Fletcher to focus on cost control

Friday 6th March 2009

Fletcher Building, New Zealand's largest building company, will focus on cost control and preserving cash in the face of weak demand in Australia and the US in 2009.

Residential markets worldwide are weak "and the positive impacts of government initiatives (are) hard to predict," chief financial officer Bill Roest said in notes for a presentation to the ABN Amro New Zealand Day event in Sydney.

The company has an "ongoing focus on cost control, managing production capacity and cash management," Roest said.

Fletcher last month posted a 27% slide in first-half profit as the group suffered from exposure to the global downturn, prompting cost-cutting measures including the elimination of 1,100 jobs worldwide. Building companies including Australian rival Boral Ltd. have seen earnings slump on the housing recession in the US and weaker demand at home.

Shares of Fletcher fell 2.3% to $5.15 and are down 31% in the past six months. Boral has tumbled 62% in that period.

Roest today said trading conditions in New Zealand aren't expected to deteriorate further from current low levels though demand in Australia has weakened recently and the US market "continues to be very weak." All markets in Europe have deteriorated, with Spain and the UK worst hit, while the outlook is mixed for Asia, he said.

Building consents in New Zealand and the US tumbled 38% in Fletcher's first half, while in Australia they declined 21%. In the UK, consents slumped 59% while Spain's fell an estimated 58%

Fletcher's operating cash flow fell 15% to $208 million in the first half, while net debt climbed 23% to $2 billion and increased to 41.3% of equity from 39.7%, EBIT to total interest weakened to 3.8 times from 5.9.

By Jonathan Underhill

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