Fletcher Building is expected to take a dip between 4% and 8%
in after-tax profits - or $157 million to $146.6 million for
its first-half results - but backed up with $75 million of
cost-cutting measures in place.
Given the collapse of Mainzeal into receivership and
heightened expectations of work taking off in Christchurch,
Fletcher's outlook comments will be keenly scrutinised by the
market today when it reports its half-year to December
Craigs Investment Partners broker Peter McIntyre expects new
chief executive Mark Adamson to announce cost savings of up
to $75 million from now until full-year 2015.
''Cost cuts will likely come from the creation of `centres of
excellence' to improve costs, a reduction in distribution and
logistics costs, development of shared services to reduce
costs and by improving digital capability,'' he said.
Craigs had factored in cost-cutting of $20 million this
financial year, $50 million in 2014 and $75 million in 2015.
Forsyth Barr broker Peter Young said he expected ''flat''
earnings before interest and tax, at $278 million, with
after-tax profit down 4% on a year ago at $157 million.
''The most important aspect of Fletcher's result will be its
near-term outlook statement, which we believe will be
cautiously optimistic,'' he said.
Since a low of $5.77 last July, Fletcher shares had steadily
gained to hit a five-year high of $9.40 earlier this month,
but had since eased and were yesterday trading around $9.19.
Fletcher is the lead contractor in the rebuilding of
Christchurch. Many tenders have been let in recent months and
contractors are expecting work to ramp up this year to more
Mr McIntyre said there was ''significant potential'' for
restructuring in Fletcher's TradeLink, Laminex and
Distributions, which should amount to $50 million to $100
million, or the equivalent of up to 1% of sales during
''We believe New Zealand housing is showing strong signs of
recovery,'' Mr McIntyre said.
He forecast 20% growth, or 18,800 homes, during 2013, with
13% growth in 2014 to 21,300 residences.
Canterbury was forecast to provide Fletcher with about 8% of
earnings before interest and tax for the three full years
2013-15, and 3.5% in 2016, but with a further boost from
''major civic projects'', he said.
Mr Young highlighted that while restructuring costs of around
$20 million had already been signalled, there was a risk of
''The collapse of Mainzeal is a timely reminder that
[construction] activity is still low, and the operating
environment challenging,'' Mr Young said.