Fletcher Building has booked a $154 million profit for the six months to last December - 10% down on last year's result - and is cautiously optimistic of growth in the New Zealand and Australian residential sector.
A year ago, Fletcher's steel division was the outstanding performer for the global construction company, but a world-wide steel downturn prompted a $53 million decline, while its panels and laminate division booked a 60%, or $23 million, increase in earnings before interest and tax.
The $154 million profit, at 10% down, beat brokers' forecasts, with Craigs Investment Partners having predicted Fletcher profit would be down 17.6% at $141.6 million while Forsyth Barr forecast profit would be 23% down at $133 million.
Shares in Fletcher, New Zealand's largest company by market capitalisation at $4.78 billion, gained 4.71%, being up 36c at $8 in New Zealand and similarly up 4.68% in Australia, following the announcement.
Fletcher chief executive Jonathan Ling said it was expected that tough economic conditions in global markets the company's divisions operated in would "negatively impact" the half-year result, with the exception of Australian Government home insulation stimulus packages helping to "offset the worst of the recession".
He said a strong group cash-flow position from operations, up 52%, and restructuring left Fletcher in a "very strong" financial position.
There was growth and increased sales in divisions exposed to the New Zealand and Australian residential housing markets.
"This suggests we are finally starting to see a recovery in residential activity in New Zealand and Australia, albeit from a very low base," Mr Ling said.
Overall sales declined 10% from $3.8 billion to $3.4 billion for the period.
Craigs Investment Partners broker Peter McIntyre said Fletcher had again delivered better than expected, due to its efficient control of operating costs and decline in interest payments.
In April 2009, Fletcher raised $506 million - $406.5 from an institutional placement and a further $100 million from retail investors.
"Fletcher `front-footed' the markets and pre-empted many other companies with its capital raising last year, which went straight to its balance sheet," Mr McIntyre said.
Forsyth Barr broker Tony Conroy was encouraged by the "general performance" of the first-half result.
"While we believe there will be ongoing weakness in the infrastructure and steel divisions, the positive momentum behind the divisions exposed to the New Zealand and Australian residential businesses are net positive for group earnings before interest and tax," he said.
However, Mr McIntyre described its outlook as "still muted", noting European markets still posed many problems and any growth from within the United States was off a low base; but these to some extent would be offset by growth in Australia and Asia.
Depending on the economic recovery, Craigs was forecasting a profit after tax of $292 million for the full year, being in the mid-range of the $278 million to $303 million Fletcher was forecasting, Mr McIntyre said.
He said the $53 million (ebit) decline in the steel division was not unexpected, considering Australian Giant OneSteel recently booked a $A28 million loss while Steel and Tube in New Zealand last week booked an 85% profit decline to $3.2 million for its half-year result.
Mr Conroy said while the reported profit of $154 million was down 10%, and ahead of Forsyth Barr's forecast $133 million, he noted the result included $15 million in one-off gains in the laminates and panels division.
He said net debt of $1.1 billion was running better than expected and should decline further in the second half of the trading year, taking the projected full-year net debt levels below Forsyth Barr's current target of $1.1 billion.
An interim dividend of 14c per share was declared, which Mr Conroy confirmed a full-year 2010 target dividend of at least 28c per share.
Fletcher earnings
Fletcher divisions' half-year earnings before interest and tax.
Steel: down 56% to $42 million
Building Products: up 38% to $76 million
Distribution: down 6% to $17 million
Infrastructure: down 27% to $76 million
Laminates & Panels: up 60% to $60 million.
