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Fletcher Building has balance sheet strength for acquisitions, eyes construction business

Wednesday 19th August 2015

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Fletcher Building has a strong enough balance sheet to contemplate acquisitions and is considering buying a construction business in New Zealand, the company said after posting annual earnings that met its guidance.

The company today said it had agreed to the conditional sale of its Rocla Quarry Products operations in a deal that would generate a pre-tax gain of about A$100 million. Under Adamson, the company has sold businesses including Hudson Building Supplies and the assets of Pacific Steel, while closing plants from its Crane Copper Tube, Iplex, Stramit, Tasman Insulation, Humes and Forman units.

Asked if the company was now the right size, Adamson said it was "less about the size and more about the performance."

"We've got some stellar assets (and) we do have some that are struggling," he said. At the same time, "there's a number of targets we have in mind, one of which we're reasonably advanced on." 

Fletcher spokesman Philip King said that of the three areas where the company is looking to expand, growth in distribution is likely to be organic, and in housing would be achieved through land acquisition, while in construction "there are one or two opportunities" in New Zealand. He declined to give details.

The company wasn't interested in the Carter Holt Harvey building supplies distribution business in New Zealand that Kiwi billionaire Graeme Hart's Rank Group is planning to take public. It was possible Fletcher would look at some other Carter assets that aren't to be included in a share sale.

Fletcher's gearing fell to 31.8 percent as at June 30, from 32.3 percent a year earlier, and is near the bottom of its 30 percent-to-40 percent target range. It also had about $614 million undrawn of its $2.48 billion funding facilities and about $228 million of cash on hand.

Among assets that could be in play are timber processing plants in New Zealand and Australia, and a building supplies business in Australia that Carter Holt Harvey has withdrawn from a possible public float.  Auckland-based Carter, owned by Kiwi billionaire Graeme Hart's Rank Group, said last week that a float would now only include the Carters building supplies distribution business in New Zealand.

Adamson said cash on hand "could be used to repay debt or to make acquisitions".

Fletcher's backlog of construction contracts rose 32 percent to $2.4 billion in its latest year. Operating earnings from construction work before one-time items rose 30 percent to $74 million.

 

 

BusinessDesk.co.nz



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