Fletcher chairman Ralph Waters. Photo by the New Zealand
Shares in Fletcher Building were boosted to a year high
yesterday on news earnings growth could be beyond 20% for 2013
from anticipated buoyancy in new-home construction.
Shares were up almost 4% at $7.66.
Although New Zealand construction, particularly in
Christchurch and Auckland, was gathering pace and appeared
positive, Fletcher chairman Ralph Waters, in a speech at the
company's annual meeting yesterday, cautioned any further
downturn in Australian work could prompt a downgrade of
He expected operating earnings of between $560 million and
$610 million, for the year ending next June, an increase of
between between 12% and 22% on the 2012 result.
Craigs Investment Partners broker Peter McIntyre said
yesterday's annual meeting "demystified", for shareholders,
some issues being faced by Fletcher.
Good financial guidance was offered up, work potential in
Christchurch was given more clarity, and an update on
expectations in Australia was given, he said.
"With [central bank] rates coming down in Australia, and in
New Zealand, too, at some time, Fletcher's work book should
be getting bigger."
With earthquake-related construction likely to accelerate
during 2014 with the start of civic projects, and to be
completed by the end of 2015, the earnings stream for
Fletcher is about 9% of total earnings before interest and
tax between 2013 and 2015, Mr McIntyre said.
Mr Waters said residential consents in New Zealand were up,
but still lagging well behind earlier highs; commercial
building was down 7%, and Government infrastructure spending
"continued to underpin the construction market overall".
"Any further deterioration in the Australian market in
particular, or in other key markets in which Formica
[division] operates, may necessitate a revision to this
guidance," Mr Waters said.
Canterbury had a "strong" gain in residential building, and
Auckland had "increased activity", but the 14% increase in
housing consents had to be considered in a wider context, he
"Housing consents for the year to June were 15,414, a 14%
improvement on the prior year, but still down approximately
30% from the long-term average."
As the lead contractor in the Christchurch rebuilding,
Fletcher had made "excellent progress" in the house-repair
programme for the EQC. More than 26,000 permanent house
repairs had been completed, plus 47,000 emergency repairs and
18,000 winter heating installations.
Key to increased building activity was a decline in seismic
activity and insurers' again offering policies.
"Seismic activity in Canterbury has reduced to the extent
that substantial progress can now be made. Activity levels in
Christchurch have continued to gain momentum, with
infrastructure repairs now under way together with increased
levels of new house-building activity," Mr Waters said.
In Australia, new residential consents continued to decline
and were down 12% on the previous year, and continued to
weaken as the year progressed, while total consented
commercial construction work fell by 9%, he said.
Infrastructure construction work was up strongly, driven by
the mining and resources sector and continued government
investment, but that was unlikely to continue given recent
announcements on deferrals placed on new mining projects.