Building Slump Hits Fletcher Hard

Sydney, Nov 13, 2008 (ABN Newswire) - The housing and building slump around the world continues to take its toll on listed players in our neck of the woods.

Boral, GWA, Harvey Norman, Nick Scali, Brickworks and CSR are just some of the listed groups to have found their businesses battered by the slump here and in offshore markets, especially the US and New Zealand.

In that respect, Auckland-based Fletcher Building is no different, except it has an especially large exposure to not only the NZ, Australian and US housing sectors, but those in other parts of the world with its leading position as the globe's biggest maker of laminated building board.

Yesterday's AGM in New Zealand heard the downside of that dominant position: warnings of a possible 38% fall in profit for 2009.

Chairman Rod Deane told the meeting that profit before one-off items may fall to between $NZ289 million and $NZ354 million in the year ended June 30 next.

"Current analysts' forecasts for net earnings after tax excluding unusual items for the full year are in the range from $289 million to $354 million.

"If current trading conditions were to be maintained throughout the remainder of the year then net earnings for the full year should be within this range. This spread is not unreasonable given the significant level of uncertainty in New Zealand and Australia and around the world," Mr Deane said.

That would be sharply down in any case from the $NZ467 million result reported in August (which was off 4%).

"It is now apparent we are in the midst of a worldwide recession,'' Deane said. "No one can say how economic conditions will develop or to what extent the worldwide slowdown will have further impacts on our markets.''

"Looking at the prospects for the year on a divisional basis, we expect Building Products and Distribution to report lower operating earnings than last year due to the slowdown in the residential housing market.

"Infrastructure is also expected to report lower earnings, due principally to the NZ$80 million of property related gains which were achieved in the past year, which will not be repeated in the current year.

"In the year to date, the Steel division has been performing strongly, reflecting the more favourable conditions in that market.

"In the Laminates and Panels division, we anticipate an improved operational performance by Formica North America being offset by weakness in demand across most regions," the chairman told the meeting.

But Fletcher (FBU) shares eased 2c to $A4.85 in Australia after the meeting. They hit a four year low of $NZ5.47 at the end of last month.

The chairman reassured investors that at this stage the dividend won't change. It paid a dividend of 48.5 NZc a share in 2008.

Fletcher is also the world's biggest maker of steel roof tiles and the largest supplier of fibre-glass insulation in Australasia.

Capital spending will also be reduced to about $NZ250 million this year, from $NZ349 million last year.


 

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