Video | Agriculture | Confidence | Economy | Energy | Employment | Finance | Media | Property | RBNZ | Science | SOEs | Tax | Technology | Telecoms | Tourism | Transport | Search


Patchy Aussie leaves NZ and cost control to drive Fletcher

Patchy Aussie leaves NZ and cost control to drive Fletcher earnings

By Jonathan Underhill

Feb. 20 (BusinessDesk) – Fletcher Building says the outlook in Australia is uncertain after a strong kiwi dollar exacerbated a drop in first-half earnings across the Tasman, leaving New Zealand and the company’s cost-cutting programme as key profit drivers.

Shares of New Zealand’s largest construction and building products group fell 2.9 percent to $9.44, paring an earlier decline to as low as $9.39 after the company posted a 5 percent gain in net profit in the six months ended Dec. 31 to $154 million.

That missed some analyst estimates as the company recognised $20 million of restructuring costs and saw some $206 million sliced off revenue when it was translated into kiwi dollars. Sales fell 2 percent to $4.27 billion.

Among the positives though, was a 1 cent lift in first-half dividend to 18 cents, a revised annual benefit from its FBUnite cost control programme of $100 million from a previous range of $75 million to $100 million, and confirmation of guidance for full-year earnings before interest, tax and significant items of $610 million to $650 million.

“Net-net if you take out the restructuring costs and currency effect, it’s not as bad as the headline number suggests,” said Slade Robertson, a portfolio manager at Devon Funds Management. “New Zealand looks like it has been quite good and that’s where the positive story is coming from.”

Operating earnings grew 7 percent to $262 million in the first half, driven by a 35 percent improvement from its New Zealand operations. Australian earnings fell 27 percent to $77 million and the strong kiwi against the Australian dollar turned a 1 percent gain in sales across the Tasman into a 10 percent decline to $1.7 billion in NZ dollar terms.

The outlook in Australia “remains uncertain (with) variation in activity levels continuing across each of
the states,” the company said in a presentation released for a conference call. While some improvement in housing construction is expected, to date this has been weighted toward multi-unit developments, rather than stand-alone houses that consumer more of Fletcher’s products.

The outlook for commercial construction remains subdued, state governments are spending less on infrastructure and mining activity is “depressed,” the company said.

“Australia is clearly looking better than it was 12 months ago,” chief executive Mark Adamson said on the call. “New South Wales seems to be leading that charge and there are pockets of improvement in Queensland as well.”

Adamson said he was able to tighten the target for the FBUnite programme as the company developed detailed plans against each of its businesses.

Revenue in New Zealand rose 3 percent to $2 billion and operating earnings lifted to $167 million as the company benefited from rising housing construction, repairs and rebuilding work in Canterbury and demand for housing in Auckland.

The ‘rest of the world’ segment posted a 4 percent gain in revenue to $541 million and a 16 percent gain in operating earnings to $37 million, with a pickup in North America activity, where earnings rose 21 percent, and flat activity levels in Europe.

Of Fletcher’s six divisions, only construction managed to increase sales in the first half – up 6 percent to $648 million and contributing to a 51 percent increase in operating earnings to $56 million.

The company had a construction backlog of about $1.6 billion as at Dec. 31, up from $1.19 billion a year earlier.

For infrastructure products, Fletcher’s largest business, sales fell 1 percent to $1.04 billion and earnings slipped 6 percent to $96 million. Within infrastructure, cement, concrete and aggregates earnings climbed 26 percent to $39 million, while concrete pipes and products posted a 29 percent drop to $20 million, largely due to lower Australian pipe volumes. Earnings at Iplex and Crane Copper Tube fell 37 percent to $19 million on rivalry and one-time costs. Steel earnings rose 38 percent to $18 million.

The building products division lifted earnings by 9 percent to $61 million as sales fell 6 percent to $657 million. Plasterboard lifted volume on steady market share, insulation earnings fell by $4 million and earnings from roll-forming, roof tiles and coated steel rose 8 percent to $26 million.

Laminates and panels had a 2 percent decline in sales to $866 million while operating earnings rose 4 percent to $53 million.

Distribution in New Zealand, the Placemakers and Mico Plumbing chains, had a 4 percent drop in sales to $582 million and a 56 percent jump in earnings to $25 million. The revenue decline reflected the sale of the Corys Electrical business while Placemakers lifted sales by 10 percent, the company said.

In the Australian Tradelink and Hudson Building Supplies businesses, sales fell 10 percent to $476 million and earnings rose 14 percent to $8 million. The currency impact eroded what was a 40 percent earnings gain in Australian dollar terms.


© Scoop Media

Business Headlines | Sci-Tech Headlines


Hourly Wage Gap Grows: Gender Pay Gap Still Fixed At Fourteen Percent

“The totally unchanged pay gap is a slap in the face for women, families and the economy,” says Coalition spokesperson, Angela McLeod. Even worse, Māori and Pacific women face an outrageous pay gap of 28% and 33% when compared with the pay packets of Pākehā men. More>>


Housing: English On Housing Affordability And The Economy

"Long lead times in the planning process tend to drive prices higher in the upswing of the housing cycle. And those lead times increase the risk that eight years later, when additional supply arrives, the demand shock that spurred the additional supply has reversed. The resulting excess supply could produce a price crash..." More>>


Sweet Health: Sugary Drinks Banned From Hospitals And Health Boards

All hospitals and DHBs are expected to kick sugary drinks out of their premises. University of Auckland researcher, Dr Gerhard Sundborn who also heads public health advocacy group “FIZZ”, says he welcomes the initiative. More>>


NASA: Evidence Of Liquid Water On Today's Mars

Using an imaging spectrometer on MRO, researchers detected signatures of hydrated minerals on slopes where mysterious streaks are seen on the Red Planet. These darkish streaks appear to ebb and flow over time. More>>


Bird Brains: Robins Can Just Be Generally Clever

Research from Victoria University of Wellington has revealed that birds may possess a ‘general intelligence’ similar to humans, with some individuals able to excel in multiple cognitive tests. More>>


Psa-V: Positive Result On Whangarei Kiwifruit Orchard

Kiwifruit Vine Health (KVH) has received a Psa-V positive test result on Hort16A and male vines on a kiwifruit orchard in Whangarei. This is the first confirmed case of Psa-V on an orchard in the Whangarei region. More>>

Regional Accents: Are Microbes The Key To Geographical Differences In Wine?

A new study of six of New Zealand’s major wine-growing regions has found that differences in flavour and aroma of wine from different areas may depend more on microbes than was previously thought. More>>


Science: AgResearch To Cut Science Staff In Areas Of 'Reduced Demand'

“We are therefore consulting with our staff from today on a proposal to reduce science staff in areas of shrinking demand. Combined with recruitment planned in areas of growing demand, this would mean a net reduction of 15 scientists and 41 technicians at AgResearch in the 2015/16 year." More>>


Get More From Scoop

Search Scoop  
Powered by Vodafone
NZ independent news