Earnings downgrade in Fletcher forecast
New Zealand building products and construction company Fletcher Building is forecasting an earnings downgrade for its 2019 half-year result.
Fletcher Building, which held its annual meeting at Eden Park yesterday, expects that earnings before interest, tax and significant items for the 2019 half-year will be 10 per cent lower than earnings reported in its 2018 halfyear result.
This was due to challenging Australian trading conditions and the timing of house sales in its residential division, it said in a statement to the NZX yesterday.
Fletcher Building said it expected its 2019 full-year profit before interest, tax and significant items to be in the range of $630 million to $680m.
Full-year profit would be affected by an ‘‘outage’’ at its Golden Bay Cement plant, a slowdown in the Australian residential market, and a reduction in its land development business arm’s earnings compared to last year.
In August Fletcher posted a full-year loss of $190m and said it would not pay shareholders a dividend in 2018. The previous year it made a $94m profit.
It is aiming to recommence dividend payments in the 2019 financial year subject to satisfactory trading conditions and group cashflows. An update on its dividend will be announced at its half-year results in February.
Chairman Bruce Hassall said Fletcher Building had a challenging year. In Australia, despite revenue increasing, profits fell as its businesses suffered from higher costs, particularly in energy and resins, he said.
Hassall said chief executive Ross Taylor, who took over from Mark Adamson in November 2017, undertook an in-depth review of its troublesome building and interiors (B&I) division projects after his appointment.
This led to February’s announcement of $486m in additional losses for the division – resulting in a total B&I loss of $660m for the 2018 financial year.
At the time of the review Fletcher shares went into a trading halt on the New Zealand and Australian stockmarkets and the company decided to stop bidding in vertical construction due to unfavourable market conditions.
A review in October 2017 said the building giant was facing significant losses after major cost blowouts in the previous financial year on two key projects.
A year prior Fletcher Building’s share price was over $10.
Yesterday, Fletcher shares closed at $4.93 each, having fallen about 16 per cent in the past year.
Fletcher has a market capitalisation of about $4.7 billion, about 20,000 employees across 40 countries, and about 50 businesses including Fletcher Construction, Placemakers, Winstone Aggregates, Rocla Quarry Products, Gerard Roofing, and Pink Batts.