KEY POINTS:
New Zealand's second-biggest listed company has delivered the type of result its investors have grown to expect, but said there might be leaner times ahead.
Fletcher Building today announced a 2006/7 full year net profit of $484 million, up 28 per cent from the previous year, including a $70m one-off tax gain.
But the construction and building materials giant agreed with forecasts that its next full year profit would likely slip to between $450 million and $460 million.
Speaking to the annual shareholders meeting in Auckland this morning, chairman Rod Deane said net earnings for the first four months of the June 2008 financial year were ahead of the same period a year ago.
The company was comfortable with a consensus of analysts' forecasts for a net profit after tax and before unusual items for the year to June 2008 of between $450 million and $460 million, Dr Deane said.
Chief executive Jonathan Ling said market conditions were generally softer.
Dr Deane said in New Zealand, Fletcher anticipated a decline in new housing consents but also noted a backlog of housing work and unsatisfied demand for alterations and additions.
"Activity levels in commercial construction, and in infrastructure remain strong, and it is encouraging that our New Zealand construction backlog is at record levels of over $1 billion."
In Australia, residential markets vary state by state, while non-residential markets were generally flat. Infrastructure markets were expected to remain relatively steady with public infrastructure investment being a key driver.
The European and Asian markets served by Fletcher's recently acquired Formica for $1 billion were in good health, but the well-publicised weakness in the US continues, Dr Deane said.
"Notwithstanding that the rationalisation is taking longer than expected, we are comfortable that the benefits will be realised. Overall we remain pleased with the (Formica) acquisition," he said.
Mr Ling said the high New Zealand dollar had had an adverse effect on earnings - specifically in some of its building products and steel businesses, where it made exporting more difficult.
"The fact that the group performed so well despite the operating environment again bears out our focus on earnings reliability.
"Operating in different regions and across market sectors, our peaks have more than compensated for our troughs."
Mr Ling said Formica's Asian business had performed strongly, since Fletcher took over in July. The European business also performed strongly while the North American business had deteriorated. It was midway through a manufacturing restructure in a tightening market.
Fletcher had closed a Californian factory and doubled production at the Ohio factory but the project was taking longer than expected.
"However, overall we're happy with our progress with Formica."
Mr Ling said the Government's plans to introduce an emissions trading scheme to limit greenhouse gas emissions would, if implemented as announced, affect Fletcher operations in several ways.
Its largest carbon dioxide emitters, Golden Bay Cement and Pacific Steel, would be among the companies required to buy carbon units.
All operations would face increased electricity charges.
"We are concerned that the scheme, if not implemented well, could have a significant adverse impact on the competitiveness of New Zealand manufacturing.
"However, there are ways to avoid this and we hope that the Government will pursue them."
Fletcher shares were up 7 cents to $11.25. They have risen from $10.95 at the start of the year but are down from a peak of $13.42 on May 24.
THE BIG TEN
Top 10 companies on the NZX, by market capitalisation:
Telecom Corporation $7,643,564,863
Fletcher Building $5,616,954,540
Auckland International Airport $2,885,603,091
Contact Energy $2,521,522,734
Sky City Entertainment $2,456,612,532
Fisher & Paykel Healthcare $1,636,072,334
Infratil Limited $1,276,112,610
Sky Network Television $1,267,467,699
Ryman Healthcare $1,025,000,000
Kiwi Income Property $987,850,309
- NZPA
