Energy drives Fletcher profit

By Phil Boeyen, ShareChat Business News Editor

Wednesday 30th August 2000

Fletcher Challenge's group net profit has rocketed to $382 million, with its Energy division providing $261 million of that result.

FCL says the net earnings figure is a near four-fold increase in consolidated group net earnings for the year to June compared with last year $101 million.

The company says strong commodity prices and high production levels helped push FEG profits, with gross operating revenue increasing 31%. The division also benefited from high gas demand in New Zealand.

As the largest shareholder in Capstone Turbine Corporation, Fletcher Challenge Energy says it had its investment revalued to $781 million following the successful IPO of Capstone in late June 2000, although recent market prices value FEG's stake much higher.

The division says it has significantly reduced its debt levels following the sale of non-core assets, and it is now positioned to pursue its commitment to growth, through reserves and production, as well as stronger cash flow and profitability.

Fletcher Challenge Building recorded a net profit of $63 million, which included $43 million net in unusual losses. Last year's Building profit was $23million. The company says the result reflected cost reductions and productivity improvements combined with robust New Zealand market conditions.

Woodpanels operations turned around a $3million loss last year to record operating earnings of $11 million, and its steel business operating earnings also jumped considerably, from $8 million last year to $29 million.

FCL says the trading outlook for the next 12 months for Fletcher Building is mixed. It expects earnings for the current year to be underpinned by moderate growth in the non-residential sector of the New Zealand economy, and a recovery in residential building activity in the second half of the fiscal year. The outlook for product prices, including wood based panel products, plasterboard and steel, is stable to positive.

Fletcher Forests' net earnings rose to $81 million, an increase of 47% over last year. The figure includes $58 million of net unusual items, mainly from the recognition of taxation benefits less a forest write down.

Total FFS revenue increased 14% to $623 million, but the company says wood product prices within the wider Asian region are still below historic long-term average levels and this situation continues to have a significant negative impact on cash flow.

It says it's not yet able to estimate what the financial impact, if any, that will come out of its dispute with CITIC over the Central North Island Forest Partnership.

No final dividend has been declared for Fletcher Forests, which last paid a dividend in April 1998. Fletcher Energy has announced a 10-cent dividend and Fletcher Building a dividend of 8 cents per share.

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