Trans-Tasman building and construction giant, Fletcher Building (FBU), has reported a 71% increase in statutory after tax profit, to $NZ462 million, meeting earnings guidance and giving shareholders a little bit more of a reward.
As a result, Fletcher will pay a final dividend of 20 NZ cents a share, taking the total for the year to June to 39 cents, up 5% or 2 cents a share from 2014-15.
The result was struck on a more sedate 4% rise in revenue to more than $NZ9 billion, as it rode the building booms on both sides of the Tasman, thanks to an improved performance in Australia and further gains in its New Zealand distribution, residential and construction operations.
Net profit rose to $NZ462 million from $NZ270 million, the Auckland-based company told the NZ and Australian exchanges yesterday and operating earnings before interest and tax and excluding one-time items (EBIT) came in at $NZ682 million, within the company’s guidance range of $NZ650 million to $NZ690 million.
The latest results include one-time gains of $NZ44 million including a $NZ90 million gain on the sale of the operations of Rocla Quarry Products to Hanson Construction Materials, offset by an impairment against its Formica India manufacturing assets and charges for plant closures.
In 2014-15 it reported one-time charges of $NZ129 million, mainly reflecting impairments and closure costs against its Australian operations.
Australian earnings climbed 29% to $NZ154 million in the year to June 30, even as revenue eased 3% to $NZ3.04 billion.
“While the macro-economic environment in Australia was mixed, we delivered strong earnings growth from our Australian business portfolio, which was the result of our focus on improving the performance and capability of our businesses in that market,” chief executive Mark Adamson said in a statement to the exchanges.
Mr Adamson said the result was driven by a 29% uplift in operating earnings from Fletcher Building’s Australian businesses, coupled with strong growth in operating earnings in New Zealand in the distribution, residential and construction divisions.
“While the macro-economic environment in Australia was mixed, we delivered strong earnings growth from our Australian business portfolio, which was the result of our focus on improving the performance and capability of our businesses in that market,” he said yesterday.
“What was equally pleasing was the continued growth in earnings from our New Zealand distribution, residential development and construction businesses. These are all areas we have highlighted as offering strong growth potential.
“Cash flow generation was another highlight of the year, with cash flow from operations up 15 per cent on the prior year.
“We made good progress during the year in completing our portfolio rationalisation. With the sale of Rocla Quarries completed in January and the acquisition of Higgins completed last month, we have now largely concluded the restructure of our business portfolio”, Mr Adamson said.
The company gave guidance for 2017 of EBIT in a range of $NZ720 million to $NZ760 million, helped by the contribution from Higgins Group, the rival construction group it bought for $NZ303 million, but needed competition approval to do.
Adamson said yesterday the expected earnings gain would be reflected in the current six months, with first-half EBIT expected to be up on the year-earlier result.
Fletcher said it sees residential building approvals peaking in New Zealand in 2018, while non-residential activity is seen remaining “steady at elevated levels”. Infrastructure work is expected to grow.
But in Australia, residential construction is expected to gradually decline after a peak this year, with little growth forecast in non-residential activity.
For the rest of the world, Fletcher sees moderating growth in China and modest growth in its Taiwan and southeast Asian markets. It sees relatively low growth in North America and a mixed outlook for Europe, with modest UK growth.
Fletcher shares ended the day in Australia up nearly 5% at $9.58.
