Fletcher tipped to sell insulation business

Photo / APN

New Zealand's $4.8 billion Fletcher Building is considering selling its huge insulation businesses which could see the manufacturer of the iconic Pink Batts get a new owner.

A statement from the company's Penrose international headquarters to the Herald said asset sales were on the cards, although it did not specify insulation in particular.

"Fletcher Building is undertaking an ongoing review of its business portfolio with a focus on lifting operational and financial performance and pursuing organic growth. The review process invariably leads to speculation on a range of possible outcomes. The company is aware of its continuous disclosure obligations, and will promptly communicate to the market if or when there are substantive matters required to be disclosed," the statement said.

Fletcher has been reported in Australia as considering selling the insulation business.
The Australian Financial Review said corporate advisory firm Greenstone Partners was gauging trade buyer appetite for dual-listed Fletcher Building's insulation business.

Philip King, Fletcher head of investor relations, was quoted in the AFR article as saying: "It's not something we're wedded to from a strategic perspective."

Fletcher holds its extensive insulation assets in its light building products division. Its businesses are Tasman Insulation and Fletcher Insulation.

The light building products had gross revenue for the June 30, 2015 year of $1.3 billion, EBIT of $118 million and employs 2526 people.

"There was significant turnaround in the insulation businesses and there is a strong outlook following building consent increases in New Zealand and Australia," Fletcher said in its 2015 annual report.

Fletcher has a market capitalisation of $4.8 billion and it is Australasia's biggest supplier of building and construction materials.

These include laminates, cement, pipes and roofing and it has just won the NZ International Convention Centre contract in Auckland, as well as the contract to build Precinct Properties' $550 million 38-level Downtown tower at the foot of Queen St on the waterfront.

Mark Adamson, Fletcher chief executive, made it clear at this year's annual meeting that he had not spent a cent buying new assets since starting in the job but had instead been dealing with the difficult legacy of selling business which were either under performing or not up to expectations.

"In my time in the job, we have not made one single acquisition," Adamson told just under 400 shareholders at SkyCity. "I have had to deal with what we have today. Profitability is improving, maybe not as fast as anyone would like," he said.

Shareholders expressed discontent about big write-downs and asked if these would continue.

Ralph Norris, Fletcher chairman, could give no reassurances that further write-downs could be avoided.

Tasman Insulation makes Pink Batts, which it says is the only brand of glasswool insulation manufactured here and is the market-leader in the residential insulation market. Tasman started manufacturing here in 1961 and makes Batts at its Auckland and Christchurch factories.