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Fletcher profit may be at low end of forecasts

Fletcher FY profit to be at low end of forecasts unless volumes lift, Deane says

Nov. 11 – Fletcher Building Ltd., New Zealand’s biggest construction company, may report 2010 earnings at the lower end of analysts’ forecasts unless there is a ‘sustainable recovery” in volumes, chairman Rod Deane told shareholders at their annual meeting today.

Deane told the meeting in Dunedin that full-year profit before one-time items should fall within the $261 million-to-$340 million range forecast by analysts, from $314 million last year, “based on current trading performance and assuming no further deterioration in key markets.” Profit before items was $314 million last year.

“However, without a sustained recovery in volumes, net earnings would likely be at the lower end of the range,” he said.

Shares of Fletcher fell 0.8% to $7.98 on the NZX. They have climbed almost 40% this year, outpacing a 15% advance in the NZX 50 Index. Fletcher, the largest company on the NZX, took a $360 million charge last financial year to close plants and reduce capacity in response to the global downturn, resulting in its first net loss since 2001. Restructuring included the closure of two uneconomic Laminex plants and the company is reducing capacity at its Formica factory in Bilbao, Spain.

“We remain cautious with respect to trading conditions for the balance of 2010, Deane said. “While volumes in most markets have been relatively stable over the past few months, we have yet to see any significant signs of a recovery in any of our markets.” Any economic recovery will be “gradual.”

Fletcher’s Building Products division is expected to lift earnings, helped by government incentives in Australia and New Zealand to install insulation in houses. Plasterboard volumes would be weaker.

Distribution would continue to trade at subdued levels unless there is a pick-up in new home building in New Zealand, Deane said.

The Infrastructure division is benefiting from government funded engineering and construction projects in New Zealand and Australia, while weaker residential and commercial construction is hurting demand for concrete.

Laminates and Panels operating earnings are expected to benefit from cost cutting and reduction in capacity. Formica’s North American laminated board volumes are expected to remain at low levels, while Europe will stabilize without improving and Asian volumes aren’t expected to rise, Deane said.

In Australia, Laminex expects commercial demand to remain subdued while the outlook for residential demand is “uncertain.”

Steel division earnings will fall this year, reflecting lower volumes and prices.

Fletcher plans to pay annual dividends of 28v cents a share in 2010, dependent on trading conditions.


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