Shares in Trans-Tasman giant Fletcher Building (FBU) hardly moved yesterday, despite the company telling shareholders at the AGM in New Zealand they can expect a solid rise in profits for the year to June 2015.
The company’s CEO Mark Adamson told the meeting that Fletcher is forecasting a gain in full-year operating earnings of up to 11%, driven mostly by an anticipated second half recovery linked to an expected improvement in Australia.
Earnings before interest, tax and significant items are expected to be in the range of $NZ650 million to $NZ690 million ($A605.13 million to $A642.37m), Mr Adamson said.
That would be up from $NZ624m in the 2014 year.
The shares rose one cent to end at $A7.84 on the ASX yesterday.
FBU 2Y – Fletcher eyes profit lift
"We have now completed the first three trading months in the new financial year. In New Zealand, we have seen continued volume growth and improved trading results, although there has been some variability in performance month by month," Mr Adamson told the meeting.
"Conditions in Australia have continued to be mixed, with residential volumes improving but weak demand across the infrastructure, mining and commercial sectors.
"We expect operating earnings in the first half of the year to be broadly flat on the prior corresponding period, while second half earnings are expected to be significantly ahead.
"While the first half is expected to show growth in New Zealand earnings and a stable contribution from the Rest of the World, lower first-half Australian earnings are likely due to weak demand for coal seam gas pipes and lower volumes in the steel roll- forming and concrete products businesses.
“Strong activity levels in New Zealand in 2014 would continue into 2015, with continued high levels of building consents and …very strong construction backlog of $NZ1.8 billion, consisting of a number of large infrastructure projects,” he said.
In Australia, Mr Adamson said Fletcher expects continued improvement in those businesses exposed to residential building, and some of the benefits of restructuring in its Laminex and Tradelink businesses which saw a sharp improvement in performance in 2013-14.
“We expect the improvement in stand-alone housing consents experienced in the latter half of 2014 to assist volumes in those businesses that are exposed to the residential sector.
"Operating results will also benefit from restructuring and business improvement initiatives particularly in the Laminex and Tradelink businesses. The non-residential outlook is less positive, with declining private sector mining investment and relatively low levels of budgeted government expenditure on core road and rail infrastructure projects, at least for the next 12 months.
“We do not expect to see a marked improvement in commercial construction activity,” Mr Adamson added.
"In North America, we expect a moderation in the rate of increase in new housing construction while a sustained up-turn in commercial construction activity, the biggest driver of Formica’s revenues, remains elusive.
"Modest improvement is expected in Europe, particularly with a recovery in volumes in the UK.
"Further volume growth is expected in South East Asian markets which will be supplied from the new Formica plant in JiuJiang in China, but the domestic Chinese and Taiwanese markets are likely to be relatively flat.
"The FBUnite business transformation programme will deliver a further $25 million reduction in operating costs and efficiency benefits this year,” Mr Adamson concluded.
