Even the blackest of clouds has a silver lining for somebody.
In the case of Fletcher Building Ltd, one of the largest builders and building products groups in Australasia, it is the Christchurch earthquake, or rather the reconstruction of the city, that will drive much of its business in coming years.
While the company told yesterday’s AGM that while infrastructure spending by the central government will be lower this financial year due to timing of large projects, Fletcher was looking for a material pick-up in the 2012 year.
But it will be the rebuilding of Christchurch, plus a government plan to fix the country’s leaky roofs, that will help Fletcher in the next year or so. The leaky roofs program could in fact last a decade.
Fletcher Construction has been elected to undertake the project management of more than 50,000 repairs to residential properties for the Earthquake Commission in Canterbury.
CEO, Jonathon Ling told the meeting the company was absolutely committed to "making things right" in Canterbury and it was vital the systems were set up to ensure that claims were dealt with efficiently and resources were managed effectively.
"We expect significant repairs and rebuilding of affected homes to gather pace in the first half of 2011 as the construction industries mobilise for the reconstruction effort.
"This will be accompanied by rebuilding of commercial properties and key infrastructure, over a longer time frame," Mr Ling said.
The first project management site office has been established and there have been more than 1,500 registrations of interest from contractors and 300 from suppliers.
Fletcher Construction, in a joint venture with McConnell Dowell, was negotiating with Christchurch City Council to undertake infrastructure remediation work in three of the quake-affected areas of Christchurch.
This will include reinstatement of wastewater pipes, sewer mains, water mains and storm water pipes as well as road repairs, including footpaths and lighting.
The work had an estimated value of $NZ190 million ($A149.64 million).
And Mr Ling said the programme outlined by the government to remediate 40,000 to 80,000 so-called leaky homes would have a significant impact on the building industry for the next decade.
The estimated cost of the work was $NZ11 billion ($A8.66 billion).
The scheme was expected to get underway in the first quarter of calendar 2011.
The AGM was told by chairman Ralph Waters that, "Trading in the first four months of the financial year has been pleasing and the performance in that time had been in line with budget and ahead of last year.
"Fletcher Building expected its full-year profit to be within the range of analysts’ expectations and broadly in with the average of analysts’ consensus estimates.
"This assumes a gradual improvement in New Zealand construction volumes, a robust performance in Australia and Asia and stable markets in Europe and North America."
On future expansion, Mr Ling said an absence of suitable targets in Australasia had forced a change of approach.
"Despite our appetite for further growth in Australasia, very few assets of size and significance have either been available for acquisition or fall within our strict value creation requirement.
"In view of this, we have increased our emphasis on organic growth opportunities for our existing businesses.
"We are also pursuing smaller acquisition opportunities in adjacent businesses where this makes sense.
"An example of the latter is the acquisition of Australian Construction Products in Australia in August.
"The purchase of this company will allow us to expand our presence in road safety barriers into Australia from our existing strong New Zealand base.
"A further aspect of our organic growth strategy is the continued review of our existing businesses and implementation of business transformation initiatives.
"We have already seen these implemented successfully in both Formica and Laminex and the transfer of that knowledge and experience to other businesses within the group is ongoing.
"While Australasia remains the principal geographic area of focus for future growth, other territories have been identified for expansion. For example, Formica is scoping out prospects in China and South-east Asia to establish additional manufacturing capacity, given their existing plants in the region are virtually at full capacity.
"Formica is also continuing to develop markets in other areas such as India, Russia and Mexico."
"Our roof tiles group has seen very strong growth in demand in Africa, and production at the recently established plant in Hungary has been rising to meet demand for the African market as well as increased sales within Europe itself."
Mr Ling added, "Let me conclude with the following observation. While the short term outlook isn’t entirely clear, and predicting results from month to month is more an art form than a science at the moment, we are confident that the median- and long-term prospects for the business are excellent."
Fletcher shares ended up 6c in Australian trading at $6.27.
That made Fletcher one of the few major stocks to end up in the green on a day when the wider market was off 1.7%.
