Construction lag times may be over for Fletcher Building, as
positive signs of growth show in Christchurch's rebuild and
more homes being built in Australia.
Fletcher delivers its result for the full year to June
tomorrow, and brokers are predicting gains in sales and
The results should be in line with Fletcher's guidance, a
consensus of analysts predicting earnings before interest and
tax of between $560 million and $610 million.
Australian building work has been softer than expected as its
economy cools and the Christchurch rebuild, in which Fletcher
is the lead contractor, has been stubbornly slow in gaining
Craigs Investment Partners' research is forecasting a gain in
sales from $8.62 billion a year ago to $9.97 billion and
earnings before interest, tax, depreciation and amortisation
up from $672 million to $803 million.
Craigs broker Peter McIntyre expected after-tax profit would
be up about 24%, from $257 million to $318 million.
''The New Zealand housing recovery is under way and there's
plenty of potential from the Christchurch rebuild. While the
Australian [housing] recovery has lagged, that's got
potential too,'' he said.
He noted while Australian home numbers are up, research was
expecting lag times to increase from three to six months,
which would impact on earnings.
For the year ahead, Mr McIntyre expected a 25% growth in New
Zealand's housing sector, with 21,400 new homes added, and a
5.9% gain in Australia, from 153,4000 homes to 163,500, in
full year 2014.
For 2014, Mr McIntyre expected almost 10% of Fletcher's
overall earnings before interest and tax would come from
Christchurch, much of the positives coming from major civic
construction and infrastructure projects, the latter perhaps
taking several years to complete.
Fletcher has been going through a round of cost reductions,
many of which are yet to be announced, and Mr McIntyre hoped
more detail would be provided in the financial result.
''Management have outlined about $75 million of cost
reductions achievable over the next three years,'' he said.
At a glance
Companies expected to report today include: Contact Energy,
Precinct Properties, Coca-Cola Amatil and Ebos. Tomorrow,
companies reporting include Auckland International Airport
and Trade Me.