Fletcher Building's trading has been "solid" in this current financial year and could exceed last year, despite lockdowns here and in Australia.
Ross Taylor, chief executive, has just given that update to the market and will address shareholders today at 2pm.
In advance of the annual meeting, he gave the first update on how the business was doing in the current financial year to June 30, 2021. The company is now four months into its 2022 year.
Taylor sounded extremely upbeat, heading the company whose latest annual profit exceeded even its own forecasts amidst a building boom on both sides of the Tasman.
"Trading either side of the New Zealand lockdowns has been very solid, and at levels above the prior year.
"Provided New Zealand stays at these present lockdown levels or better, we would expect the trading conditions to remain above last year.
"In Australia, we are predominately east coast focused, and lockdowns of some shape or form have been a feature of the FY22 year to date," he said.
The net effect of those lockdowns had been to slightly subdue trading levels across most of the businesses.
"However, as both New South Wales and Victoria start to open up with increasing vaccination levels, we expect trading to improve quickly and to levels above last year.
"We have a strong balance sheet, a favourable market outlook and remain well-positioned to drive ongoing performance and growth. We continue to target circa 10 per cent EBIT margin in FY23.
" In FY22, the 1H22 margin will be impacted by lockdowns. We are confident that our 2H22 margin will show good progress toward our circa 10 per cent target, assuming no further material impacts from Covid lockdowns," Taylor said today.
The presentation said that while lockdowns had impacted trading in the first quarter, the activity pipeline remains strong here and in Australia.
"This is driving a robust bounce back in market demand as government restrictions ease. Operating disciplines [are] in good shape across the group, input cost inflation and supply chain disruption [is] being managed effectively," it said.
"We have a strong balance sheet, a favourable market outlook, and remain well-positioned to drive ongoing performance and growth," Fletcher said.
One shareholder asked why Fletcher had not taken a lead in house building like it did after the war. Chairman Bruce Hassall said the business was making many housing components in a pre-assembly plant. It would significantly lift its house-building activity, he said.
Another shareholder asked why directors did not reduce their remuneration. Hassall said fees were cut by 30 per cent for six months to September 2020 but had delivered a strong result.
Concern was raised about the settlement of the Ihumātao land and a claim made that it was $20m short of what it should have been. Villa Maria buying land in the area was cited by the shareholder.
Hassall said the sale price was agreed to be fair and reasonable at the time and Fletcher had "largely broken even" on the transition. It would be a long and difficult process if it continued with the development. The sale price was fair and commercially sound and the right call to make, he said.
Asked about the share buyback, Hassall said the company was committed to that buyback.
Asked about share price being as high as $10 in 2017, Hassall said the board and management team had a solid strategy in place to drive performance.
A shareholder wondered if directors were involved in the business at the "coalface" and Hassall said he personally, as well as other directors, had visited many operations.
Another shareholder asked if the northern motorway project was on schedule. Taylor said the business did not make announcements on projects underway. But it had been affected by Covid shutdowns which had delayed it.
The NZ International Convention Centre job was "progressing well" and Fletcher was working with Auckland Council and the client on that, Taylor said.
Asked if the share buyback would have been better when the shares were trading under $6, Hassall said another buyback operated more than 18 months ago. That had been re-started and the programme was beneficial to shareholders, he said.
The Shareholders Association said the board was "a bankers' board" but Hassall said there was a strong range of experience across the directorships. A succession plan was being worked on.
The company has a $5.8b market cap on the NZX and shares are trading around $7.28.