HOT TOPICS:   Housing affordability  |  NZ$   | KiwiSaver                                            RESOURCES:    Economic calendar   |   Soil moisture history

The comment stream

Recent comments

Reader poll

Do you support the Reserve Bank intervening in the currency market to weaken the NZ dollar?

Choices

Fletcher Building to benefit from cost cutting, the Christchurch rebuild and the improving house market

Posted in Bonds

Construction giant Fletcher Building might be able to cut its costs by as much as NZ$75 million a year within three years, according to Deutsche Bank analysts.

In addition the Christchurch rebuild - in which Fletcher is heavily involved - could contribute as much as 8%, or up to NZ$78 million a year - of the company's operating earnings over the same period, the analysts say. 

Fletcher is due to announce its half-year results next week. The Deutsche analysts are forecasting an after-tax profit of $146.6 million, which would be down 7.8% on the same time a year ago.

However, they say that new chief executive Mark Adamson, who took over from Jonathan Ling last year, is expected to drive cost savings of about NZ$20 million within the company this year, rising to NZ$75 million by 2015.

The analysts say the cost savings will likely come from: Creation of “centres of excellence” to improve costs, reduced distribution and logistics costs, development of "shared services" and improved digital capability.

They believe that Fletcher will also benefit from the improved NZ housing market. and say they are confident that their forecast 20% growth in the number of housing consents issued here this year (to 18,800) will be achieved. They forecast a further 13.5% rise (to 21,300) in consents next year.

And then there is Christchurch, which the Deutsche analysts predict will contribute about NZ$50 million to Fletcher's operating earning this year. They tip the Christchurch contribution to peak at NZ$78 million in 2015. The analysts are picking total operating earnings of NZ$620 million for Fletcher this year, rising to NZ$994 million by 2015.

The company itself has predicted operating earnings of between NZ$560 million and NZ$610 million this year. Deutsche is picking after-tax earnings of NZ$352 million for Fletcher for the year to June, which compares with an actual reported profit by the company of NZ$185 million in 2012.

The Deutsche analysts rate Fletcher shares a "buy" and believe there is 15% upside potential to the share price. The Fletcher stock was changing hands at NZ$8.88 today.

We welcome your help to improve our coverage of this issue. Any examples or experiences to relate? Any links to other news, data or research to shed more light on this? Any insight or views on what might happen next or what should happen next? Any errors to correct?

We welcome your comments below. If you are not already registered, please register to comment in the box on the right or click on the "'Register" link at the bottom of the comments.

Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current Comment policy is here.

10 Comments

Fletcher Building

Fletcher Building this,Fletcher Building that,
Iam sick of hearing about them .
Here's an idea
JUST GET ON WITH THE REBUILD AND HURRY UP.

However, they say that new

However, they say that new chief executive Mark Adamson, who took over from Jonathan Ling last year, is expected to drive cost savings of about NZ$20 million within the company this year, rising to NZ$75 million by 2015.
 
What, another wealth transfer merchant? - when will corporate management cease stealing from labour to reward capital? As an owner of non-share capital I find that my ilk are being asked to shoulder too much of the tax burden, at the margin, thus enabling the entitled to pretend they and therefore society are richer.

lots of pretending....no ones

lots of pretending....no ones really nashing yet over the shrinking cake....this hasnt even started yet.
regards

Could SYSTEMIC RISK exist in

Could SYSTEMIC RISK exist in a particular sector ( Like  Construction).

"In finance systemic risk is

"In finance systemic risk is the risk of collapse of an entire financial system or entire market"
Yes....worse everything is so inter-linked these days that if there is substantial failure in one sector just why would those effects not be limited to within that sector?
Look at the 5 or 6 big banks. They all would seem to have substantial and similar exposure to say dairying....so if the milk prices collapse so do the banks....domino effects abound. then there is leverage....looking at that ever incraesing ratio once you get a decent neg event really the banks are insolvent...the only way past that is to hide it or fudge it with Govn agreement...
If retail collapses, just where does commercial property investment / returns go? 
Musical chairs right now IMHO...
regards
 

Probem we have is that once

Probem we have is that once all these Fletcher houses are built interest rates would have gone up and the houses would be unaffordable again.

Let's also recall that F is

Let's also recall that F is one of the Duopolists responsible for the Materials angle to Housing Unaffordability.  According to none less than the Productivity Commish.
 
So enthusiasm for the Oodles of Dosh being generated by said Duopolist, should be tempered with the realisation of where said Oodles are a'comin' from.

+1 A more appropriate

+1

A more appropriate headline would be something like "Fletcher Building still benefitting from excessively gouging the public thanks to its uncompetitive practices, and possibly a back-hander or two to the Minister in Charge Of the Chch Rebuild"

In Christchurch, cutting

In Christchurch, cutting corners on repairs... ideally avoid doing them at all...seems an effective  approach to cost cutting. hmmmm

Fletcher is obviously well

Fletcher is obviously well positioned to  benefit from the construction boom.
And they will be in an even stronger position if the rumoured acquisition of Mainzeal becomes a reality.
liberte