Fletcher's earnings before interest and tax are expected to be in the range of $750 million-$760 million, with its after-tax profit remaining at forecast levels around $450 million-$460 million, chief executive Jonathan Ling said in a financial results update yesterday.
However, the profit range would reflect a $21 million reduction in Formica's earnings due to a "severe downturn in the USA markets".
Fletcher shares opened at $8.12 yesterday but slumped to a two-year low of $8.01 on turnover of $42 million of shares before retracing to $8.20 and closing at $8.25.
ABN Amro Craigs broker Peter McIntyre said the market did not initially react well to the 4%-5% cut in after-tax profit from the Formica profit downturn, but rallied shortly after.
The slowing in the US economy, and housing in particular, was difficult for Fletcher, but it had reacted by repositioning some of the Formica factory sites and cutting staffing levels.
Mr McIntyre said the Government's budget tomorrow could be good news for Fletcher's, depending on the level of infrastructure spending announced.
Mr Ling said with the exception of Formica's US operation, the group had performed satisfactorily and the company remained comfortable with earlier analysts' consensus of an after-tax profit in the $450 million-$460 million range.
This would include an expected one-off gain of $43 million from property transactions.
"While Formica's initial trading and operational results have been disappointing, and conditions in the USA market in particular are tougher than the [Formica] acquisition assump-tions, directors are still confident the synergies and improvements identified on acquisition will be achieved," Mr Ling said.
