Fletcher mops up laminate holding

Fletcher Building has bought the remaining 50% of German-based laminate specialist Homapal Plattenwerk for $50 million, prompting a slight decline in its recovering share price.

Fletcher's laminates and panels division manufacturer Formica has, since 1983, been a 50% shareholder and the largest customer of Homapal, which manufactures and distributes metal and specialty laminates.

While Fletcher looks to underpin European sales with the Homapal purchase, building consent data closer to home reflects continuing softness ahead for the construction sector, with 2011 building consents for new homes during a calendar year at their lowest in 46 years.

Fletcher shares had been in decline in recent months, losing more than $2 billion in market capitalisation and hitting an almost two-year low of of $5.78 in early-January before beginning to rebound. Following yesterday's acquisition announcement, its shares were down slightly, at 2% or 13c, trading around $6.50.

Craigs Investment Partners broker Peter McIntyre said the acquisition "should come as no surprise" to shareholders, given chief executive Jonathan Ling said six months ago Fletchers remained on the acquisition trail.

Because Fletcher Building had such a long history with Homapal, and was its largest customer, Fletcher knew it would offer attractive financial returns.

Formica chief executive Mark Adamson said Homapal's product range was complementary to Formica's, and would consolidate Formica's position as a global brand leader in the surfacing industry.

Full ownership of Homapal will increase Formica's presence in Germany, one of the world's largest laminate markets and where Homapal already has a strong market position. In turn, Homapal will gain greater access to growth opportunities for metallic laminates in Asia, through Formica's distribution network and customer base.

Forsyth Barr broker Suzanne Kinnaird said the Homapal acquisition was relatively minor, but otherwise "a sensible mop-up of the ownership structure".

"We'd also draw some confidence in the signalling that would suggest Formica is still showing an improvement in its operating performance, despite the obvious weak trading environment in Europe and the US," she said.

There has been a stream of monthly and quarterly data reflecting a languishing construction and building consent sector, including estimates that the most recent Christchurch earthquakes were pushing out the city's rebuild to towards the end of the year.

Building consents out yesterday from Statistics New Zealand (SNZ) outlined that 2011, compared to 2010, saw new dwelling numbers fall 12% to 13,662, the lowest December-year total since the data series began in 1965.

For the same period, residential consent values fell 12% to $4.9 billion, while non-residential consent values fell 3.5% to $3.6 billion.

However, in comparing December data, SNZ said new dwelling numbers rose 13% to 1127, while residential consent values for the period rose $75 million and non-residential consent values were up $7 million.

ASB economist Jane Turner said consent issuance remained weak and continued to point "to a very weak construction outlook".

"The Reserve Bank now expects that earthquake reconstruction activity will not pick up in earnest until 2013," she said in a statement yesterday.

It remained too soon to see an increase in residential consents on the back of earthquake reconstruction activity in Christchurch, noting further seismic activity in Canterbury could further delay rebuilding.

Given the ongoing delays to the Christchurch reconstruction process, continued uncertainty from offshore and "very subdued inflation pressures", Ms Turner said there was very little urgency to increase the interest driving official cash rate, set by the Reserve Bank.

• Homapal's manufacturing facility is located about 100km south of Hanover and 250km from Hamburg, and employs 70 people. Laminates include aluminum, brass, copper and other metal foil in various plain and design effects.

simon.hartley@odt.co.nz