Building Products

Building Products provides building product solutions, from foundation to roof. The division’s core plasterboard, insulation and metal roof tile business streams have leading market positions and respected brands.

Building Products’ businesses include:

• Winstone Wallboards, the sole New Zealand manufacturer of plasterboard, and DVS, a leading New Zealand provider of domestic ventilation systems.
• Fletcher Insulation, in Australia, and Tasman Insulation, in New Zealand, which lead the Australasian market in glasswool insulation, and own four of the six glasswool manufacturing plants in the region.
• Forman Group, the leader in commercial and industrial insulation and commercial ceiling and wall systems in New Zealand, and Tasman Access Floors, a leading provider of access flooring systems in Australia.
• AHI Roofing, with manufacturing plants in New Zealand, Malaysia and Hungary, and Decra Roofing Systems in the United States, make Fletcher Building the leading global supplier of stone chip coated metal roof tiles.

Complementary businesses in the division include Tasman Sinkware in Australia which manufactures high-end sinkware, and Fletcher Aluminium which designs and manufactures aluminium window and door systems.

Performance overview

Building Products' sales increased four percent to $771 million, but operating earnings, excluding unusual items, were down 28 percent to $106 million. Deteriorating residential housing markets, and higher input costs, particularly in relation to imported material as the New Zealand and Australian currencies weakened, were the key factors affecting earnings.

Operating earnings for the plasterboard business were down 36 percent, reflecting a weak New Zealand residential construction market and increased input costs. Good pricing discipline, an improved sales mix in the core plasterboard product, and strong overhead cost control partly alleviated market impacts.

Operating earnings for the insulation business were up one percent. This was due to several factors, including strong contributions from the Australian-based Baron Insulation business which was acquired at the beginning of the year, and from the access flooring systems operation. Economic stimulus packages from the Australian and New Zealand governments included incentives for home insulation, and this increased demand for insulation products in the final months of the year. The New Zealand commercial insulation and ceiling and wall systems business performed well with robust demand until the latter part of the year.

Operating earnings for the metal roof tile business were down 38 percent. The impact of high steel costs, weak sales volumes in New Zealand, and a challenging competitive environment in Japan were partially offset by robust pricing, a strong sales performance in Africa, and a favourable exchange rate. A new manufacturing plant in Hungary was commissioned late in the year and is operating to expectations. The 2007 oven fire at the United States plant disrupted operations until full commissioning of the new plant in October 2008. Insurance proceeds were received following settlement of the claim.

Weak residential markets also affected the earnings of the division’s other businesses. Aluminium business earnings were lower by 38 percent due to reduced demand in the New Zealand residential market. The sinkware business experienced a 36 percent decline in earnings due to lower demand in its domestic and export markets.

During the year, the division restructured to operate more effectively in the current economic climate. Initiatives included the closure of door manufacturing and other plant, shift reductions, sales and marketing rationalisations and branch downsizing. In the insulation business, key restructuring actions included closure of the Auckland-based Duroid foils and wraps plant, two paper and foil laminating lines at the Homebush manufacturing plant in Sydney, and the Braeside sales office in Victoria. Employee numbers for the division reduced by 270 positions during the year, albeit the insulation business subsequently employed additional people to cope with increased demand on both sides of the Tasman arising from the government stimulus packages.

Back to topLooking ahead

Significant cost rationalisation during the year means each of the division’s businesses are well positioned to capitalise on upturns in key markets. The insulation business is already seeing benefits from Australian and New Zealand government incentives, while both the plasterboard and insulation businesses will benefit from increasing interest in energy efficiency solutions and sustainability.