It’s likely to be a mixed bag of numbers for New Zealand construction giant Fletcher Building when it releases its interim results tomorrow.
Following the release of its 2008/09 results in August, Fletcher Building chief executive Jonathon Ling refused to provide guidance for the year ahead.
“We just don’t know what’s going to happen,” he told NBR then.
This was after a $46 million net loss for the year, its first since 2001. While a series of one-off costs eroded the company’s bottom line, a flagging economy eroded the performance of most divisions – most were a victim of a global slump in residential and commercial building.
The company’s steel division was the strongest performer with an ebitda of $175 million against the previous year’s $123 million.
Brokerage house Forsyth Barr is expecting a 16% first half drop for ebitda to $340 million and reported profit down 23% to $133 million against the first half of the previous year.
Analyst Rob Mercer said a key risk for New Zealand’s largest listed company was the sharp deterioration in earnings exposed to the commercial building sector, particularly cement, steel and aggregates.
Despite the steel division’s strong performance last year, Mr Mercer forecast the division’s ebit would be down nearly 60% to $40 million, reflecting a sharp fall in steel prices and volumes.
Perhaps telling was Steel & Tube’s interim results last week which presented an 85% drop in its reported after tax profit – down to $3.2 million.
For Steel & Tube, the word recovery was quietly spoken with an admission that there were early signs conditions were improving, but the key issue was the uncertainty around the extent and timing.
However, Statistics New Zealand latest building figures show a gradual increase in non-residential building consents.
The value of consents last December was up 5.6% to $404 million compared with the same month in 2008. While there were slight declines in factories and industrial buildings along with offices and administration buildings, infrastructure construction was up.
Hospitals and nursing homes, social, cultural and religious buildings and education buildings all increased in value.
The quarterly result for non-residential building was up even higher by 7.9% in the three months to December. This followed a fall for 20% in the previous quarter.
Year on year, non-residential construction was static.
This could bode well for Fletcher’s construction divisions. Although the increases are relatively small, they indicate a changing climate and possibly changing fortunes for the company.
Also Fletcher’s Australian operations were expected to perform better than New Zealand.
Mr Mercer suggested the Laminex and insulation businesses would fare well and expected business exposed to the residential housing cycle to show a modest improvement, mostly due to cost improvements.
In New Zealand, residential building consents issued continued to decline.
For Fletcher the 2008/09 was hard on staff with 15% of it 16,500 workforce shed during the year. Mr Ling said further cuts were possible.
Redundancies and other restructuring costs contributed to the unusual items that eroded the company’s after tax earnings of $322 million leading to a loss.
Fletcher Building has a market capitalisation of $4.5 billion. The company’s share price has fallen nearly 12% since mid-January and was trading at $7.46 today NZX:FBU).
Tue, 16 Feb 2010