KEY POINTS:
Fletcher Building is backing predictions of a 24 per cent to 38 per cent profit slide caused by deteriorating market conditions.
The company, New Zealand's third-largest, made $467 million this year but shareholders heard yesterday that could fall to between $289 million and $354 million in the year
to June 2009.
Fletcher chairman Rod Deane told the annual meeting in Auckland that analysts were forecasting profits at those lower levels for year to June, 2009.
The board agreed. "If current trading conditions were to be maintained throughout the remainder of the year then net earnings for the full year should be within this range," Deane told about 400 people at The Langham, Auckland.
However, the board hopes wants to pay out the same dividend of 48.5c a share, almost double the 2004 dividend of 25cps. Shares closed down 4c yesterday at $5.56.
Deane outlined extremely challenging times for Fletcher.
"We are meeting today in a period of profound economic and financial upheaval worldwide," he said, explaining a four-pronged strategy for the business which has divisions specialising in building products, distribution, infrastructure, laminates and panels, and steel.
"We are very conscious of the need to be prepared for ongoing demanding times by reducing costs vigorously, constraining capital expenditure, emphasising the vital importance of cash flow and maintaining a conservative balance sheet," Deane said.
Fletcher chief executive Jonathan Ling said staff levels were being cut, new projects were undertaken only if they had early payback, inventory was being aggressively managed and cost reductions were being pursued.
The company, which shed 600 workers between August and October, has a hiring freeze and Ling said times were tough.
Conditions in the New Zealand residential market softened but commercial and infrastructure markets had held up. Fletcher's Australian markets were weaker and the sub-prime mortgage crisis in the United States had an impact on Fletcher's Formica operations.
Ling said retail chain PlaceMakers was being hurt by New Zealand's housing downturn. Sales were still growing but at a lower rate - just 2 per cent for the year compared to 11 per cent previously.
One shareholder demanded an apology for Fletcher's $1 billion Formica punt, saying the purchase at the height of the boom last year was extremely badly timed.
Deane said there was no intention of selling and Ling said 60 per cent of Formica's revenue came from Europe and Asia, so the business was not totally dependent on US fortunes.