Fletcher Building Limited

Thank you for standing by and welcome to the Fletcher Building FY26 four-year results briefing. All participants are in a listen-only mode. There will be a presentation followed by a question and answer session. If you wish to ask a question, you will need to press the star key followed by the number one on your telephone keypad. We ask that you please limit yourself to two questions. I would now like to hand the conference over to Mr. Andrew Redding, Managing Director and Group Chief Executive Officer. Please go ahead.

Good morning, and welcome to the presentation of our full year results for the 12 months ended 13th of June, 2026. Setting the agenda for today, I'll cover off the 2026 financial year and the progress we've made against our strategy. I'll then talk to the divisions and our stakeholders. Will Wright, our group CFO, will then take you through our financial results in more detail. And finally, I'll return for our outlook, after which we will take questions. Before we get into the detail, let me give you a quick overview of the year as I see it. The end of financial year 26 signifies the end of the first stage of our turnaround. The first stage was the initial hard work to turn around this group, and we've now completed that. We've progressed with the portfolio simplification. We've made Roic a discipline in our business. We've put the focus on performance, and we've taken out a major first-transport cost. We have moved quickly and decisively, and we now have a fitter, leaner organization. The next stage is going to be about finding and proving up where growth comes from inside the core and continuing to pursue portfolio simplification opportunities. Turning to slide five, there are five points I want to make sure I get across today. We have delivered a steady performance in a tough macro environment. We have executed well and progressed the strategy consistent with what we set out at our investor day last June. We've continued to strengthen the balance sheet and net debt is now inside our target range. Group Rowit has improved, although there is still more work to do on this. And operating cash flows were strong, albeit with some offsetting the legacy project costs. Moving to slide six. There is no getting away from the fact this has been a challenging economic environment. Back at the start of this calendar year, we saw signs of the start of a recovery. but events in the Middle East have since caused a drop in economic momentum for both New Zealand and Australia. In the context of this backdrop, we've developed a respectable performance. Will is going to talk to the financials later, so I'll just focus on three measures for now. Firstly, net earnings were $228 million against a loss of $419 million last year. This is our first positive earnings result since financial year 23, the lack of impairments being the main driver. Secondly, net debt was $637 million, down from $999 million, which puts us inside the $400 to $900 million range we set at the investor day. That came mostly from improved operating cash flows, property sales, and most importantly, divestments. Thirdly, ROIC, our core strategic measure, was 5.3% at the group level, 4.7% if you exclude land sales. We're just starting to head in that direction, but there is more to be done, and we have very clear plans to improve ROIC at each of our business units. Slide 7. In yesterday, last June, we set out what we were going to do, and I won't go through every item on the page. The portfolio work is well in train, with the construction divestment completing sooner than our own expectations. The cost and structure work is well advanced. NZICC is handed over, and the roughly 15 remaining legacy projects are now provisioned. Delivering an asset to the NJICC's quality, despite the setbacks and challenges along the way, while also getting our arms around the remaining retained legacy construction projects, has been a substantial undertaking. I am proud of what the team has achieved. No single item on this list has got this here. It's the aggregate of all of them. Clearly, the major initiative of the year was construction, and I don't think anyone should underestimate what coming out of that does for our ability to perform as a group. As well as the financial drain, construction was costing the whole organization a lot in time and attention. Monitoring its risk profile, managing their legacy projects, and negotiating settlements was to give significant distractions from our core divisions. I know you'll have questions on residential and development, and what I can say is that we're working through the options to get the best outcome for shareholders. One more thing from the future column. It says further decentralized corporate functions. There is still more to do, but we're getting closer to an optimal balance. The reality is that some centralized corporate functions do carry real economies of scale, but I can assure you we are still running the ruler over everything. With respect to dividends, We will look to reset the dividend policy once we begin generating positive, sustainable free cash flow and balance sheet targets are met. Moving to slide eight with financial year 26 operational highlights. It's been a busy year with many highlights, so I'm just going to pick out three. The first is Cavendish Drive. Our new frame and truss plant in Auckland is now operational and it gives us technology no one else has in the New Zealand market. We had been selling frame and truss below cost, so every extra unit we sold made the problem worse. The Cavendish Drive plant changes that. The second is the Urban Quarry, our network of metro collection sites for dealing with demolition waste. We opened a new site at Tamahiri during the year, with tonnage up 28% and clean fill up 35%. This is the start of a real position in the circular economy, and it sprinkles off the capabilities that Golden Basement already has in firing alternative fuels. Third is Lawinex Australia, where disciplined structural cost-doubt and site rationalisation have improved earnings quality and positioned the business to margin and rowing uplift. Slide 10 – Divisional Performance Given the challenging macro environment, this was a robust performance by our manufacturing divisions. Whilst these divisions perform well, the amount of red arrows highlight that more work needs to be done across the wider portfolio, especially on returns. I'll be covering the divisions individually over the next few slides. Moving to slide 11. In our Light Building Products division, earnings grew 22%. Additions and alterations volume and activity in the rural sector offset weaker residential construction activity in the North Island, while the South Island and Australia performed relatively well. The wallboards grew volumes 4% on strong South Island demand, again delivering double-digit returns. While we generally had continued volume recovery across multiple businesses in the second half of the year, I wanted to call out wider part-time volumes. Please refer to the chart on the right and the line in light green. This is an example of a business that's benefited from our wider portfolio leverage. Placemakers has been able to take in a greater volume of product, which illustrates the type of synergies we can create internally and to our critical map in the markets in which we operate. Our insulation distances have performed well, with flexural insulation in Australia reaching a double-digit ROIC. Slide 12, heavy building materials. Heavy building materials also experienced earning growth of 8% versus the prior year. Winston Aggregates had a material improvement in the second half, generating a double-digit ROIC, driven by increased project activity and market share growth at the urban quarry, which I mentioned before. first continued to concentrate on long-term customer relationships. Lower input energy costs improved earnings, while a 12-month volume average, shown in a solid grey line, grew in the last quarter. The in-quarter growth on a long-trailing average basis was comparable to the wider reported market stats by Stats Museum. However, we know that the concrete tiling market, which we take a large share in Auckland, has seen delays. Moving to slide 13 on distribution. Distribution performance improved materially in the second half of the year, returning to profitability with place-native regaining lost share. In the first half of the year, we spoke about needing to improve our operational efficiency and capability in our frame and truss operations. And we now have it with our new operation at Cavendish Drive. The new plant will help serve the Auckland market, possessing technology uniquely available to such a building in New Zealand. With a list in frame and truss volumes, it is estimated that every dollar of frame and truss sales will be converted on average into $4.20 of higher margin balance of house sales. Going forward, the structural cost of the division will benefit from both labour productivity improvement for the new plant, as well as a flatter organisational structure. A further lever for growth is our regional joint venture branch model, which we re-established this year, commencing with four branches in Southland. Slide 14, Resi and Development. Turning our attention to the Development Division, the market in Auckland remains subdued, with elevated inventories and pricing pressures, while Canterbury remained resilient, which is all in line with what we're seeing with the rest of the portfolios. Development Mix transitioned during the year, influencing volume and margin. I will note there were no new land commitments entered into during the year, and all land payments related to prior commitments. Next, let me talk about our stakeholders. Our success depends on our people, our customers, our communities, and our shareholders. Moving to slide 16. Before discussing anything else, I want to acknowledge the tragic loss of Max, a team member who passed away following a crane incident in Vanuatu last July. Although our TRIPRA of 3.7 is very credible, the loss of Max is totally unacceptable. and reinforcing the scale of commitment to safety required across the entire organization. Reviewing all 339 of our locations across Australia and New Zealand as part of our ongoing focus on improving our safety performance and moving forwards, we're conducting a further safety system review and refreshing our protect framework for leaders in the business. Slide 17. No doubt the most important part of our organization is our people. You cannot operate a decentralized structure without a capable leadership team and general manager cohort. We have spent a lot of time and focus on our leaders and their ENPS score is a world-leading 59. I also wanted to mention the secret weapon that is our Employee Education Fund, which, due to its external funding, enables us to invest in training and performance of our colleagues, independent of the organisation's financial performance. And thirdly, I want to acknowledge just how much positive change I've seen coming back to the organisation after my years away. We are now more diverse than ever with active support for pride, reconciliation in Australia and women making up around 24% of all leadership roles in the company. Slide 18. Our people also reflect the communities we operate in. We have a role to play in both New Zealand and Australian societies and we try to do our bit to make a positive impact. On the page you will see just a small example of the good work our team is doing across our many locations. From supporting children living with critical illnesses, to helping sports clubs raise roofs, to providing support to communities experiencing food insecurity. Slide 19, our customers. On top of our community work, we are proud of the relationships we forge with our customers and the products we bring to help build the future in New Zealand and Australia. Again, this is just a small example of our latest projects spanning a huge range of work, from pouring concrete for renewable wind farms to laying down the building blocks critical to water infrastructure. Moving to slide 20. continues to be committed to our environmental targets, it's just good business, and 76% of our revenue comes from sustainably certified products. Golden Bay Cement is among the top quartile of low-carbon cement producers globally and received the Carbon Reduction Award from the Concrete New Zealand Conference Awards in 2025. As previously mentioned, other initiatives such as the Urban Quarry are great examples of our circular economy ambitions. I will now pass on to Will Wright, who will cover our financial performance.

Thank you, Andrew, and good morning, everyone. At a high level, FY26 was a year of meaningful progress for Fletcher Building. Market conditions across New Zealand and Australia remained challenging, but the group delivered a stable financial result, materially improved cash generation, and continued to simplify the portfolio. Turning to slide 22, the income statement. Revenue from continuing operations increased 7.3% to just under $6 billion, reflecting improved volumes across the core manufacturing and distribution divisions. EBIT before significant items increased by $85 million to $414 million, with the core manufacturing and distribution divisions contributing $46 million of earnings improvement year-on-year. Excluding pre-announced property sales, EBIT for the year was $362 million, an 11% improvement on FY25. Pleasingly, all continuing operations businesses were profitable on an EBIT basis in the second half. 13 of our 19 core business units improved ROIC compared with FY25 and Winstone Warboards, Fletcher Insulation, Winstone Aggregates and Colourcoat all achieved double digit ROIC. At a group level, however, returns remain below acceptable levels. Earnings per share were positive at 21.2 cents, the first positive ETS result since FY23. Now turning to slide 23, discontinued operations. These results primarily reflect the construction division, reinforcing and wire, and vivid living, all of which have been presented separately to provide a clearer view of the continuing group. The most significant event was the sale of the construction business which completed on the 29th of May. The digital legacy vertical construction liabilities remain within the dist's continued operations as we complete the wind down. The reinforcing and wire transaction is expected to complete within the first quarter of FY27 and the Vivid Living divestment process continues. Overall, these actions simplify Fletcher Building and improve the quality of future earnings and cash flows. Turning to slide 24, total group significant items were $40 million. These include IFLEX Western Australian pipe legal costs, the previously announced Cheltenham and Monkland property exits, silicosis-related claims, Calpo OSB transition costs, and the remaining Winston-Wallboards property rationalisation costs. Corporate significant items included divestment costs and residual surplus SAP licences. These costs are largely associated with legacy matters, portfolio actions or investments required to position the business for future performance. In FY27 it is proposed that the group moves towards an IFRS18 compliant P&L and therefore will no longer have significant items as a category of expense. Slide 25 shows the primary drivers of year-on-year movement in EBIT. Improved market volumes contributed $75 million and pricing added a further $13 million. These benefits reflect improved ANA volumes in our core and market share gains in select categories as well as continued commercial discipline. The gains were partially offset by lower residential earnings and the net overhead cost inflation. Land sales contributed an additional $49 million year-on-year, reflecting active management of the property portfolio and our focus on releasing capital where appropriate. Turning now to slide 26, the balance sheet. Investment capital reduced to $5.5 billion from $5.8 billion a year ago. This reflects continued portfolio simplification, lower leased assets and liabilities, and disciplined capital deployment. Inventory reduced by approximately $75 million and debtors were also lower, reflecting a strong focus on working capital management across the business. Residential and Development Investment invested capital increased as we settled previously committed land purchases and joint venture profit share arrangements. This was largely offset by lower build and land stock on hand. Previously contracted land settlement payments were $236 million in FY26. Going forward, settlements are expected to be $110 million in FY27, of which $75 million will be in the first half and $37 million in FY28. Turning to slide 27, cash flows. Net cash from operating activity increased to $715 million, up from $214 million in the prior year. This improvement reflected stronger earnings across the core manufacturing and distribution divisions increased proceeds from surplus land sales and materially lower cash outflows associated with legacy projects. Normalised operating cash flows were $707 million. This excludes $64 million of inflows from discontinued operations and $56 million of outflows relating to legacy matters. Funding costs were lower year on year, and net debt was reduced from $999 million to $637 million. We're converting earnings into cash more effectively, and the portfolio actions taken in FY26 have materially improved financial flexibility. Moving to slide 28 in central costs, reducing central costs has been a major focus over the last 18 months. Technology costs reduced by 20% on a continuing basis, driven by more efficient use of licenses, lower project spend, and the simplification of the technology operating model. Corporate costs before recharges reduced by 21% as we simplify the way we run the business and push greater accountability into the divisions. The objective is not simply to take cost out, but to make Fletcher Building faster, more accountable and simpler to manage. Moving to capital expenditure on slide 29. Capital expenditure came in below guidance at $288 million in FY26. Excluding OSB and divested operations, capital expenditure was $138 million. Investment in quarry consenting and stripping was $24 million. This was lower than previously indicated due to the timing of quarry land settlements. Looking forward to FY27, capital expenditure is expected to step down materially to approximately $170 million, including around $40 million for OSB, plus around $30 million of stripping and quarry land acquisitions. This reflects a shift towards a more disciplined, cash-focused business. Turning to funding and liquidity, we've made substantial progress simplifying the group's capital structure and improving financial flexibility. Whilst 28 maturities remain elevated, this reflects the transitional nature of the capital structure We're currently finalising a refinance and the post-refinance weighted average maturity will increase from 1.6 years to 2.6 years. Finally, turning to the net debt bridge. Net debt now sits in the middle of the target range at $637 million. Inflow from investments of construction division and property sales were partially offset by capital expenditure, lease payments, funding costs and working capital investment in Revan development. Importantly, the reduction in net debt was achieved while completing major capital projects. As these become operational and CapEx reduces, we expect stronger fee-free cash flows over time. In summary, FY26 delivered improved earnings stronger operating cash flow and lower net debt. We are not yet producing adequate returns, but the group is now in a stronger position with lower risk, better financial flexibility and clearer accountability for capital allocation. I'll now hand back to Andrew to discuss the outlook and priorities for 2017. Thank you.

As Will mentioned, we have a robust balance sheet to navigate whatever is in front of us. Let me now turn to what we are seeing in our markets. Slide 33 splits what we are seeing by market. There is detail there for you to read, so let me just give you the shape of it. I'll start with New Zealand. Firstly, residential. Consents are back above 40,000 for the first time since 2023, and our volumes have lifted through the second half. The interesting part is that these consents are not converting into activity the way they normally would. Our read is that uncertainty is causing people to hold off already consented projects, given high inventory levels, rather than start them. That said, additions and alterations to activity is providing a welcome offset and remains strong. Meanwhile, commercial remains weak. Not much change there. and infrastructure is the offset with it just starting to bubble. Major roading and social infrastructure work is continuing. For example, the Second Ashburton Bridge, the Hawke's Bay Bridge Program, Northern Corridor, River Link, Otaki to North Libin, and hospitals at Whangarei, Nelson, and Dunedin. For Australia, population growth and underlying housing demand are supported. interest rates and affordability are not. Also, the picture varies more than usual by state. Renovation activity, however, appears more robust, mirroring what we're seeing in New Zealand. Meanwhile, commercial construction in Australia is supported by health, education and data centre demand concentrated in New South Wales and Victoria. This is partly offset by a contraction in office retail and industrial projects. And in terms of infrastructure, there is a strong pipeline, including the 2032 Brisbane Olympics. Growth is also expected to be concentrated in energy transmission, water, and social infrastructure. With regard to infrastructure in both countries, I will point out that our exposure to this sector is smaller than both the residential and commercial sectors. The point I would leave you with is this. The reason the last few years have been so hard is that residential, commercial and infrastructure all came down at the same time in both countries. They are now moving again at different speeds, but we do not need all three to turn at once to make progress from here. That brings me to the outlook on slide 34. If we look ahead to financial year 27, the operating environment remains volatile across New Zealand and Australia. Volumes did recover through the second half of financial year 26, although I would note that some of that was pricing pulling demand forward. It is too soon to say whether any recent improvements will be sustained. Customers continue to complete projects already underway, but many developers and businesses are adopting a wait-and-see approach when it comes to starting new projects. In a similar vein, I urge analysts to be careful with simply tracking consent numbers. We are not yet seeing these translate into project starts, that this could create a pent-up demand effect down the track. Economic, political, and geopolitical backdrop remains uncertain, and we expect it to weigh on the first half, especially with the upcoming general election in New Zealand and the Victorian state election in Australia. but as you've hopefully seen today, we are focused on controlling what we can control. Putting that all together, we do not expect a meaningful recovery in underlying volumes until calendar year 2027. Finally, I would add that the work we've done since late 2024 has left us with a lower cost base and a leaner operating model. This means we have more insulation during challenging times like these, and it also means we have operating leverage whenever that demand does return. Slide 36 conclusion. Now to wrap up, back to my five takeaways on slide 36. We've delivered a steady performance in a tough macro environment. We executed against our strategy. The balance sheet has been strengthened. Group Rowick improved and operating cash flows were strong. As I said at the beginning, financial year 26 is the end of the first stage of our turnaround. The next stage is in front of us and the job now is proving where the growth comes from inside the core and exploring opportunities to further simplify the portfolio. Finally, this has been another demanding year. And I would like to say well done to all our team for performing under both major organizational change and a challenging macro environment. With that, thank you for your time, and we're happy to take questions, but please do limit it to two per person.

Thank you. If you wish to ask a question, please press star 1 on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star 2. If you're on the speaker, please pick up the handset to ask your question. And once more, we do ask that you please limit yourself to two questions. And today's first question comes from Ramon Lazar with Jefferies. Please go ahead.

Hey, good morning, Andrew. Good morning, Will. Just a couple from me. The first one is just if you could help us maybe bridge that early gap into the first half, 27. Obviously the second half you had a meaningful step up in earnings, sustainable earnings somewhere just north of $200 billion. I guess what level of permanent cost out or cost out carries into the first half and any sort of offsetting factors from that volume pull forward that you can point to to just help us frame what that first half number could look like?

Yeah, I'm comfortable with sort of giving you too much guidance on the first part because we think the underlying situation is very volatile. So in terms of cost down, I think we've taken structural of about 50-ish. Any update on that? Yeah, I think, yeah.

Look... I think the market remains uncertain and so looking forward, what we undertake to do is to sort of update the market on a regular basis. But it is dependent on a lot of things. It's a really uncertain macro environment. It's also coming into election year in New Zealand as well and so the market tends to soften as we go into the election in November. Your point on cost out, you'll see that we had a net 23 of benefit in FY26. And so we're constantly having to take cost out across the business to fight against inflation at the moment that isn't fully recovered through price increases. So whilst we've taken significant cost out, our prices also continue to move.

Right, okay. You can't provide us with anything else, Will? I mean, just give us a meaningful step up into the second half and then we're just trying to frame what that first half number could at least look like, given all the work you've done.

Yeah, there's a reason why we don't provide guidance at the moment is it's just really uncertain and I think I've said to you previously, at the end of February I allowed myself to breathe a bit of a sigh of relief and then in April the war kicked off. It still remains volatile. What we don't quite know at the moment as we sit here today is how much of that last quarter was market recovery. and how much was related to either share gain or pull forward of volumes because we put through a lot of price increases over that last quarter and so what that tends to do is people buy up in advance of price increases.

Okay, got it. And just one more, Will, for you, just on financial costs in terms of next to your interest costs. I mean, you've obviously done a lot of heavy lifting on the debt number. So just anything you could help us there with?

Yeah, no, it's a good question. I'll just point you to Note 2.1 of the accounts. You'll see that we made a couple of changes around accounting policies. And so we've moved the gain on the pension asset from what used to be in corporate overheads into the interest line, so the corporate overheads are the cleaners. and also we've moved FX movements on a US dollar ship lease that we have as well into the interest line and so there is some positive numbers that are offsetting the interest cost in the interest line. Probably as we sit here today a little bit uncertain around you know, what forward earnings look like and therefore, you know, cash flows. We expect probably, you know, interest costs around $60 million in the FY27.

Thank you. And our next question today comes from Niraj Chow of Goldman Sachs. Please go ahead.

Good morning, guys. I just wanted to double-click on Ramon's question, just thinking about first half, 27, but specifically on the distribution business. How should we be thinking about seasonality there, just trying to get a sense of the base, given the strong recovery in the second half?

Yeah, so, yeah, great question. Look, that business will be weighted to the second half because of the way that their rebates work. So a number of their rebates are volume-based, and so you're not sure if you're going to get them right until the end of the year. And so a lot of those rebates flow in sort of May and June, and because their earning space is so low, they're actually a larger than normal percentage of their earnings at the moment. But what we are seeing in that business at the moment is really positive momentum. They had a very bad Q1 to FY26, but the business has improved materially from that Q1. And so we are expecting a slightly better first half result out of them this year.

Got it. And just a second, when you've alluded to that sort of potential pull forward a couple of times, is that sort of, I know it's sort of uncertain and hard to read, but do you think that risk is sort of broad-based or are there any businesses or products where you see that more likely than not?

Yeah, I'd probably call it out in iFlex in Australia is probably one area in particular if I was to call out any business just because they have had significant price increases off the back of significant reason increases. But it is in a number of other pockets across the business as well potentially.

Thank you. And our next question today comes from Kieran Carlin with Craig's Investment Partners. Please go ahead.

Thanks, Andrew, and well done on the improved result. First question from me, you know, you've made good progress simplifying the business over the past year or so since Invista Day, but obviously your ROIC is still tracking well below the WAC target. Now that you've divested construction and shut down a range of loss-making businesses, can you just talk to some of the specific levers you're looking to pull in the year ahead to improve returns from here?

Right. So, look, all our businesses have got business improvement plans if they're not performing adequately in terms of growth return. But we have some significant opportunities ahead of us. For example, we've got the new Taupo plant, which will become operational at the end of this calendar year. And that's got significant market opportunities ahead of it, really some very exciting ones. I think the performance improvement of placemakers, we can confidently say that that's going to be a significantly improved business. And then a whole range of other businesses where we can turn around and improve performance. So I can't or don't want to point to specifics, but just point out that we broadly have a program in place for that.

Okay, thank you. I mean, looking at your outlook statement, I know it's covered off largely already, but You know, you talk to no meaningful improvement in volumes until 2027. I guess beyond the list and consents that we've seen more recently, is there anything that gives you confidence in a second half recovery at this stage?

I think those consents probably represent some pent-up demand, so I think that's encouraging. I think you have to think about taking the two markets separately. In New Zealand, the net migration numbers have been firming. They're not going for the roof, but they are firming, and that tends to be supportive for the residential housing market. and even though interest rates are uncertain they are still stimulatory at the moment in New Zealand so I think there's some supportive tailwinds there it's the headwinds that are causing us to be deferring a meaningful volume recovery until 2027 and that's obviously the situation in the Middle East the uncertainty caused by the election coming up and Going forwards, there is some uncertainty about where interest rates are going to end up if the Middle East continues its inflationary spiral. In Australia, it's a very state-by-state picture there. I think the population growth and historic backlog in housing is giving us a tailwind, but it headwinds. There's been significant economic issues being... occurring in Victoria, for example, and the Reserve Bank, even though they paused the OCR at the last meeting, it is still quite a punitive interest rate environment there.

Thank you. And our next question today comes from Lee Power at JPMorgan. Please go ahead.

Oh, good morning, Andrew and Will. I hate to labour the point, but just on the second half, 26, like, is there any more colour you can give us on the pull forward? Like, were there limits on the pre-buy or anything that at least maybe caps out? What could have been pulled forward? And then maybe just the view on what, like, the diesel price moves kind of meant for the second half and maybe for them for the first half, 27?

So, in both the IPLEX New Zealand and IPLEX Australia businesses, they did put customs on quota, so they referred back to historic ordering patterns and limited people to that plus a percentage. So, that would have in some ways limited what the pour-forwards were, but we still think there was significant up-stocking by merchants as well as people who had probably got projects underway. The extent of that We just don't know. We would expect to see that playing out in the first half of financial year 27 in this off the way. In terms of diesel, the overall impact was certainly ameliorated by the fact that we had fuel adjustment factors in all our businesses. And what surprised us most actually was the collaborative way that people in New Zealand turned around and accepted that this was a factor outside suppliers' control, and therefore they were actually taking aboard those readjustment factors. So the impact of what today is a net 55% increase in diesel overall has been very minimal.

Okay, thanks. And then just... on I think Will's comments about distribution before and the seasonality. Like you've obviously made a lot of changes in the overall business. Can you just give us a reminder of like where seasonality, like what were you thinking of seasonality in the other divisions going forward? Like what's a more normal view of the market?

Yeah. Look, it really does depend a lot on how the subsequent quarters go. What we saw in FY26 is we saw it was very heavily weighted to the second half. The reason for that is there was just a really poor Q1 in FY26. That was driven by a number of factors, some of it economic, some of it also weather-related, and that was just a very wet start to the winter period. I think also historically most of our seasonality outside of FY26 has come from our residential business and our construction business. With construction outside of the portfolio, that will remove some of the seasonality. However, residential is still weighted more towards the second half as it always has been.

Thank you. And our next question today comes from Rohan Corman-Smith with Foresight Bar. Please go ahead.

Morning, guys. Maybe just go back to Karen's point on ROIC. You know, there's more of a focus across the group. I understand that you've got 13 out of 19 businesses improving ROIC year on year, and you outlined a few that are double-digit. And management teams now have that as part of their incentives or a key performance indicator. Can you Maybe provide some colour on what you think longer term sustainable ROICs are for the businesses and then maybe also the level of invested capital that you'd need to generate these ROICs. I guess given all the work you've done, you should have some idea plus you've also talked previously, whack a first step and then maybe something higher is achievable but any colour on that would be appreciated.

Yeah, look, I mean, I think we'd further focus on getting our work up to whack, first of all, before we start talking too much about where we're taking the group after that.

Yeah, I think, look, Ron, you know, we've probably got a long track record of dangling out ambitious targets and not hitting them. So we're trying to be pretty conservative on this one. You know, what I can say is it was really pleasing to see the improvement that we did in the year, albeit, you know, off pretty poor levels and still not good enough. The businesses that did go backwards, because implied in that statement is that some went backwards, by and large it was for reasons of investments and business strategy. So, for example, Lamin-x New Zealand was one of the businesses that went back as we built the OSB plant where invested capital goes up. and likewise Placemakers Return on Invested Capital went backwards as we invested in the Frame of Trust site. And Furnes is another one I'd call out where we've expanded the distribution network and so their lease debt has gone up. So, you know, it's certainly an area of laser focus for all of our business unit leaders and, you know, we are targeting further improvement in CSY27.

And I'll just add Fletcher Insulation in Australia, that list of businesses where it went back, but that was because they've invested in their new Sinatra plant and that's just coming up this year, this week's heat.

Thanks for that, Carlos. That's helpful. Just maybe a more technical point. When you look at this new disclosure that you're providing or new accounting standards you're working to, Should we be looking at $414 is the comparable or $373 which is the significant items included? How should we think about your communication in terms of what earnings are going forward?

Yeah, it's something that we'll probably come and talk to the market about over the next six months. I think, one, we don't want to do anything that's out of step with what shareholders are expecting or the analyst community. And also, I think it will be nice to get some sort of consensus across industrial stocks as well as to what they're going to measure themselves on. As you'll know from reading the standard, operating margin, as you currently see it in our P&L is a reasonably prominent number, but that excludes things like JV income as well. And then what is now currently called significant items will be broken into a number of line items, so that more pull out the categories of costs. So there'll be a category such as restructuring costs. going forward. So I think the short answer is we don't quite yet know, and we would like to reach some sort of consensus across the wider market, but I think that will be a bit of test and adjusting as we're one of the first to move on the FRIS 18.

Thank you. And our next question today comes from Phil Campbell at UBS. Please go ahead.

Yeah, morning, guys. This is a couple from me. I was wondering, Will, if you can give us any colour. You know, the fourth quarter volumes, particularly IPLEX New Zealand, we saw some of that pull forward. Are you seeing, so far into the first quarter, any kind of reversal of that?

Yes, we are, yeah. So we have seen our volumes pull back in both IPLEX New Zealand and in IPLEX Australia so far in this quarter.

Okay, awesome. And then I suppose the second one I just had was just around the election. Like, if you go back and look at kind of Fletcher's trading history around elections, you know, what do you kind of expect in terms of softer volumes kind of pre-election, assuming like maybe two or three months before an election you could see like 5% to 10% lower volumes, or is it something like that? Or have you got any data that gives an indication of what you might see?

Yeah, it's really hard to put a data point on it specifically and put it down to one specific event. But what we are seeing is, more generally, because of the uncertainty of which the erection is one of those uncertainty points... is we're seeing a lot of developments put on hold, and in particular pushing out into next year. And things like the downtown development is a really good example, but a number of those CBD developments going on hold. We're also seeing people sort of pull back in their commitment to things like new warehouse space, and so there's a bit of an oversupply of warehousing space. development sites at the moment. And so, you know, seeing quite a pullback in sort of our forward order block around pouring piles for things like warehouses.

Thank you. And our next question today comes from Henry Saunders at EMP. Please go ahead.

Morning, thanks for taking my questions. Bertie, asking different ways of bridging 27 to 26. Can you quantify the various non-macro tailwinds you're anticipating for the full year? So, you know, including the incremental cost down as inflation, if there is any, you know, turnaround of foreign businesses, the start-up of OSB, the new OSB plant, the construction exit, if there's any costs out there and the exit of reinforcing and wire. Yeah, maybe just sort of talk through those factors, please.

Sure. So if I start with the last one, all of the costs associated with those businesses that we've exited are sitting in the discontinued line. So you should be thinking of that continuing operations P&L as sort of a go-forward P&L, and that's why we've done that. Just, sorry, what was your third point you made, Harry?

I was just, so the other factors were, you know, cost out of inflation, turnaround of businesses, if there's any sort of broader benefit yielded there, and start-up of senior SB parts.

Yeah, so in terms of the new OSB plant, we don't expect any impact from that, you know, positive impact from that in this financial year. I think, you know, sort of any positive impact will be offset by the cost of setting up a new plant. So that's kind of a net zero impact. in this financial year. And then in terms of cost out, you know, we're in business improvement. You know, we're on a constant, you know, performance improvement program across all of our businesses. And, you know, we've said, you know, we want to make an acceptable return in all businesses. markets, and we're a long way away from that. And so we think there's still a lot of self-help initiatives that we can do across the portfolio, be that cost out, be that the manufacturing excellence program that Andrew has spoken about, or be that just really simple things like restarting exports in some of our businesses so that we can get overhead recoveries on those export sales.

Just also a follow-up on the macro potential pickup in calendar 27. Just wondering if you give a sense, if you think that there could be a benefit in the second half of FY27 or you think sort of later in the calendar year and I'll sneak an extra one on just on tax rate expectations for the year. Thanks.

Yeah, I mean, that's a difficult one to answer because obviously we're saying that there's a high degree of uncertainty as we come through to calendar year 27. But assuming, and this is a dangerous assumption, but assuming that the factors that we know of at the moment don't get any worse and we have resolution of the elections, one could reasonably expect the second half of financial year 27 to start to benefit from some of those tailwinds we've spoken about.

Thank you. And our next question today comes from Grant Swainpool with Jordan. Please go ahead.

Good morning, all. First question is around the strategic review on residential and development. Is there a capital gain still sitting in that book value assessment that's sitting at $811 million of invested capital? And how many units are you holding for sale in the housing division?

Sorry, what do you mean by capital gains Grant? Do you mean on theoretical market value of the land bank?

I assume you have to market the land bank and is it a gain sitting in at the moment?

No, the land bank's held at historical cost because it sits in stock.

That's not a historical cost, but in the past... In the past, Festival Building used to give us what their assessed cash flow gain was sitting in the book value. Are you guys no longer willing to do that?

No, I think because we're going through a process, that probably wouldn't be wise. We'll probably keep those sort of numbers to ourselves at the moment.

Okay, and the number of units that you're sitting on your books at balance end, that's held for sale?

Off the top of my head, I think it's about 120, Grant, but I'll have to get back to you on that in a bit.

Thanks. And my second question is just on IPEX Australia, the Western Australia saga. 10 million of legal costs, is that going to be an ongoing number until this court case is over, or is that just one humbling thing at the moment? And how's that court case going?

Well, there's several court cases underway there. The level of legal costs I sound a bit fat, I apologise for it, but it will be what it will be because we're responding to other people's positions. At the moment, we believe that the provision we've got for Western Australian is adequately provided for. All the modelling we're doing around the leak rates and so on that we're suffering are within the bounds of what was originally used to create the provision. At the moment, we have 58 builders in the industry response, but Buckridge have not yet joined that. And the legal costs that we're suffering are mainly in response to Buckridge, and Buckridge not having joined that industry response.

Thank you. And our next question comes from Keith Chow at MST Marquis. Please go ahead.

Good morning, Andrew and Will. First question is a follow-up on the distribution business. I know we're all trying to work out what the momentum in that business is with respect to the improvement in earnings power, but maybe, Andrew, if you can help us understand in broad buckets how much of the improvement in the second half of distribution was related to Canada's drive and how much of that... Mm-hmm.

The Cavendish Drive wasn't completed until June, so you won't have seen any Cavendish Drive improvement in financial year 26, but we should see it starting to flow through us from now.

Okay, and what would the quantum of that benefit be at EBIT, roughly?

I'm not really sure I want to start getting into that degree of specifics at the moment.

Okay, thank you. And Will, just another follow-up on the interest fees. I think you spoke to the $60 million number before. Is that a gross or net interest number? And what are leases likely to end up to be? The reason I ask is, you know, there's quite a variation in expectations for your overall net financing cost line. And, you know, given where the net debt balance is, come to and changes in the portfolio, there could continue to be significant variations. So if you can help us there, that would be appreciated.

Yeah.

No, good point, Keith. So that's sort of, that's basically as if the interest costs on the debt, it doesn't include lease interest costs, which are approximately another 65 to 70. And, you know, it will obviously be subject to... any further meaningful reduction in debt as well. Thank you.

Sorry about that. Thank you. That does conclude our question and answer session. I'd like to turn the conference back over to Mr. Redding for closing remarks.

I'd just like to thank you all very much indeed for coming along today and I look forward to meeting with many of you as we do our roadshow. So have a great day. Thank you.

Thank you, sir. That does conclude our conference for today. Thank you for participating. You may now disconnect your lines.