Good morning, ladies and gentlemen. I am Bruce Hassall, Chair of your company. On behalf of the board, it is my pleasure to welcome you to Fletcher Building's 2022 Annual Shareholders Meeting at the home of rugby. Today's meeting is being held both in person, after two years, and online via the Computershare online meeting platform. It's good to be back in person after two years of online meetings. We welcome our shareholders, proxies, and guests, both here in the room and joining online. Before we start the formal business of the meeting, I'd like to remind people in the room to ensure their mobile phones are on silent, please. In the unlikely event of an emergency, if we need to evacuate the building, please leave by the nearest safe exit as directed by staff and security. Assembly is on Walters Road.
As a quorum is present and due notice of this meeting has been given, I declare the meeting duly constituted and open for business. I will now introduce my fellow directors. On my right, your left, starting from the far end is Martin Brydon and Barbara Chapman. On my left from the far end, we have, Rob McDonald, Doug McKay, Cathy Quinn, and Peter Crowley. Your CEO, Ross Taylor, is seated on my immediate left, and the Group General Counsel, Andrew Clarke, is seated to my right. We also have in attendance members of our leadership team 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 will then move on to the resolutions that are outlined in the notice of meeting. The resolutions will be decided by poll.
Questions on a resolution will be dealt with before they are voted on. At the conclusion of the formal business, we'll then take the opportunity for your general questions from the floor and online. For those attending online, you can start submitting questions now. Please note that questions will be moderated to avoid repetition and to summarize lengthy questions. We won't address questions that, in my opinion, are not reasonable in the context of this meeting or that repeat previous questions and do not allow all shareholders a fair chance to have their questions heard. 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. Finally, if for some technical reason we don't have the opportunity to answer your question, we will answer them in due course via email.
At the conclusion of the meeting, we invite you to stay and enjoy some light refreshments. On behalf of the board, I'm pleased to report that Fletcher Building delivered a very strong set of financial results in FY 2022. Given that the year continued to feel the impacts of the global pandemic, this performance takes into account the significant COVID disruptions and lockdowns which occurred during the first quarter. The group delivered improved year-on-year revenue, profit, and margins, while return on funds employed was ahead of target. EBIT was up 13% for the year, and net earnings improved significantly to NZD 432 million, up 42% on FY 2021. Cash management has been an important focus throughout the disruptions and the year. Cash flow from operating activities were solid at NZD 592 million, and our balance sheet remains very strong.
Against this backdrop of continued operational improvements and the strong financial result, the board was pleased to pay total dividends of NZD 0.40 per share for the financial year. The up to NZD 300 million buyback program was also completed during the year. The results continue to demonstrate we remain on the right track and are achieving key milestones for continued performance and delivering stable results for success. The board remains very focused on driving strong outcomes across a range of ESG measures and continuing to drive a performance culture. As with our financial performance, we also made progress on our key non-financial measures and outcomes during the year. The left-hand box on this slide shows a continued improvement on safety. TRIFR was 3.4 at the end of the year, 32% down on last year.
This translated to 90% of our sites being injury-free through the year. The board will continue to prioritize these critically important outcomes, focusing on making achieving zero injuries every day possible, and that everyone returns home from work safely. After the challenges of resetting our cost base through the early stages of the COVID years, the board was pleased to see overall employment engagement improving to 69%. We will maintain our efforts so this continues. We've overseen the implementation of a materially enhanced parental leave policy, gender affirmation leave, an improved remuneration structure, and we are continuing to work towards pay parity across the group. Moving to sustainability on the left-hand side of the slide. We believe sustainability in what we do and the products we make is central to building a better tomorrow.
Over the past few years, we have focused our energies on decarbonizing, recycling, minimizing waste, and continually innovating to produce better, more sustainable products and homes. We continue to make good progress on reducing carbon and improvements on other sustainability initiatives. Group carbon emissions are now 12% below our 2018 base levels, and we diverted 51% waste from landfill. We also published our first climate-related disclosure report. Finally, on this slide, the COVID disruptions that occurred to demand and supply chain over the last couple of years impacted on our customer Net Promoter Score, which softened slightly to 36% through the year. The board acknowledges this has been a difficult time for many of our end customers.
The lessons regarding the supply chain challenges over the last two years have been learned, and we have changed our operational and risk management processes as a result to help safeguard against them occurring again. Looking forward, most building product supplies, including plasterboard, are moving back into balance. Capacity has been added, and international local supply chains are starting to sort themselves out. Beyond this, we are very focused on improving our own performance and value proposition to our customers, including driving e-commerce and innovative product solutions. Overall, we are pleased with the progress we are making on safety, our people, sustainability, and our customers. We recognize there is still work to do. Finally, on this slide, as we are looking ahead to drive the long-term success of Fletcher Building, the board is focused on a number of key themes.
Firstly, continuing to oversee the performance culture that has been becoming embedded to deliver long-term sustainable performance across both financial and non-financial metrics. To this end, we are today announcing our commitment to an enhanced sustainability strategy and targets. As Ross will outline shortly, these initiatives are ambitious, but we see that we need to continue to play our part in the communities we operate and drive leadership across a number of fronts. Climate change is an urgent global priority, and we are committed to minimizing our impact and managing the climate-related risks to our organization, including on carbon and waste. We want to lead the way with continued innovation in producing sustainable products and are committed to driving a circular economy. We value the importance of diversity and inclusion of our people by fostering an inclusive culture and having better gender and ethnicity balance in leadership.
Importantly, this focus is aligned to driving meaningful outcomes for our people and our customers. Despite all the uncertainty and disruption of the past year, and there's been a lot, as a board, we never lose sight of our agenda. We never lost sight of our agenda and core responsibilities to ensure Fletcher Building has the right strategy and execution, talent, and risk management to deliver value in the near and long term. The investments we are making across the business will further enhance the strength of our business and is critical for future success in delivering stable returns to our shareholders. We are very confident about the current momentum and the direction Fletcher Building is on for delivering continued success and is very well positioned for the future, both in New Zealand and Australia.
Before handing over to Ross, I would like to express my thanks on behalf of the board to our people who have worked so hard to deliver a successful year, particularly amidst the uncertainties of COVID. We also thank our shareholders for your continued support.
With that, I now invite Ross to provide his address. Ross?
[Foreign language] Thanks, Bruce, and I'd also like to add my welcome to those joining our shareholder meeting today, both here in the room and online. Having delivered a strong set of results in FY 2022, which Bruce just outlined, our sights are now set on continuing to improve our operational performance and growing the top line. This slide summarizes on one page what we've been doing to achieve this. I'll briefly talk to the five key areas we remain focused on going forward. We have a belief that all injuries are preventable, and 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 service that they're offering 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 will 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. 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 across all of our business lines.
In going after our growth in revenue and profits, it's important we make sure we stay true to our purpose: improving the world around us through smart thinking, simply delivered. We measure progress, our progress against this commitment across a number of areas. Ensuring our workplace is safe, diverse, and inclusive. Putting our community at the heart of what we do. Moving progressively to achieve a net positive impact on the environment. Looking to sell only sustainable building products and solutions. Embedding circular economic principles across all of our businesses. I'll now talk to each of these areas in a bit more detail. We want the makeup of our business to reflect the communities we operate in, and for our people to be able to bring their whole selves to work each day. Importantly, return home safely at the end of that day.
We are making good progress on safety with 90% of our sites injury-free last year. We have set gender targets in management goals, and we're starting to see year-on-year improvements in the number of women generally, and importantly, those in leadership roles. We're ensuring our facilities, our policies, the forums we run, and the way we behave, support and foster a diverse and inclusive organization and culture. Pleasingly, while there remains much to do, we are seeing our overall employee engagement scores increasing off the back of this work. As a large business in our sector, we touch many customers and communities around New Zealand, Australia, and the South Pacific. Doing great things for our customers is clearly aligned with our business. Equally important is how we support and enhance the communities where we operate.
We are very active across both these areas. For our customers, we're providing digital tools to better support them in their business. Driving leading e-commerce and online sales options. Focusing on providing better stock and service levels than our competition, and constantly bringing innovations and smart ideas to them. We measure our performance constantly, and looking to get all of our businesses to world-class levels in the coming years. Across our communities, we do many things, both broadly and at the local level. Our larger programs are focused around educational sponsorships and support. All of our businesses are active at their local levels as well, and quite often working with our suppliers and customers on specific things that matter to those communities. Through FY 2022, these activities resulted in donations and sponsorships totaling around NZD 3 million.
We are absolutely convinced that good business has to be good for the environment, and we're committed to both achieving this ourselves and doing what we can to influence the broader sector. Our carbon emissions are now down 12% on our 2018 levels. We have detailed plans on getting to a 30% reduction by 2030, and we are committed to net zero by 2050. We're achieving this through many technology innovations and plant upgrades, but also through the clever reuse of waste streams that would otherwise go to landfill. For example, we have substituted 50% of the coal we use at the Golden Bay Cement plant with waste tires and waste wood. We're also focused on maintaining or improving biodiversity at and around our quarry operations and our larger residential development projects. We have found that these types of operations can be done sustainably.
There is work to do over the coming years to define our targets and pathway to achieve a net positive environmental impact, but we're convinced this is absolutely doable. Innovation in products and solutions are increasingly intertwined with sustainability, and we expect that trend to increase. Interestingly, this is not generally coming at additional cost. Sustainable products are progressively replacing the older products at the same or a lower cost point. We're very well positioned to both take advantage of this and to drive it within our industry. Already, 61% of our revenue comes from sustainably certified products, and we expect this to be above 75% in three years' time. We're actively looking at how we drive and introduce sustainable solutions.
A good example is our Low Carbon Home, which has been designed to operate through its life to limit global warming to less than a 1.5-degree increase in temperatures. The final piece of the puzzle is to consciously eliminate waste across all our operations and to create ways to reuse both our own and others' end-of-life products. As of last year, we have diverted 51% of our waste from landfill and expect that to be above 70% in three years' time. We're making equally strong progress in our circular economy commitment with many exciting examples emerging. We have diverted 80,000 tons of other people's waste from landfill at Golden Bay Cement, and our ambition is to double this and, by 2030, become 100% coal-free.
Our insulation and plastic pipes businesses already extensively use both recycled product and general recycled plastics and glass. Our plasterboard operation will be able to reuse recycled plasterboard when the new plant at Tauriko opens next year. While I'm the first to admit that much remains to be done, we're well on the path of driving both strong financial returns and growth, while at the same time living up to our promise to improve the world around us through smart thinking, simply delivered. Turning now to a trading update and the outlook for FY 2023. Trading in the products and distribution divisions across New Zealand and Australia remains in line with expectations. Customer indicators point to volumes remaining at or around current levels for the balance of FY 2023.
We are watching lead indicators closely, and we have a clear playbook if activity shows any signs of softening in the next six-nine months. In our residential and development division, house prices and margins are in line with our expectations and are running at around 10% below the peak levels we reached in December 2021. House sale volumes have been mixed, solid through July and August, a bit softer in September, but customer visitation levels have been picking up positively in the spring sale season. Group earnings and cash flows are expected to be weighted to the second half of FY 2023, and this is due to the timing of revenues and working capital builds in our residential and construction divisions. Finally, we reconfirm our FY 2023 EBIT target of NZD 855 million or better.
When we look at our strategy, we remain confident we're well-positioned to drive shareholder value, both in the short and longer term. We expect to see solid profit growth in FY 2023. We continue to have both plans and runway to further drive margin improvements above what we're achieving now. We have an established pipeline of growth opportunities that will start to mature over the next three years. Our balance sheet and financial position is strong, and we intend to keep it that way, and we remain ready to act if we see demand starting to ease in the next six-nine months.
Before I hand back to Bruce, I'd like to thank our people for their commitment and resilience through what has been a very demanding couple of years. It is through their efforts that we've been able to get Fletcher Building to a place where we can now focus on the many exciting opportunities that are in front of us. I'd also like to acknowledge all our customers and thank you, our shareholders, for your ongoing support. [Foreign language]
Thanks, 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 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. For eligible online attendees, voting on the resolutions is now open, and you can vote at any time until I declare the voting closed.
For shareholders and proxies in attendance in the meeting, I invite you to place your completed and signed voting proxy form in one of the ballot boxes, which will be passed around the room after all resolutions have been introduced to the meeting. If anyone in the room is unsure how to complete the voting form, I invite you to go to the registration desk, where someone will be able to help you. I will now turn to the resolutions. It is now my pleasure to move that Peter Crowley be re-elected as a director of the company. Peter was appointed to the board on 1 October 2019. He's a member of the Audit and Risk Committee, a member of the Nominations Committee, and a member of the Safety, Health, Environment and Sustainability Committee. That's a mouthful.
The board has agreed that he is 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 his re-election. I now extend to Peter the opportunity to address the meeting in support of his re-election. Peter?
Thank you, Chair. Good afternoon, fellow shareholders, ladies and gentlemen. It really has been a privilege to serve as a Director of Fletcher Building Limited over the past three years, and today I'm again seeking your support for election to the board. As Bruce and the documents you've received indicate, I have a background of over 40 years as an executive and a director in the building products and construction materials industries in Australia and New Zealand. With this experience, I bring a strong mix of operational and governance skills to the board. These skills and experiences are highly aligned with the interests of our shareholders, employees, customers, and the communities which the company serves. As an Australian resident, I am passionate about the building products and wholesale distribution industries in Australia and provide my own governance insights to drive opportunities in these markets.
Improving performance from the Australian operations is an integral part of the company's strategy, and I'm pleased that steady progress is being achieved. Over the past three years, I have served, and this is back to the mouthful of committees, on the Safety, Health, Environment and Sustainability Committee, the Audit and Risk Committee, and the Nominations Committee. In fulfilling my duties with these various committees, I, along with my board colleagues, have been able to visit many sites across Australia and New Zealand. During the COVID-19 lockdowns in 2020 and subsequently 2021, I made a special effort to visit as many East Coast Australian sites as I could to maintain a connection between the board and our workforce. Across all my interactions with our employees, I've encountered a strong customer focus and a culture where improving safety is a number one priority to every employee.
Looking forward, I am excited by the opportunities ahead for Fletcher Building. The company is now on a strong financial footing and can invest to better meet our customers' product and service needs, while also significantly reducing carbon emissions and waste. I truly believe Fletcher Building is in a unique situation to take a leadership position in New Zealand and establish our future as a sustainable business. Fletcher Building is also bringing innovative new products and services to our markets. Some of these innovations have been developed within the company, while others are great ideas adopted from overseas. These ideas and innovations will benefit our customers and broader communities. It's been great gaining insights into some of the significant innovation and growth opportunities which have emerged to date. For example, at Laminex, we're using what was formerly considered a waste material to create new high-quality building products.
While at Golden Bay, new cement products and the use of alternative fuels will lower the carbon dioxide produced in making cement and concrete. This will contribute to delivering a low-carbon future for New Zealand. Ladies and gentlemen, we have a clear strategic plan with the financial capability and people to deliver it. With your support, I look forward to continuing to work with my fellow directors, with Ross and the management team, to create value for our shareholders and the broader stakeholders in Fletcher Building. Thank you.
Okay. Thank you, Peter. I now invite discussion on the resolution. Are there any questions that shareholders would like to ask Peter Crowley? If you're in the room, I invite you to please raise your hand and a microphone will be handed to you. Before you ask your question, please state your name. Okay. Are there any? Doesn't seem to be any in the room. Are there any questions online? Oh.
There are no questions online without the requirement.
Sorry, I couldn't quite see you behind there. Go for it.
[Foreign language] Delwyn Roberts. In reference to visiting Australia, could you tell us what percentage of ethnic Aboriginal people you might be employing in Australia?
Ross, would you like to make a comment? Perhaps you could,
Yeah. Look, in defense of Peter, look, it's very low percentage. It's in the 1%-2% level. A reflection broadly of the background of communities. The thing I'd add to it though is that we've just started the recognition of First Nations process in our business over there, so it's a very important step for us because it's about the reconciliation process. So it's a journey, and it's been an important one for us to start because it just lets us engage with the broader First Nations community across the country, so we take that obligation very seriously.
Okay. No other questions.
No questions online.
No questions online. Okay.
General business.
No, no, we haven't got to general business yet. We'll get there. We'll now move to the second and 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 resolution. Are there any questions in the room? Are there any questions online?
There are no questions online without recording, please.
Thank you. Thank you. We'll now vote on the resolutions. Please now cast your vote on Resolution 1, the re-election of Peter Crowley. Please cast your vote on Resolution 2, that the directors be authorized to fix the fees and expenses of the auditor. The voting on the two resolutions will close shortly. We'll just take a minute for that to take place, and there's people walking around the room with boxes you can put them in. Everybody had the opportunity to put their vote in the box. If you've still got a vote and somebody hasn't collected it, please put your hand up and they will come to you. Okay, all the resolutions have been collected. Okay. Voting on the resolutions is now closed.
You will now see on the screen the results of the proxy voting received ahead of the meeting for the two 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 like to give any shareholders, both present here and online, the opportunity to ask questions. While we wait for your questions, first in the room, we will address the pre-submitted questions received ahead of the meeting, which haven't been specifically answered through my or Ross' address already.
We received a question from Alexander Ward Smith relating to the road closure at a Fletcher Living development in Lincoln, it's in the South Island, earlier this year. We've responded to this already. The road is now fully sealed, and local residents are enjoying a much improved stretch of road. Well done, Dr. Evans. We'll now answer questions, starting with those in the room. Please raise your hand if you have a question and wait for the microphone to come to you.
My name is Robert Gray, shareholder. This business last year, where you know, you couldn't supply GIB Board. People have been importing it. How much damage do you reckon has been done for the future supply? You know, these construction companies are likely to keep importing it. Then you'll come to a, you know, a situation where there's price wars between the two of you, and the ones imported. The overseas company that are supplying it, they'll probably wanna keep the business, so they'll probably lower their prices and in competition to yours. How much damage do you think has been done?
Okay. Thank you. Good question on GIB. First of all, if we sort of go back. I mean, the challenge we had with GIB, as with many building products at the time, is that there were surges in demand. During last year, demand effectively went up 200%. It was impossible for the market, and we were a big part of that, to supply that. That compounded that problem. Then we also had a number of importers that had been in the market in New Zealand for a time that withdrew from the market because they could sell the product more easily in their home markets.
In the context of where we are now, you know, as we've stated, we're now back to supply starting to sort of normalize back to three-four weeks, pretty similar with most building products. You know, we are very focused on delivering to our customers. We are confident that, you know, we are in good position and there'll be no long-term impact on the business. Very confident about that. That also reflects the fact that, you know, the Winstone Wallboards has a great customer service model and their proposition has generally been unmatched by competitors. Yeah, we're pretty comfortable. It's been challenging.
It caused challenges for us and obviously for builders and customers, but we're coming out the other side of it, and we do not believe there will be any long-term damage to the business. Any other question down the back there?
Yes. Edwin Stranahan, I'm a shareholder. Question I had relating to the use of sand that you're taking out of the Kaipara Harbour. A lot of the information that I actually gained was from a consultant's report that was done as an appeal regarding the taking of sand from Pākiri. They were saying that by, in about five years' time, there was going to be about 1 million tonnes taken out of the Kaipara. Do you see that as sustainable? Because if you do, I don't. Where is it being replaced from? The Kaipara's actually got a build-up of sludge in there above the sand, and that sludge is. The NIWA are monitoring that every three months to see what damage is being done to the marine life, particularly the smaller ones.
I know of one mussel farmer up there actually had his whole farm wiped out because of the amount of sand that's being taken out. Do you see an alternative source for that sand to be obtained from?
Okay. Detailed question. Ross, why don't you pick that up?
The first thing I'd say, look, I understand your concern. What occurs when we're into what I call those more dynamic resources like sand or gravel out of riverbeds is they get constantly assessed as terms, you know, environmentally. While you may have other data, we are heavily scrutinized with that with the authorities, and we have to review those each and every year as we take those resources. The reason I call them dynamic is to the extent there then becomes overuse of a resource or that looks like a potential, then we have to pivot to different places and do it that way. In regards to the resource you're talking about, I'm absolutely confident that it's actually getting scrutinized and getting reviewed.
I can't talk to the specific issue you mentioned, but what we do take seriously is the comments I made in my thing is we are very focused on how we impact the environment and the broader environment, including biodiversity. If we thought that what we were doing was having a systemic impact, we would actually think twice, or we'd actually change what we're doing with that resource. I don't have the facts in front of me exactly on what you're talking about, but I can assure you we do look at that.
The Maersk, the Maersk Shipping Company that's actually taking it out of the Kaipara, I guess they've actually got a license for that. That is usually, well, perhaps even always, for a finite period. Do you know when that license is --
No. Off the top of my head, I don't. And as I said, there's two lenses we look at this through across all our operations. You know, we may have a license or a right, but we also test ourselves, is it the right thing to do? Our reality, you know, the size of the company and the impact we have is you've got to conduct yourselves appropriately, and I mean that quite genuinely. It doesn't mean we get everything right all of the time, but we actually take that very seriously. We will always be looking at what is our license and legal rights around things as well as what do we feel the right thing to do is as a company.
You're quite happy with what you're doing is all right at the moment?
I know it's reviewed. I just don't know the specific details off the bat. You know, I can assure you, I'll go back and have a look at it after this and just have another dig around.
We can drop you an email on that.
Yeah.
Thank you.
Any other questions? Question right down the front there.
Hello.
Hello.
Can you hear me?
Yes.
Okay. Thank you. My name is Shabbir Baj. I have got some three questions. First thing, I would like to congratulate you for your excellent performance. I want to know, because you say you people are very broad and vague in giving any specific. I want to know if there is any specific initiative which you are taking advantage of the good financial balance sheet that you have as of today.
The second question is, are you taking any steps for NZ government to achieve its housing targets? My third question is, you're talking about the sustainability and all that, whether you have any specific program to raise trees and all that like other people are doing, and what specific action you are taking so that you can. You know, your industry is in wood building and all that, everything. Are you there in any project? Because I heard the government is taking a lot of initiative in developing the forest and all that. Thank you.
Okay. Let's try deal with that. The first one was, what specific initiatives we're taking leveraging our strong balance sheet. Thank you for acknowledging our strong balance sheet. You know, as we've sort of said, we have a range of growth initiatives that we're focused on. The largest one that's been running for quite a while is obviously the new wallboards plant, Tauriko, down in Tauranga. But we've also announced in the last sort of 12 months, we investments in relation to a new wood panels plant for Laminex down in Taupō. Our insulation business, Comfortech, where we're significantly increasing capacity there in light of the changes to the increased insulation requirements. Frame and Truss, where we're looking to build a new facility there. New steel.
We have a range of growth initiatives, which are obviously organic ones. We also continue to look at, you know, growth investments, which, you know, are maybe alongside where we currently operate, so they could be adjacencies. We are appropriately and carefully looking at growth opportunities, conscious that we're spending your money. We're doing that in a very disciplined manner. Next one was around the housing shortage in New Zealand. We're doing our very best to run our plants as hard as we can to produce building products right across the spectrum and investing in increasing capacity with new plants and material upgrades.
Steve Evans, who runs our residential business, has got ambitious targets to in relation to their own you know building houses. Our sort of four-five year plan is to lift that significantly. We are very focused on that. The last one was around trees. Have we got any plans to go into sort of trees? It reminds me of many years ago, Fletcher Challenge, the predecessor to Fletcher Building, had Fletcher Forest. No, at this stage, there are no plans to do that. But we do. I mean, we currently don't you know have a timber business, but we do obviously buy a lot of timber. PlaceMakers is probably the largest purchaser of timber and wood in New Zealand and we obviously do work across the industry to encourage trees.
I mean, New Zealand, we're lucky in many respects. You know, we have a sustainable wood industry where our trees grow typically radiata pine, which we use mostly for over a 26- 28 year cycle, you know, versus in Northern Europe, the trees take 100 years to grow. So again, we're lucky in that sort of sense, and we're working collaboratively across the industry to encourage that whole sustainability around trees and forests.
Okay. Are there any other?
I'm Coralie Van Camp, shareholder. I can't remember where the saying came from, but there's money in muck, is a very true one. When I last checked, EnviroWaste was owned by Cheung Kong Infrastructure of Hong Kong, and the Chinese owners of Waste Management are in the process of selling to a fund management company out of Singapore, waiting overseas investment approval. I would like to put a hypothetical question to you, seeing as you're very interested in recycling and sustainability, and that 46% of your products are recycled. If National and ACT form a government next year, would Fletcher be conducive in building in partnership a big recycling plant in Auckland to take all our household rubbish and instead of trying to send it overseas, I believe there's a plant in the South Island, but we need one in Auckland.
Would you be conducive to considering doing that?
Haven't currently given it any thought. Always interested in looking carefully at opportunities. I would say that a lot of the material that we currently recycle, we actually are recycling and then obviously using it as whether it's a fuel source, or if it's plaster or, you know, glass that goes under insulation. You know, we probably have for a number of years, been one of the biggest recyclers of waste material in New Zealand. We haven't got the credit for it, but we have been.
Okay.
You know, at the moment, are we actively looking to, you know, move into running a giant recycling plant? I mean, interesting, I was in Denmark recently. If you go to Copenhagen, they have one of those in the area. no, it's not currently on our agenda, but we're always looking for opportunities in a careful and considered way.
Also in those Nordic countries, they burn a lot of their rubbish for electricity. It's just a thought.
Yep. Thank you. Interesting idea. You got that in your memory banks there, Ross? I do. Question over here, and then we'll come up the front here.
Mohammad Naqi, shareholder. I've got some data here, research from Morningstar with one of the major bank securities. COVID started in 2019, ended 2020. I've got data from November 21st. The share price was NZD 7.25, right? Our valuation, according to Morningstar research, is NZD 6. Now, we slide it down. I checked it on Friday because I didn't have chance in the morning. The price was NZD 4.90. So there is a variation of NZD 2.35 in between the period. In comparison to the similar sort of company who haven't paid dividend. I can't name the company. They haven't paid the dividend for the last two years. Their variation has been only NZD 0.75. There has been a big demand, residential and commercial properties within this period, despite the fact COVID and all that.
Don't throw the excuse on COVID or Ukraine, Ukrainian war and all that. I would like some sort of. Can you throw some light on this, why the variation was so big from NZD 7.25 to NZD 4.90? Thank you.
Happy to comment on that. Look, when, you know, if you just think in the context of we've just delivered a really strong financial performance, and our share price doesn't seem to reflect that. Why is that? It's a good question. It's largely to do with a range of macro factors. There's no doubt that what's happened is there's a global view on the New Zealand economy, and that's actually had an impact on us. There's also been a perspective on if you look at the major building products companies that are sort of in our peer group in Australia, their share price has been affected. This sort of macro view on the economy, you know, global challenges, shipping, Ukraine wars, inflation, interest rates rising, all of the above.
That's the primary, you know, challenge for us at the moment, and that's what's impacted on our share price. I think there's another thing is that, you know, Fletcher's, you know, over the last sort of four or five years that I've been on the board, the first part of it, we were dealing with what I call the near-death experience of construction. In recent times, you know, Ross and the management team have reset the business and have, you know, focused on growth and going forward. You know, there's no doubt the markets have a view as to, you know, whether we'll, you know, the economy, you know, we look, talk about next year, what the economy is gonna be like.
I think what we have to demonstrate that if the market demand comes off, that we can still manage this business very well. How the company performs through the cycle will be very, very important in relation to the share price.
Okay. Thank you. We've got another question down the front here.
It's Brian Farley, shareholder. I'm just interested how we deal with the pollution that is probably caused by burning tires and wood to make cement.
Great question. You're not the first person to ask that 'cause I also asked it way back. What actually happens is it's the temperature you build them in. The simple way to think, they don't actually burn, they get vaporized. When they get vaporized at around 1,000 degrees Celsius, which trust me is very hot, literally there are literally no emissions. If you think around, you know, tire fires that you've seen around the black sort of stuff, slow burning, whatever, when you burn them at a very intense heat, they literally vaporize. That's why you don't get the emission. That's similar to other things as well. Good question, though.
Hi. Tim Hunter, shareholder. I think I saw on the slide for the votes on the election of Peter Crowley that there was a 9% negative vote. Those types of votes are often the result of proxy advisors' recommendations. What's your understanding of the reason behind that vote?
Sorry. I probably didn't hear that.
What was the reason behind the 9% negative vote?
Oh, okay. A good question. I mean, Peter got a very strong 90% support. The auditors had a few percent higher than that. That was driven by a combination of factors. You know, one of them was a U.K. shareholder group had a requirement that you had to have 30% of your directors had to be female. We had 29%. That was a new requirement which we weren't aware of. Look, there's a range of issues. I mean, I think sometimes you get major shareholders in particular might vote against a director, and it's actually got nothing to do with that director.
They sort of, you know, why is your share-- You know, you're doing a lot of good things, but we want your share price up. Well, we all do. So sometimes it's their way of, I guess, giving the board a little tickle up in that sense. Entirely comfortable. You know, Peter's got strong support.
First of all, I want to congratulate you, Chair, and the board and all the rest of the Fletchers employees for producing such good results. Well done. Wish you all the best for the next year, and we'll be clapping you next year with pretty good dividends and all that sort of stuff. All right? The questions I got is basically on dividends. First of all, has the board considered introducing dividend reinvestment plan? Because dividend reinvestment plan is like money makes money, what Warren Buffett calls as the eighth wonder of the world, especially if you get dividend reinvestment at a discount. I'm talking here from point of view of a shareholder, like I've got a few New Zealand shares and Kingfisher f unds. You know, the Barramundi and all this, they got dividend reinvestment plan.
Wonderful performance. Might be one question. The other one is, has the performance of the company based on earnings and cash flow, how sustainable will be the dividends going into the future? Because if you're paying, you know, a lot of money out of your cash flow, you haven't got anything left to invest in new business. But what are the figures on cash? Because I looked at the financial things, very hard to work out what the payout ratio out of your cash flow is for the dividends. Thank you.
Thank you. Good questions. Yeah, currently we don't have a dividend reinvestment plan, but it's something that we look at on a regular basis, and I'm happy to commit that we will have another look at that as we go forward. Your comment in relation to sustainable dividends, I think we as a board, we're very focused on sustainable dividends and, you know, we have a policy that, you know, requires us to look at sort of free cash flows as part of sort of the dividend piece. I mean, can't guarantee the future, but, you know, dividends are important to our shareholders and we, you know, we have a, you know, our approach is.
We have a policy, but we also have approach to make sure we can do those on a sustainable way, which is what we'll continue to do as we roll forward. You know, sometimes things happen and we saw that, you know, at the beginning of COVID when, you know, when sort of we went into countrywide lockdowns in March. You've gotta be prepared for. You've gotta, you know, pivot when you need to.
What's the dividend I think, dividend requirement? What is the percentage of?
50%-70%.
The percentage of our cash flow? Well it can. It's not related to sort of the percentage of our cash flow, but also it can depend on you know, the level of CapEx we're doing. When we look at the level of dividend that we are declaring, we look at what our earnings are like, we look at our cash flow, we look at the level of CapEx. It's a combination of all of those things coming together.
All right. Thank you.
Because in some years, if I look back in 2021, our cash flows were exceptionally strong. What drove that was that we had an unwind of working capital, so our inventory levels came down significantly. Again, you just sort of sometimes you've just gotta be careful and make sure you sort of do it in a balanced way. Any other questions? I'm conscious from this side of the room. Is there anybody? I'll come back to you. You just had one or two. Over there. Thank you.
Thank you. Gordon Wallace, shareholder. Look, what a result. I must admit, wow, just marvelous. I'm so pleased that you have these meetings for us to come and talk to you. Just because I must say, but when you stand up, there is quite a few people here, but it didn't look it when we first come in. No, a couple of questions I wanna ask, one is, how are you getting on with the convention center. You haven't mentioned much about it, and I mean, SkyCity isn't having one of these, so the shareholders can't go and have a proper. It'll all be online, and it's not easy to talk. This is the beauty of this, you can have answers and talk later.
One is that, if that's okay, and I've got one other.
Okay, well, let's deal with the convention center. Ross, why don't you make some comments on it?
Yeah. The convention center has obviously been a hard old road with the fire and all that sort of stuff. The team is now. We're well through the cleanup, and we're actually well into rebuilding it. I go down there regularly, once a month at least, and chair the project group. Where we are now is fully clean. The car parks will be opening next year again, and the roof's going on as we speak. The team morale and tempo is really good. By towards the end of calendar 2024, early 2025, the project should be complete.
You have no trouble with labor?
Look, we've suffered across the entire industry with labor availability and borders being closed. That has really caused issues, not just on the convention center. Right across the industry and our business, whether it be our residential housing or our other projects. So, yeah. Look, we've just had to work through that and deal with it and get on with it.
Thank you. I know the Labor government seems to be handing out heaps of money here left, right, and center, but I just wondered how you're gonna get on with the Pūhoi situation. 'Cause there's a road up there where you wanna make a little bit surplus there. You're sorta running out of budget. At Pūhoi, you know, the motorway.
Yeah, I know what you're talking about. I drive up north regularly. I can tell you that--
Oh, one thing, thank Christ you fixed that pothole at Wellsford. Christ almighty. I mean, it went on for a month. I was just wondering if you were in the insurance business.
Yeah, I've got a company that does glass, windscreens. No, I don't. First of all, I can tell you that we're getting very close to finishing the Pūhoi to Warkworth. Ross, do you wanna make sort of comment on--
Yeah. As Bruce said.
On the claim.
What's the claim? What's the amount?
I didn't hear what that last.
He means the size of the claim.
Oh, yeah. Look, there's a couple of things around that. I mean, yeah, it is a very sizable claim. But there's a couple of realities that references the second COVID lockdown 'cause we did settle with Waka Kotahi or NZTA, however you refer to them.
Yeah, NZD 83 million. Is that the one you're saying?
On the earlier one, yes. The first lockdown, we negotiated a settlement. The thing is that the second COVID lockdown did occur, and then beyond that, there were then border closures and a whole lot of ancillary issues that went on quite some time. That is real. What happens in these things then, you actually then go through a process of hopefully finding a settlement with them. We don't get into the detail of it because that's with the client. But based on history and the reality, I'm confident that we'll actually get the right resolution. More importantly, we get the road finished to a good quality and get it open because it'll be such a wonderful asset for getting up. It'll be next year, probably early, but we'll actually just.
We're just working through with Waka Kotahi now, but it's in good shape. We're just about there, so yeah.
Okay. Another question down the front here.
Robert Gray again. I see a government display down there. The company is sort of moving into the retirement village sector of it and appears. What are your future aspirations and how many villages have you got?
Okay. Talking about Vivid Living, which is our- - what we originally called our retirement lite option, which is through the residential area. Ross, do you wanna sort of make a few comments on that?
Yeah. Look, I don't take any ill will from this statement, but we thought this was a good demographic to advertise this to when you all turned up. I mean that in a loving, concerning way. I'd encourage, if you didn't look--
Please sign up on the way out.
If you didn't look at our offer on the way in, please, I encourage people to go and have a good look at it. Look, it's a logical extension of what we do. I mean, when we have our larger developments, we know that a lot of the people in there either wanna bring their parents close to them or people want to have an opportunity to go into those sorts of facilities. We'll provide a retirement offering. It's a wonderful ancillary offering to what we're doing in our residential communities. Yes, we'll build that progressively, over the years.
Don't think of us trying to compete with the big end of town on that. It's really a nice offering that we can do just for our customers and the communities they live in.
How many units and how many villages are there at the moment?
We're basically thinking around, there's a couple of sites that we're working on up at Red Beach and in Waiata Shores, and we think next year or this year, circa 50%-70% might come on the market. That sort of order of magnitude. Ultimately, we see it being about hopefully 100%-150% a year as we get out a few years' time.
The way to think of it isn't standalone villages, so these will be Vivid Living will be sort of retirement houses that are part of a bigger state that we might be developing over three or four or five years. Inside those developments, we might have a section that could be anywhere between 40, 50, 60 retirement units which will be part of that. They're not standalone. That's why we're not competing directly. It's a different model. We're doing nice stuff like we're sharing any capital gain that comes from it. That'll be shared 50/50, which is currently not the practice for the industry, and that's just a point of difference as well.
Okay. Any other questions? I'm gonna go online, if not. Let's go online. Christian?
We have one question from Chris Patel. It's a multi-part question, but much of this has already been answered. Has the buyback been a good tool for large funds managers to exit small shareholders? Is it a good tool to add value? The second part is, are capital returns on the cards?
Deal with the second one first. There's no current plans on capital returns at this point. In relation to the share buyback which completed, we saw a variety of shareholders, both big and small, you know, exit from that, but you know, nothing unexpected.
There are no further questions online.
No further questions. Okay. Is there any further questions anybody would like to raise? Okay. Thank you very much for all your questions, which is really, really good. Ladies and gentlemen, that brings us to the end of the formal business of the company's 2022 Annual Shareholders Meeting. I now declare the meeting closed. Thank you for your attendance and participation today. We'd be pleased if you would join us for some light refreshments which are being served in the foyer on the room on my right.
Thank you very much.