Fletcher Building profits up 19pc

Fletcher Building posted a 19 per cent gain in full-year profit, before one-time items, as the contribution from newly acquired Crane Group more than made up for a drop in sales of building products. The shares rose after the results were released.

Profit before unusual items rose to $367 million, or 45 cents a share, in the 12 months ended June 30, from $301 million, or 44.7 cents, a year earlier, the Auckland-based company said in a statement today.

Sales rose 9 per cent to $7.4 billion, though excluding three months contribution from Crane, revenue growth stalled in the latest year.

The biggest company on the NZX 50 Index posted weaker operating earnings in its two biggest markets of New Zealand and Australia, even as sales rose, and chief executive Jonathan Ling said commercial construction is likely to remain subdued and any improvement in housing will be gradual. Trading conditions in North America and Europe aren't expected to pick up any time soon.

"Market conditions have been tougher than we anticipated at the start of the year, with no recovery evident in New Zealand and Australia showing clear signs of having slowed in the second half," Ling said. "We remain uncertain around the timing and pace of a recovery in the New Zealand construction industry, but are well positioned for the upturn when it comes."

Shares of Fletcher rose 2.2 per cent to $7.90 on the NZX and have bounced back from a 12-month low of $7.20 reached on Aug. 9. Profit before one-time items beat the $325.9 million estimate of Forsyth Barr analyst Rob Mercer.

The shares were rated 'outperform' yesterday, based on the consensus of 10 recommendations compiled by Reuters.

Fletcher will pay a final dividend of 17 cents a share, making 33 cents for the year, up from 29 cents last year. The company will offer its dividend reinvestment plan for the final payment.

Cash flow from operations fell to $402 from $522 million a year earlier.

Net profit rose 4 per cent to $283 million, including $76 million of one-time charges, mainly to write down the value, plant and inventory of its Australian insulation business after the federal government abandoned a subsidy scheme. Fletcher also recognised costs to purchase and restructure Crane.

Laminates & Panels, Fletcher's biggest division, had a 2.5 per cent increase in sales to $1.98 billion, lifting operating earnings by 19 per cent to $168 million. Sales from Infrastructure, the second-largest unit, rose 0.9 per cent to about $1.9 billion and earnings climbed 12 per cent to $161 million.

Steel revenue rose 3.6 per cent to $1.2 billion, while earnings gained 1.2 per cent to $83 million. Crane contributed $623 million in sales for the three months ended June 30 and $29 million of earnings.

Distribution, which includes Fletcher's DIY stores, posted a 2.5 per cent decline in sales to $856 million but managed to lift earnings by 2.6 per cent to $39 million.

Revenue from building products fell 13 per cent to $692 million and earnings fell 2.6 per cent to $111 million.