 27 APR 01 10 AUG 01 17 AUG 01 24 AUG 01 31 AUG 01 11 MAY 01 18 MAY 01 25 MAY 01 25 MAR 01 30 MAR 01 price since the establishment of Fletcher resulted from a comprehensive review There are seven directors – Ralph Norris Building as a stand-alone company of the carrying values of the assets. Full and Ralph Waters are new to the – although the share price has been details are included in the financial sec- company, Sir Dryden Spring who was affected by the recent catastrophic tion of this report. a relatively recent appointment to the events in the United States. Fletcher Challenge Board and Paul Baines, Hugh Fletcher, Kerrin Vautier It is also appropriate to note at this The way ahead and I who are longer-standing members point that the separation process made When the company commenced of the Fletcher Challenge Board and considerable demands on the manage- business on 24 March 2001, Michael thus have a considerable knowledge ment and staff of the company. I would Andrews, the former Fletcher Challenge of the Fletcher Building operations. like to record the warmest appreciation Chief Executive, was the Acting of the Board for their efforts and loyalty Chief Executive of Fletcher Building. during this exacting period. We informed you in the separation Outlook Information Memorandum that the With the separation process behind us The results for the nine months prior to Board’s first key task was to identify and the senior management team now separation are relevant to shareholders and appoint a suitable full time Chief in place, the primary focus for the year for two reasons – firstly because, along Executive. After an international search, ahead will be operational improvement. with adjustments to the carrying values the Board appointed Ralph Waters on There are still many challenges. Demand of assets, they directly affected the values 1 June. Ralph was previously the remains subdued, especially in our major at which Fletcher Building acquired Managing Director of Email Limited, market of Auckland, there are underper- assets from Fletcher Challenge; and a major Australian diversified industrial forming assets in South America and in secondly because trading in that period company where he had held senior Steel where solutions will not be easily influenced the initial Fletcher Building positions over his 18 years of service. found, and there are energy supply and share price. Further, it is important to Ralph’s long experience in highly pricing concerns. However, the core of report the 12 months period so that competitive industrial markets will be Fletcher Building is a range of excellent year-on-year comparisons can be invaluable, and considerable progress businesses with strong market positions made. Thus pro forma accounts for the in lifting operating performance is and their recent performance gives 12 months have been prepared and already evident. the Board confidence about the these are reported beside those for the immediate future. period 24 March to 30 June. I am confident your new Board, whose sole focus is Fletcher Building, and a Revenues for the year were $2,273 substantially renewed management million, a reduction of 4 per cent on the team, will together not only improve previous 12 months. Net profit after tax results in the short term, but also shape and minorities was $34 million before the company so as to ensure better results unusual items, and a loss of $272 million are sustainable for the coming years. R S Deane after unusual items. This result was Chairman affected by $181 million of unusual items, I believe the Board we have assembled plus the write-off of tax benefits of $125 for Fletcher Building has the right million. Some of these changes were combination of commercial acumen, associated with the separation from the experience, fresh perspective and old Fletcher Challenge Group, while others familiarity with the business to take the company forward. 03 Chief executive’s review Operations summary The pro forma results for the 2001 year have been reported for each of the major segments in which Fletcher Building conducts business. These are Building Products, Concrete, Construction and Distribution. These business segments have clear unsatisfactory, the results of Fletcher flatter organisation structure should allow New Zealand market leadership in one Building Limited since trading com- each chief executive more time to devote or more of their activities. Winstone menced on 24 March 2001 are an to new initiatives such as new products, Wallboards, Golden Bay Cement, encouraging indication of what share- new processes, new technologies, or Firth’s readymixed concrete, Winstone holders might expect of the company new complementary business activities. Aggregates, Fletcher Construction, going forward. Also, resolution of some The broader structure did not require the Pacific Coil Coaters, and PlaceMakers long-running disputes in construction creation of new positions; it simply are the major examples. projects in Australia and New Zealand required some existing positions to report has removed further uncertainty from directly to the Fletcher Building CEO, Although demand did not favour any of forward prospects. rather than through an additional level. the businesses, there were good results from some business units – for example, Cash flow during the year was strong Management the full year results from Golden Bay – particularly in the last quarter, where The senior management team has been Cement and Winstone Wallboards, and a $159 million inflow resulted in a year- substantially changed from that in place much improved last quarters from Fletcher end net debt of $274 million, compared prior to separation from Fletcher Challenge. Construction, Fletcher Residential and to $485 million a year earlier. Thus we The Executive Committee comprises the PlaceMakers. Wood Panels, Aluminium, have entered the new financial year with seven most senior executives of the Firth and Winstone Aggregates all improving earnings, a strong balance company. Only two of the present reported profits well down on the sheet and all major disputes now resolved, committee were also members of the previous year through lower demand providing a sound base for our first full senior executive team prior to separation.