Fletcher Building shares ended calendar 2019 in positive territory for the first time in three years, gaining 4.3 per cent.
Last year's gain follows a 34.7 per cent decline in 2018 and a 28.3 per cent fall in 2017 after 2016's 50.6 per cent gain.
Fletcher shares began 2016 at $6.97, peaked at $10.66 in April 2016, but ended 2019 at $5.09.
No doubt chief executive Ross Taylor will be hoping he's at the start of an upward trend.
He took the helm in November 2017 and revealed the following February that the company's high-rise construction unit, Building + Interiors, had lost almost $1 billion over an 18-month period.
While the losses were brought to book in the June 2018 annual accounts, the cash impact will be felt until the company completes the last of its major high-rise projects, the SkyCity convention centre and hotel, a project that suffered a major setback when its bitumen roof caught fire on October 23.
Fletcher hasn't been able to say how much rebuilding will be necessary or over what time frame. All Taylor could tell the annual shareholders' meeting in November was that he would provide an update with the first-half results in February.
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Nevertheless, he continues to reiterate that construction losses will be contained within the firm's existing provisions – any break from that mantra would be a huge blow to Taylor's credibility.
But analysts can't quite rid themselves of the fear the losses will exceed the provisions, a foreboding that only grows as time goes on.
Ahead of the November AGM, Fletcher said core operating profit for the year ending June 2020 could be down 6 percent to 3 percent higher.
Earnings before interest and tax were expected to range from $515 million to $565 million for the year ending June 2020 compared with $549 million the previous year.
Much will depend on how Fletcher's Australian operations fare.
The signs haven't been promising since June 2018 when Taylor outlined that Fletcher's new strategy will be focused on the core New Zealand building products operations and on bringing profits from the Australian operations closer to those achieved in New Zealand.
Fletcher reported a halving of ebit to $57 million in Australia, which accounts for about a third of the group's revenue, for the year ended June 2019. That was down from $114 million the previous year.
Taylor aims to lift Fletcher's Australian ebit margin to 7 per cent of sales but it was just 1.9 per cent in 2019 and has been going in the wrong direction, having fallen from 3.7 per cent in 2018.
While Taylor has been talking about fixing the problems in Australia and getting it positioned for growth, analysts can't help noticing macro conditions in Australia are worsening.
Fletcher's own forecast is that residential building consents in Australia will fall to 150,000 or 160,000 during the current year from 187,000 in the year ended June and 232,000 the previous year.
The Australian division is about 54 per cent exposed to the residential market.
Ebit margins in New Zealand are significantly higher – even for the still-recovering construction division where the margin was 2.8 per cent in 2019.
The building products division's ebit margin was 16.7 per cent with concrete at 10.5 per cent, distribution at 6.5 per cent and steel at 5.9 per cent. The residential and development division achieved a 21.4 per cent margin in 2019.
However, margins in every New Zealand division deteriorated in 2019, although the macroeconomic outlook for this country is significantly better than in Australia.
Fletcher is predicting that residential construction will ease slightly from current levels, which are at their highest since the 1970s, that commercial activity will be steady and that infrastructure spending will shift from roading to road safety, water and rail.