Fletcher Building posts first loss in eight years

Wednesday 12th August 2009

Fletcher Building, New Zealand’s biggest construction company, posted its first annual loss since 2001 on costs to reduce capacity and writedown the value of assets.

The company declined to give an earnings forecast for the current year.

The net loss was $46 million, from a profit of $467 million a year earlier, Auckland-based Fletcher said in a statement. Sales were little changed at $7.1 billion. The loss about matched expectations. Excluding one-time items, profit tumbled 33% to $314 million.

“This year has been about maximizing our cash earnings during a recession and restructuring the business so that we are strongly positioned for the economic recovery, when it comes,” chief executive Jonathan Ling said.

Fletcher has responded to the worst economic slump in 30 years by closing manufacturing plants to meet reduced demand and trimming its dividends to preserve cash. Plant closures and impairment costs amounted to $360 million in the full year.

It raised some $526 million to repay debt and strengthen its balance sheet and is benefiting from the government’s accelerated infrastructure spending programme, winning contracts such as Auckland’s Victoria Park roading expansion. The shares have surged 25% this year.

The company declined to forecast 2010 earnings, citing “the degree of uncertainty in many of our markets.”

Accelerated spending by on infrastructure by New Zealand’s government will only partly make up for a downturn in commercial projects and is likely to have a lagged impact, it said.

The outlook for 2010 “is subdued and most markets are expected to record continuing low levels of activity relative to recent years,” it said.

The downturn will be most marked in the first half, it said.

At an operational level, earnings fell across five of the company’s six divisions, with Steel showing the only gain. Operating earnings from steel rose 54% to $154 million, helped by stronger prices and shortages in the first half.

Earnings from laminates and panels, before one-time items, fell 3% to $74 million from $101 million. Earnings from Laminex more than halved to $54 million while Formica’s earnings rose 11% to $18 million. Operating earnings from infrastructure halved to $105 million and distribution earnings dropped 59% to $30 million.

Earnings from building products fell 28% to $106 million, reflecting deteriorating housing markets in Australia and New Zealand an higher input costs.

Fletcher will pay a final dividend of 14 cents a share, down from 24.5 cents a year earlier and bringing the full-year payment to 38 cents.

The construction and building products producer, the second-biggest company on the NZX 50 after Telecom is preparing for a changing of the guard as it tightens its belt in the downturn. Chairman Rod Deane plans to retire in March, and is expected to be replaced by the highly rated former chief executive Ralph Waters.

In the past two months the company has announced the closure its particleboard factory at Kumeu on deteriorating demand and the consolidation of its Australian medium density fibreboard plants.

Businesswire.co.nz

Comments from our readers

No comments yet