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Analysts expect a weaker result from Fletcher Building this week, as its residential construction and American operations take a big hit.
On Wednesday, Fletcher chief executive Jonathan Ling will present the annual results for the company's June year, previously anticipated to better last year's $484 million net after-tax
profit.
Three months ago, Fletcher issued profit guidance saying it expected to make $450 million to $460 million.
But analysts at three influential firms issued reports saying they are expecting grim news and figures at the lower end or below.
Andrew Mortimer of Credit Suisse, Emily Behncke and Sally Clarke of Deutsche Bank and Matthew Henry of Goldman Sachs JBWere forecast tougher times for the building materials distributor and manufacturer.
Henry is worried about Fletcher's high exposure to New Zealand's house-construction market and its Formica business in the United States.
The house-building outlook here was among the world's worst, he said, and he forecast a 35 per cent drop in Formica's underlying earnings over the next year. Formica's outlook was highly challenging.
Henry expects Ling to say $454 million on Wednesday.
"Fletcher acquired Formica in July 2007. In retrospect, the timing could not have been worse. Formica's three largest markets - the US, Britain and Spain - probably have the worstconstruction outlook for any major economies globally," Henry said, citing significant delays and cost overruns in the Formica US restructuring programme. To make matters worse, Formica competitor Wilsonart had performed strongly, suggesting the Fletcher business had lost market share.
"There is no sign of an imminent recovery in US housing. Indicators suggest non-residential, which to date has provided a partial offset to residential weakness, may also start to deteriorate," he said.
Mortimer expects Ling to say $432 million on Wednesday.
He is worried about Fletcher's building products, distribution and infrastructure divisions, saying these are most exposed to the downturn. Laminex will also be affected, he said.
"The question is not that the New Zealand outlook is bleak, but how bleak? Residentially exposed businesses will feel pain in the current year and in particular the ready-mix, wallboard, distribution and housing businesses. However, a strong construction forward-order book, Australian exposures and the potential to win several further large projects should provide a measure of protection," Mortimer said.
Behncke and Clarke gave Fletcher an earnings downgrade but said the stock represented great value because of its huge infrastructure order book. They cited Infometrics' infrastructure forecast on big Fletcher jobs such as the $200 million Eden Park upgrade, $265 million Manukau Harbour Crossing, $224 million Hobsonville deviation and $320 million Victoria Park Tunnel.
The election of a National government would only help, they said. National has flagged its commitment to infrastructure, particularly roads, water, energy and the internet. Its election could be a big boost to Fletcher.
They expect Ling to say $447 million on Wednesday.
Henry has a "hold" notice on the stock. Mortimer issued an "outperform" rating, meaning the stock's total return is expected to exceed the industry average by at least 10 to 15 per cent. Behncke and Clarke have it rated as a "buy".
Fletcher closed down 11c at $6.69 on Friday. It manufactures, distributes and sells materials for the building industry, including wood fibre-based products, cement and aggregates, plasterboard, lumber and aluminium extrusion.
