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Fletcher posts profit drop, declines to give forecast

Wednesday 13th August 2008

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Fletcher Building, New Zealand's biggest construction company, posted a 3.5% decline in full-year earnings, reflecting a year-earlier tax gain and delays in restructuring its Formica unit.

Net income fell to NZ$467 million in the 12 months ended June 30, from NZ$484 million a year earlier, the company said in a statement. Profit exceeded the company's prediction in May of NZ$450 million to NZ$460 million. Fletcher stock gained 3.4% to NZ$6.65.

Chief executive Jonathan Ling declined to forecast 2009 earnings, citing "the degree of uncertainty" in Fletcher's markets. It will focus on generating cash and managing costs, with capex likely to reduce this year.

Shares of Fletcher have handed investors a loss of 41% in the past 12 months, on disappointing progress at Formica and the impact of dwindling housing market demand in New Zealand and Australia. New Zealand's economy probably fell into recession in the first half.

The building materials manufacturer and distributor will pay a final dividend of 24.5 cents per share, with tax credits, up from 23 cents per share last year.

Dividend Payment

Fletcher will pay a final dividend of 24.5 cents a share, up from 23 cents.

Full-year profit in 2007 included a tax gain and other items amounting to NZ$85 million that weren't repeated in the latest 12 months, the company said.

Earnings before interest and tax climbed 10% to NZ$768 million, a record for Fletcher, mainly reflecting revenue from Formica, the laminates manufacturer acquired in July last year for about NZ$1 billion.

Full-year sales rose 20% to NZ$7.09 billion, with NZ$1.1 billion of the increase contributed by Formica. Sales growth stalled for its infrastructure, Laminex and distribution units. Steel and building product revenue rose on acquisitions and higher prices for the metal.

Formica performed "well short of expectations" in North America, reflecting a slump in housing demand, Fletcher said. Operating and restructuring costs were higher than expected, it said. Total earnings from laminates and panels rose 8% to NZ$141 million.

Earnings from steel rose 26% to NZ$101 million, before unusual items, as price gains drove up sales by 10%. Infrastructure earnings rose 37% to NZ$308 million.

Building product profit rose 5% to NZ$148 million as sales advanced 6%. Distribution profit fell 9% to NZ$73 million.

The company will pay a final dividend of 24.5 cents a share, up from 23 cents per share last year.

By Jonathan Underhill

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