Fletcher Building today announced its unaudited interim results for the six months ended 31 December 2011. The group recorded net earnings after tax of $144 million, compared with $166 million in the prior corresponding period.
Operating earnings (earnings before interest and tax) were $256 million, 10 per cent lower than the $285 million achieved in the first half of the 2011 financial year.
The result includes unusual expenses totalling $15 million after tax incurred to date in restructuring the Laminex business.
Net earnings before unusual items were $159 million, 4 per cent lower than the prior corresponding period. Operating earnings before unusual items were $277 million, 3 per cent lower than the prior corresponding period.
Cashflow from operations was $129 million compared with $202 million in the first six months of the 2011 financial year. The reduction was due to a net increase in working capital including cash payments for land purchases, along with higher funding costs and cash tax payments.
The interim dividend will be 17.0 cents per share. In line with the company’s approach to allocating tax credits, the dividend will be fully franked for Australian tax purposes but will not be imputed for New Zealand tax purposes.
Total revenue for the group increased 30 per cent, as a result of the acquisition of Crane, with underlying revenues on a like-for-like basis excluding Crane declining by 5 per cent.
Chief Executive Officer Jonathan Ling said the result was a creditable outcome given the tough trading conditions and low volumes in most markets.
“As we outlined in October, earnings have been negatively impacted by low levels of activity in the New Zealand construction industry. This is particularly the case with new house building activity, with approvals in 2011 the lowest in the 46 years since records began.
“Australia was already slowing at the start of the year, and there has been a pronounced decline in new residential construction there over the past six months.
“Consequently, all of our businesses exposed to the residential markets in both countries have experienced lower volumes and reduced earnings,” Mr Ling said.
In response to the low volumes and margin deterioration in Laminex, a thorough review is being undertaken to determine how to achieve a step-change in the cost structure of the business. This goes beyond the restructuring undertaken in 2009, which addressed the manufacturing footprint and product profitability. The current review encompasses the go-to-market model and the profitability of ancillary activities that support the core Laminex product range. Additionally, further product rationalisation, coupled with closer integration of the Formica and Laminex product ranges, are expected to result in procurement efficiencies.
Costs totalling $21 million were incurred in restructuring Laminex’s operations in the period to 31 December 2011. As a result of further restructuring activity to be undertaken in the period to June 2012, Fletcher Building expects to incur an additional $40 to 50 million in unusual costs in Laminex in the second half of the 2012 financial year.
Fletcher Building is also undertaking a strategic review of its Australian and New Zealand insulation businesses. The outcome of the review may result in additional costs being incurred to improve the performance of these businesses.
“The sudden decision by the Australian government two years ago to terminate the insulation subsidy scheme has been disastrous for the domestic insulation manufacturing industry. The dislocation of the industry could not have happened at a worse time, with the strong Australian dollar undermining the competitiveness of domestically manufactured product. Given the change in market dynamics, we are undertaking a strategic review to determine what will be required to generate satisfactory returns in this business in the future”, Mr Ling said.
For the full year, net earnings before unusual items are expected to be in the range of $310 million to $340 million, compared with $359 million in the prior financial year. The guidance assumes very modest increases in new housing construction in New Zealand, no improvement in Australian residential building activity and reflects the magnitude 6.3 earthquake which occurred in Canterbury on 23 December 2011 which has further set back reconstruction activity.
Results overview (comparisons are with the prior corresponding period.)
Total sales of $4,509 million, up 30 per cent from $3,468 million
Operating earnings:
- Operating earnings of $256 million, down 10 per cent from $285 million
- Operating earnings before unusual items of $277 million, down 3 per cent from $285 million
Net earnings:
- Net earnings of $144 million, down 13 per cent from $166 million
- Net earnings before unusual items of $159 million, down 4 per cent from $166 million
- Cashflow from operations $129 million, down 36 per cent from $202 million
Earnings per share:
- Earnings per share: 21.2 cents, down 22 per cent from 27.3 cents
- Earnings per share before unusual items: 23.4 cents, down 14 per cent from 27.3 cents
- An interim dividend of 17.0 cents per share, fully franked for Australian tax purposes, up 6 per cent from 16.0 cents per share
Interest cover at 3.8 times, down from 5.6 times
Capital expenditure of $154 million, up from $148 million
For further information please contact:
Philip King
General Manager
Investor Relations
Phone: + 64 9 525 9043
Mobile: + 64 27 444 0203
ENDS