Fletcher profit climbs on sales growth, one-time gains

Fletcher Building posted a 71% gain in full-year profit and met its earnings guidance, driven by an improved performance in Australia and gains in its New Zealand distribution, residential and construction divisions.

Net profit rose to $462 million from $270 million, the Auckland-based company said in a statement. Total revenue gained 4% to $9 billion. Operating earnings before interest and tax and excluding one-time items were $682 million, within the company's guidance range of $650-690 million.

The latest results include one-time gains of $44 million including a $90 million gain on the sale of the operations of Rocla Quarry Products to Hanson Construction Materials, offset by an impairment against its Formica India manufacturing assets and charges for plant closures. In the previous year it recognised one-time charges of $129 million, mainly reflecting impairments and closure costs against its Australian operations. Australian earnings climbed 29% to $154 million in the year ended June 30, even as revenue across the Tasman slipped 3% to $3.04 billion.

"While the macro-economic environment in Australia was mixed, we delivered strong earnings growth from our Australian business portfolio, which was the result of our focus on improving the performance and capability of our businesses in that market," chief executive Mark Adamson said in a statement.

The company gave guidance for 2017 of ebit in a range of $720-760 million, helped by the contribution from Higgins Group, the rival construction group it gained antitrust approval to buy for $303 million. Higgins was likely to offset the impact of its discontinued Pacific Steel, Rocla Quarry Products and Fletcher EQR businesses.

Adamson said the earnings gain would be reflected in the current six months, with first-half ebit expected to be up on the year-earlier result.

Fletcher sees residential building consents in New Zealand peaking in 2018 while non-residential activity is seen remaining "steady at elevated levels." Infrastructure work is expected to grow. In Australia, residential construction is expected to gradually decline after a peak this year, with little growth forecast in non-residential activity.

For the rest of the world, Fletcher sees moderating growth in China and modest growth in its Taiwan and southeast Asian markets. It sees relatively low growth in North America and a mixed outlook for Europe, with modest UK growth.

Fletcher will pay a final dividend of 20c  a share, fully tax paid, on October 12, for holders as of September 23. That brings total payments for the year to 39c  and it will also offer a dividend reinvestment plan. For New Zealand shareholders it expects to be able to fully impute dividends through to 2019 while in Australia it will fully frank final dividends "where possible." That's unlikely to include the final 2017 payment, it said.

Fletcher shares last traded at $9.69 and have gained 32% this year.

(BusinessDesk)