The economic disruption to Christchurch after last week's earthquake has prompted Fletcher Building to issue a profit downgrade - potentially $14 million to $24 million lower than previous guidance.
While signalling the short-term loss, Fletcher is picked by analysts to eventually recover its earnings capacity through reconstruction work during 2012.
Included in the downgrade total is a $5 million donation Fletcher is making towards Christchurch's recovery and reconstruction, including repairing historic buildings and providing relief accommodation for people displaced from their damaged homes.
Shares in Fletcher were up 1.6%, or 14c, to around $8.85 on the news.
Last month, Fletcher's 2011 full-year profit guidance forecast profit after tax of $313 million to $396 million, while analysts picked a $354 million result.
Craigs Investment Partners broker Peter McIntyre predicted Fletcher would continue to deliver "towards the top end" of its own forecast range, despite yesterday's downgrade.
"What's taken now will come back later... Fletcher will eventually pick up their loss of earnings in 2012," he said.
Forsyth Barr broker Tony Conroy said the size of the downgrade was "relatively minor" and "sensible ... given the earthquake".
While the outlook was negative in the short term, investors were looking beyond that, focusing on undertakings such as Fletcher's consultancy role during the rebuilding, with the long term offering a strong business case for Fletcher, Mr Conroy said.
"There are clearly going to be difficulties in the short term and there are timing issues and practical issues to overcome, such as insurance payouts, consent processes and design, so the process can't be rushed," Mr Conroy said.
Before the February quake Fletcher had a share of $190 million in infrastructure contracts with the Christchurch City Council, which was expected increase during the second half of 2011.
Similarly, while flood devastation in Queensland and Victoria was also likely to have a short-term negative impact, work there was expected generate a more positive contribution to Fletcher's bottom line in 2012.
Fletcher's general manager of investor relations, Philip King, said yesterday, while post-quake reconstruction activity was expected to increase, there would be "a short-term negative impact on earnings as the assessment and planning phases are put in place".
It has been estimated the February quake will be two to three times more costly than the September quake, meaning the local economy has been "seriously disrupted".
Based on current estimates, Fletcher Building expected the impact of this event would result in net earnings after tax for the year to 30 June, 2011about $14 million to $24 million lower than previously forecast, Mr King said.
He noted Fletcher had not yet quantified any potential impact on its financial results in future years as a result of the Christchurch quake.
In mid-February Fletcher reported an increased after-tax profit, up 8% to $166 million, for its half year to December.
