Fletcher Building invests in wood sector

FLETCHER BUILDING HAS CONFIRMED TWO STRATEGIC investments in the wood sector.

It will proceed with building a new wood panels plant at its current Laminex site in Taupo with a capital cost of some $275 million. The investment involves building a new wood panel production and processing line to serve the New Zealand market and export markets.

The new process will supersede the current particleboard production line by producing cost-competitive products that have diverse applications in furniture, joinery and the broader construction sector.

All appropriate consents for this project have been granted and initial civil works will commence in early 2023. The project is expected to take around two-and-a-half years to complete, with FY26 expected to be the first year of operations. After a ramp-up period, the investment is expected to generate mid-cycle EBIT of approximately $40 million and return on funds employed at or above 15%.

In addition, Fletcher Building has agreed to acquire Waipapa Pine and Renewable Wood Fuels (together, “Waipapa”) for a some $97 million (including land and buildings but excluding earn out).

Waipapa produces a range of sawn timber products, including industrial and structural grades, and includes a renewable fuels business. It is geographically advantaged by being in Kerikeri (sawmill) and Whangarei (timber treatment plant), close to the supply of high-quality logs. Fletcher Building intends to continue to expand production capability to strengthen Waipapa’s ability to support the market.

Waipapa forecasts revenue of $50 million and EBIT of $14.5 million for the 12 months ended 31 December 2022. It is expected to generate mid-cycle EBIT earnings of over $20 million and ROFE greater than 15% within two years of Fletcher Building ownership.

The acquisition, conditional on Overseas Investment Office approval, will be completed in the final quarter of FY23.

Fletcher Building’s Chief Executive, Ross Taylor, says: “Together, these investments represent our first major expansion steps in the wood products sector and nicely complement our already strong positions in Steel and Concrete. Wood products is a highly attractive sector with significant growth opportunities, giving both these investments a favourable long-term position. In addition, increased utilisation of wood resources fits within New Zealand’s broader sustainability goals through carbon storage and contributing to our international climate change targets.”