Fletcher Building Results
Six months ended Dec 31, 2008
Revenue
2008- $3.7bn
2007- $3.5bn
Profit
2008- $172m
2007- $235m
Dividend
2008- 24cps
2007- 24cps
KEY POINTS:
Fletcher Building has kicked off the latest results season by announcing a nearly 30 per cent profit fall for the six months to the end of 2008.
The construction and building materials company is the third biggest company on the NZX, with a market capitalisation of $2.78 billion.
Fletcher said its operations were "exposed to rapidly deteriorating economic conditions and a marked slowdown in residential and commercial construction markets globally."
Net earnings were $172 million, compared with $235 million in the previous corresponding period. This is a fall in earnings per share from 47 cents to 34 cents.
The result was broadly in line with analyst's expectations. Fletcher shares fell 3 cents when the New Zealand stock exchange opened this morning, changing hands at $5.47 each. They are now up 4 cents from their opening price, at $5.54.
"Significant volume declines were experienced across the business, particularly in New Zealand, the United States, Spain and the United Kingdom. Other parts of Europe saw demand levels fall away during the period while Australia also evidenced signs of a major slow-down. Higher input and energy costs also negatively impacted earnings," the company told investors this morning.
The company's steel division saw strong earnings growth due to higher steel prices and margins, and strong volumes during the half year.
But a "rapid decline in demand in US and European markets" negatively impacted its North American Formica business.
It is still paying its shareholders an interim dividend of 24 cents a share for the half year, the same as last year. Total shareholder return was negative 4 per cent for the half year.
"We have seen extremely tough trading conditions in most of our key markets over the past six months - particularly New Zealand, the United States, UK and Spain - and demand for building materials has fallen significantly," said company chief executive Jonathan Ling. "In light of this, the result for the half year is a reasonable one."
Something offsetting these weaker markets has been the stronger infrastructure investment in New Zealand and Australia, said Ling. Fletcher had a "solid construction backlog" in New Zealand of nearly $1.2 billion.
Residential housing markets were in recession all over the developed world, said Ling, including Australia, which had been relatively buoyant until recently.
Commercial construction activity has also been affected in most of Fletcher's markets, although not to the same extent as the housing sector. In New Zealand, Ling said he expected to see "further contraction" in the market overall from last year's levels.
He reminded investors of the company's full year profit outlook given in November last year was for profits to be within the range of $289m to $354m. That range later narrowed to $289 million to $336 million.
"While the economic environment has worsened since then, full year net earnings after tax, and excluding unusual items, are still expected to be within this range but at the lower end of it," he said today. "This assumes that there is no significant further deterioration in trading conditions from those experienced in the year-to-date."
Key Points Fletcher Building Half Year Results
* Group sales up 6 per cent to $3,757 million
* Group net earnings down 27 per cent to $172 million
* Operating earnings down 23 per cent to $303 million
* Cashflow from operations down 15 per cent to $208 million
* Earnings per share down from 47 cents to 34 cents
* Capital expenditure up 16 per cent to $162 million
* Interim dividend of 24 cents per share with partial New Zealand tax credits.
