Troubled NZX giant Fletcher Building says it still expects to make huge annual operating earnings of $680 million to $720m for the year to June 30, despite issues with its construction division.
In an outlook released with the half-year result to December 31, 2017, Fletcher which has a market capitalisation of more than $4b re-stated its profit forecast, saying other aspects of the business were going well.
That illustrated that the business which employs more than 18,000 people around the world is far bigger than just its struggling Buildings + Interiors division where construction is held.
"Fletcher Building reiterated its expectation that [full-year 2018] group operating earnings excluding B+I will be between $680m and $720m," the company said in an NZX statement.
The company said there would be no interim dividend.
Fletcher Building shares touched their lowest levels in more than five years after the company's first-half results.
The stock recently traded down 2 per cent at $6.72, having sunk as low as $6.50 after the results.
The big one-time items including B+I operating losses of $631 million in the first half had been revealed in a profit warning last week that saw the resignation of chairman Sir Ralph Norris.
Ross Taylor, the new chief executive who took over from Mark Adamson, was upbeat about the future, in spite of losses over a two-year period of almost $1 billion at the Buildings + Interiors division.
"Outside the challenges experienced in B+I, the broader Fletcher Building business continues to perform to guidance. While it is pleasing to see an increase in sales revenues, operating earnings have decreased due to lower profits in the construction division, outside of B+I, as well as the building products division," he said.
Residential, commercial and infrastructure activity levels across the company's core markets of New Zealand and Australia remained in line with expectations, Taylor said. Growth in activity in this year's current second half-year was expected to be limited, particularly with the New Zealand building sector operating at or near capacity, he said.
"In New Zealand residential consents are up 3 per cent, and while there has been some softening of house price growth we believe this is a sign of the market normalising.
"In Australia residential activity is declining, but standalone approvals remain resilient. Growth in the infrastructure and commercial sectors remains robust in all states outside Western Australia," Taylor said.
Fletcher was widely tipped yesterday to be the business which withdrew from a competitive bidding process to build tunnels and stations in Auckland's $3.4b City Rail Link.
But neither CRL nor Fletcher would confirm that. Instead, Fletcher said there were commercial and confidential aspects so it could not say.
However, three independent sources close to the project told the Herald it was Fletcher which was one of the eight short-listed and which had withdrawn.
CRL said the withdrawal of one un-named bidder put the CRL back by about three months while a new bidder was sought.
- additional reporting BusinessDesk