Fletcher Building first-half profit rises 51% on impact of one-time items, revenue gains 2%

Wednesday 17th February 2016

Fletcher Building, the listed building supplies and construction group, posted a 51 percent gain in first-half profit, reflecting changes in one-time items from the year-earlier period and a modest increase in revenue.

Net profit rose to $172 million, or 24.9 cents a share, in the six months ended Dec. 31, from $114 million, or 16.6 cents a year earlier, the Auckland-based company said in a statement. Revenue advanced 2 percent to $4.4 billion. Profit met brokerage house's forecast.

Earnings in the latest six months included a $10 million gain related to the sale of Rocla Quarries assets, while in the first half last year, it took $66 million in impairments and costs to close manufacturing plants in Australia. Today the company affirmed its guidance for the full-year of earnings before interest, tax and significant items in a range of $650 million to $690 million, up from $653 million last year and excluding the Rocla gain.

Fletcher has been shedding unprofitable assets to focus on businesses where it has a dominant position, announcing this month the acquisition of Higgins Group Holdings, New Zealand’s third-largest road construction and maintenance company, for $315 million, having sold Rocla Quarry Products to Hanson Construction for a profit of $85 million, that will be booked in the current year. The profitable Higgins won't contribute to profit this financial year because the deal settles at the end of June.

"The current strong market conditions in the New Zealand construction industry are expected to persist through the 2016 financial year, with ongoing demand for new housing particularly in Auckland and surrounding provinces," the company said. It also sees "an increase in commercial construction activity off the back of the significant increase in the value of consents, and government expenditure on infrastructure to remain at the present healthy levels."

By contrast, the outlook for Australia remains mixed, residential and commercial construction activity levels in North America would continue at the same levels as in the past year, while Europe was still faced with a generally weak economic outlook. Growth is seen in Southeast Asia but market conditions in China "remain highly competitive."

The company will pay an interim dividend of 19 cents a share on April 13, with a March 23 record date, and is offering its dividend reinvestment plan.

The shares last traded at $6.85, having dropped 22 percent in the past year. The stock is rated a 'buy' based on 12 analysts polled by Reuters.

BusinessDesk.co.nz

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