Fletcher Building shares down 12pc

Fletcher Building chief executive Jonathan Ling. Photo / Natalie Slade

Fletcher Building's share price is in retreat as market analysts readjust their expectations about the timing of benefits from the rebuilding of Christchurch and from the company's $1.2 billion acquisition of Australia's Crane Group in May.

The stock has dropped by 11.7 per cent in the past three months, closing yesterday at $8.41, down 15c for the day. It hit a year-high in April of $9.53.

The Herald understands some analysts had become too optimistic in their forecasts for the group, to the point where they have received a cautionary tap on the shoulder from the company itself.

That has seen a number of brokers in Australia and New Zealand adjust their recommendations to "hold" from "accumulate".

Continuing seismic activity in Canterbury has not helped the share price.

"Each time there is a quake it's been pushing out the date for reconstruction and so analysts have been adjusting down their 2011-12 earnings," said one fund manager. Conditions for new housing starts in New Zealand and Australia remain difficult.

Fletcher Building has said it expects its 2010-11 (to June 30) net profit to fall within the analysts' estimated range of $313 million to $396 million. Market expectations for the year are in the region of $340 million. The result is due out midway through next month.

For the 2011-12 year, market expectations for Fletcher Building's net profit had been in a range of $400 to $500 million, with an average of about $480 million.

"But now the revisions are coming in closer to the $400 million end," said one market source.

The jump in earnings between the two years is expected to reflect the first full year of Crane operations and what are expected to be generally improved economic conditions.

But the economic situation in Australia, from which Fletcher Building derives 45 per cent of its income, remains delicate.