Distribution

Fletcher Building's distribution business, PlaceMakers, is the premier supplier of building materials to New Zealand's commercial and residential construction markets.

PlaceMakers leads the market in its core trade segments and provides an important distribution channel for Fletcher Building products. There are 62 stores, most of which are operated in partnership with local owners. Frame and truss manufacturing is a key feature of the division's offering.

PlaceMakers works closely with joint venture operators and key suppliers to deliver value to customers through credible trade products, and great services through the quality of its employees and its customer relationships. These are key points of difference underpinning PlaceMakers competitive success. 

Performance overview

PlaceMakers sales were in line with the prior year, but with increased residential building activity in New Zealand emerging in the latter part of the year. Operating earnings were 27 percent higher at $38 million driven by reduced costs and steady margins.

A 13 percent increase in New Zealand residential building consents from 2009 assisted the results. The building materials market has, however, continued to be affected by the low level of residential building consents, and the decline in non-residential consents. Forward indicators for commercial building materials markets have been slowing, while those for residential have improved in metropolitan areas but remain weak in rural and coastal areas.

The competitive landscape has seen most industry participants continuing to compete aggressively on price and margin to retain share.

Pressure on the trade segment continues, but PlaceMakers' market share has been maintained with the joint-venture ownership model proving resilient. An active margin management programme also mitigated pricing pressure.

The trade and serious DIY segments remain the core business. Successful marketing and promotional campaigns have brought a fresh focus and added customer appeal to our 'Know How Can Do' brand.

The growth in operating earnings was attributable in part to a five percent reduction in employee and facility costs, and improved freight cost recovery.

Working capital increased by three percent mainly as a result of inventory price increases, but free cashflow was 43 percent higher than the prior years. Cashflow management remained a primary focus. This helped Distribution achieve an annualised return of 27 percent on funds employed.

Enhancements to delivery management improved freight cost recovery. Productivity gains were achieved in frame and truss manufacturing, a core trade product, through improvements to the plant network, production scheduling, quality control and plant layout. Capital expenditure was limited during the year principally to store maintenance and high pay back projects. Planning for redevelopment and relocation of existing stores is underway and an increase in activity is planned for 2011 with a number of store refits and relocations. This will extend our lead in Trade and serious DIY markets.

The transition to a new leadership team is complete. Key appointments from within the wider industry have been made, including the CEO, National Sales, HR, Supply Chain and IT general managers. Twelve new branch operators have been appointed who will also help drive performance and growth.

Health and safety remains a lead engagement strategy with a 39 percent reduction in the TRIFR rate in the 2010 year. New training, auditing and performance management will support this strategy in the year ahead. Renewed focus is also being given to staff development and talent management as we move into thinking about growth and how to best capture the benefits of improving market conditions. New talent and performance management frameworks have been established.

Back to topLooking ahead

Improved trade customer services to grow market share will be driven off PlaceMakers strong base of trade relationship skills, and product and industry knowledge. Training and development will be expanded via our 'Know How' Academy and related programmes. Strategies will be focused on partnership and growth. The existing collaboration with Joint Venture partners on strategy development and execution will be expanded.

DIY customers will be advantaged by the relaunched Know How loyalty card and major promotional programmes. Value-added initiatives for trade customers around installation solutions, and project and job planning, will significantly improve the overall attractiveness of PlaceMakers to this market.

Improvements to supply chain and logistics effectiveness are also a priority.