Fletcher Building reiterates 2017 earnings guidance, lifts planned spending on land for housing

Tuesday 18th October 2016

Fletcher Building reiterated its forecast for 2017 operating earnings while lifting the amount it plans to spend on land for housing as it chases a target of boosting the number of homes it brings to market each year.

Fletcher chief executive Mark Adamson told shareholders at their annual meeting in Christchurch that the construction and building products group is on track to lift earnings to a range of $720 million to $760 million, from $682 million in 2016.

The Auckland-based company is focussing on lifting earnings from existing assets rather than seeking acquisitions - a strategy affirmed today by chair Ralph Norris, who said while Fletcher remains open to acquisitions, such opportunities "are likely to be limited in number".

Fletcher spent $89 million on land and work in progress in its 2016 year, acquiring "land inventory" to enable the company to bring to market 1,500 homes a year by the 2018 financial year, from 300 in the latest 12 months, Adamson said. Fletcher expects to invest a further $160 million in the 2017 year, he said today.

The diversified company has completed restructuring the business, selling off unwanted assets and is now turning to what it dubs the “Accelerate” programme: essentially getting more out of what it has and completing the turnaround of under-performing businesses such as Iplex and Tradelink in Australia and Formica Europe. It also involves beefing up external procurement to take more advantage of Fletcher’s scale and introducing manufacturing efficiencies.

Incremental earnings from the Higgins road construction business acquired for $303 million "are expected to fully offset the loss of earnings from Pacific Steel, Rocla Quarries and Fletcher EQR," he said.

Adamson did flag the strength of the New Zealand dollar, which he said was currently above budgeted levels against the Australian dollar and the greenback, "which is adversely impacting the translation of overseas earnings at present."

Fletcher shares fell 1.6 percent to $10.33 and have soared 44 percent so far this year.

BusinessDesk.co.nz

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