Tightening up pays dividends for Fletcher building

By PAULA OLIVER

Tightening the purse strings and successfully marketing higher-value products gave Fletcher Building a $63 million profit, up nearly 200 per cent on last year.

Chief executive Terry McFadgen said yesterday there had been a shift of focus away from commodities towards higher-margin products, and their increasing acceptance among customers was starting to bear fruit.

Specialised Gib-board products and high-density particleboard accounted for much of the growth, while annual savings of $35 million had been achieved in procurement.

Both factors compensated for an overall 11 per cent drop in sales revenue to $2.3 billion.

Unusual items cast a significant shadow across the profit result, reaching $43 million. These included a $30 million write-off from restructuring the company's employee education fund, and $10 million written off the value of operations in Fiji. Finally, $3 million was attributed to the cost of the Fletcher Challenge separation programme.

Mr McFadgen said the outlook was mixed due to a slump in residential building, which has been mirrored in Australia since the introduction of GST.

"It's hard to judge which way the market is moving, but clearly residential consents have been dropping off quite sharply for three or four months," he said.

However, the company had an excellent backlog of non-residential building work, valued at $565 million. This was largely due to more Government spending on hospitals, and strong rural sector growth, said Mr McFadgen.

The company's South American wing returned a disappointing result, owing to an economic downturn in Peru and Bolivia.

Shareholders will receive an 8c dividend, bringing the full-year payout to 16c.

Fletcher Building shares closed down 1c at 226c.