Fletcher Buildings' first-half trading results have
reaffirmed Christchurch's rebuild is surging ahead, with
expectations of a strong performance in the second half.
Further business transformation detail might be less than the
market wanted, but Fletcher appears to be positioning itself
to benefit in mid to long-term planning.
Overall revenue declined slightly from $4.49 billion to $4.38
billion, but earnings before interest and tax (Ebit) rose
from $256 million to $262 million. After-tax profit rose from
$148 million to $151 million, for the six months ended
In a half-year review released yesterday, Fletcher painted a
glowing picture of New Zealand work ramping up and
contributing strongly to full-year Ebit guidance of between
$560 million to $610 million, but outlined weak and volatile
trading conditions in most overseas operations.
Fletcher is the lead contractor overseeing the repair and
rebuilding of Christchurch, with 1100 accredited companies
involved. An estimated $30 billion will be spent during the
next five years. Of 100,000 repairs expected by 2015, 30,000
home repairs and 47,000 emergency repairs have been
In a joint statement by Fletcher managing director Mark
Adamson and chairman Ralph Waters, the pair said Canterbury
reconstruction was ''expected to be maintained at the high
levels evident in the first-half [trading]''.
''The pace of new residential construction in New Zealand
improved substantially during the period, particularly in
Auckland and Christchurch,'' the review said.
Last year's 17c interim dividend was repeated.
Craigs Investment Partners broker Peter McIntyre said while
the market wanted more detail on Fletcher's business
transformation process, Fletcher was positioning itself for
making the most of the US housing recovery, up to a decade of
work around Canterbury, and also to take advantage of low
interest rates, which he expected to fall further.
''Fletcher is effectively trying to make each division more
efficient,'' he said.
He highlighted its review of property costs and also its
The latter is to gain cost-savings from $800 million per year
paid to third parties. Outside purchases will be handled by
head office to garner better purchasing power, rather than
purchases by division, Mr McIntyre said.
Australia has seen a residential consent downturn and weak
Softening work volumes in North America are expected to
improve, while Asian business is reliant on expectations of
an improvement of activity in China, the review said.
''Conditions in Europe remain challenging and the near term
outlook remains poor.''
Mr McIntyre said, ''Europe is still a basket-case, and
there's Cyprus. Some data out there indicates Europe will be
going back into recession.''
Cash flows for the six-month period were up from $129 million
to $204 million while capital expenditure was down from $154
million to $94 million.
A total $11 million was spent on acquisitions, including
Formica India, while $69 million was raised from business
sales, including Austral Wright, Mico Metals and Corys
Electrical. Aside from Canterbury earthquake work, there was
a ''significant lift'' in residential house sales, mainly
from an Auckland development.
The overall construction backlog was down slightly from $1.2
billion a year ago to $1.19 billion.
Following on from widespread restructuring in recent times, a
review of Fletchers' property portfolio is under way; the
group's total property costs across New Zealand and Australia
being more than $250 million.
''An assessment will be made of the distribution footprint
and how this can be optimised to reduce site duplication and
improve site utilisation,'' the review said.
Fletcher will continue to look at new business opportunities,
through ''bolt on'' acquisitions, in markets with attractive
Fletcher operations by region
: ''Strong momentum'' earnings up 31%
: ''Weak conditions'', earnings down 12%
: ''Flat revenue''
South East Asia
: ''Revenues up''
: ''Poor outlook . . . flat revenue''
: ''Flat revenue''
Fletcher operations by division
Building products: Ebit down 13%, from $64m to
Construction: Ebit up 48% to $37m
Crane (Aust): Ebit down 26% from $53m to $39m
Distribution: Ebit up 13% to $17m
Infrastructure products: Ebit up 14% from $63m to
Laminates and panels: Ebit up 21% from $42m to $51m