KEY POINTS:
As world financial markets panicked and plummeted yesterday, listed construction company Fletcher Building was doing deals.
The NZX-listed firm has entered into a conditional agreement to buy all shares in steel business Fielders Australia.
Adelaide-based Fielders provides roll-formed steel building components to the Australian commercial, industrial and residential sectors, with annual sales of about A$275 million ($314 million) and 890 staff.
Fletcher Building's acquisitions since last year include United States-headquartered Formica Corporation, Australian kit-set builder AG&S Building Systems and Hi Tech, Eziform Sheet Metal, Morinda Australia and the assets of All Steel Products.
Goldman Sachs JBWere analyst Matt Henry said the latest deal was relatively small and not a surprise.
"We obviously haven't been given any details regarding what they've paid for the business but it's easily funded with their current balance sheet capacity," Henry said.
"Certainly they indicated at the result and continue to indicate that bolt-on acquisitions, consolidating their positions in Australasia is part of the strategy and they expected it to be ongoing."
Fletcher Building chief executive Jonathan Ling said Fielders was a well run business, with a solid reputation for performance and would complement existing business units in Australia and New Zealand.
"Our balance sheet is strong and we have the funds to do it and I think it's a very good strategic acquisition," Ling said.
The agreement was conditional on due diligence and regulatory and board approval. The cost of the deal was yet to be determined, while Fletcher Building now had a more conservative and cautious attitude towards acquisitions, Ling said.
"But again if similar opportunities to the Fielders acquisition become available in our core part of our business and at good financial parameters then yes we'll continue to look."
In August Fletcher Building posted net profit for the year ending June 30 of $467 million, down from $484 million the previous year, although Ling said operating earnings were actually up 10 per cent.
The overall outlook for the current full year was very difficult to predict.
"I think the activities in the world over the last week or two just reinforce that."
The downturn in the domestic residential sector and probably a slowing in Australia were part of a global economic connection, with a difficult economic outlook for the next period.
"Having said that we're in a fortunate position where the infrastructure projects, and we've got work on the book in New Zealand, is very strong for the next few years."
Fletcher Building had about a $1.3 billion backlog of work.
The steel division accounted for 12.7 per cent of Fletcher Building's trading profit in the year ending June 30, with $123 million of earnings before interest, tax, depreciation and amortisation.
The company had an acute focus on costs and was pushing ahead with a look at structural changes, including site rationalisation and shift reduction.
Shares, which have traded as high as $12.95 in the past year, closed down 8c yesterday at $6.42.
