Fletcher Building's half-year profit has plummeted from $154 million to $114 million with $66 million of significant items blamed - due to impairment of goodwill and site closure costs.
Net earnings before significant items were 11 per cent higher at $171 million in the six months to December 31, 2014. Operating earnings before interest and tax were $224 million, compared with $281 million in the 2014 first half year, the company said.
" Fletcher Building today announced its unaudited interim results for the six months ended December 31, 2014. The group recorded net earnings after tax of $114 million, compared with $154 million in the prior corresponding period," it said.
Adjusting for the sale of businesses announced in the prior year, underlying revenue was up $108 million or 3 per cent, Fletcher said.
An 18c interim dividend is in line with that paid for the prior corresponding period and will be paid on April 15.
The company with a market capitalisation around $5.8 billion and operations in plasterboard, steel, panel products, laminates, concrete and building announced its December 2014 half-year result just before 9am this morning.
Andy Bowley and James Bascand, Wellington-based Forsyth Barr analysts, forecast $161 million net profit after tax for the first half of the financial year, up 4.7 per cent on the previous year.
Their commentary, released last week, contrasted expectations from New Zealand and Australia.
"Fletcher Building is due to report another polarising result. Further advances in New Zealand given improving activity levels will be offset by apparent struggles in several key Australian businesses," they said.
We have never been convinced that Fletcher's disparate portfolio of businesses in Australia form a unified whole with common goals or natural synergies.
"We forecast ebit (earnings before interest and tax) of $285 million, up 1 per cent against the prior year, which implies [there will be] a significantly stronger second half. Fletcher will be reporting its new divisional structure, including light building products and heavy building products, for the first time." The key issues were the outlook for Australian heavy building products businesses and Stramit, the rate of underlying New Zealand activity uplift and growth drivers for an anticipated significantly stronger second half, they said. Sydney-based UBS analysts David Leitch and Andrew Moller said the strong local building cycle had been Fletcher investors' friend.
"By value, the six-month moving total of non residential consents is up 29 per cent year on year and for residential up 18 per cent. These are very good numbers and supported by concrete production up at least 15 per cent," they said.
Even after allowing for lower profits from Auckland housing estate Stonefields at Mt Wellington, the New Zealand business would show good momentum, they predicted. Fletcher's four big Australian businesses are Laminex, Rocla, Stramit and Tradelink and the analysts said these all had some potential for earnings surprise.
They questioned extensive management changes announced last year at Laminex, Iplex and in other areas, saying it hinted at some problems that need solving.
"We have never been convinced that Fletcher's disparate portfolio of businesses in Australia form a unified whole with common goals or natural synergies," they said.
"As such we think that over time a more focused and easily understood portfolio will emerge. Rocla, Stramit, Laminex and Tradelink are unrelated businesses. They have different manufacturing technologies, different end markets and different distribution channels."
Credit Suisse research analysts Kar Yue Yeo in Wellington and Andrew Peros in Sydney said the recovery in the New Zealand building market, a projected recovery in the United States non-residential sector and cost savings from chief executive Mark Adamson's FBUnite programme were all positives for Fletcher.
They also expected the domestic construction sector to improve further.
New Zealand led building activity indicators suggested further strengthening of approval levels and for higher work to be put in place in 2015, they said.
This was driven by a combination of residential and non-residential work in Auckland and Christchurch and generally assisted by strong net positive migration to New Zealand.
Fletcher will hold an international media conference at its Penrose headquarters at midday today.
