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Fletcher Building sees 2014 earnings of $610M-$650M, no Australian improvement

Wednesday 16th October 2013

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Fletcher Building forecast earnings before interest and tax for 2014 of between $610 million and $650 million, saying there has been no improvement in Australia and weak trading is being compounded by a strong kiwi dollar.

"In Australia, there has been no noticeable improvement in volumes since the new financial year began and our prognosis for the year is for relatively flat conditions," chairman Ralph Waters told shareholders at the annual meeting in Auckland.

While Fletcher is hopeful for policy reform under the new government in Australia and there are signs of a pickup in activity in New South Wales, "declining investment in the mining and resources sectors will be a potential near term drag on activity levels," he said.

The strong kiwi dollar against the Australian dollar is likely to slice about $15 million from earnings in the current year, he said. There is a risk the local currency will appreciate further.

Overall, trading in the first three months of the year has been similar to the 2013 year, when sales fell 4 percent and it posted full-year operating earnings of $569 million, at the low end of the $560 million to $610 million guidance Fletcher gave in February.

In its largest market of New Zealand, further increases in construction activity are expected and a strong increase in housing consents in the second half of the previous financial year "should underpin activity levels in the first half of the current year, and the repair of houses and infrastructure in Christchurch will continue to boost activity levels," Waters said.

Most parts of Europe remained difficult, especially Spain, and the region is expected to break even in the current year. North American activity would benefit from new home building while commercial construction remains flat.

South East Asia would "continue to grow satisfactorily" while northern Asia and China "may be more subdued."

Fletcher shares fell 0.2 percent to $9.38 and have gained 12 percent this year.

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