Fletcher Building's contracted order book has expanded to $3.4billion, with a strong outlook in New Zealand but expectations of a waning performance in Australia.
Weak first-half trading may yet prompt broker downgrades.
Operating earnings before interest, tax and significant items is forecast in a range of $650million to $690million in the year ending June, 2016, compared with $653million reported for the previous year.
Chairman Ralph Norris told shareholders at the Auckland annual shareholder meeting yesterday that in New Zealand, operating earnings rose by 24%.
''We saw continued growth in residential consent numbers in New Zealand over the year, although the pace of growth slowed later in the year. Residential consents are now running at 8% above the long-run trend,'' he said in a statement yesterday.
He said Auckland had recorded strong growth in new housing demand and was ''very much the driving force'' behind the new consenting activity, while Christchurch growth slowed considerably during the year.
''Net migration climbed throughout the year and approached record levels, and this has clearly impacted demand for housing, particularly in Auckland,'' he said.
Craigs Investment Partners broker Peter McIntyre said Fletcher's guidance was ''significantly below'' consensus expectations at the low end, ''and therefore we expect downgrades to current full-year 2016 forecasts''.
With the weakness expected in the first half of 2016, albeit some of it timing-related, this guidance assumed a significant pick-up in the second half of the financial year, which was a risk, he said.
FBU expects full-year 2016 earnings before interest and tax of $650million to $690million, representing growth of -0.5% to 5.7% from full-year 2015.
''This is below both consensus expectations of $700million and Craigs' at $738million,'' Mr McIntyre said.
Forsyth Barr broker Suzanne Kinnaird said Fletcher had provided first-time full-year 2016 guidance for earnings before interest and tax of $650million to $690million.
''This compares to our existing forecast of $705million, which after adjusting for the upcoming disposal of Rocla Quarries is adjusted to $695million,'' she said.
Mrs Kinnaird was comfortable with Forsyth Barr's forecast being marginally ahead of the guidance range, given Fletcher's likely desire to keep a lid on forward expectations.
''The company's outlook commentary is little changed from that provided at the full-year 2015 result: New Zealand strong, Australia mixed, and rest of world mixed,'' she said.
Fletcher's contracted order book now stands at $3.4billion, compared with NZ$2.4billion at 2015 full year. Mr Norris said conditions in Australia were more ''mixed'' and operating earnings were down 30%.
''There is no doubt that the residential construction market has been the bright spot across the industry,'' Mr Norris said.
''Consents have been running at record levels, with multi-residential consents tracking ever higher, although stand-alone housing permit levels flattened out,'' Mr Norris said.
Beyond New Zealand and Australia, conditions had ''continued to be more mixed''. Operating earnings were down 7%, with a strong performance from Formica in North America, but mixed conditions in Europe and a more difficult trading environment experienced in China. Mr Norris said another trend in New Zealand during the past year had been the rise in the number of multi-unit dwellings and apartments consented.
In the year to June, multi-unit dwellings accounted for 29% of total consents, double the number five years ago. Government-funded infrastructure activity remained strong, and there was also a marked increase in commercial activity, with the value of commercial consents rising by more than 20% year on year.
''These activity levels flowed into increased demand for building materials and we saw excellent growth in volumes for most of our core product lines,'' he said.
