Report from BusinessDesk by Paul McBeth
Fletcher Building, the biggest company on the NZX, expects operating earnings to grow by as much as 22 percent in the 2013 financial year as new home construction accelerates and the firm keeps a lid on costs. The shares rose to $7.65, their highest level since October last year.
The Auckland-based company sees operating earnings of between $560 million and $610 million in the year ending June 30, 2013, chairman Ralph Waters told shareholders at their annual meeting today. That includes a $20 million restructuring cost, and would be between 12 percent and 22 percent higher than the 2012 result. Fletcher restated its 2012 earnings to include a $54 million restructuring cost, which it plans to treat as a normal expense item in the future.
“The board believe that this is achievable, on the basis of the momentum seen in New Zealand recently, which is expected to continue for the whole of the year,” Waters said in speech notes published on the NZX.
“Any further deterioration in the Australian market in particular, or in other key markets in which Formica operates, may necessitate a revision to this guidance,” he said.
The shares rose 3.7 percent to $7.65, and have rallied 21 percent this year.
Fletcher has rejigged its business and executive team since the recent departure of chief executive Jonathan Ling, restructuring its steel business and expanding its Indian laminates unit.
Waters said New Zealand’s residential housing activity has improved, with activity in Canterbury and Auckland leading the way, though work elsewhere has been limited and commercial work remains subdued.
The Australian market is continuing to show a decline in new housing consents, and Waters said the company’s doesn’t believe lower interest rates will be enough to “significantly improve consumer confidence in the short-term.”
New home building in the US has improved, though parts of Europe remain difficult, he said.
Chief executive Mark Adamson told shareholders Fletcher will continue to look at international investment opportunities, particularly in Australia, and is building on measures to remove costs.
He flagged logistics and distribution as an area in need of cost-cutting, which may see shared retail outlets and regional distribution centres, and site closures.
Other ways to reduce costs included the creation of global hubs for procurement, logistics and distribution, manufacturing excellence, digital technologies and business services, and sharing administrative functions such as finance, human resources and IT, Adamson said.
Fletcher will invest in its digital capability to open up new and cheaper communication lines with customers, he said.