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Fletcher Building's Placemakers building products chain is continuing to "defy gravity" by performing well as the building market turns down.
Fletcher Building's distribution unit, which includes the Placemakers chain, posted an 8 per cent increase in earnings on a 5 per cent increase in sales in the six months to December, when the overall company earnings were up just 2 per cent.
Fletcher Building chief executive Jonathan Ling said Placemakers was still going strong. "The trends are continuing."
He said its business normally followed the building market up and down, but Placemakers was defying gravity currently because a lot of work had been put into extending the product range and revamping stores.
It had also picked up some market share as ownership changed in the rival Carters chain.
Ling acknowledged that the new owner of Carters - billionaire Graeme Hart via his Rank Group - was a more formidable competitor than former owner Carter Holt Harvey.
Carters has been cutting costs and has bought some ITM businesses, while Fletcher Building has bought Maddrens Timber, a three-site operation in West Auckland and a business in Mangawhai.
Analysts are in no doubt that a big shakeout is coming in the building supplies sector, where Placemakers is No 1, Mitre 10 second, Carters third and ITM and Bunnings roughly fourth equal.
Ling said there had been no talks with Rank Group about the building supplies chain and he didn't want to give the impression that anything was about to happen soon.
"Firstly, from our point of view, Placemakers is a very important strategic part to our business. I can't imagine a circumstance in which we would be willing to sell under any price."
Placemakers is a joint venture. Each store is owned 51 per cent by Fletcher Building and 49 per cent by a store owner, while Carters is wholly owned by Carter Holt Harvey.
Some of the big Placemakers stores can have turnovers of $50 million to $100 million, while Placemakers over- all has a turnover close to $1 billion - against Carters' $400 million to $500 million.
Carter Holt has never disclosed Carters' profit, and neither has Hart.
Fletcher Building likes its joint venture model.
"We feel that model actually works very well. We have the benefits of a large corporate with buying power, the ability to brand Placemakers nationally and a channel to market for many of our building materials businesses.
"We get the benefits of the large business combined with the close attention to detail and costs and relationships that a small operator can provide," said Ling.
He estimates Placemakers has 30-35 per cent of the market and Carters around half that.
"I think certainly Carters under Rank ownership is a lot more aggressive.
"They are certainly taking a lot of costs out and they've been very active in the market place."
- NZPA
