Ralph Waters. Photo / Natalie Slade
Fletcher Building is weighing into Auckland's housing crisis with plans to step up its game and increase the supply of new places.
In forecasting an operating earnings rise which might be up to $81 million ahead of last year, chairman Ralph Waters said chief executive Mark Adamson wanted to lift the company's house-building rate from around 300 a year.
"His aim is to have land in place for 1000 new homes a year," Waters said, referring to Fletcher's acquisition of the Manukau Golf Course.
"This is not the only golf course we've been in discussion with in Auckland and we hope there will be others. The golf courses don't disappear but move to areas where there's less demand for housing," Waters told about 500 shareholders.
Adamson said the rise of the new Saltus apartment block at Fletcher's Stonefields in Auckland was a hallmark.
"We have historically confined our home building activities to stand-alone and low-rise developments and the Saltus apartment complex was our first multi-level apartment development. We have several more apartment buildings planned for Stonefields which will complement our other housing offerings, in what has been a very successful development for the company," Adamson said.
"We see further opportunity to expand in the housing market here in Auckland through increased medium and high-density housing developments. Land now accounts for up to 43 per cent of the total cost of a new house. Bringing new housing solutions to market, thereby increasing the supply of housing stock, will be critical in ensuring that the growing population can be accommodated," Adamson said.
Waters forecast earnings before interest and tax (ebit) for the June 2014 year of between $610 million and $650 million, saying there has been no improvement in Australia and weak trading was being compounded by a strong kiwi.
In the year to June 30 Fletcher made ebit earnings of $569 million, while in the year to June 30, 2012 it made $403 million. He said there had been no noticeable improvement in volumes in Australia since the new financial year began and forecast was for relatively flat conditions.
The strong kiwi against the Australian dollar is likely to slice about $15 million from earnings in the current year, he said. There is a risk the local currency will appreciate further.
Overall, trading in the first three months of the year has been similar to the 2013 year.
In its largest market of New Zealand, further increases in construction activity are expected and a strong increase in housing consents in the second half of the previous financial year "should underpin activity levels in the first half of the current year, and the repair of houses and infrastructure in Christchurch will continue to boost activity levels", Waters said.
Most parts of Europe remained difficult, especially Spain, and the region was expected to break even in the current year. North American activity would benefit from new home building while commercial construction remained flat.
Southeast Asia would "continue to grow satisfactorily" while northern Asia and China "may be more subdued".
Fletcher's shares closed up 13c at $9.53, having gained about 12 per cent this year.
- Additional reporting BusinessDesk
Ralph Waters to retire early
Fletcher Building chairman Ralph Waters has announced his early retirement towards the end of next year from the NZX-listed company's board - three months earlier than his due date in March 2015.
Waters is chairman of one of Australia's biggest corporates, Woolworths, as well as chairman of Fletcher - New Zealand's biggest listed company. He is on the board of Australia's largest national rail freight and ports operator Asciano and is a trustee for the private charitable foundation of the Australian industrialist, 92-year-old Sir William Tyree.
Waters has also been on the Fonterra and Westpac New Zealand boards.
Next year's Fletcher annual meeting will be his last.
"The annual meeting is a good time to stand down and I will be finishing at the annual meeting next year," Waters said after yesterday's AGM in Eden Park's South Stand.
Cricket Australia and New Zealand Cricket, joint hosts of the ICC Cricket World Cup 2015, have appointed him chairman of the local organising committee and he said yesterday that was a prominent role.
"I will have been here for 13 years," he said of the Fletcher role, "and there's no need to extract every last second out of my tenure. Secondly, it will also free up time for the cup."