Fletcher Building cautious on 2010 outlook

The Manukau Harbour Crossing is one of Fletcher Construction's projects. Photo / Dean Purcell

Fletcher Building is expecting full year net earnings, excluding unusual items, to fall within the range of analysts' forecasts from $261 million to $340m.

Chairman Roderick Deane told the company's annual meeting today that net earnings should fall within that range, based on current trading performance, and assuming no further deterioration in key markets.

But without a sustained recovery in volumes, net earnings would likely be at the lower end of the range, he said.

Fletcher Building remained cautious about trading conditions for the rest of the 2010 financial year.

While volumes in most markets had been relatively stable in the past few months, any significant signs of a recovery in any of the company's markets had yet to be seen.

Any recovery was expected to be gradual rather than rapid.

"It should be noted that some of the countries in which we operate continue to exhibit severe vulnerabilities including unusually large fiscal deficits, high unemployment, and in some cases huge balance of payments current account deficits," Dr Deane said.

"New Zealand shares some of these problems and one should not be sanguine about the challenges we face as a nation in getting back to sustainable and positive economic and productivity growth."

It was intended that the total dividend for the 2010 financial year would be 28c per share, being the annualised rate of the second half dividend in the 2009 year of 14cps.

The size of the dividend would depend on the financial outturn for the year as a whole.

For the year to the end of June 2009, Fletcher Building reported net earnings, before unusual items of $314m, down from $467m the year before.

Total dividends for the 2009 year were 38cps, compared to 48.5cps the previous year.

Dr Deane today said actions taken by the company in the past year had left it in a strong position to see out the current cyclical downturn, and to benefit when construction activity levels improved.

In the Building Products division, stronger earnings were anticipated from the insulation business due to the impacts of government stimulus programmes in this country and Australia.

That should more than offset weaker volumes in plasterboard.

The Distribution division would continue to trade at subdued levels while the market for new housing in this country remained at present levels, Dr Deane said.

For the Infrastructure division, good work flows continued from government -sponsored engineering and construction projects in New Zealand.

Weaker residential and commercial construction markets would continue to have a negative impact on concrete and related product volumes. The picture was similar in Australia.

Improved operating earnings were expected in the Laminates & Panels division, due to capacity rationalisation and other cost reduction initiatives.

For Formica, volumes in North America were expected to stay at low levels in both commercial and residential sectors, while Europe was expected to stabilise but not improve materially. Further growth was expected this year in Formica's Asian operations.

For Steel, the company had previously indicated earnings would be lower this year compared to last year, due to lower volumes and prices.

- NZPA