Fletcher Building Limited (FBU) Earnings Call Transcript & Summary

[Foreign Language] I am Bruce Hassall, Chair of your company. Good afternoon from New Zealand, ladies and gentlemen. On behalf of the Board, it is my pleasure to welcome you to Fletcher Building's 2021 Annual Shareholders' Meeting. Today's meeting is being held online. This allows shareholders, proxies and guests to attend the meeting virtually. I sincerely regret that yet again, we find ourselves unable to meet in person owing to the recent COVID developments. All attendees can watch a live webcast of the meeting and read the associated company documents. In addition, shareholders and proxies have the ability to ask questions and submit votes. If you have a question to submit during the live meeting, please select the Q&A tab on the right half of your screen at any time, type your question into the field and press send. Your question will be immediately submitted. Should you require any assistance, you can type your query and one of the Computershare team will assist you with the chat function and reply to your query. Alternatively, you can call Computershare directly on the numbers noted in your online meeting guide. Please note that while you can submit questions from now on, I will not address them until the relevant time in the meeting. Please also note that your questions may be moderated or if we receive multiple questions on 1 topic, they may be amalgamated together. Finally, if for some technical reasons, we don't have the opportunity to answer your question, we will answer them in due course via e-mail. Voting today will be conducted by way of a poll on all items of business. In order to provide you with enough time to vote, I will shortly open the voting for all resolutions. At that time, if you are eligible to vote at this meeting, you will be able to cast your vote under the vote tab. Once the voting is open, the resolutions will allow votes to be submitted. To vote, simply select your voting direction from the options shown on-screen. You can vote for all resolutions at once or by each resolution. Your vote has been cast when the check appears. To change your vote, simply select change your vote. You have the ability to change your vote up until the time I declare voting closed. I now declare voting open on all items of business. The resolutions will now be opened in the vote tab. Please submit your votes at any time. I will give you a warning before I move to close voting. I will now introduce my fellow directors. On my right, your left, we have Doug McKay. On my left, we have Cathy Quinn and Rob McDonald. Then joining us via video conference are Barbara Chapman; Martin Brydon joins us from Perth; and Peter Crowley from our Brisbane offices in Banyo. You'll see Ross Taylor also joins us via video conference from Sydney. Back here in Auckland, Group General Counsel and Company Secretary, Andrew Clarke, has ceded off camera to ensure we maintain the required social distancing. They also have an attendance online. Members of our management -- members of our leadership team, our lawyers and our auditors, EY. Moving on to the agenda. Today's meeting will commence with addresses from me as Chair and from Ross Taylor, CEO. We'll then move on to the resolutions that are outlined in the notice of meeting. The resolutions will be decided by poll. Questions on the 4 resolutions will be dealt with together and before they are voted on. At the conclusion of the formal business, we will then take the opportunity for your general questions. We reserve the right not to address questions that, in my opinion, are not reasonable in the context of this meeting or that repeat previous questions. Thank you also to the shareholders who have submitted their questions in advance. Ross and I will speak to the more frequently asked ones in our addresses. On behalf of the board, I'm pleased to report that Fletcher Building delivered a very strong set of financial results in FY '21. Over the last 3 years, the Board has been very focused on driving our strategy to lift performance. So I'm pleased with what has been achieved so far. It demonstrates we are on the right track and are achieving key milestones for continued performance and the future success of our business. The result is testament to the leadership of the executive team and the focus from all our people, particularly amongst the uncertainties of COVID. The ability of our teams to shift tech rapidly through this time has been noteworthy, and we thank everyone across Fletcher Building for their very hard work. Group revenue for the year was $8.1 billion. In New Zealand, our exposure to the strong residential market had a positive impact. While in Australia, the effects of a slower commercial and civil market was a slight headwind. Pleasingly, EBIT before significant items was $669 million. Net earnings for the year were $305 million. This included $128 million of significant items from the impairment of Rocla in the last phase of restructuring costs. The strong performance across all dimensions of cash management through FY '21 was very pleasing. Cash flows from operating activities were $889 million. Against this backdrop, our confidence and the outlook, the Board considered that a buyback program was an efficient way of returning capital to shareholders, and the Board was pleased to pay total dividends of $0.30 per share for the financial year. The Board is very focused on driving strong outcomes across a range of ESG measures and driving a performance culture, in particular, on safety, sustainability and innovation. We acknowledge that cultural transformation on the many fronts, which I will now outline, can take time, but we are making really solid progress. We believe that embedding a safety culture across the group is critical. Our safety goal is a future with zero injuries every day is possible, and where everyone comes home from work safely. We are continuing to make good progress with 85% of our sites injury-free, and our overall injury rates dropping to just under 5.0% for the year. It's worth pointing out this is the lowest level ever. Development and training on safety is across all levels of our business, which has the aim of both lifting the skills and changing the culture of our organization. On sustainability. We continue to make good progress towards our 30% by 2030 carbon emissions reduction goal. Sustainable carbon emissions are now running at 5% below our 2018 levels. Our group-wide carbon reduction road map sets out ongoing projects that are key to achieving the overall reduction goal. In this vein, we are aligned with the government's transition to a low emissions economy. We are keeping abreast of the ETS challenges and assessing the impact on our business to ensure the best possible outcomes. We do have some general concerns about any ETS changes or carbon policy that could discourage further investment in reducing carbon emissions and incentivize imports of more carbon-intensive products. We do not believe that it's beneficial to NZ Inc. or to global carbon emissions to move manufacturing from New Zealand to overseas competitors. These are important topics that we continue to proactively engage with government about. Finally, on this side -- slide, the Board is focused on continuing to drive an innovation mindset and culture which is central to achieving our goals of ongoing performance and growth. This means advocating investment in all parts of the value chain, championing an environment for the continual generation of new ideas and concepts as well as looking at major trends globally and bringing those opportunities in. Ongoing investments in technology and data will further enhance the strength of our business and is critical for future success. Driving improved outcomes. Importantly, this focus is aligned to driving meaningful outcomes for our people and customers. As a Board, we value the importance of investment in our talented and diverse workforces through training programs and providing continual career development opportunities. We are driving the improvement of diversity and inclusion of our people by fostering an inclusive culture, having greater women representation and more ethnicity in leadership. We have targets in place to deliver initiatives, including increasing the number of women in operational roles year-on-year. We are also driving gender pay parity with action plans in place to close the gap. Ultimately, the Board is focused on overseeing improvements in our engagement levels as we recognize they are not at the level we want them. We have continued to support our people through the most recent COVID disruptions with health and well-being support as well as certainty of remuneration through the lockdowns. A key action taken by the Board during the year was on remuneration. We made significant changes to the group-wide remuneration framework with the main outcomes being that the new structure aligns more closely to the interest of our shareholders. We'll continue to engage with shareholders on these and other matters. Meanwhile, key to strengthening our customer relationships is the recognition that our investment in innovation and driving solutions for our customers is essential for their success. As we continue to navigate the range of service disruptions due to the pandemic and general supply chain constraints, we are focused on continuing to improve our customer experience. As we look forward, we are very confident about the current momentum and future performance of Fletcher Building. We are still navigating the complexities of COVID, but it is clear that more collaboration between government and business will bring benefits to the economy and to society more broadly as we prepare for living with COVID. Encouragingly, vaccination levels are trending in the right direction on both sides of the Tasman, which we expect would unlock more freedoms and allow businesses and economies a return to normal. Our economies need resilient companies with vaccinated workforces to meet demand and fill supply chains without the risk of further disruption. So looking ahead, we will continue to advocate for a rational risk-based approach from the government when it comes to progressively opening up the economy and removing border restrictions as vaccination levels continue to rise. To achieve this, businesses are looking for more certainty and speed of decision-making from the New Zealand government around things like the rollout of rapid antigen testing, combined with support to drive up vaccinations for their workforces. This is about safety for workplaces, safety for customer and safety for the community. Like other businesses, we welcome more investment and focus on the vaccination drive and a clear signal that unvaccinated people will face restricted access to travel and other activities. I strongly believe that the most effective way to convince people to get vaccinated is a nationwide vaccine passport. We've been encouraged by the New Zealand government's testing of a vaccine passport app, and are looking forward to seeing more details around how it will be used in practice. Meanwhile, the New Zealand government has signaled their intention to conduct a market study in the building materials in which we will fully participate when it is established. We've argued strongly for some time now that residential land is the largest cost contributor to new housing developments and that the cost of building materials is highly variable between New Zealand and Australia. We are confident there are a number of cost dynamics playing out in residential housing developments beyond building products, and we look forward to presenting our views to the Commerce Commission at the appropriate time. As ever, we also remain acutely focused on cash, a healthy balance sheet and delivering to our shareholders. And we're excited about what we are seeing at the Board table as the group continues to drive operational performance and make value-enhancing growth investments. Before handing over to Ross, I would like to express my thanks to our shareholders for your continued support. I am confident Fletcher Building is very well positioned for the future. With that, I now invite Ross to provide his address.

[Foreign Language] And I would also like to add my welcome to those joining our shareholder meeting today. On this first slide, we show a high-level view of the plan we've been working to in Fletcher Building for the last 3 years. Pleasingly, we continue to remain on track, with very solid performance outcomes being achieved across all areas of our business last year. Importantly, and as Bruce noted, this performance is showing up in our bottom-line results. We are in great shape to build from this position and drive both further operational improvements and above-market sales growth over the coming years. Moving to Slide 14. And before I get into the detail, you'll see on this slide that we provided 3 years of comparison numbers. We've done this as we felt the FY '19 year was a more meaningful comparator year than FY '20. As you'll recall, the FY '20 year was significantly impacted by COVID restrictions on our businesses, particularly in New Zealand. Turning now to the slide and working across it from left to right. Our profitability or EBIT margins on revenue continued to improve and were 8.2% for the year. Notably, our trading cash flows were very strong at $929 million. I'd point out, however, that we expect cash flows to be lower this year as we replenish our housing stock in the residential development business and inventories generally. And finally, on this slide, our return on funds employed or ROFE was 18.6% for the year. This was a solid result and well ahead of our base target of 15%. Slide 15 shows at the end of FY '21, our balance sheet was very strongly positioned with net debt levels sitting at $173 million and liquidity sitting at $1.6 billion. This balance sheet strength allows us to support the share buyback, our new wallboards plant, the necessary inventory build after a busy year, the completion of our legacy construction projects and still maintain a strong balance sheet. We forecast that after all of this, the debt levels will sit slightly below the bottom of our range. Importantly, this provides us with ample capacity to drive targeted growth investments, which I'll outline shortly. Our sites are now firmly set on ensuring that we continue to both improve our operational performance and grow the top line from here. Slide 16 summarizes on 1 page where our focus is going to support this and our aspiration to be the leader across New Zealand and Australia in building products and solutions. There are 5 areas we're focused on. We have a belief that all injuries are preventable. We want to get everyone home safely each and every day. We want to see each business absolutely focused on its customers, making sure the solutions and services that they're offering to them are better than what anyone else in the market can achieve. We need to be ever vigilant that we have our costs under control against both local and global competition. To achieve this, we'll relentlessly benchmark, evolve and invest to ensure we maintain this position. We want the economic performance of each of our businesses to be in the top quartile of similar businesses globally, not just our local competition. And finally, we need to take advantage of both our relative scale in New Zealand and Australia and our distance from the larger Northern Hemisphere markets. This allows us to innovate and drive sustainability as a fast follower and to disrupt our home markets and ourselves before others do. This done well should allow us to readily achieve above-market growth in our revenues. As we look ahead, we are confident we can continue to deliver against the plans we laid out 3 years ago. We remain on track to get our overall EBIT margins to around 10% by FY '23. This improvement will be achieved from 4 key areas. Firstly, by lifting margins in Australia into the 5% to 7% range. This will build on our present momentum and come from continued improvements in our operating disciplines and the delivery of numerous growth initiatives we already have underway. Secondly, by lifting construction margins to above 3%. With our forward order book now being reset to a lower risk profile and higher margins, our people skills and systems improved, and the zero-margin legacy work broadly completing through FY '22, we are confident our overall margins from construction will move above 3% into FY '23. Thirdly, we'll continue to drive margin expansion across the New Zealand core businesses. We still have further runway in front of these businesses for both ongoing operational improvements and product adjacencies that will support further margin expansion into the future. And finally, we'll get a natural profitability uptick at the group level as we grow our residential house sale volumes in the coming years. Beyond the operational and margin improvements I've just outlined, we also are focused on driving our top line growth. Across the divisions, our growth efforts are focused across many areas and include new localities, new products, existing products we can grow through refreshes, customer services, we can expand and growing our e-commerce sales volumes and channels. Just by way of example, our digital sales run rate across Fletcher Building now sits at around $450 million per annum. This is up from virtually 0, 2 years ago. At the group level, we have a team focused on scanning the world looking for relevant innovations and start-up companies that are doing things that we can potentially commercialize in our markets. This team also assists our businesses bringing their new ideas to maturity. Importantly, we're also accelerating the upgrade of our backbone systems to support the strong growth we're seeing in digital, data and all things e-commerce. To ensure we maintain this growth focus and momentum, we've earmarked around $50 million to $100 million of our base CapEx spend and around $30 million to $40 million of our base overhead spend each year to support this. Beyond what I would call base business growth, we are also looking at a growing pipeline of larger and more material opportunities. Examples of these are shown here on Slide 19 and include plans that will see our residential housing business grow by around 550 housing units per annum over the next 3 years, scaling up our off-site housing manufacturing business, Clever Core. And this has 2 benefits. We get a material new business in its own right. And by being able to build our houses faster, we'll use less annual working capital per house and effectively make the capital we have in this business work harder. In concrete, we'll introduce pozzolans, which is essentially ground up volcanic rock into our stand-up concrete mixes -- our standard concrete mixes. This does several things. It lets us reduce the embedded carbon in our concrete by around a further 30%. And then with greener concrete than our competition, we expect to win extra market share. And it also allows us to grow concrete volumes without scaling up our Portland cement plant. And in Australia, we're looking to disrupt the kitchen cabinetry market with our Haven Kitchens offer, and we've now opened our first stores in Melbourne. Its proposition for kitchen installers is they can get a full high-quality kitchen in 1 day. This compares very favorably with the traditional 6-week lead times across the industry now. Importantly, we expect to progressively add to this list as other opportunities we're working on mature, therefore, adding to the strong confidence we have around our growth prospects into the future. Looking now at our markets. I'd characterize both our New Zealand and Australian markets as looking solid into the medium term. The New Zealand market continues to see strong residential consenting levels and high planned levels of government infrastructure spend. That said, ongoing supply chain and labor constraints mean that the New Zealand construction sector is currently at or near capacity. This dynamic means that consent and project commitments will not flow directly into work volumes and is likely to have the impact of extending the higher levels of building activity through FY '22 and beyond. In Australia, the outlook for residential remains resilient particularly across the detached housing and renovation subsectors, while the commercial and key civil sectors seem to be stabilizing at their current levels. Unlike New Zealand, the Australian government is committed to infrastructure spend into the future. I now want to briefly touch on the impacts we're seeing from COVID so far this year. In New Zealand, through August and September, we were forced to close almost all of our business operations across the full country for 2 weeks and in the Auckland region for 5 weeks. Through the lockdowns, all our staff were fully remunerated and their health and well-being was supported through various programs and initiatives. Trading either side of these lockdowns has been very solid and at levels above the prior year. And provided New Zealand stays at these present lockdown levels or better, we would expect the trading conditions to remain above last year. In Australia, we're predominantly East Coast-focused, and lockdowns of some shape or form have been a feature of the FY '22 year-to-date. The net effect of these lockdowns has been to slightly subdue trading levels across most of our businesses. However, as both New South Wales and Victoria start to open up with increasing vaccination levels, we expect trading to improve quickly and to levels above last year. I wanted to call out the efforts of our team across Australia and New Zealand. They've had to deal with the demands and complexities of the differing approaches taken by each state government and government this year and through this, have kept our business running effectively and our customers well serviced. To finish, I'd like to provide a few outlook comments. With strong vaccination levels in both New Zealand and Australia, we're increasingly confident we'll see less impacts on our business from full or partial COVID lockdowns. This should then allow the present strong trading conditions to flow uninterrupted through our businesses for the balance of FY '22 and beyond. Our operational disciplines and business settings are in good shape, which leaves us well positioned in this environment to drive ongoing performance improvements and growth. We continue to target margins of around 10% by FY '23. And while our first half margins this year will be impacted by the various COVID lockdowns we've had to deal with, we are confident that the second half margins will show good progress towards achieving our 10% by FY '23 target. In closing, I'd like to thank our employees, suppliers and customers for their dedication for the last 12 months, and I also want to thank you, our shareholders, for your ongoing support. [Foreign Language] id="421945446" name="Bruce Hassall" type="E" /> Thank you, Ross. I now move on to the formal business of the meeting, which is to vote on the resolutions outlined in the Notice of Meeting sent to all shareholders in September. All resolutions are ordinary resolutions. To be passed, they require the approval of a simple majority of the votes of those shareholders entitled to vote and who vote on the resolution. I advised at the beginning of the meeting that we will vote on the resolutions by way of a poll. Any undirected proxy votes given to the Chair of the meeting or any director will be voted in favor of the resolutions. Any directed proxies given by the shareholder will automatically be cast as directed when the poll is closed. Voting on the resolutions is open, and you can vote it any time until I declare the voting closed. I will close the voting after all resolutions have been considered and voted on. As you're well aware, there is usual slight delay to the broadcast. So to ensure the smooth running of the question process and when we have -- and we have ample time to receive your questions, we will run through all the resolutions and we'll take questions on all the resolutions at the end. We'll then run through the voting process. It's now my pleasure to move that Rob McDonald be reelected as a director of the company. Rob was appointed to the Board on September 1, 2018. He is Chair of the Audit and Risk Committee as a member of the Nominations Committee and a member of the Remuneration Committee. He is considered by the Board to be an independent director. His credentials are outlined in the explanatory notes to the notice of meeting. The Board unanimously recommends that shareholders vote in favor of the election of Rob McDonald. I now extend to Rob the opportunity to speak about his reelection before we proceed to a discussion on the resolution.

[Foreign Language] My name is Rob McDonald, and I'm here to seek your continued support in my appointment as a director of Fletcher Building. From the very earlier stages in my career, during a time with a leading Australasian building company, it was impressed upon me the importance to our society of companies that actually make products in New Zealand that impact the daily lives of people, whether wallboards in a house or concrete and aggregates in a road or in a bridge. Fletcher Building is a critical company to the New Zealand economy and a successful Fletcher Building supports a successful New Zealand. This has again been demonstrated through the COVID pandemic as overseas supply chains have been disrupted. Developing our platform for future growth holds great opportunity for Fletcher Building, at the Board level, tapping into proven financial expertise, to refine and enhance business performance is critically important. I am the Chair of the Audit and Risk Committee at Fletcher Building. The company has returned to a more profitable position, which in turn means a stronger, more reliable, Fletcher Building for our people, customers and those industries that rely upon us as well as providing better shareholder value in the long term. Balancing smart operational management and clear financial oversight will be key to achieving our growth ambitions over the next 2 years. During these past 3 years in my governance work, I've provided guidance for a range of high-profile New Zealand companies carefully charting a course through these challenging times. Prior to that, I had a lengthy and rewarding career with 14 years as Chief Financial Officer at Air New Zealand, managing and overseeing large and complex funding structures, together with developing strong risk management frameworks while overseeing high-performance finance function. Most importantly, I have experienced the impact on a large organization of events such as a cyclical downturns and the global financial crisis. When I last had the pleasure of speaking with you in this forum, albeit it was in person, we reflected on the fact that the recent past had not been kind to Fletcher Building shareholders, and that as a fresh set of Board of Directors, we were strongly motivated to turn that around. Shared today, we have evidence that, that strategy set out by Ross and the team is making great progress towards delivering sustainable shareholder value in the long term. And I'm proud to have played a role in that shift. Importantly, as the challenges of 3 years ago have diminished, the organization has increased its focus on digital transformation and reducing its carbon footprint. With encouraging signs of our strategy taking hold, it's with real optimism that I look forward to continuing my contribution at the Board level to building a bright future for Fletcher Building. I'm excited about the opportunity in front of us, and thank you for your consideration, and thank you in advance for your support ahead. [Foreign Language]

Thank you, Rob. The next resolution that I'll move is for Doug McKay. It is now my pleasure to move that Doug McKay will be reelected as a director of the company. Doug was appointed to the Board on September 1, 2018. He is Chair of the Safety, Health, Environment and Sustainability Committee. He's a member of the Audit and Risk Committee and is a member of the Nominations Committee. He is considered by the Board to be an independent director. His credentials are outlined in the explanatory notes to the Notice of Meeting. The Board unanimously recommends that shareholders vote in favor of the election of Doug McKay. I now extend to Doug the opportunity to speak about his reelection before we proceed to a discussion on the resolution

[Foreign Language] Good afternoon, fellow shareholders, ladies and gentlemen. It's my pleasure to join you today as a director of Fletcher Building, a role I seek reelection to during today's proceedings. When I last stood before you in 2018 for my first AGM, I spoke about my ambition for the business, the relevance of my experience and my workload. I would like to recap how things have turned out over the last 3 years, what I said I would do and what did I do. I have a diverse and interesting portfolio of Boards and find this energizing and helpful in supporting my contribution at Fletcher's. My participation and attendance at Fletcher's has been 100%, as shareholders would expect, and I remain committed and enthusiastic to continue for the next 3 years, building on the strategy and progress I have been part of for the last 3. On my experience. I said 3 years ago, I would bring a deep background in large, complex and multisite Trans-Tasman manufacturing, distribution and customer service turnarounds. How prescience that experience was, given it became clear early on in my first term at Fletcher's, these were the challenges at the heart of our strategy moving forward. None was more challenging than health and safety and as the Chair of the Safety, Health, Environment and Sustainability Committee, we have built our approach to safety from the ground up, using the world's best practice benchmarks and practices. Our whole culture has been transformed, where safety is now the #1 priority for every employee and our safety performance is reflecting this renewed focus and commitment. The culture has changed, and health and safety is now embedded and sustainable. Through much effort across the organization, we have led an impressive safety turnaround to reassert the belief that all injuries can be prevented. We have delivered a much improved site safety record with 85% of our sites remaining injury-free in the last financial year, and total recordable injuries within reach of industry best. COVID permitting, we regularly visit sites to see how safety is landing with our people on the ground. Our efficiency and productivity is up, and business leaders are really owning it, supported by internal and external subject matter experts to ensure best and consistent practice. But there is still more work to do. And thirdly, I spoke of my ambition for the business that for New Zealand to be strong, Fletcher's needs to be strong. The turnaround at Fletcher's is now evident despite new obstacles and challenges along the way, not limited to the Convention Centre fire in 2019 and COVID, of course. I have played my part on a refreshed senior and highly experienced Board, supporting and challenging a talented management team. The Board and Ross are clear about what is going to be required over the next 3 years, and I am very committed to wanting to contribute my part to that. I look forward to the opportunity to serve my fellow shareholders and would be happy to take any questions. Thank you.

Thank you, Doug. We'll now move to the next resolution. It's now my pleasure to move that Cathy Quinn be reelected as a director of the company. Cathy was appointed to the Board on September 1, 2018. She is a member of the Audit and Risk Committee, is a member of the Nominations Committee and is a member of the Safety, Health, Environment and Sustainability Committee. She is considered by the Board to be an independent director. Cathy's credentials are outlined in the explanatory notes to the Notice of Meeting. The Board unanimously recommends that shareholders vote in favor of the election of Cathy Quinn. I now extend to Cathy the opportunity to speak about her reelection, before we proceed to a discussion on the resolution.

[Foreign Language] Good afternoon, fellow shareholders, ladies and gentlemen. I'm delighted to join you online for this, my fourth Fletcher Building Annual Shareholders Meeting. As a director of Fletcher Building, I bring a broad experience of a long and successful professional services career, notably contributing to the emergence of my former firm, MinterEllisonRuddWatts, to become one of the acknowledged market leading law firms in our region. During my time on the Fletcher Building Board, I have supported the development of customer-focused strategies leading to sustainable growth and change across the group in both Australia and New Zealand. I'm pleased that as we sit here today, the efforts by this Board, management and our 14,500 people across Fletcher Building are being recognized and rewarded as having made a sizable positive shift and becoming an aspirational business for New Zealand once again. As Doug too outlined in his speech, I'm particularly proud of the progress made in key areas of long-term strategic importance, such as those areas led by the Safety, Health, Environment and Sustainability Committee. One of the benefits being a member of that committee has given me is the opportunity to interact with a broad range of members of the Fletcher Building team as the committee has conducted site visits across New Zealand and Australia. These last 18 months in particular had demonstrated that in order for our business to have a bright future, world-class health and safety governance must take precedence. And I've been pleased to participate in an entirely collective effort to drive performance in areas with critically important implications for our business and beyond. I'm building a more sustainable business for the future, it was with much pride that Fletcher Building became the first building products company in Australasia to set a science-based target to reduce emissions by 30% by 2030. In the past 12 months, your company received an upgrade from the internationally recognized Carbon Disclosure Project to a B- rating for our approach to managing carbon emissions and climate change. In late 2020, Fletcher Building was included in the Dow Jones Sustainability Asia/Pacific Index for the first time. My passion and ambition for Fletcher Building is to support this business to deliver on its potential, to be one of the New Zealand incorporated companies that all New Zealanders can be proud of, but most importantly, that it's people and our shareholders can be proud of. As we shift into our performance and growth phase Fletcher Building's 5-year strategy, we are starting to see the impact and potential to refocus on the opportunities for our businesses in New Zealand and Australia. It's my intention to keep on doing my homework. I will not shy away from asking difficult questions, encouraging the team to reach for better and the quest to see Fletcher Building deliver value to you, our shareholders. I am known as a resilient person, someone who can get to the heart of things and speak clearly and directly when required. With your endorsement, I look forward to working with my fellow directors, Ross and the management team, and creating long-term sustainable value to you, our shareholders. Please cast your vote in favor of my reelection as a director. I can assure you that I will do my very best to reward your trust in me. Thank you.

Thank you, Cathy. We'll now move to the final resolution. I now move that the directors be authorized to fix the fees and expenses of the auditor. EY is the company's auditor and is automatically reappointed under the Companies Act 1993. This resolution authorizes the Board to fix the fees and expenses of the auditor. EY audit partners are present at the meeting should shareholders have any questions of them concerning this resolution. I now invite discussion on the resolutions regarding the reelection of the directors. Are there any questions that shareholders would like to ask Rob McDonald, Doug McKay and Cathy Quinn?

There appear to be no questions on the resolutions.

Okay. I now invite discussion on the resolution regarding the auditor's fees and expenses.

There appear to be no questions on the resolution.

Okay. There are no questions.

There are no further questions.

Thank you for -- thank you for your -- well, I won't thank you for your question. There haven't been any. So please now cast your vote on Resolution 1, the reelection of Rob McDonald. [Voting]

Please cast your vote on Resolution 2, the reelection of Doug McKay. [Voting]

Please cast your vote on Resolution 3, the reelection of Cathy Quinn. [Voting]

And finally, Resolution 4 that the directors be authorized to fix the fees and expenses of the auditor. [Voting]

The voting on all 4 resolutions will close shortly. We'll take a few moments now to allow those people that have not already voted to do so via the Computershare online portal. Please complete your voting now. [Voting]

Okay. So I'm not sure. Have the proxy votes come up on the screen? I'm not seeing it in front of my screen. So I assume we're having a little technical problem there. Here they are. Excellent. You'll now see on the screen results of the proxy voting received ahead of the meeting for all 4 resolutions. The company's auditor, EY, will act as scrutineer for the polls. Please note that the final results of voting on the resolutions will be advised to the NZX and ASX this afternoon. Ladies and gentlemen, finally, we turn to the part of the meeting where shareholders have the opportunity to raise further questions. I'd now like to give any shareholders the opportunity to ask questions. While we wait for your questions to come through online, we will address the pre-submitted questions received ahead of the meeting which haven't been specifically answered through my or Ross's address already. The first question is from you and [ Elizabeth Kappa ], shareholders. Okay. Let's roll on to this one. I'll read them out. Why Fletcher has not taken a lead in house building as they did after World War II? Standardized kits precut with all equipment, carpets, et cetera, have been produced in Canada, U.S. and Scandinavia for years. Why can you not do this either with a factory here, Australia or Canada? To answer your question, pleasingly, as Ross has already highlighted, we already have this technology in place at our Clever Core facility here in Auckland. This was opened 2 years ago and manufactures prefabricated building components. Clever Core products, closed wall panels, mid-floor and roof cassettes that are assembled on-site by their specialist teams. Total build time, depending on topology, can be reduced by 50% to 60%. Since opening, Clever Core has designed, manufactured and assembled a range of home types: Single-level duplexes, 2-story terraces and stand-alone single-level homes for a number of Fletcher Living developments. We are targeting delivery of 200 homes in FY '22, and we are looking to significantly lift this in the period ahead. Our next question comes from [ Michael Ramsey ], shareholder. Why do directors not reduce -- why do directors not reduce their directors' remuneration when shareholders take a dividend reduction? Is it a double standard? It certainly isn't a double standard. As disclosed to the market and our shareholders at the time, no dividend was paid for FY '20 due to the impact of COVID and related government protection measures. We reduced our directors' fees by 30% for 6 months to the end of September 2020. Having delivered a strong earnings and cash flow result in the last financial year, the Board approved a total dividend of $0.30 per share. Full details of changes and adjustments to the directors' fees as set out in your company's 2021 annual report. Our next question comes from [ Steve Nelson ], a shareholder. I remain concerned about the company's settlement in relation to the Ihumatao block of land. The $29.9 million settlement accepted from the government appeared to me, at the time, to be grossly inadequate. The settlement figure is, in my view, at least $20 million short of the mark, anything like a reasonable mark. As support for this contention, I would point out the recent purchases by Goodman Property Trust of 34 hectares of land around the Villa Maria Estate vineyard. Goodman Property Trust paid $75 million for the similar-sized block of land. To date, there have been no reasonable attempt by the company to explain their acceptance of this settlement. I believe it was not in the interest of shareholders. I would still like to hear a reasonable explanation if, in fact, there is one. The way I see this at present is that the company has put aside the expectation of shareholders that the company acts in their interest. Okay. Let's talk to Ihumatao. The sale price was agreed as being fair and reasonable at the time, and we largely broke even on the transaction. It's true that had the development progressed to completion, the returns would have been more significant. However, management and the Board believe that there was no clear time frame and process to do so. This was going to be a very long and difficult process if we continued with the development. We have a duty to our shareholders to act responsibly with their investments, and we believe that the sale price was fair and commercially sound. It was the right call to make. Our next question comes from [ Arthur Willard ], shareholder. Why are Fletcher's not proceeding with the share buyback? As we appreciate your question predates our recent buyback trading, you'll have seen since that time that we remain committed to the buyback program, which has recommenced. Our next pre-submitted question is from [ Lewis Merkis ], shareholder. What strategies are in place to again share price levels of 2017, i.e. $10? Great question. Thank you for your question, Lewis. I can reassure you that the Board and management team have a solid strategy in place to drive the performance and growth of the business. The 5-year strategy started with stabilizing the business after a very difficult period and is now focused on delivering consistent performance and growth. As you will have seen in the presentations, we are making good progress to that goal. We now have 3 questions from [ Alison Robert ], shareholder. First one, firstly, why does the CEO not ever concrete-based CO2 emissions reduction goal as part of their incentive? I've seen how effective this was for safety with Protect and sustainability initiatives will not get traction until this is in place. Thanks for your question, [ Alison ]. I'm pleased to highlight that as part of ensuring we meet our decarbonization goals, the Chief Executive of our Concrete division does, in fact, have a carbon reduction goal, as do senior managers across our cement business. Delivering sustainable business performance, including successful sustainability outcomes, will be a key factor to Ross Taylor also achieving his growth goals beyond FY '20, built into both his short and long-term incentives. Second question from [ Alison ]. I understand there is minimal use of supplementary cementitious materials, CSMs (sic) [ SCMs ]. When will you set a target and report percentages of low-carbon products such as a proportion of cement sales? Okay. Let me start by saying that we know that our New Zealand-manufactured cement is 20% lower in carbon than imported competition. We hold environmental product declarations for our cement at many of our concrete products. EPDs are publicly available and give a verified assessment of the carbon in these products and allow comparison of embedded carbon in our products versus other products. Our carbon reduction strategy covers several elements, and we have now achieved coal substitution of more than 50% at our Golden Bay Cement plant. We are also focused on identifying sources of supplementary cementitious materials, CSMs (sic) [ SCMs ] as a way of avoiding the emissions associated with using clinker to produce cement. Typically, use CSM (sic) [ SCM ] such as slag, fly ash are only available in very limited quantities and also come from CO2-intensive industries. Therefore, we are working hard on sourcing alternatives with natural pozzolans being one New Zealand-sourced, as Ross has already outlined. Thirdly from [ Alison ]. When do you plan to revise emission reduction targets to the less than 1.5% global warming goal? In line with the requirements of the Science Based Targets initiative, we will review our targets as part of the next validation, which for our business is in 2024. Our focus at the moment is to focus on and progressing with carbon reduction plans across our business and reporting publicly on our carbon reduction progress. Our final pre-submitted question comes from [ Dora Roberts ], shareholder. Do any of the directors ever have any interaction with the company's coalface workers? Thanks, [ Dora ], great question. As you've heard from our directors seeking reelection they have been involved in the business. I personally have been actually involved going around the businesses, conducting site visits and spending time talking to staff. You'll appreciate though that COVID have made this difficult but it's certainly something that all the Board are doing. I would also add that having our directors spread across New Zealand, Australia, where they can visit operations, has also been of great benefit through this time. That concludes our pre-submitted questions. We'll now answer questions received via the Computershare platform.

Thank you, Chair. The first question is from [ Gordon Wallace ], is the Northern Motorway project progressing on schedule? When do you expect it to be completed? Also, you received a top-up of funds from the government for the motorway project, will you be receiving a further top-up from the government?

Okay. There's a lot of questions there. Why don't I go to -- Ross, why don't you pick up those questions?

Yes. Thanks, Bruce. The first comment I'd make is whenever we work in projects, we actually don't make announcements on it. It's actually our client that does. So we don't ever talk explicitly about projects. But I can give you some broad comments on the questions you've asked. Firstly, when you talk top-ups, those such thing exists to the project. What happens is you have to submit formal variations, and the client has to agree that they're valid under the contract, and that's only when you get paid. So that's the process we go through when the scope of the project has increased, and that's what you've seen come into that project envelope. In terms of schedule. I can say the project was on schedule. But clearly, with the COVID shutdowns recently in Auckland and the greater Auckland area, that's obviously delayed things. So as we get into the Level 3 and things start -- there's still distancing, we'll be working out with [indiscernible] just how and when we'll finish the project, but we've got to get back up to a full production first. I see another question in there, which I -- on the screen, so I'll just go ahead on the SkyCity project that you asked. It is progressing. And yes, there are some supply chain challenges in procuring the materials, but we're broadly dealing with those. And the work we're doing now is more about getting the damaged components off still the facade, the roof trusses, which is progressing well, and then cleaning up the basement. So that's giving us time to then get the procurement in place for the next stages when we start bringing new materials in.

Ross, there's also a question on SkyCity in relation to how the roof is going and the redesign. Do you want to make a comment on that?

Yes. So firstly, what I will say is the roof that was there was code compliant and would still be code compliant. We have been looking at a design alternative, but it's more been about how we design it to actually expedite the rebuild. So that's a process we're working through with the client and Auckland City Council. It's progressing well, and we expect to have that landed in the next few months.

Thank you, Chair. We have another question from the New Zealand Shareholders Association. If I like 3 fires, 1 burning wood, another coal and another tires, tires would probably be the dirtiest. Can you explain how you overcame the poisonous black emissions in heating for concrete manufacturer?

Okay. That's a great question. Why don't you pick that one up on tires, Ross? I know the answer, but you go.

Thanks, Bruce. Look, what happens when you consume tires, it actually emits less carbon than burning coal basically. What you also need to understand is the temperature it gets burned at is circa 1,100 degrees Celsius, from memory. So what that does is it really consumes the tire chips in a very different way than if you go up to your backyard and just throw a match in there and you get all the black smoke. So you don't get that sort of emissions from it, and you've got various filters on our stacks as well. But broadly, the real answer is, yes, it's consumed at 1,100 degrees. It's a very different burning process than if you throw a match into a pile of tires at the back. So -- and the beauty of doing it is it solves 2 problems. It actually is much less of an emitter than coal, which we've displaced now 50% of our coal in the kiln over at Golden Bay Cement. And it also has iron in it. So it actually lets us use less iron oxides in the process as well. And by the way, the other good thing is it's actually taking about 2/3 of New Zealand's waste tires out of landfill which are exposed to random burning events as we've seen in the news. So it's got those multiple benefits. So it's a great use of waste to offset carbon and clean up the environment.

Thank you, Chair. The next question is also from the New Zealand Shareholders Association. A couple of questions on the buyback, which we appreciate is good for shareholders. If the directors felt that Fletcher Building shares were undervalued in 2021, then the best time to buy back would have been earlier when the price was $5.80. Did you consider it then? Also, in light of the allocation of capital, a buyback suggests the company has surplus capital, which it can't invest in existing operations. However, at this time, Fletcher Residential is only 8% of group revenue and New Zealand is facing acute housing shortages and extreme demand inflation. Was there a better way to spend the $300 million?

Okay. So sort of 2 questions here. So why don't I pick the first one up? So in relation to the current buyback, if you remember, we had a buyback that was operating over 18 months ago, which effectively we stopped when COVID hit. So the buyback was at the early stages. We've stopped it at that point, and then we've restarted it. And obviously, we've restarted it because we still believe that it's beneficial to shareholders. and to our share price. In relation to the allocation of capital, your comment, could we redirect that capital to Fletcher Residential, we are comfortable we can do both. So we've got sufficient capital to grow Fletcher Residential and build more houses as well as the share buyback. So we're comfortable that we have got the capital requirements to do both.

Thank you, Chair. The next question is from the New Zealand Shareholders Association. We congratulate the board on the progress made. However, criticism in the past was that the balance of the Board was more towards banking and finance than expertise and technical construction and development. It is a bankers' Board. Does the Board have a succession plan to include more building, manufacturing and technical expertise?

Thank you. We've had this question a few times. Look, this is a Board of very experienced governance that have a range of experiences and skill sets across many industries and sectors. And I'm a firm believer that you actually -- if you want to assess the quality of your Board, look at what we've delivered in the last 3 years. So entirely comfortable with the makeup and composition of the Board and judge us on what we say and do, would be my comment there. Do we have a succession plan? That's one that we're working on. I mean one of the smaller challenges we have is we had the -- I'm the oldest-serving board member at just on 4 years. And most of the Board, actually, 5 directors joined at one time. Three of them are up for reelection today. So that's something we're working on, and we will manage that in the period ahead. And we will make the decisions on the type of experience and skill sets we need at that time.

Thank you, Chair. There appear to be no further questions.

Okay. Thank you very much for your questions. Ladies and gentlemen, that brings us to the end of the formal business of the company's 2021 Annual Shareholders Meeting. I now declare the meeting closed. Thank you and -- for your attendance and participation today. Stay safe.