Fletcher Building today reported net earnings of $185 million for the year ended 30 June 2012, compared with $283 million in the 2011 financial year. The result included restructuring and impairment charges totalling $132 million after tax. Net earnings before restructuring and impairment charges were $317 million, 12 per cent lower than the prior year.
Operating earnings (earnings before interest and tax) were $403 million, 18 per cent lower than the $492 million achieved in the prior year, while operating earnings before restructuring and impairment charges were $556 million, 7 per cent lower than for the prior year.
Restructuring and impairment charges included $38 million in costs incurred in restructuring the Laminex business, $20 million of closure costs for the Formica plant in Bilbao, Spain, and a $74 million reduction in the carrying value of the insulation business in Australia.
Cashflow from operations was $448 million, 11 per cent higher than for the prior year, driven by stronger cash contributions from Formica and the Crane, Construction and Steel divisions.
A final dividend of 17.0 cents per share will be paid on 17 October 2012, with full New Zealand tax credits attached, bringing the total dividend for the year to 34.0 cents per share.
Chief Executive Officer Jonathan Ling said the result was driven by low volumes in the group’s core markets of New Zealand and Australia.
“Weak building activity in New Zealand coupled with a marked slowdown in residential and commercial construction in Australia have resulted in lower earnings being achieved compared to last year”, Mr Ling said.
“In the past year in New Zealand we continued to experience very low levels of new house building. Coupled with the on-going disruption to rebuilding in Canterbury from further earthquakes, weak commercial construction activity, and a slowdown in infrastructure spending, we’ve endured a very tough year in our New Zealand businesses.
“In Australia, the pace of activity in residential and commercial construction slowed throughout the year and materially impacted our businesses exposed to these sectors,” Mr Ling said.
“Additionally, the high Australian dollar has adversely affected a number of our businesses with imports negatively impacting volumes and eroding margins,” Mr Ling said.
Despite the reduction in group earnings, operating earnings in the Concrete division were up $5 million to $130 million. Within the Laminates & Panels division, Formica’s operating earnings before restructuring and impairment charges were up 27 per cent to $71 million. Crane, which was acquired in March 2011, delivered operating earnings of $106 million in its first full year of ownership.
“We were very pleased with the first full years’ contribution from Crane, achieved despite the weakness in the Australian residential market. The Concrete division increased earnings from its Australian businesses due to the strength of the infrastructure sector and improved operational performance. Formica continued to deliver improved operating earnings through growth in its Asian business and from improved economic conditions and operating performance in North America,” Mr Ling said.
As announced in February 2012, a review of Laminex was undertaken to determine how to achieve a step change in its cost structure. Restructuring costs of $38 million after tax were incurred in the Laminex business during the year, with $15 million incurred in the first half. In addition, following the announcement in June of the consolidation of Formica’s manufacturing operations in Spain, $20 million was incurred in closure costs for the plant in Bilbao.
During the year, a strategic review of the insulation business was completed. While it has been decided to retain the business, the outcome of the review highlighted that medium term earnings prospects have deteriorated. This has necessitated a reduction in the carrying value of the business through a write down of goodwill, a write-off of stock, and a reduction in the value of its brands, totalling $74 million after tax.