Fletcher reveals profit expectations for coming year

Fletcher Building expects to post operating profit of up to $565 million in the coming financial year.

In an announcement ahead of its annual general meeting in Auckland this morning, the company said it expected earnings before interest and tax somewhere between $519 million and $565 million.

That compares with the $549m recorded in the 2019 financial year.

The company's mid-point guidance for the coming year is $540 million, signalling a small downside bias in its core operating profit forecast.

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The guidance released today indicates that Fletcher does not expect the convention centre fire to have an immediate impact on the company's bottom line.

"In recent days, the insurers for the project have now formally confirmed that both the
Contracts Works, and the Third Party Liability insurance policies, will respond to damage and claims caused by the fire," said Fletcher chief executive Ross Taylor.

"We have now had access to the site for two weeks, and are actively working on making the site safe. And in parallel to this, we are also developing the rebuild plan and timetable, which we expect to have finalised by February next year."

On a more concerning note, Taylor did note that the company had five fatalities over the last year.

Taylor said that the company has made significant changes in response to these deaths.

"We are now well into a multi-year reset of our safety approach to ensure we have both; safe work practices, and safe work places across every corner of Fletcher Building," he said.

"To help us achieve this as quickly as possible we have partnered with Dupont, an
international safety organisation. Our target is be at industry best practice in safety within the next three years."

Overall, Taylor suggested the business remained in good health.

"Fletcher Building's New Zealand core divisions – building products, concrete and distribution – remain on track against a solid market backdrop," chief executive Ross Taylor says in notes prepared for today's annual shareholders' meeting.

"Activity for residential and commercial finishing trades remains strong, supporting good performance in plasterboard, insulation and laminates," Taylor says.

"Activity for civil, infrastructure and starting trades is trending slightly lower as expected, leading to a slight easing in demand for concrete and pipes. In addition, the steel market remains highly competitive," he says.

Demand for housing in key target segments remains strong and prices remain supportive.

"In construction, Higgins experienced a slower start to the year due to a wet first quarter," Taylor says.

"In Australia, the division's cost-out programme is progressing to plan and there is good turnaround momentum in Laminex and Fletcher Insulation," he says.

"Intense competitor activity in the declining residential market is placing ongoing pressure on price and margin in Stramit and Tradelink while infrastructure project delays are expected to have some near-term impact on Iplex and Rockla in full-year 2020."

Fletcher shares closed yesterday at $5.24 and are up 7.4 per cent year-to-day compared with the benchmark S&P/NZX 50 Index's more than 26 per cent gain.

- With BusinessDesk