Fletcher Building profits on the rise
Cost-cutting and a burgeoning New Zealand construction sector helped Fletcher Building increase profits by more than 5 per cent in the half year to December 31.
Restructuring, under way since chief executive Mark Adamson was appointed 18 months ago, shaved $126 million from operation costs and a back-office centralisation effort will see 200 jobs relocated to the company's headquarters in Penrose, Auckland, by the end of 2015.
Fletcher reported a tax-paid profit of $159 million for the half year, up from $151m in the same period last year.
Operating revenue declined 2 per cent to $4.27 billion, down from $4.38b.
Adamson said underlying revenue growth had been wiped out by an appreciating kiwi and the construction sectors in New Zealand and the United States were picking up.
"We are delivering on our earning-growth targets while at the same time implementing a programme of business enhancement initiatives that will underpin our operational and financial performance in the medium term and beyond," Adamson said.
The centralisation of back-office accounting and other roles in business units to Auckland was proceeding, and was expected to affect 200 staff across Australasia.
"All our staff who will be displaced to New Zealand will be given first option, but it would be unreasonable to expect too many to make the shift," Adamson said.
He expected the process to take up to two years.
Prior restructuring has seen 1000 staff in Australasia lose their jobs over the past 18 months, but he was optimistic growth in the business would allow any future changes to see staff redeployed.
Operating profit was up 7 per cent to $281m. Fletcher Building said that if adverse foreign currency transactions were removed the increase would have been 13 per cent.
Improved profits from construction and distribution, which rose 51 per cent and 43 per cent respectively, spearheaded the profit increase.
Other sectors were more muted, with profits from infrastructure products declining 6 per cent.
The company said the New Zealand market had experienced "strong momentum" due to the Christchurch rebuild, while conditions in Australia remained "mixed" with the outlook "uncertain".
Adamson said this time last year New Zealand and Australia contributed about equally to profits, but now only one-third was coming out of Australia.
Fletcher's shares dropped 1.85 per cent to close at $9.54.
Forsyth Barr head of private wealth research Rob Mercer said, while the company was a medium-term hold, the sluggishness in Australia "probably just dampens our enthusiasm".
"It's certainly evident around the New Zealand business there's both good top-line and operate profit growth coming through there.
"We know that Australia has more challenges . . . and that continues to be a point of weakness," he said.
The company declared an interim dividend of 18 cents a share, up from 17c last year. Fairfax NZ