Fletcher Building expects to report improved earnings in the 2010/11 year, with impetus coming from reconstruction activity in Christchurch after the September earthquake and the remediation of leaky buildings.Chairman Ralph Waters said he expected the co
Fletcher Building expects to report improved earnings in the 2010/11 year, with impetus coming from reconstruction activity in Christchurch after the September earthquake and the remediation of leaky buildings.
Chairman Ralph Waters said he expected the company’s current year net earnings to be in a range of $311 million to $405 million, in line with analysts' forecasts. The average of market forecasts is for a net profit of $357 million.
The construction and building materials group reported net earnings before unusual items of $301 million for the 2009/10 year, which was down from $314 million in the previous year.
Mr Waters told the annual meeting the group’s performance in the first four months was in line with budget and ahead of the same period last year.
At the end of October, Fletcher Building’s construction backlog – excluding earthquake work -- was $835 million, with a further $400 million of work, for which the company is the preferred contractor, lined up.
Chief executive Jonathan Ling said the two significant factors facing the building materials market over the next few years would be rebuilding activity in Christchurch and the remediation of leaky homes.
“We expect significant repairs and rebuilding of (earthquake) affected homes to gather pace in the first half of 2011 as the construction industries mobilise for the reconstruction effort,” Ling said. “This will be accompanied by rebuilding of commercial properties and key infrastructure, over a longer time frame.”
He said an $11 billion programme outlined by the government to remediate 40,000 to 80,000 leaky homes will have a significant impact on the building industry over the next decade. Fletcher Building expects the scheme to start in the first quarter of calendar 2011.
Overall, the company expects residential house building activity to continue to pick up from the weak levels of a year ago, but to remain below the long run average for another year or two.
A recovery in commercial construction is expected to lag behind any pick up in the residential market.
Infrastructure spending by the government is forecast to be lower this year due to the timing and implementation of larger projects, but Fletcher Building expects a pick up in the 2012 financial year.
In Australia, the company expects conditions to remain relatively favourable driven by the continued strength in the mining and resources sectors. However, housing starts and commercial construction activity levels will depend upon the relative strengths in each of the state economies.
Fletcher Building’s shares last traded at $7.92, down 2c.
