Fletcher to forecast $500m revenue

Fletcher Building will next month forecast operating revenue of about $500 million for the year to June 2010.

Forsyth Barr analyst Rob Mercer has released an analysis predicting the result of an earnings update due from the board at the November 11 annual meeting in Dunedin.

The board of Fletcher Building will confirm a more conservative profit guidance, towards the lower end of the consensus of analysts' forecasts for earnings before interest and tax (ebit) of $469 million-$566 million, he said.

"We believe this will happen because the current trading conditions are still very tough and the anticipated recovery in 2010 is just that - an expectation," said Mercer.

Net income of $249 million to $307 million is being forecast based on anticipated sales of $6.8 billion to $7.2 billion and the most successful division is picked to be infrastructure, earning $191 million to June 2010 and $206.7 million in the year to June 2011.

Least successful will be PlaceMakers with $57.9 million in the year to June 2011.

Mercer downgraded his recommendation on Fletcher from "buy" to "accumulate", noting how the share price has rocketed up from an annual low of $5.13 to close yesterday at $7.92, although that is below its annual high of $8.50.

Mercer said the share rally was perhaps an overly optimistic interpretation of the fortunes of New Zealand's largest listed company with a market cap of $4.8 billion.

"The positive re-rating in FBU's share price implies that its earnings are about to enter an upgrade cycle, however confirmation of the upgrade is still some way off," he said.

The market had become too optimistic about the timing of the recovery and its impact on Fletcher, he said.

Fletcher also yesterday released a series of investor presentations on its building products division, Formica Laminates & Panels and The Laminex Group.

Mark Adamson, Formica chief executive, said the company was the world's largest global laminate business with a 64 per cent world share compared to WilsonArt's 16 per cent.

But he showed how the economic crisis had led to a significant fall in demand.

Formica's sales volumes were down in North America and Europe but holding steady in China, Taiwan and Thailand, he said.

The recovery of Formica's manufacturing plant in Ohio's Evendale had a massive impact on last year's performance of the business, he said.

"All elements of performance improved dramatically including productivity, yield, overheads and service," Adamson said.

Forsyth Barr's analysis also showed how Formica's ebit would climb from 2009's $18 million to $72 million by the June 2011 year.

Adamson said Formica's strategy was focused on completing restructuring, improving the service and share of the US market and rationalising its European manufacturing footprint.