Fletcher Building CEO tells analysts not to expect 'big bang' announcements as company implements cost-cutting measures; issues guidance predicting 12-22% earnings increase in 2013 to up to NZ$610M, restructuring costs of NZ$20M
SURRY HILLS, Australia
November 20, 2012
– FLETCHER Building has flagged a 12-22 per cent lift in earnings for the 2013 financial year to between $NZ560 million ($440m) and $NZ610m, despite lingering weakness in the trans-Tasman housing markets.
Yesterday's guidance was well received by the market with shares in the company gaining 26c to $6.07.
Fletcher Building, which derives 85 per cent of its revenue from Australasia, said in August that guidance would be offered this month as the volatile market conditions at the time made earnings too difficult to predict.
Chairman Ralph Waters told shareholders at yesterday's annual meeting in Auckland the outlook for Australia, where home building levels had fallen, remained uncertain.
``We do not believe that the easing of interest rates by the Reserve Bank of Australia will be sufficient, in and of itself, to significantly improve consumer confidence in the short term,'' Mr Waters said.
``A sustained improvement in consumer confidence is, in our view, a necessary prerequisite for a substantial pick-up in new home construction.''
Mr Waters said that in Australia, home-building starts were down 12 per cent on the previous year and continued to weaken as the year progressed, while New Zealand home-building starts increased 14 per cent in the past year but were still down 30 per cent on the historical average.
``There is no doubt that 2012 was a difficult year, with poor economic conditions significantly impacting our financial performance. At the start of the year we were very cautious about how the key economies to which we are exposed would perform and, as it transpires, we were right to be cautious,'' Mr Waters said.
The group's fiscal 2013 earnings guidance included $NZ20m of restructuring costs.
``A caveat to note, however, is that any further deterioration in the Australian market, in particular, or in other key markets in which Formica operates, may necessitate a revision to this guidance,'' Mr Waters said
Fletcher, which is New Zealand's largest public company and is also listed on the Australian Securities Exchange, appointed Mark Adamson as chief executive from the beginning of last month.
Mr Adamson said he was confident of growing earnings regardless of the economic cycle.
``I would like the economy to improve, it makes my life easier, but I don't bank on it improving,'' he said.
Mr Adamson said he planned to co-locate businesses and distribution centres and to reduce leasing overheads as part of a wider program that would likely reduce costs by tens of millions of dollars.
``I don't think you should expect big-bang announcements of significant headcount (reductions) or closures.
``What I do think you should expect is that with the current level of activity, Fletcher Building would employ fewer people in two years' time than it does now,'' he said.
Mr Adamson has already announced a management shuffle and divisional restructure, following several rounds of cost cuts by his predecessor Jonathan Ling, and has said that aspects of the business remained under review.
(c) 2012 News Limited