As all listed companies begin the present reporting period, their respective decisions on whether to maintain dividends - picked to in general be slashed by up to 20% - Fletcher's guidance will be carefully weighed by the markets and investors alike.
All but one of its six divisions are under earnings duress, with infrastructure and building products both down 27%, Placemakers down 43%, laminated and panels down 24% and US-based Formica down 42%, according to research by brokers Forsyth Barr.
Both brokerages, ABN Amro Craigs and Forsyth Barr, are forecasting respectively a 38.2% after-tax profit decline and 32% downturn for Fletcher's half-year result, declining from $235 million for the same time last year to respectively $170 million and $160 million.
ABN Amro Craigs broker Peter McIntyre said while the gains of property sales by Fletcher in 2008 will not be repeated this year, forthcoming work for its infrastructure division will be a crucial factor; and at least for the first half, its steel division should book a 36% increase in after-tax profit from $47 million to $64 million.
"The [proposed] Government spending on infrastructure will be a benefit for Fletcher, as the spending won't be delayed but should go through sooner rather than later," Mr McIntyre said.
Forsyth Barr broker Peter Young said there were few positives to be gained from Fletcher's forthcoming result.
However, the markets would be keen to see it maintain earlier guidance of delivering a full-year result of between $289 million and $354 million.
Fletcher said in November the "profound economic upheaval" was having a significant impact on its trading environment, but it remained "comfortable" at the time, with an after-tax profit of $289 million-$354 million predicted.
Key infrastructure spending by the Government has been signalled as one of several tools to remedy the present recession and get cash circulating in the economy.
Fletcher had signalled a decline in residential and light-commercial building at its November annual meeting and Mr McIntyre said it had about $900 thousand to more than $1 million in backlog work on its books.
"Infrastructure will be the key division for Fletcher over the coming 12 to 18 months," Mr McIntyre said.
Mr Young is expecting Fletcher to maintain its 24c per share dividend; the same as last year; while Mr McIntyre is forecasting a slight decline to 22c.
"However, the key risk is Fletcher don't hold that dividend and instead decide to hold the cash on their balance sheet to insulate [themselves] from a further downtown," he said.
Mr Young also noted there was a risk that Fletcher would take the opportunity to write down the book value of US-based Formica, which stands at $1 billion, and this would have a negative impact on market sentiment.
Fletcher Building also announced yesterday it had sold its Auckland head office buidling to an investor for $36 million.
A long-term lease has been signed for the Penrose site.
