Fletcher reiterates full-year operating earnings guidance at lower end of $650-690m range

Fletcher Building [NZX: FBU], whose shares have missed the rally on New Zealand's bourse in the past five years, has reiterated its forecast for full-year earnings and capital spending to be at the lower end of its guidance range.

Operating earnings before one-off items would be at the lower end of the range of $650-690 million in the 12 months ending June 30, the Auckland-based building products and construction group said in a statement, repeating the guidance it gave with its first-half results in February. Capital expenditure is expected to be at the bottom of its guidance range of $275-325 million.

Fletcher shares have barely budged from where they were five years ago, achieving a 0.5% gain, excluding dividends, while the NZX15 Index has soared 91%. Chief executive Mark Adamson, tapped for the top job in 2012, has been forced to deal with the high-priced purchase of Crane Group, a downturn in Australia's mining sector, and has been selling assets while embarking on a cost-cutting programme and overhauling his management team.

In presentation slides for a Macquarie Australia Conference this week, the company said residential building consents in New Zealand, its biggest market by sales, were above their long-run trend and the outlook for commercial construction was "encouraging," with civil infrastructure driven by government spending.

Residential construction in Australia was expected to remain strong while the outlook for non-residential work was "challenging," with declining investment in the resources sector and uncertainty over government infrastructure spending. Conditions in the North American market were "expected to track higher," while Europe was mixed with a weak economic outlook. Further volume growth was seen in Asia although the Chinese market was "increasingly competitive."

The company said its performance in 2015 would be affected by the sale of businesses last year and the substantial completion of the Canterbury home repair programme. Earnings from its Fletcher Living residential development business were now forecast to be up year on year, it said. A decline in first-half earnings partly reflected charges to close plants and write down goodwill.

Its shares last traded at $8.31 on the NZX and are rated a 'hold' based on the consensus of 11 analysts polled by Reuters, with an average price target of $9.01.