Fletcher Building falls to three-year low; funds exit New Zealand

Jonathan Underhill

Friday 20th June 2008

Shares in Fletcher Building, New Zealand's biggest construction company, fell to the lowest in more than three years as the prospects of slowing economic growth sapped demand for the nation's equities.

Fletcher fell 1.8% to $6.42 and has halved in value since October. The benchmark NZX 50 Index dropped 1.1% to 3304.807, the lowest in more than two years.

"This economy may be among the first industrialized countries to move into recession," said Stephen Walker, head of asset management at Goldman Sachs JBWere (NZ) in Auckland. That's hurting companies whose earnings tend to be cyclical, such as Fletcher, he said.

The stock of Fletcher Building has slid since its May announcement that earnings this year will include a one-time gain from property sales while increased costs and the downturn in the US market hurt its Formica unit profit.

Chief executive officer Jonathan Ling said that conditions in the US have been tougher than was assumed when the company acquired Formica to become the world's biggest maker of the laminated board.

Figures next week will probably show the New Zealand economy contracted in the first quarter and some economists predict it will shrink this quarter as well. Finance Minister Michael Cullen this week said the economy is facing "some quite significant headwinds" as high interest rates curb demand.

First-quarter GDP will "inevitably be negative," he told a select committee.

Comments from our readers

No comments yet