Fulton Hogan warns of significant transtasman uncertainty

Fulton Hogan warns there's significant uncertainty about the outlook for major infrastructure on both sides of the Tasman, with commercial contracts deferred and little visibility on public work.

The privately-owned civil construction firm told shareholders last week that its NZ business was back in full swing, and while there were inter-state restrictions in Australia, more people were back to work.

The NZ contracting business has a "solid near-term workload" across most of the country due to pent up demand from the lockdown, while its Australian unit looks "like it will finish the year strongly," chairman Dean Hamilton said in a letter to shareholders.

However, Hamilton noted "significant uncertainty" on both sides of the Tasman.

"Already, a number of commercial contracts have been cancelled or deferred, and local governments in both countries are facing lower budgeted incomes," he said.

"Whilst both central governments have spoken of additional investments into infrastructure, the speed at which these major projects are likely to come to market, and our fortunes in gaining our share, are still unknown."

Shovel-ready?

Central government this week said it has 150 projects approved in principle for some $2.6 billion of spending that can be up and running quickly and is close to announcing a package for multi-billion dollar three-water upgrades needed across the country.

And the NZ Local Government Funding Agency this week lifted the debt ceiling for A-rated council borrowers to three times revenue for the next couple of years to free up capital for local authorities through the Covid crisis.

Fulton Hogan's Hamilton said it feels as though the company is facing more risk and more opportunity than normal.

The company's land development sales and settlements were in line with expectations, it said.

The board suspended its share buyback on March 25, when the pandemic injected heightened volatility in financial markets.

Hamilton said that with the business operating on both sides of the Tasman, the board will reopen the buyback programme at a price of $15.50.