Fletcher Building will report their annual result tomorrow. Photo / File
Fletcher Building will report their annual result tomorrow. Photo / File
Fletcher Building will deliver a no-surprise annual result on Wednesday, projected to be up around 12 per cent annually - but how much it will say about the Gib crisis is unknown.
Forsyth Barr analysts Rohan Koreman-Smit and Paul Koraua forecast earnings before interest and tax (ebit) for the fullyear to June 30, 2022 before significant items to rise 12 per cent to around $750 million.
"We don't expect many surprises, with most of the detail pre-announced at the June investor day," they noted.
"We expect the result will reaffirm a business that is seeing strong demand. Given the change in the housing market, all eyes will be on outlook statements. While Fletcher does not typically provide guidance at its full-year results, we expect reiteration of its FY23 ebit target of $850m," they said.
They projected net profit after tax to rise from June 30, 2021's $413m to an estimated $459.4m for the June 2022 year.
That will largely be driven by the New Zealand performance and a strong contribution from housing development via Fletcher Living, whose performance is forecast to rise 40 per cent.
They said high house prices have been underpinning growth in Fletcher's residential activity.
They expect Fletcher to reaffirm its FY23 targeted $100m+ uplift in group ebit which reflects a lack of lockdowns [$105m impact in 1H22], construction activity stable at 2H22 levels, continued margin improvement in the New Zealand core and Australia, a 10 percentage point reduction in residential development margins, and lower land sales and higher corporate costs.
Fletcher's Australian ebit will be broadly flat, they said.
The current trading year is expected to be even better for the overall business financially.
Revenue is forecast to rise from 2020's $7.3 billion to $8.1b last year and is estimated to be $8.3b this year. Dividends are also forecast to rise17 per cent from 30 cents per share last year to 35cps in the 2022 year.
Keith Chau and Ben Kairaitis of MST Marquee in Australia projected the June 30, 2022 ebit to be around $747m and net profit after tax to be $455m.
They have a "buy" rating on the shares, with a target price of A$7 when it's only trading around A$4.83.
Ross Taylor, Fletcher Building boss. Photo / Michael Craig
"The deterioration of Fletcher's share price has been persistent and deep, particularly against the backdrop of operational margin improvement. Trading multiples are at trough levels similar to the time of the GFC," the analysts wrote.
The result should contain few surprises given divisional ebit guidance was provided on June 22, they said.
However they questioned NZ building consents running at about 50,000 annually and whether that would continue.
"Residential consents in New Zealand have risen well above the country's capacity to complete. Based on an analysis of experimental completions data from NZ stats, we surmise the capacity of the NZ new residential market currently sits at 35,000 to 40,000.
"With consents running at around 50,000 in the year to June 2022and less than 44,000 in the year to June 2021, the level of consents activity has tracked well above capacity to complete even under high attrition assumptions," they said.
The market would also be looking for comments on management's views on the potential impact of the Commerce Commission's market study into building supplies, particularly for forced changes to plasterboard rebate structures and encouragement of more competition, the analysts said.
Grant Swanepoel, equity research director at Jardens, headed his Fletcher outlook "house price worries" because prices are expected to fall to $740,000, down 18 per cent, by December next year.
He expects little impact on Fletcher from the commission's building products review and says: "The ComCom has no problem with integrated players, indicating that this is unlikely to be anti-competitive. This gives a tick to Fletcher's integrated structure."
Fletcher was trading on the NZX yesterday about $5.43, down from $7.95 last May, giving it a market cap of $4.2b. Wednesday's results will be announced to the market around 8.30am, before the NZX and ASX open.
