Fletcher Building 1H profit rises 8%, driven by Australia

Fletcher Building first-half profit rises 8%, driven by Australian growth

Feb. 16 (BusinessDesk) – Fletcher Building Ltd., the biggest company on the NZX, posted an 8% gain in first-half profit on increased volumes sold in Australia and improved U.S. margins. Full-year earnings will meet analyst estimates, it said.

Net income rose to $$166 million, or 27.3 cents a share in the six months ended Dec. 31, from $154 million, or 25.5 cents a year earlier, the Auckland-based company said in a statement. Profit about matched the $165 million forecast from brokerage First NZ Capital.

Chief Executive Officer Jonathan Ling is targeting Australia as the key market for growth, with a takeover offer for Crane Group to expand the company’s footprint across the Tasman. He said conditions in Australia are expected to remain “relatively favourable” as demand is driven by the mining and resources sectors, making up for weaker housing and commercial work.

“This is a strong result in the context of mixed markets,” Ling said. “The outlook for the 2011 financial year continues to be mixed.”

Full-year profit will be broadly in line with the average of analyst estimates at $354 million, a jump of about 30% from last year’s $272 million.

The forecast assumes no further deterioration in New Zealand construction, robust economic performance in Australia and Asia, and stable markets in aggregate across Europe and North America.

Sales in the first half climbed 2% to $3.45 billion, which the company said was helped by increased volumes in Australia of laminates, panels and steel products. Insulation sales were “down significantly” following the withdrawal of a government subsidy scheme.

The company will pay a first-half dividend of 16 cents a share, up from 14 cents a year earlier.

Fletcher shares were unchanged at $8.21. They have climbed about 8% in the past 12 months, lagging behind the NZX 50 Index’s 10% gain. The shares are rated ‘outperform’ based on the consensus of 10 recommendations compiled by Reuters.

Fletcher’s building products division reported a 15% decline in sales to $371 million, leading to a 26% decline in operating earnings to $56 million. It cited the end of the Australian insulation subsidy as a factor, with earnings from insulation tumbling 51%.

Distribution sales rose 2.5% to $446 million and earnings jumped 47% to $25 million as the company squeezed down on costs to fatten its margins.

Infrastructure sales climbed 3.8% to $954 million and earnings grew $68 million to $77 million, on increased turnover for concrete in New Zealand and sand quarrying, construction and residential house sales up in Australia.

Laminates and panels, Fletcher’s biggest business, recorded sales of $1 billion, up 3.7% from a year earlier, lifting earnings by 14% to $80 million.

Steel sales rose 5.7% to $616 million and earnings rose 2.4% to $43 million.
Ling said the Canterbury earthquake and aftershocks “negatively impacted”

Fletcher’s New Zealand business in the first half an even though repair and reconstruction will have a positive impact, “this may not be significant in the second half.”

In Australia, its businesses were disrupted last month by flooding in Queensland and Victoria though activity is expected to pick up later in the year as repairs get underway.

(BusinessDesk)

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