Fletcher Building back on path to profit

Rod Deane and Jonathan Ling fronted up to Fletcher Building shareholders in Dunedin yesterday. Photo / Otago Daily Times

Fletcher Building is on track to return to profitability and make an annual after-tax profit of between $261 million and $340 million, shareholders heard yesterday.

Celebrating the firm's centenary by meeting in Dunedin, chairman Rod Deane said that based on current trading performance and assuming no slides in key markets, analysts' expectations for the June 2010 year would be met.

In the June 2009 year, Fletcher made a net after-tax loss of $46 million, only the second time since listing in 2001 that it was in the red.

Deane told the company's ninth annual meeting that earnings from Fletcher's insulation business would be stronger than previously anticipated, largely due to Australia and New Zealand government stimulus programmes to heat up houses.

State contracts were boosting infrastructure but PlaceMakers would continue to trade at "subdued" levels while the house-building sector stayed subdued.

"The infrastructure division continues to see good workflows from government-sponsored engineering and construction projects in New Zealand. However weaker residential and commercial construction markets will impact negatively on concrete and related product volumes. In Australia, the picture is similar and the performance there will depend on how the residential and commercial construction markets perform," Dean said.

"For Formica, volumes in North America are anticipated to remain at low levels in both commercial and residential, and Europe is expected to stabilise but not improve materially. We expect to see growth this year in Formica's Asian operations."

Jonathan Ling, chief executive, told shareholders how Fletcher was well-placed for the economic recovery.

"With the restructuring and manufacturing capacity reduction initiatives largely completed and the balance sheet in a strong position, the next imperative is to prepare for the upturn when it comes.

"We are looking to learn from our insulation business, which earlier this year saw a very sudden increase in demand due to the government stimulus packages," he said.

"Fletcher Building's long-term strategy continues to be to improve earnings reliability through geographical and product diversification, to maintain and improve internal capabilities, and to pursue acquisition opportunities where these meet our key investment criteria. In New Zealand, we will continue to maintain and grow our existing businesses and pursue means of strengthening our distribution capability.

"Australia remains the key geography for pursuit of our growth aspirations. We will continue to build on our existing positions in the building products and construction materials sectors over time," Ling said.

Fletcher Building shares closed down 9c at $7.95 yesterday.