BusinessDesk: Fletcher Building says first-half profit to fall 10%, full-year earnings growth to stall

BusinessDesk: Fletcher Building says first-half profit to fall 10%, full-year earnings growth to stall

By Jonathan Underhill

Fletcher Building, New Zealand's biggest sharemarket listed company, said first-half profit will fall 10% and earnings growth will stall in the full year on weak residential construction and potential delays in the rebuild of Christchurch after further quakes.

Profit in the six months ending Dec. 31 may be decline to about NZ$150 million from NZ$166 million a year earlier. For the year ending June 30, 2012, profit before one-time items will be about the same as 2011’s NZ$359 million, the company said in a statement today.

Fletcher is effectively the lead managing firm for the Christchurch rebuild, a reconstruction effort that’s expected to stoke economic growth and drive demand for the company’s services. In June Fletcher CEO Jonathan Ling told interest.co.nz in a Double Shot interview that rebuilding would not be able to get underway properly until the aftershocks cease.

“In New Zealand, no material improvement in trading conditions is expected in the first half of the 2012 financial year, and the timing of a sustained and meaningful recovery beyond that is uncertain,” Fletcher said.

“In Australia, there is a clear risk that residential and commercial construction activity will remain around the current low level for the balance of the 2012 financial year,” it said.

Reconstruction in Canterbury is expected to pick up in the second half of the 2012 financial year, “assuming a continuing reduction in seismic activity.” Still, the latest magnitude 5.5 quake last Sunday could further delay rebuilding efforts, the company said, citing the government. Treasury expectations are that the rebuilding in Canterbury will not “begin in earnest” until the second half of the 2012 calendar year, Fletcher said.

While building consents have risen in recent months, that hasn’t translated into activity levels, with the number of housing starts holding at “historically low levels.” Infrastructure activity “has remained steady” in New Zealand and is satisfactory in Australia, it said. Australian residential and commercial consents have remained weak, with the Laminex division’s earnings hurt in particular, the company said.

A global surplus of capacity in long steel markets, combined with a high Australian dollar, has weighed on steel export earnings across the Tasman. On a brighter note, Fletcher’s Formica laminated board business is managing to lift earnings in North America, Europe and Asia.

Fletcher's shares shed 11%, or 83 cents, to $7.07, heading for the lowest close since July 2009. Before today, the company was rated ‘outperform’ based on the consensus of 10 recommendations compiled by Reuters. Today’s move surprised analysts who had toured the company’s Crane facilities in Australia late last month with no hint then of a downgrade.

“There’s a bit of angst around the timing of this,” said Paul Harrison, equities manager at BT Funds Management. “And it sends a bit of a signal in terms of the rest of the economy.”

Fletcher’s announcement comes after carpet maker Cavalier Corp. said sales fell about 20% in the first quarter and the uncertain market conditions meant it couldn’t give any meaningful full-year guidance.

Fletcher is effectively the lead manager for the rebuild of Christchurch and has face set-backs in the process as the region was rocked by a series of earthquakes since the original damaging temblor in September last year, the latest being magnitude 5.5 last Sunday.

Reconstruction in Canterbury had been expected to pick up in the second half of the 2012 financial year, “assuming a continuing reduction in seismic activity” though the latest quake could push that out to the second half of calendar 2012, Fletcher said, citing Treasury estimates.

Rival construction firm Fulton Hogan has said spending on the rebuild could channel funding away from other regions.

BT’s Harrison said the Christchurch rebuild will happen eventually, helping underpin Fletcher’s longer-term valuation. “People are reacting today over what this means for the 2012 year,” he said.

While building consents have risen in recent months, that hasn’t translated into activity levels, with the number of housing starts holding at “historically low levels,” Fletcher said.

Infrastructure activity “has remained steady” in New Zealand and is satisfactory in Australia, it said.

Australian residential and commercial consents have remained weak, with the Laminex division’s earnings hurt in particular, the company said.

A global surplus of capacity in long steel markets, combined with a high Australian dollar, has weighed on steel export earnings across the Tasman.

On a brighter note, Fletcher’s Formica laminated board business is managing to lift earnings in North America, Europe and Asia.

(Updated with analyst reaction, share price fall)

(BusinessDesk)

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FBU share drop back to Sept '08 level...spooky...

Right...so since we know the shakes will carry on carrying on...the rebuild is all hype for now. In which case the wise will leave and invest any insurance payouts elsewhere. Look to see land values rise in the region beyond the shakes.

Makes sense; but with what, Wolly? The insurance payout in many cases will discharge the mortgage and assorted debts. Leaving...no deposit money to even 'get going' anywhere else. And would you, having lost it all to an event outside your control, invest in the same thing again? Just like in The States etc."'once ( property) bitten, twice ( forever?) shy" is going to be a phrase well followed.

That's quite likely NA but not all were up to the eyeballs in debt. Those who were, as you suggest will not be able to refi a new build and are likely renters for life. That may save their bacon but they won't know it. Those who do get the loot will move if they are not tied to work and since a heap of that has gone west...I expect the peasants will too.

I agree. And it does take 'the floor' from underneath the property market...wherever it is. Without the re-buyers, prices at all levels, will fall. Many will do as I am ,and  Bernard suggest they will; go o/s. And in my case, whatever 'profit' I have made from property in my homes over the last 18 years, goes with me, and I leave behind... debt in some form ,taken on by those who have bought from me, that aggrigates into the national debt we see in NZ today.

A lot of the so called rebuild was never going to happen. Repairs, yes. Rebuild, no. There'll be no shortage of empty lots in CHCH for decades to come, just like there has been in every other disaster struck city throughout history.

Which leads to falling land values...right Yoda.!

I don't know, Wolly. It's hard to think of an asset class that isn't bubbling, but it's hard to see those bubbles bursting when central banks continually roll out printing programmes denominated in hundreds of billions, and fools continually clammer to be elected.

I can Yoda....cash! Kiwi$ down near 16% in value since the 'new normal' broke. By 2021 it'll be down nearly 50%....how you like that for an asset class? Well done Alan....you keep the destruction going boy....chocolate fish at $10 each by 2021.

I went into the dairy with $1.80 in left over coins the other day.. the cheapest drink was a small bottle of Budget brand soda for $1.79... i left with my $1.80 in hand, couldn't even afford a can of coke. Back to the good old tap water for me.

Well, okay. That stuff they print with heads on, that can be an asset class then. And so can toilet paper - although toilet paper may be a little harder to short.

Excatly, it was hype to stop a mass exodus, but the exodus is taking place..slowly as people realise just how long this will drag out..first 10 years then 20 years and really a city built up over 150 years will not be  rebuilt within 40 years unless a huge amnt of money gets driven into it, which the governemnt has not got, and investors will not wait.

Flectchers await end to aftershocks....!

I'm still waiting for the Job Creation scheme to kick in....the cycle lane to be built...real trains

that don't require the driver to shovel coal...the raining money from the RWC...Billy Bob  to

actually understand a document he has read...John Boy to wipe that stupid smug look off his

face and admit we've got trouble a plenty....My plumber to come when he says he will....and

finally ..............Obama to grow wings add halo and tell us it was all just a test.

Your style is reminiscent of Sore Loser , well done Count ..... keep up the good work !

... I'd value your advice in the one thing that really matters .. not Rena , no not the $18 billion deficit , not Fletchers fart-arsing around ( who'd have guessed that'd happen , huh ! ) ....

The most important thing on the Gummy mind , is who to barrack for in the RWC final , France or Australia ? ..... whaddya reckon , Count ...

well GBH if they happen to sneak past us then it would be the Australians fore sure.

 You made need to revise your finalists though...the Welsh have probably played the most composed football of any side........I've had a great run picked the French/Welsh/Wallabies and sat shitting my pants during the Brave Argentines demonstration of how to styfle the All Black game.

Mark my words on this... two years post their inclusion in the Super 15 they will be genuine contenders for the number one spot..

as to the SL thingy ...I..suppose so, but I like to think I'm a little briefer and while I have the utmost respect for that particular scribe....you should know I could never attach the L word to my name, nom de plume or no.

Cheers my good man....don't doubt the All blacks...this is an occassion I think they will rise to, more so without Carter and no longer complacent...I fear the Wallabies may have already played their final.....it was a smashing affair..!

Thankyou , Count . .. . excellent advice . So it'll probably be Wales , not France , in the final against the Aussies ... Gotcha !

[ that Quade Cooper , he really is a goose , isn't he . I shat myself laughing at how useless he was ]

GBH If your refering to Qualude Cooper as he is affectionately know to his team mates...just a matter of lowering the dose for him.....but he is a dick is he not...tee  hee..

and stop that ...............WE WILL NOT CHOKE>>WE WILL NOT MESS IT UP>>WE WILL NOT SURRENDER>> WE WILL WIN OR DIE IN THE ATTEMPT.

For a number such as Ritchie there will be no return to a world cup....and that is one story that deserves a fitting end.

I just got sent the following in an email, it might amuse you. Personally I'd rather see the guy clapped in irons...

"New Zealand's coastline is turning black. It means the All Blacks will win! We should embrace this sign...and the pissed captain who brought it to us!"

For twas his Birthday Gareth....and someone was regaling him with a rendition of "Hey ho up she rises"...................bonk!

Where the heck is Nick Evans when you need him ! ... He was only a nick below Dan Carter's skill level .

..... the NZRFU are dopey sods , when it comes to refusing to get guys back from Europe . Carl Hayman would bolster the pack too .

They need a polly in there behind the scrum Gummy...bit of the old hypnotherapy to turn the ball into a hot political spud and that ball would move with lightning speed...

Gummy suspects that introducing politicians into the game would stop the flow of the game . In fact I'd bet that the goal-posts would be removed into the safety of the stands ( OSH & ACC recommendation ) . Pieces would be shaved off the ball , to give to the " poor " . And only Labour politicians would get into the tight of a scrum or maul with any gusto .... " hello sweets , and why do they call you "  hooker "  ... hmmmm  ? "

Nick fell out of favor for I understand insider reasons....plus the IRB would love the English  Media to revisit the blood capsule in the mouthguard incident....he'd get hell ...but yes Nick was a real talent fearless too.

Look..! we will be fine.....Cruden will do the job...qiite an unflappable sort really..and grows with every outing.......of course if Donald runs out with two to go he will be promptly tackled out of the game by one of his own......................Lest We Forget.  

Wow..! SL..that's got to be a record ...!

So if it wasnt for the Chch earthquake, just where would they be financially?

in deep doo doo?

Looks that way to me.....

regards

You don't spose it was them what was drilling under chch in August last year do you steven?

How long before Fletcher Building tries the 'covered bond ' financing stunt currently proposed by this US homebuilder?

ECB purchases of this debt type are flavour of the month so it seems - our RBNZ would not flinch, I guess, if national interest excuses were justified.- AMI. Why not Fletchers?

 "Hovnanian is locked into fairly high interest rates on the money it borrowed from bondholders (the debt the company is trying to exchange carries rates between 6.5% and 11.85%, and comes due between 2014 and 2017). " SHs link

Now how would you feel owning those bonds! Safe as houses!

Is there any HAPPY news in NZ ???

Yes - there is - the RWC 1/2 final between NZ vs AU isn't played yet.

I am here in Australia (Queensland) and the word is the cup will be theirs in 10 days..  Yeah right?????????? 

 It is a different mentality – big nations like Germans, Americans and Australians always think they win. Watching the games and the coaching team - it seems to me the Kiwis are at least looking very tense - not confident at all. Hopefully they know about their ability and class they have to win the RWC.

I would hope the Kiwis have an organised, loud supporting crew – stimulating the crowd and the team every  5- 10 minutes. Haka – haka All Black – go ! Haka – haka All Black - win !  ..or similar.

A number of impressive Haka’s in front of the “Aussie crowd” would certainly help too.

 

….and do the same in the final against the French.

Or if the ABs kept on reading stuffs from interest.co.nz, it would be ABs playing against Wales in third-fourth place.  

Never seen so much depressing news... no wonder this country is in the deep end.

OK This wat"s Gonna Happen.......

1. Ship Brakes UP or Down.

2. Nats Find There Basin Of Oil

3. The Greens Will Get 16% At Next Election ( U no Voting thing }

4. Powerball Will Be this Saturday Be No: 7

5.The Game Well I Can't Say .......U'r Beater Off WAtching IT

And is the quake also the reason why Xtra so frequently stuffs up email connections and leaves subscribers in the lurch????So what caused the mess today....somebody did it....!

Your getting very close now Wally ........Hot Hot ooooppps ///////