Result reflects ‘good progress’: Fletcher
AUCKLAND: Fletcher Building exceeded its own forecast by earning 47% more operating profit in the latest halfyear, rising from $219 million to $323 million.
New Zealand’s biggest building construction and materials manufacturing business had forecast making $305 million to $320 million but came in $3 million above the top end of its own range.
Revenue was up from $3.96 billion to $3.98 billion, net profit after tax up 48% from $82 million to $121 million, and shareholders will get an interim dividend of 12 cents per share, paid on March 24.
Fletcher Building chief executive Ross Taylor said the result reflected ‘‘good progress made on our strategy to drive consistent performance and growth’’.
‘‘The improved earnings and profitability are the outcome of initiatives undertaken over the past three years to improve operating disciplines and efficiencies across the group.’’
Group cash flows from operating activities of $428 million were significantly higher than the $5 million outflow in the prior period, resulting from a higher ebit and a material improvement in working capital. Group ebit margins improved to 8.1% from 5.5%, and there was improvement across all operating divisions.
‘‘We have seen a broadly stable market environment. Growth in the New Zealand residential sector has been offset by softer demand in Commercial and mixed conditions in infrastructure in both New Zealand and Australia,’’ Mr Taylor said.
‘‘In all businesses, we have remained focused on executing our strategy, especially improving the underlying disciplines and efficiencies of our operations. The sustainable improvement in margins was achieved through pricing disciplines; targeted share gains; consolidation and automation of manufacturing and supply chains; and a more efficient overhead cost base.’’
Market factors contributed 15% of the group’s ebit rise, but the other 85% came from ‘‘strategic improvements in operating efficiency’’, Mr Taylor said. In mid2018, he announced a fiveyear plan to transform the company and indicated yesterday the result was paying off.
Shareholders will get the 12cps dividend due to the better performance.
At Fletcher’s annual meeting in November, Mr Taylor told shareholders that the first six months looked promising.
‘‘The trading update also showed we are making good progress on improving the operating performance across all of our businesses. Through the first four months we saw group revenues up slightly by 1%, group ebit of $227 illion up $80 million, group ebit margin up 2.9% to 8.4% due to improved operating efficiency, and our cash flows and balance sheet remain strong with net debt at $388 million and available liquidity at $1.4 billion as at October 31, 2020,’’ he said then.
Fletcher has been trading on the NZX at about $6.44, up $1.20, or 23%, in the past year, giving it a market capitalisation of $5.3 billion. On the ASX, it is at $A5.98 ($NZ6.45), up on November’s A$5.33.