Fletcher Building shrinking to be undisputed leader in NZ, Australia

Fletcher Building chief executive Ross Taylor. Photo / File

If Fletcher Building was a movie, it would be Honey I Shrunk The Kids.

The shrinking of one of New Zealand's biggest businesses was graphically illustrated this week at its strategy presentation in Sydney.

Unveiled by chief executive Ross Taylor, the strategy included a graphic showing Fletcher as it is now — a group that employs about 18,000 people spread across North America, Europe and Asia.

On the page below was a very different picture: it showed that Fletcher's presence on the globe once the new strategy is executed will be limited to Australia and New Zealand.

The rest of the world will then be Fletcher-free.

Once Fletcher sells its Formica and Roof Tile businesses, Taylor says it will be a far simpler operation.

The headline on the first page said: "continuing to manage multiple platforms across multiple geographies from a capital and capability perspective was likely to be challenging."

And on the following page: "Therefore we have decided to focus the business."

"Quite brilliant," said one divisional boss of the changes. "A far simpler business makes so much more sense."

The new model will cost between $85m and $95m to introduce.

And it prompts a question: what does the new strategy say about previous chief executives including Ralph Waters and Jonathan Ling, who grew the Penrose-headquartered business to be a global presence?

Were they wrong?

Taylor summed it up in straightforward terms: "It felt like complexity was an issue for us."

But it wasn't all about retreat. Another page of the presentation listed all the areas where Fletcher is absent, and where it sees room to grow.

Taylor said more than once that the business had no presence in heating — though he stressed he was not particularly thinking about that area. Cladding, clay bricks, glass, doors, floor covering, building paper, heating and air conditioning, joinery, electrical, security and paint were New Zealand sectors where Fletcher had minimal or no presence, the document showed. Much the same applied to Australia, it said.

So where to now? For Taylor, it's a matter of quitting the world stage but shoring up strongholds closer to home.

"To be the undisputed leader in NZ and Australia building solutions," is the new corporate catch-cry.

As well as the new strategy, Fletcher will also have a new-look board.

Former PwC chairman Bruce Hassall will be the company's chairman, taking over from Sir Ralph Norris, who is resigning after nearly $1 billion of losses from big construction contracts like Sky City's convention centre and Christchurch's Justice Precinct. Hassall, a Fletcher director since March last year, will take up the top position on the board from September.

The company also announced four other directors yesterday: former ASB chief executive Barbara Chapman, Robert McDonald, Douglas McKay and Cathy Quinn.

Two current directors will be stepping down in the next few months — Alan Jackson, who will retire after nine years on the board, and Cecilia Tarrant, who is stepping down after seven years.

Shane Solly, of Harbour Asset Management, said the planned strategy would "ultimately return the business to a similar structure to what it had employed in the 2011 and 2012 financial years."

But a key difference, he noted, was that Australia would be run as a completely separate business.

"Changes should help bring some stability to the business after several years of divisional and management change," said Solly.

Any turnaround in operating earnings "requires significant investment," he said.

Michael Sherrock of Nikko Asset Management in Auckland attended the investor day in Sydney and emerged impressed by the new plan.

"It's good to get an update. Re-focusing the business like this is also good. One of the problems with Fletcher in the past has been the complexity of the business. Managing a big conglomerate on a global basis has been too complex," he said.

"There were too many moving parts."

The $262 million investment in a new Winstone Wallboards factory in Auckland "sounds like it's been a long time coming. It's probably something that should have been done a while ago. They need to defend," Sherrock said of Fletcher's strong positions in sectors such as wallboard.

And the announcement of a $15m investment in a new Auckland residential construction panelisation plant was "interesting, but it's early days. It's one of those things that will only be proven over time."

- Anne Gibson travelled to Sydney with assistance from Fletcher Building.