Fletcher Building exceeded its own massive profit guidance, posting its full-year result just as all non-essential construction sites throughout New Zealand went into lockdown.
The business declared earnings before interest, tax and significant items of $669 million for the year to June 30, exceeding the top end of its own guidance range of $665m.
Last year's $7.3b revenue rose to $8.1b and net profit after tax turned around from last year's $196m loss to a stellar $305m profit.
But chief executive Ross Taylor cited New Zealand's new lockdown and possible effects on his sector.
"There does remain some uncertainty around the impact of Covid-19 on activity in our markets. We will continue to monitor and manage this closely," Taylor said.
Shareholders will get a final dividend of 18 cents per share, bringing the annual dividend to 30 cps.
Fletcher made a return on funds of 18.6 per cent, had cash flows from operations of $889m and its result referred to its strong balance sheet, with only $173m net debt yet liquidity of $1.6b.
Last year, net debt was $497m but strong cashflows, earnings growth and tight margins are enabling the company to repay loans.
The company is buying back $300m of shares in a scheme not due to finish till June next year.
A few weeks ago, Fletcher issued guidance, saying it expected to meet the top end of its $650m to $665m band this last financial year.
Taylor reflected on the huge turnaround in the business, a result of the five-year plan he launched in Sydney in winter, 2018.
The strong result reflected "significant work carried out over the past three years to reset and simplify the business," Taylor said.
"We are confident we have a sustainable base from which we can drive further performance improvements and growth," he said.
The company experienced increases across all its key financial metrics, including ebit margin of 8.2 per cent and return on funds employed of 18.6 per cent, which were both materially higher than financial year 2019.
"Cash flows from operating activities were very strong at $889m, partially benefiting from low stock levels in our manufacturing and housing businesses, which we expect to rebuild through FY22.
"Our balance sheet finished the year in a strong position, with net debt of $173m and $1.6b liquidity at 30 June 2021. Just after year end, we were pleased to reach an agreement to sell Rocla for A$55m," Taylor said.
The company employs about 14,500 people and had revenue of about $8b, of which $5.2b is from New Zealand, $2.8b from Australia and the rest from the South Pacific.
Fletcher made a $196m net loss after tax for the year to June 30, 2020.
The residential sector accounts for 48 per cent of Fletcher's revenue in this country. Fletcher Living has more than 500 apartments being worked on currently and is developing retirement villages at Red Beach and Waiata Shores in Auckland.
Construction's revenue rose 10 per cent and that division has now returned to profitability after losses at the NZ International Convention Centre, Commercial Bay and Christchurch's Justice and Emergency Precinct. Construction's order book now stands at $3b.
This division's focus for the current year was "to deliver performance and growth - strong forward quality revenue secured with better ebit margins", according to the investor presentation.
The order book had been "successfully increased and reshaped to lower risk profile".
Grant Swanepoel, Jarden's equity research director, noted Taylor's point that guidance on the 2022 year would come at the AGM in October.
"Management are confident of continued growth in NZ," he noted of the company which he said had a full order book and positive momentum.
"Relative to our expectations, the concrete division was the biggest miss on higher electricity costs and product purchases due to extended shutdown, while commissioning waste tyre platform likely reduced full positive demand impact," Swanepoel said.
Key risks were mortgage rates rising, changing government intent to grow housing supply, company risk management on large contracts and momentum in Australia.
Lisa Huynh of Citi noted the result was slightly ahead of guidance, "driven by the building products division on price rises above inflation and the residential development business which was supported by rising NZ house prices, despite the mix shift towards lower value homes during the period".
No outlook was given but the trading result "indicates a robust macro environment for the year ahead. Input costs and supply chain disruption remains key features of both NZ and Australian markets but the company appears to be managing through this thus far, and anticipates to offset this through price rises".
In his outlook, Taylor referred to expansion via investment in key assets, like the massive new Bay of Plenty wallboard plant to replace the outdated one at Penrose.
"We continue to make targeted investments to deliver on our strategy. This includes a mix of capital and operating spend and remains focused in three areas: key maintenance investments such as the new Winstone Wallboards plasterboard facility, initiatives which support our sustainability ambition such as the waste tyre recycling facility at our cement plant and growth investments," he said in the final reference to digital changes.
Although the last year had been challenging, Taylor thanked employees and said the business was focused on its customers.
The company is today trading on the NZX around $7.63, down on yesterday's close of $7.92.