After-tax profit is expected to fall by at least $113 million and as much as $178 million.
Describing the global credit crunch as a "profound economic and financial upheaval, worldwide", chairman Roderick Deane said Fletchers was in good shape, with debt levels around 40%, strong continuing cashflows and the financial capacity for future investment.
However, "we will be suitably careful in the assessment of these opportunities", Dr Deane said to shareholders at its annual meeting yesterday in Auckland.
Fletcher's after-tax profit in 2007 was $484 million, dropping slightly for the year to June 2008 to $467 million.
However, Dr Deane said yesterday if current trading conditions continued for the remainder of the current financial year, the after-tax profit would be in range of $289 million to $354 million as forecast by analysts.
"This spread is not unreasonable, given the significant level of uncertainty in New Zealand and Australia and around the world," he said.
Dr Dean expressed concern over how corporate bonds would fare in the future, given the Government now guaranteed many financial institutions, leaving corporate bonds "distorted" and sitting between the offerings of banks and finance companies.
"These changes also leave much uncertainty around the potential severity of the economic slowdown we are now experiencing," Dr Deane said.
Housing consents in New Zealand during the past quarter were at their lowest levels in 25 years and even house additions and alterations may be affected by the tightening credit lines, he said.
As with many of New Zealand's Top 10 stocks, Fletcher dividends are relied on by shareholders and Dr Deane said the company intended maintaining the dividend level, which was up from 45c to 48.5c.
However, this would be "clearly subject" to the firm's financial performance over the year.
ABN Amro Craigs broker Chris Timms said a strength of Fletcher's, noted by chief executive Jonathan Ling, was its modest refinancing requirements during the next two years, which could be readily met by undrawn banking facilities of $377 million and its debt maturity profile, which extended until 2020.
"They have taken steps to cut debt levels and have the ability to find funds to weather the storm," Mr Timms said, referring to Fletcher's capacity to survive the global credit crunch.
Fletcher shares rose 15c yesterday to trade at $5.75.
ABN maintains a "buy" recommendation on the stock, with a 12-month target price of $8.28.
Dr Deane said from an internal perspective, despite the share price dropping from $13 in June last year to its present level of under $6 per share, the company was not operating significantly differently from a year ago.
"This is disappointing. However, it is in line with the share price movement of our peer companies operating in Australasia, reflecting the tougher conditions in the building products sector," Dr Deane said.
Mr Timms said the Fletcher commitment to similar dividend levels was good news for shareholders but noted it came with the caveat on overall performance.
Dr Deane said in the year ahead earnings from its building products, distributions and infrastructure divisions were expected to fall in line with a decline in the residential housing market, while its steel division was facing more favourable trading conditions.
The firm's Formica acquisition in the United States reported lower returns in the wake of the US sub-prime crisis, operating below expectations for 2008.
While the subsidiary's performance should improve, it would be offset by weakening demand across international markets, Dr Deane said.
