Fletcher Building made $164 million in net profit after tax in the year to June 30, turning around the previous year's disastrous $190m loss.
Investors liked the result, sending the share price up 18c or 3.94 per cent to $4.75 shortly after the market opened Wednesday.
New Zealand's largest construction company and building materials manufacturer and distributor made revenue of $8.3 billion, up 1 per cent on last year.
Earnings before interest and tax came in at $631 million, below the midpoint of guidance and reflecting a softer performance from NZ Steel due to margin pressure.
Significant items of $234 million were incurred through the divestment of the company's international businesses and through restructuring charges taken to reset the Australia division.
Earnings from its building products division fell to $127 million from $132 million the previous year, ebit from the distribution division was unchanged at $104 million, steel division ebit fell to $33 million from $49 million and concrete ebit fell to $84 million from $90 million.
Fletcher, which has announced $300m share buyback, said it will pay a final dividend of 15cps on September 19, taking the full year dividend to 23cps.
Ross Taylor, Fletcher chief executive, said 2019 was an important transition year for the company.
"We made significant progress on our five-year strategy. Fletcher Building delivered a solid financial performance for the year, and I am pleased with the work we carried out to stabilise and refocus the company.
"In New Zealand our core building products and distributions businesses delivered good results, maintaining strong market positions and revenues despite operating in a highly competitive environment.
"The construction division stabilised which led to a return to profitability and we are on track to complete the remaining legacy B+I projects within the provisions we set in February 2018," Taylor said.
Fletcher's Australian result showed EBIT fell 50 per cent from $114m last year to $57m this year. The company said performance reflected tough market conditions, rising input costs and poor operating disciplines in some areas. Turnaround plans are well underway to reset these businesses and deliver growth in FY20, a statement said.
The company's decision to operate in a more focused geographic footprint led to the sale of international businesses roof tile group and Formica during the year.
Both sales were completed ahead of schedule and the amount paid was above expectations.
"The sale of Formica for $1.2b materially strengthened the company's balance sheet, we have commenced our $700-800 million debt reduction and will distribute up to $300m to shareholders through an on-market share buyback," the statement said.
Dividend payments resumed at 23cps, weighted to the final payment.
Fletcher has proposed a 480-home Māngere development at the controversial Ihumātao, a site of protesters and police. Gross revenue of $639m was declared from the residential and development division, up 11 per cent on last year. "Excellent revenue" was being produced and solid demand for homes in the $600,000 to $900,000 bracket was cited.
When Precinct Properties announced its result this month, that revealed it had withheld $34m from Fletcher Construction for delays on Auckland's $1b Commercial Bay project.
SkyCity Entertainment Group said last year it was withholding $26.9m from the Fletcher Construction Company because of issues building the $703m plus NZ International Convention Centre in Auckland.
Before the result's release, Forsyth Barr released an update on Fletcher tagged "underperform", saying much of the year's activity had been pre-announced at June's investor day in Sydney.
"We expect the result will reaffirm a business facing macro (in Australia) competitive and cost pressures. Although FBU does not typically provide guidance at its full
year result, we suspect any outlook commentary would dampen FY20
expectations — our FY20E EBIT/NPAT is -8%/-14% below consensus," the analysis from
Matt Henry and Matt Dunn said.
Revenue was forecast to be much higher at $9.5b for the 2019 financial year, up 0.4 per cent on last year's $9.4b. EBIT was forecast to rise from last year's $50m to $627m. Dividends are forecast to be 23cps.
Softened Auckland house prices could hit the company's house-building margins and further losses were likely from the Building+Interiors division, the analysts forecast.
"Industry anecdotes and Fletcher's lack of profit recognition to date suggests its infrastructure division is also grappling with project delays and cost overruns."
They forecast disappointment from market earnings expectation in the 2020/2021 terms as well.
In the past decade, Fletcher had been "a perennial disappointer vs market expectations. Unfortunately, we see a high risk of it doing so again over FY20/21 given the plethora of competitive, macro and operational challenges it faces," they wrote.
It had a low-quality Australian portfolio of assets which performed poorly.
Fletcher shares were trading on the NZX at $4.57 yesterday and the company had a market capitalisation of $3.8b.