Further business transformation detail might be less than the market wanted, but Fletcher appears to be positioning itself to benefit in mid to long-term planning.
Overall revenue declined slightly from $4.49 billion to $4.38 billion, but earnings before interest and tax (Ebit) rose from $256 million to $262 million. After-tax profit rose from $148 million to $151 million, for the six months ended December.
In a half-year review released yesterday, Fletcher painted a glowing picture of New Zealand work ramping up and contributing strongly to full-year Ebit guidance of between $560 million to $610 million, but outlined weak and volatile trading conditions in most overseas operations.
Fletcher is the lead contractor overseeing the repair and rebuilding of Christchurch, with 1100 accredited companies involved. An estimated $30 billion will be spent during the next five years. Of 100,000 repairs expected by 2015, 30,000 home repairs and 47,000 emergency repairs have been completed.
In a joint statement by Fletcher managing director Mark Adamson and chairman Ralph Waters, the pair said Canterbury reconstruction was ''expected to be maintained at the high levels evident in the first-half [trading]''.
''The pace of new residential construction in New Zealand improved substantially during the period, particularly in Auckland and Christchurch,'' the review said.
Last year's 17c interim dividend was repeated.
Craigs Investment Partners broker Peter McIntyre said while the market wanted more detail on Fletcher's business transformation process, Fletcher was positioning itself for making the most of the US housing recovery, up to a decade of work around Canterbury, and also to take advantage of low interest rates, which he expected to fall further.
''Fletcher is effectively trying to make each division more efficient,'' he said.
He highlighted its review of property costs and also its ''procurement project''.
The latter is to gain cost-savings from $800 million per year paid to third parties. Outside purchases will be handled by head office to garner better purchasing power, rather than purchases by division, Mr McIntyre said.
Australia has seen a residential consent downturn and weak commercial approvals.
Softening work volumes in North America are expected to improve, while Asian business is reliant on expectations of an improvement of activity in China, the review said.
''Conditions in Europe remain challenging and the near term outlook remains poor.''
Mr McIntyre said, ''Europe is still a basket-case, and there's Cyprus. Some data out there indicates Europe will be going back into recession.''
Cash flows for the six-month period were up from $129 million to $204 million while capital expenditure was down from $154 million to $94 million.
A total $11 million was spent on acquisitions, including Formica India, while $69 million was raised from business sales, including Austral Wright, Mico Metals and Corys Electrical. Aside from Canterbury earthquake work, there was a ''significant lift'' in residential house sales, mainly from an Auckland development.
The overall construction backlog was down slightly from $1.2 billion a year ago to $1.19 billion.
Following on from widespread restructuring in recent times, a review of Fletchers' property portfolio is under way; the group's total property costs across New Zealand and Australia being more than $250 million.
''An assessment will be made of the distribution footprint and how this can be optimised to reduce site duplication and improve site utilisation,'' the review said.
Fletcher will continue to look at new business opportunities, through ''bolt on'' acquisitions, in markets with attractive growth prospects.
Fletcher Building
Fletcher operations by region
New Zealand: ''Strong momentum'' earnings up 31%
Australia: ''Weak conditions'', earnings down 12%
North America: ''Flat revenue''
South East Asia: ''Revenues up''
Europe: ''Poor outlook . . . flat revenue''
China: ''Flat revenue''
Fletcher operations by division
Building products: Ebit down 13%, from $64m to $56m
Construction: Ebit up 48% to $37m
Crane (Aust): Ebit down 26% from $53m to $39m
Distribution: Ebit up 13% to $17m
Infrastructure products: Ebit up 14% from $63m to $72m
Laminates and panels: Ebit up 21% from $42m to $51m
