While a full recovery of the building industry is still some time away, Fletcher Building already putting has plans to take advantage of the expected return of volumes.Speaking at a Trans-Tasman business circle lunch in Auckland today, Fletcher Building c
While a full recovery of the building industry is still some time away, Fletcher Building already putting has plans to take advantage of the expected return of volumes.
Speaking at a Trans-Tasman business circle lunch in Auckland today, Fletcher Building chief executive Jonathan Ling said the traditional method of waiting for volumes to increase before building production back up had left businesses such as Fletcher scrambling to satisfy demand in the past.
He said Fletcher was now working on various scenarios for the future and identifying key trigger points for when they needed to have increased production in place if they wanted to avoid losing customers.
“These turn into very detailed plans, so we can turn that increased demand into profit instead of just wasting it.”
He said the company was also changing the way it dealt with its equipment that was not needed during the downturn.
While in the past it would simply switch it off and mothball it during volume slumps, that meant it now had equipment that was decades old and uncompetitive and the company would now need to reinvest in new technology as demand returned.
Last month the company revealed a 10.4% drop in its interim half-year net profit to $154 million, although this was still above analysts’ forecasts of about $133 million.
Mr Ling told members of the business circle that Fletcher had got through the unprecedented downturn in the building industry by focusing on its aim of having a high performance culture, ruthlessly cutting back on aspects of the business that weren’t performing.
That included pulling back on its global workforce, which has dropped by about 3000 over the past 18 months.
More than geography
With less than 50% of its shares owned by New Zealanders, Fletcher Building is now technically an offshore company and the global outlook varied hugely between different regions around the globe.
Mr Ling said that recently after speaking to investors in New York and London, the consensus was that there were still a lof ot structural issues to deal with in established markets like Europe, issues the Asian region did not share.
He said there was no question that Asia and Australia would be one of the real growth areas of the future and while New Zealand had the opportunity to grab on to the coat tails of that growth, it also meant increased competition from similar companies in North America and Europe.
“It’s not just enough to be there, it’s a matter of how you’re going to compete and how you’re going to win.”
Australia – where Fletcher Building has built up a strong presence over the past decade – was in some regions heading back into pre-2008 levels
But Mr Ling said the relatively strong performance across the Tasman during the global recession and the wind-back from last year’s stimulus package meant the country was not that well positioned to maximise earnings as volumes got higher.
