Fulton Hogan 1H earnings dip on weak Aussie economy

Friday 6th March 2015

Fulton Hogan, the privately held construction firm, says first half pre tax earnings dropped 10 percent as Australia's economic woes kept a lid on spending in the resources and state sectors, while the strong kiwi dollar eroded profit earned across the Tasman.

Pre tax net profit fell to $83.4 million in the six months ended Dec. 31 from $92.8 million a year earlier, the Christchurch based company said in a statement. Fulton Hogan still expects to grow annual post tax profit from the $138.2 million it earned in 2014, and is involved in $2.8 billion of tender bids which it hopes will boost its forward work book.

"A steep reduction in mining royalties has impacted infrastructure and maintenance spending by federal and state governments in Australia, combined with the negative impacts of a strong New Zealand dollar when repatriating Australian profits to the New Zealand parent company, has been a challenge," managing director Nick Miller said. "We remain confident that our resource based vertical integration business model, along with our committed workforce, will continue to deliver solid results on both the safety and financial fronts."

The construction firm boosted annual profit 43 percent in the 2014 financial year as it bounced back from project write downs a year earlier, and decided to put more emphasis on growing its water, rail and airport units as Australian revenue declined.

Fulton Hogan said its forward work position was down 20 percent from a year earlier, though "a significant flow of new projects coming to the market in early 2015" was likely to turn that around.

The company completed its buy back of former cornerstone investor Shell in the six month period, and is "investigating a number of future growth opportunities," Miller said.

Fulton Hogan has previously said it would return its dividend policy to paying out 50 percent of net profit after tax, from its current 35 percent level, once the buy-back was completed.

The construction company improved its safety performance with a total recordable injury frequency rate of 7.4 in the half, and has been on a drive to reach zero harm in the workplace.

BusinessDesk.co.nz

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