Fletcher Building posted a 4% revenue increase for its first-half half trading, but not without some cracks appearing in the otherwise buoyant construction division data.
Easing workloads in its role in the Christchurch rebuild and losses from an unspecified ''major construction project'' are likely to have hurt earnings for the period.
However, Fletcher is maintaining its full year forecast of delivering earnings before interest and tax (ebit) in a range of $720 million to $760 million.
Revenue for the six months to December grew 4% to $4.61billion, earnings before interest and tax (ebit) were up 2% to $294 million and after-tax profit similarly rose 2%, to $176 million.
Shareholders took exception to the result and Fletcher shares closed the day down 53c, 5.19%, to $9.68.
Fletcher boosted its dividend 1c on a year ago, declaring 20c.
Craigs Investment Partners broker Peter McIntyre described the result as a ''miss'', saying while Fletcher's underlying ebit of $310 million was 12% above a year ago, it was well below Craigs' forecast $366 million and market consensus of $333 million.
''The miss looks to be driven by the New Zealand construction division.
''When stripping out the contribution from [acquisition] Higgins, the underlying ebit contribution fell from $25 million to only $1 million.''
He said while Fletcher's management reconfirmed full year guidance for underlying ebit in a range of $720 million to $760 million, it looked demanding, albeit second-half earnings were historically higher. Last year's split was 41% in the first half and 59% in the second.
While the construction division revenue grew 29%, its ebit fell 33%.
''Fletcher's attributes the New Zealand construction weakness to timing of major projects, bid costs and some isolated underperformance; likely losses on a fixed price contract,'' he said.
However, Fletcher's backlog of work increased to $2.7 billion, Mr McIntyre said.
On Fletcher's's outlook, Mr McIntyre said good macro-economic conditions in New Zealand were expected to continue, providing opportunities to expand margins in building products and distribution.
''Elevated levels of residential, commercial and infrastructure development would continue over the medium term,'' he said.
Forsyth Barr broker Damian Foster said the underlying result was ''below expectations'', principally due to a lower performance by the construction division.
When excluding the contribution from the recently acquired Higgins construction company, Mr Foster said construction ebit would have plunged from $36 million a year ago to $5 million.
''Construction is inherently opaque and can be impacted by project timing, but we suspect 'losses incurred on a major construction project' have had a material impact,'' he said.
Construction aside, Mr Foster said the result was ''generally solid''. New Zealand ebit was
up more than 20%, excluding construction and the divest-
ment of Pacific Steel, and was otherwise '' broadly in line with our expectation''.
Australian ebit improved more than 22%, excluding divestments, driven by operating improvements, but an expected lift in performance by Iplex Australia and Tradelink appeared to have lagged expectations.
''Offsetting that was a strong performance from Formica, largely due to a $14 million reduction in European losses and solid growth in Asia,'' Mr Foster said.
