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.