Despite a weak result, Fletcher Building (FBU), New Zealand’s biggest listed company, has joined the dividend boosting club with a small rise in its interim payment to shareholders.
The company yesterday lifted dividend to 18c a share for the first half of 2013-14, from 17c in the first half of 2012-13, despite reporting a weak 5% rise in profit and a surprise fall in revenue.
Due to strong NZ building sector, especially the rebuilding of Christchurch, a higher figure had been expected by some investors.
But revenue fell because of the stronger Kiwi dollar.
Total revenue for the group fell 2% to $NZ4,273 million, "as the strong New Zealand dollar more than offset underlying revenue growth. Adjusting for foreign exchange translation effects, revenue would have been $NZ99 million higher, up 2%," according to the company’s statement yesterday.
Profit rose to $NZ146 million in the six months ended December 31, from $NZ144 million. Operating earnings (earnings before interest and tax) of $NZ281 million were $NZ19 million or 7% higher than the first six months of the 2013 financial year.
Adjusting for the adverse effects of foreign currency translation, Fletcher said operating earnings would have been up $NZ32 million or 13% in the period. Adjusting for the adverse effects of foreign currency translation, operating earnings would have been up $32 million or 13% in the period.
Fletcher also reiterated the guidance given at its annual meeting last year for full-year profit of $NZ560 million to $NZ610 million.
It sees no improvement in Australian trading in the second half while all of its New Zealand businesses should show gains, underpinned by increased home building, infrastructure projects and continued strong reconstruction activity in Canterbury.
FBU 1Y – Fletcher is another to lift dividend, despite a weaker than expected result
"The pace of new residential construction in New Zealand has improved substantially over the past six months in both Canterbury and Auckland," chief executive Mark Adamson said in the statement.
"By contrast, in Australia, weak market conditions have continued in the residential and commercial construction sectors."
The biggest weakness was at Crane Group, the Australian pipe manufacturer and distribution company acquired in early 2011 with the aim of diversifying Australian earnings.
Mr Adamson said in the statement that underlying revenue growth had been wiped out by an appreciating NZ dollar, but the construction sectors in New Zealand and the US were picking up.
"We are delivering on our earning-growth targets while at the same time implementing a programme of business enhancement initiatives that will underpin our operational and financial performance in the medium term and beyond," Adamson said.
Improved construction and distribution operating earnings spearheaded the profit increase, rising 51% and 43% respectively.
Other sectors were more muted, with earnings from infrastructure products declining 6%.
The results described the New Zealand market as experiencing "strong momentum" due to the Christchurch rebuild, while conditions in Australia remained "mixed" with the outlook "uncertain".
“Across most of our Australian businesses, sales volumes were mixed with declines in the steel and concrete pipe businesses, while volumes in the insulation and laminates and panels businesses were steady and increased in the plastic pipes and quarry sands businesses.
"In our Tradelink distribution business we enjoyed improved earnings as a result of the business improvement initiatives underway in that business,” Mr Adamson said.
Overall, the result disappointed investors on both sides of the Tasman yesterday.
In Australia FBU shares fell 1.2% to $A8.86, but that was a much smaller fall than the 3% plus dip in early trading to $A8.57.
