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Big activity increase needed to lift earnings: new Fletcher boss

Building activity will have to climb significantly to see a dramatic earnings increase this financial year, Fletcher Building's Mark Adamson says.

Mr Adamson, who will take over from chief executive Jonathan Ling in October, said at a briefing in Auckland today following its full-year result, he does not think a 20% lift in earnings is possible this financial year given the poor outlook for construction.

"We would need to see a significant increase in activity beyond where we are today."

That comment comes after analysts' optimism ahead of the company's result

Fletcher's share price (NZX: FBU) tumbled 28 cents, or more than 4%, by midday, to $6.38. 

Mr Adamson says the business's strategic review, involving external consultants, will identify further cost reductions and possible divestment of "non-core assets".

He says the company wants further efficiencies to drive earnings ahead of the cycle.

However, he says he doesn't have Mr Ling's drive to spread the business more geographically.

Construction backlog

Mr Ling says Fletcher's has a $1.1 billion construction backlog to the end of June, including Auckland's Waterview connection and Wiri Prison.

However, he says those projects will not start in earnest until the second half of the financial year, shifting any revenue to FY14.

Mr Ling says momentum is starting to build for Christchurch's rebuild.

"My view is that it will be a long, hard, slow road," he says.

"It's going to take quite some time to get back to the levels of house-building we were doing before the earthquake."

'Tougher than expected'

Fewer new houses being built and ongoing earthquakes in Christchurch led to a tougher than expected year, Mr Ling says.

the key markets in which Fletcher competes remain difficult.

"The year has been tougher than anticipated and tougher than the prior year."

He says New Zealand experienced lower levels of new house building, ongoing disruption to the Canterbury rebuild, and a slowdown in commercial construction infrastructure spending.

Australia residential and commercial consents continues to slow.

Fletcher Building's concrete and cranes division increased earnings. The building products, construction, distribution, laminates and panels and steel divisions all had significant declines.

The company makes 41% of its revenue from New Zealand, 47% in Australia, with 12% in the rest of the world.

Fletcher will hold its annual shareholders' meeting in November.

More by David Williams

Comments and questions
1

It may be a good idea to start with reviewing the "efficiency factor" and "slack communication factor" of your hubs in Earthquake struck Christchurch. We're all appalled by the arrogance and ignorance of your Fletchers Hub management and staff! We would like to be treated like all your staff and management would like to be treated themselves.
Don't show up on peoples doorsteps without prior notice given in any way, do return calls when people leave messages, don't tell us 1 thing and then do the opposite and do stick to your promises! Like the people from EQC, your people and company would get a far better reception by the people of Christchurch if only we we got treated like proper citizen. Your company is only a small link in the total chain of hurdles the people of Christchurch have to deal with, CERA, EQC, the continuous roadworks, and last but certainly not least ""the so called Insurance companies"! Don't forget what market share your company is potentially dealing with here in Christchurch: you're not only want to be seen to be doing the right thing here, you actually NEED to be doing the right thing at the same time by putting only a little more effort in. Please take notice.