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Fletcher Building Cautious On Outlook After $46m Net Loss

Fuseworks Media
Fuseworks Media

Wellington, Aug 12 NZPA - Fletcher Building is cautious about its prospects for the current year, after reporting a $46 million net loss for the year to June.

The result took into account unusual items of $360 million, including charges for restructuring and manufacturing capacity reduction initiatives, and the impairment of some assets, the company said today.

Net earnings after tax before unusual items were $314m, down 33 percent from $467m the previous year.

"This year our results have been tremendously impacted by the slow down in building activity worldwide. There is no place to hide when volumes fall as sharply as they have," Fletcher Building chief executive Jonathan Ling said.

Increased spending on infrastructure by governments in this country and Australia had been of immense benefit, but were not enough to offset reductions in residential and commercial building.

Total operating revenue was $7.1 billion, little changed from a year ago, with Mr Ling saying it was boosted in part by currency movements, in particular a weaker NZ dollar throughout much of the year.

During the year the total labour force across the group fell by about 2500 to 16,500. Mr Ling said he though the company was "through the worst" of the layoffs.

The unusual items included $157m after tax for adjustments to asset carrying values.

Mr Ling said the adjustments reflected the current market outlook.

Reduction in Formica's carrying value of goodwill of $56m and impairment of fixed assets in Formica Europe of $65m reflected depressed trading conditions in the US and Europe.

But Mr Ling said Fletcher Building remained focused on developing its Laminex and Formica businesses into world leaders with commensurate profit performance.

Fletcher Building's $US700m purchase of American company Formica Corporation in 2007 was followed by disappointing results.

Mr Ling said today the latest result, with Formica's earnings before interest, tax, depreciation, and amortisation of $60m, was up 25 percent from a year earlier.

Most importantly profit continued to improve each half year, despite the difficult conditions, he said.

The outlook for 2010 was cautious with activity levels expected to remain low in most markets. In particular volumes in the first half of this year would be lower than more buoyant market conditions in the first half of last year.

Weakening commercial and industrial markets were expected, particularly in the second half as customers cut capital spending, Mr Ling said.

Residential activity might show some improvement, but overall demand was expected to remain weak in the short term.

Insulation was expected to perform well as a result of government stimulus in this country and Australia.

"There's still a fairly high degree of uncertainty in the marketplace ... and at this stage, with that uncertainty, it's very hard to put a number on what the guidance might be for the 2010 year," he said.

A key question would be activity levels in the second half, "and I just don't know what they'll be at this stage".

Fletcher Building planned for the worst and hoped for better.

The company said the result for the latest year reflected a strong performance from the Steel division, with operating earnings up 52 percent on the prior year to $154m.

All other divisions recorded lower operating earnings than the prior year due to the slowdown in building activity across most markets.

Property-related earnings from the residential business, quarry end use activities, and surplus asset sales were $18m, compared with $80m the previous year.

A final dividend of 14 cents per share is to be paid, compared to 24.5cps the previous year.

At mid-afternoon Fletcher Building shares were up 43c, or 6.1 percent, to $7.45.

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