What will Fletcher bosses tell us next week? Photo / Natalie Slade
What will Fletcher bosses tell us next week? Photo / Natalie Slade
Fletcher Building's interim result out this week could give guidance on how it's trading, which might lead to a market upgrade, two experts say.
Grant Swanepoel and Luan Nguyen, Jarden research analysts, have released their outlook on the result due this week from the Penrose-headquartered business run by Ross Taylor.
In a piece headed "near-term upgrade", the analysts were relatively upbeat about what could be announced and the current trading half-year.
This Wednesday's result from the Australasian business, which employs more than 14,500 people, will be for the half-year to December 31, 2021.
A 16c dividend is expected from the manufacturing, distribution, retail, home building, construction and infrastructure projects business.
Adrian Allbon, Arie Dekker and Jason Cao of Jarden cited Fletcher in a wider piece on the upcoming reporting season.
Those three analysts also indicated the market expected good news from the business.
"Consensus is primed for earnings upgrades to 2H22 flowing through to FY23 but equally macro tail risks are building for house price growth moderation and potential oversupply medium term. Outlook comments should be strong for the 2H and we will be watchful of further strategy progression/evidence points that suggest the quality of future earnings prospects are improving," they wrote.
In October, Taylor gave an indication of how the business was tracking in its first half.
"While Covid lockdowns have impacted trading in the first quarter of FY22, the activity pipeline remains strong in New Zealand and Australia," he said then.
"This is driving a robust bounce-back in market demand as government restrictions ease."
Operating disciplines were in good shape across the group, input cost inflation and supply chain disruption were being managed and the company had a strong balance sheet, a favourable market outlook and remained well-positioned to drive ongoing performance and growth, Taylor said.
Will Ross Taylor give cause for the market to upgrade the stock's outlook? Photo / Jason Oxenham
"We continue to target around 10 per cent ebit margin in FY23. In FY22, 1H22 margin will be impacted by lockdowns. We are confident that 2H22 margin will show good progress toward around [the] 10 per cent target," he said.
That assumed no further material impacts from lockdowns.
The next update on trading and outlook would be in the results announcement in February, Taylor told shareholders on October 19.
In the full-year result out last August, the company exceeded its own massive profit guidance, posting its full-year result just as all non-essential construction sites throughout New Zealand went into lockdown.
Fletcher declared earnings before interest, tax and significant items of $669m for the year to June 30, 2021, exceeding the top end of its own guidance range of $665m.
The previous $7.3b revenue in 2020 rose to $8.1b last year and net profit after tax turned around from last year's $196m loss to a stellar $305m profit.
Last October, Swanepoel reduced the company's earnings outlook in the year to June 30, 2022, by $18m because operations could not function when the lockdowns started in August.
"Due to lockdown impact, we reduce our ebit from $719m to $701m," he said in his latest analysis. "Fletcher has been negatively impacted by recent lockdowns.
"The last time construction was halted, it was for seven weeks and impacted FY20 ebit by $200m. This was after receiving $68m in wage subsidy," he said.
Today, Fletcher has a market cap of around $5.1b, its shares trading around $6.32, which is down only 2 per cent annually.
