Taylor's turnaround strategy has been a major success. Photo / Jason Oxenham
Taylor's turnaround strategy has been a major success. Photo / Jason Oxenham
Fletcher Building delighted institutional analysts and shareholders with its outstanding interim profit result, drawing an upgrade for outperforming forecasts and pushing up its dividend payment by 50 per cent.
Grant Swanepoel and Luan Nguyen of Jarden praised the company's performance in delivering its $171 million net profit aftertax - 41 per cent up from $121m previously to $171m for the December 31, 2021 half-year.
In an analysis headlined Fletcher beats budget, the pair said the company's result exceeded their own more conservative estimates of an interim $311m ebit by announcing $322m.
As a result, shareholders' dividends rise a spectacular 50 per cent in the clearest sign yet of chief executive Ross Taylor's five-year turnaround strategy announced in Sydney in 2018.
The company had previously suspended dividends shortly after previous CEO Mark Adamson left. Late last decade, its buildings and interiors division recorded losses over two years of nearly $1 billion after problems on major construction sites.
Grant Swanepoel of Jarden - delighted with Fletcher's result and dividend. Photo / supplied
Today's half-year marks yet another significant turning point for the business which also exceeded expectations in its full-year result last year.
Now, for the full-year to June 30, 2022, Fletcher looks ready to outperform expectations once again.
The Jarden analysts noted the Bloomberg consensus of analysts' forecasts for annual ebit of $715m.
Yet today, Taylor - born in Queensland but with a house in Sydney - announced the company was on track to deliver ebit of an even better $750m.
The analysts have a target price on the shares of $7.36 but they're only trading around $6.28.
The two also praised the dividend upgrade from 12cps to 18cps for the latest half-year. That, they said, was a positive surprise and a 68 per cent payout ratio. Dividends will be paid on April 7.
But they did notice Taylor's more muted tone on Omicron, noting Covid's impact on this first half-year hit ebit by $105m and around $300m in revenue reduction.
"This is far greater than what we had expected and implies that first-half ex-Covid and development gains would have been $390m, up considerably on the $323m in pcp, with a healthy ebit margin of [circa] 9 per cent," the analysts said.
Taylor's turnaround strategy has been a major success. Photo / Jason Oxenham
Taylor's turnaround focused on defending its core business and positions, fixing the construction division and stopping losses, getting Australia performing better and selling businesses including Formica.
Talking to the Herald after the result, Taylor said from the Penrose HQ his five-year turnaround strategy finished next year.
When asked to reflect on the achievements to date, he replied: "Oh, I just said what I was going to do and I did it.
"But things just don't end and stop there. The original five-year plan does take us to 2023 so pleasingly, we will get there. But in the last few years, we've looked beyond that and looked at how we want to grow the business.
"You can't suddenly decide to grow the business when you reach the end of five years. So we've been actively working on the next leg of it. We'll talk more about that in our investor day in late May/early June," he said.
The $400m being spent on the new Tauriko wallboard plant was the single largest company investment, he said, replacing the Penrose plant.
The new $400m Winstone plant at Tauriko. Photo / George Novak
"It takes our capacity from 20 million square metres a year, up to 30 million square metres a year.
"We do need it. That will be available by mid-2023," he said of the factory where around 200 people will work at the Winstones Wallboard plant.
Wallboard lead times were delayed, he acknowledged. Deliveries had been almost instantaneous from warehouses previously.
Fletcher Building's Clever Core factory in Auckland. Photo / supplied
"We're running single product lines longer which makes us more efficient. Because we're doing that, one product might be four weeks from changing the line over to the next," he said.
Delays of up to three months could be likely, he said, but it depended on merchants who had substantial control of the sector because they sold directly to customers, he said.
The second-biggest new Fletcher investment had not been disclosed.
"What we spend in capital every year - some of the improvements are $200m to $250m a year. We have flagged above-plan growth initiatives of around $150m a year. They're quite substantial. We just aren't ready to announce them specifically but we will over the coming 12 months," he said.
Taylor has done three MIQ stays here and one in Australia.
He has no immediate plans to return to Australia "because I just don't need to get caught again. I'll stay put until I'm confident," he said.
Fletcher is trading up today around $6.70 in the afternoon.
