Fletcher Building chairman Ralph Waters says Australasia’s biggest building materials maker and distributor sees no material improvement in trading in any market except Asia in the first half of its 2011-2012 financial year, with a risk of a further downgrade if construction volumes fall.
Waters was speaking to shareholders at their annual meeting in Auckland, where he reiterated the company’s forecast last month for a 10% decline in first-half profit to NZ$166 million, and no growth in full-year earnings, before one-time items, from last year’s NZ$359 million.
“These are challenging times. I have not seen so many western countries in economic difficulties in my 40-year corporate lifetime,” Waters said in a speech notes for the AGM.
“In New Zealand, that is exacerbated by the tragic circumstances of Canterbury.”
Shares of Fletcher Building fell 2.5% to $6.24, a 2 ½-year low. Waters said the weak share price was disappointing. The shares are rated ‘outperform’ based on a Reuters poll, with a price target of NZ$7.51.
The company had hoped for a sustained pick-up in economic activity in New Zealand through 2011. Instead, building consents fell to a record low in the first quarter.
“With interest rates at 45-year lows and weak demand for new housing it is difficult not to conclude that consumer confidence has yet to recover,” Waters said.
While commercial building proved stronger, overall activity was flat and government-funded infrastructure projects “continued to underpin the construction industry,” he said.
The Australian market started the year on a stronger footing but deteriorated in the second half while no improvement has been seen in the US or Europe. Asia, excluding flood-hit Thailand, has “continued to achieve strong growth,” he said. The company’s revised forecasts assume no further deterioration in its key markets.