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Daily ShareChat: Fletcher Building

By Jenny Ruth

Sunday 28th November 2010

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 Jenny Ruth

Fletcher Building's trading update and updated guidance hasn't led Aegis Equities analyst Nachiket Moghe to change his forecasts for the company for the years ending June 2011 and 2012.

He is forecasting reported net profit will rise to $345 million for the year ending June 2011 from $272 million the previous year and will climb to $400 million for the year ending June 2012.

"The first-half results will see some growth but the real uplift in earnings will come in the second half, driven by higher activity levels stemming from the Canterbury region and leaky homes repair work across New Zealand," Moghe says.

The company told its annual shareholders' meeting it was comfortable with the range of analysts' forecasts between $311 million and $405 million with the average being $357 million.

Moghe says the wide range of forecasts reflects varying assessments of how much contribution will come from the Canterbury region following its earthquake.

Fletcher Building's volumes are still under pressure, especially in New Zealand and the US where conditions remain fragile, he says.

"Building products and distribution are greatly leveraged to residential construction which remains weak."

However dividends are safe and unlikely to be cut as long as economic conditions remain stable.

Recommendation: Hold.



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