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Friday 26th June 2015 |
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Fletcher Building Limited (FBU.NZ; FBU.AX) incorporated on December 19, 2000, is the holding company of the Fletcher Building Group. The company arose in March 2001 as the stand-alone entity, having been formerly listed as the Building shares of Fletcher Challenge Ltd. The company's operations were core business interests of Fletcher Holdings Ltd, which in 1980 merged with Challenge Corporation and Tasman Pulp & Paper to form Fletcher Challenge Ltd. Fletcher Building Limited is currently the second largest listed company in the New Zealand Stock exchange with a market capitalization of over NZD $5.6 billion. FBU is one of the longest surviving organizations in New Zealand. It started from humble beginnings in 1909 constructing weatherboard houses in Dunedin, New Zealand. The company grew into a respected Australasian building materials supplier and employs 19,200 staff globally with 50+ businesses operating under the Fletcher Building banner.
Along with its subsidiaries, Fletcher Building Limited, manufactures and distributes building products and construction materials in New Zealand, Australia, North America, Asia, and Europe. The approximately 50 businesses within Fletcher Building's divisions include construction, building materials and distribution, the manufacture of cement, steel and building products, the world's largest manufacturer of decorative surfaces and high pressure laminates, the world’s largest manufacturer of steel roof tiles, the Australasian leader in the manufacturing and distribution of plastic pipeline systems, plumbing and electrical supplies and non-ferrous products as well as a range of market leading businesses in their Australasian home base.
Fletcher Building’s unaudited interim results for the six months ended 31 December 2014 showed that the group recorded net earnings after tax of $114 million, compared with $154 million in the prior corresponding period. Reported operating earnings included significant items of $66 million relating to site closure costs and impairment of goodwill. Site closure costs of $34 million included the closure of the Crane Copper Tube business in Sydney, along with the closure of several other manufacturing facilities.
Cash flow from operations before net working capital movements was $282 million, up from $267 million. This increase was offset by the cash impacts of increased residential land acquisitions for Fletcher Living and the one-off purchase of the group’s head office campus in Auckland. As a result of these two initiatives, cash flow from operating activities of $146 million was $33 million lower than the prior period.
An interim dividend of 18 cents per share was declared, which is in line with the dividend paid in the prior period. There is also a Dividend Reinvestment plan in place for existing shareholders.
Looking ahead to the balance of the year, FBU expect the strong activity levels encountered in New Zealand in the first half of the year to continue. Residential housing consents have remained above the long-run trend due to the strong migration flows coupled with continued demand for new housing in Canterbury and Auckland. The outlook for commercial construction is encouraging with consents up significantly over the past six months, and government expenditure on infrastructure projects will continue at current levels throughout 2015 and beyond.
In Australia, residential construction markets are expected to remain strong for the balance of the year. The non-residential outlook remains challenging with declining private sector mining investment and reduced near-term government expenditure on core road and rail infrastructure projects. Commercial construction activity is not forecast to lift materially from current levels.
North America is expected to track moderately higher in terms of residential and commercial construction activity levels. Conditions in Europe are expected to remain mixed with some markets improving but with a generally weak economic outlook and the risk of further instability in Eastern Europe.
Further volume growth is expected in South East Asian markets but market conditions in China are likely to remain highly competitive.
Guidance for earnings for the 2015 financial year is unchanged from what was outlined at the shareholders’ meeting last October, with operating earnings (earnings before interest, tax and significant items) expected to be within the range of $650 million to $690 million. However, due to the deterioration in mining and infrastructure sectors in Australia Fletcher Building expect operating earnings to be towards the lower end of the range. Capital expenditure is expected to be at the bottom of its guidance range of $275 million to $325 million. The company said its performance in 2015 will be impacted by the sale of businesses last year and the substantial completion of the Canterbury home repair programme. Earnings from its Fletcher Living residential development business were now forecast to be up year on year, it said. A decline in first half earnings partly reflected charges to close plants and writedown goodwill.
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