Fletcher Building flags $650m to $690m earnings

More than 65,000 permanent Canterbury residential repairs have been completed, the largest residential repair in New Zealand's history. Photo / Simon Baker

The Canterbury rebuild's imminent conclusion and business sales will push New Zealand's biggest listed business to make operating earnings of between $650 million to $690 million - the lower end of guidance.

Gerry Bollman, Fletcher Building's chief financial officer, gave an investor presentation to the Macquarie conference in Australia yesterday and in the outlook for the June 2015 financial year, he indicated those factors would affect earnings.

"FY15 performance will be impacted by businesses sold in FY14 and substantial completion of the Canterbury Home Repair Programme. Operating earnings before significant items expected to be at lower end of guidance range of $650 million to $690 million," the presentation said.

More than 65,000 permanent Canterbury residential repairs have been completed, the largest residential repair in New Zealand's history.

Merrill Lynch analysts John Hynd and Brent Walsh reinstated Fletcher coverage with a buy rating.

"We are impressed with the attractive regional exposure and strong portfolio of nonresidential construction-oriented businesses. Fletcher Building is trading at a significant discount to its peers across all metrics," they said.

Although the EQR Canterbury rebuild had "played out", non-residential construction would fill the gap. Fletcher's Tradelink has earnings issues but these are "resolvable and we believe management's initial steps are the right way forward".

Bollman said earnings from new division Fletcher Living and its residential development were forecast to rise and further cost savings of $25 million from rationalisation programme FBUnite are due.

A June 2015 half-year highlight was 18 per cent growth in earnings from residential building, with a bigger number and range of homes on the market as well as more land purchases, Bollman said.

New Zealand residential consents rose 11 per cent to 25,038 in the March 2015 year and Australian consents rose 12 per cent to more than 110,000 stand-alone houses in the December 2014 year, his charts showed.

New Zealand residential consents were continuing at levels above the long-run trend, the outlook for commercial construction was encouraging and civil infrastructure was being driven by ongoing investment by the Government, he said.

In Australia, residential construction was expected to remain strong, but the non-residential outlook was challenging. Conditions in Europe were mixed and although further growth was expected in Southeast Asia, China was increasingly competitive, he said.

Total revenue for the June 2014 year was $8.4 billion.