Fletcher steady but outlook more positive for 2014

The Christchurch  rebuilding is creating interest in the fortunes of Fletcher Building. Photo by...
The Christchurch rebuilding is creating interest in the fortunes of Fletcher Building. Photo by Linda Robertson.
Fletcher Building is picking a relatively flat trading year for 2013 but the Christchurch rebuilding and major infrastructure projects should underpin improving results in 2014.

Fletcher shares are at an almost 12-month high, trading about $7.48 yesterday, as expectations rise over the Christchurch rebuilding and offshore institutions look more closely at increasing their stakes in Fletcher.

Craigs Investment Partners broker Peter McIntyre said Fletcher was a "reasonably consistent" dividend payer - its last full year totalled 34c per share - which had attracted domestic investors and there was a positive outlook for forward infrastructure work in 2014.

"The visibility of the Christchurch rebuild is clearer and there is realisation both Auckland and Christchurch's housing stocks need to be replaced," Mr McIntyre said.

Fletcher noted a "continued modest" improvement in house building in New Zealand, but in Australia there was "risk of further decline" in residential activity, commercial remained "subdued" while infrastructure was expected to remain "steady".

Further afield, North America was expected to remain "flat to slightly positive", growth in Asia "continued", but "no recovery" was expected in Europe, with the exception of Germany and Scandinavia.

Mr McIntyre said the input of Australian acquisition pipe manufacturer Crane group, which booked a 15% increase on the previous year with operating earnings at $106 million, was now being more appreciated by institutional investors as a "positive acquisition".

Fletcher noted it was facing tighter construction margins in a subdued market, but its construction backlog had increased to $1.09 billion to the end of June. It has undrawn credit facilities of $782 million and maintains $168 million cash in hand.

Mr McIntyre said the $1 billion backlog boded well for Fletcher, as did potential new infrastructure projects, while for investors its historical gross yield of about 6% was attractive.

An additional $300 million contract for a new men's prison was concluded last month and Fletcher was a preferred contractor on two projects worth $537 million, which could positively add to full-year 2014 earnings if they proceeded, the company said.


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