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Fletcher Building to maintain dividends as profit tumbles

Wednesday 12th November 2008

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Fletcher Building, New Zealand's largest construction company, said its financial strength should allow it to maintain dividend payments at 2008 levels even as profit slides as much as 38%.

Profit before one-time items will be between $289 million and $354 million in the year ending June 30, down from $467 million last year, Chairman Rod Deane told shareholders at their annual meeting in Auckland.

"Our geographical and portfolio diversification, coupled with a strong balance sheet, should serve us well in the coming year, and leave us well placed to continue to grow our business in the future," Deane said.

Fletcher paid dividends of 48.5 cents a share in 2008, a 7.8% increase on the previous year as the contribution from its Formica acquisition helped lift revenue. The company today said markets are "considerably tougher" than a year ago and it expects weaker earnings from building products, distribution and infrastructure projects.

The shares rose 2.3% to $5.73, providing a dividend yield of about 13% based on the past 12 months. From a peak of more than $12 in November 2007, the stock has sunk 53%, marking it as one of the worst performers in the NZX 50 Index, alongside children's clothing chain Pumpkin Patch and global positioning systems supplier Rakon.

In a presentation to shareholders today, the company argued that its shares have under-performed rivals in Australia including Boral, CSR and James Hardie. Fletcher is trading at just six times reported earnings, while Boral and CSR trade at 11 times.

Fletcher is rated a "buy" by seven analysts who follow the company, while three more rate it "outperform." The lowest rating is one of "hold."

By Jonathan Underhill

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