Fletcher Building's interim result is out. Photo / Natalie Slade
Fletcher Building's interim result is out. Photo / Natalie Slade
A strong cost-saving drive and higher demand for its products has seen Fletcher Building nail a strong interim result, pushing up net profit 41 per cent.
Ross Taylor, chief executive, said the company made a net profit after tax of $171 million in the December 31, 2021 half-year, up from$121m previously.
Revenue rose 2 per cent from $3.9b to $4.06b and ebit before significant items was up 3 per cent from $323m to $332m.
"With improved operational performance and cost disciplines now embedded across the business, we were able to deliver a strong half-year performance. This was despite the first quarter being heavily impacted by the up to five-week-long Covid-19 stringent lockdown in New Zealand and local lockdowns in Australia which impacted EBIT by approximately $105m," Taylor said.
"Our strong second-quarter performance was a particular highlight in this result where the group generated EBIT of $264m, up 73 per cent on the comparative quarter, delivering a strong group EBIT margin of 11.8 per cent, indicating strong momentum into the second half," he said.
Cash flows from operating activities for the half-year were $157m, compared to $424m reported in HY21 and reflects flagged investments to rebuild stock in key areas and housing investment following a busy FY21.
The board approved a fully imputed interim dividend of 18cps, to be paid on April 7.
The second half of the June 30, 2022 financial year was expected to be very solid with customers and forward indicators pointing to continuing volumes.
"With confidence in our operational disciplines and in covering inflationary costs, we expect our second half EBIT margin to be approximately 9.5 per cent and to deliver FY22 full-year EBIT before significant items of approximately $750m. Based on our experience in Australia with the Covid-19 Omicron variant, we foresee a potential risk impact on our EBIT in the $25m to $50m range," he said.
The business was well-positioned to drive growth.
Ross Taylor on today's result. Photo / Michael Craig
"In our New Zealand materials and distribution divisions, we are investing in increased manufacturing capacity and driving product and market growth. Our residential and development businesses are well advanced in growing annual sales volumes by circa 500 houses a year which includes our new Vivid Living retirement offer. In Australia, we continue to drive an innovative suite of disruptive product offers," Taylor said.
New Zealand residential consents were running ahead of industry capacity.
"This has created a backlog of work on top of future consents in the coming years. This is anecdotally supported by our home builder customers generally now placing orders for their customers 12 to 18 months in advance," he said.
As well, the infrastructure sector continued to have a strong growth outlook on the back of committed and planned government projects. Similarly, in Australia, forecasters are all pointing to ongoing strong growth across residential, commercial and infrastructure through FY23 and beyond, Taylor said.
"Fletcher Building is in a very strong position: our markets look robust, we expect to not see the significant impacts of lockdowns to reoccur, we remain on track to further improve EBIT margins across the group to 10 per cent in FY23 and importantly, we have a maturing pipeline of investments that will keep driving growth beyond FY23," he said.
Massive new $400m Winstone Wallboards plant rising in the Bay of Plenty. Photo / George Novak
In October, Taylor gave an indication of how the business was tracking in its first half. HE had an optimistic tone.
"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.
Grant Swanepoel and Luan Nguyen, Jarden research analysts, were relatively upbeat about the business in their outlook for today.
"The guidance given at the 1H result could be a catalyst for a modest upgrade".
The Bloomberg consensus for Fletcher's full-year 2022 result is ebit of around $715m, they noted.
Adrian Allbon, Arie Dekker and Jason Cao of Jarden said: "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."
Shares have been trading down lately around $6.28, an annual 2.6 per cent decline, giving a market cap of $5.08b. But they are well up on the disastrous $3.20 they sank to when the pandemic struck around March 2020 - a two-year low point for many NZX listed stocks.
