Australia has old-fashioned union arrangements and needs "a dose of Margaret Thatcher," says Mark Adamson, the British chief executive of Fletcher Building.
On a media call following the release of Fletcher's annual profit, Adamson said he had been "amazed" at both the level of salaries and inefficiencies in Australia. He took the top job at Fletcher last October, having run the company's Laminex & Panels division, based in the US.
"I do come across unions and union arrangements the likes of which I haven't come across since I was a child in the UK in the 1970s," Adamson said. Australia needs "a dose of Margaret Thatcher."
Nick-named 'The Iron Lady', Thatcher was British prime minister between 1979 and 1990, during which time her government privatised state assets, deregulated industry, closed unprofitable coal mines and broke the power of the unions as part of what became known as 'Thatcherism.'
Australia was the black spot in Fletcher's latest results, with operating earnings before one-time items falling 22 per cent. The company garners 45 per cent of its sales in New Zealand and 50 per cent of EBIT, while Australia generates 43 per cent in revenue but only 36 per cent of earnings.
The different pace of the Australian and New Zealand economies has also helped drive the kiwi dollar up against the Australian dollar to near five-year highs and the translation effect hurt reported earnings by about $7 million in the latest year.
"We anticipate year on year (the hit) will be about $15 million to reported earnings," Adamson said.
The outlook for the Australian business, Fletcher's second-largest market, "remains soft and uncertain."
"A sustained improvement in activity levels in New Zealand coupled with operational efficiency gains should drive earnings growth," the company said. "However, no significant volume growth is forecast in the Australian market and any further deterioration from current levels will temper the group's earnings momentum."
Adamson said there are some signs that record low interest rates in Australia are starting to revive activity in New South Wales but the company is yet to see that spread to Victoria and Queensland, while Western Australia is feeling the effects of a slowdown in mining and resources investment.
Fletcher's net profit jumped to $326 million in the 12 months ended June 30, from $185 million a year earlier, when the Auckland-based company took $132 million of charges. Sales fell 4 per cent to $8.8 billion. Profit beat First NZ Capital's estimate of $304 million.
The shares jumped 4.8 per cent to $8.60 after the results.