Fletcher Building has reported a solid lift in first-half profit as it benefited from a strong housing market and building boom.
A strong demand for new houses has contributed to a rise in profit for Fletcher Building. Photo: 123RF, Andy Dean Photography
Key numbers (six months ended December 2021 vs a year ago)
- Net profit $171m vs $121m
- Underlying profit $214m vs $195m (includes $43m currency reserve reclassified as income following divestment of Rocla)
- Revenue $4.06bn vs $3.99bn
- Full year forecast underlying profit $750m (NZ Omicron outbreak could reduce outlook between $25m-$50m)
- Dividend 18 cents vs 12 cps
Ross Taylor Photo: RNZ / Dan Cook
Chief executive Ross Taylor said with improved operational performance and tighter cost control now embedded in the business, it was able to deliver a strong performance over the first half.
"This was despite the first quarter being heavily impacted by the up to five week-long Covid-19 stringent lockdown in New Zealand and local lockdowns in Australia which impacted EBIT (underlying profit) by approximately $105 million."
The strongest growth was in its residential and development division with its underlying profit almost doubling to $112m, which more than offset a fall in sales volumes caused by Covid-related building delays.
Earnings from its building products arm fell $6m to $96m as a tight labour market and higher raw material and freight costs were a key feature of the operating environment.
Increasingly, builders and material suppliers had complained about product delays as supply was not keeping up with record levels of demand in the residential building sector.
There had been reports of some tradespeople struggling to [https://www.rnz.co.nz/news/business/460620/construction-material-shortages-price-hikes-plague-building-industry
get their hands on key materials such as GIB plaster board,] which is supplied by Fletcher's products business.
The company said the division continues to invest in improving manufacturing capabilities, with ongoing investments in the new wallboard and pipes facilities, and process automation and new technologies in its insulation and steel businesses.
The company's concrete and distribution division also reported a modest fall in earnings, which was attributed to the disruptions caused by the lockdown in the first quarter.
Fletcher's Australia operations reported revenue that almost mirrored last year at $1.39 billion.
Taylor said trading was expected to remain very solid for the second half of the year and the business was forecasting a full year underlying profit of $750m.
However, the potential for disruptions caused by the Omicron variant could see this fall by between $25m and $50m.
Beyond 2022, the company said it was in a very strong position and expected its underlying profit to increase by 10 percent in the coming financial year.