Fletcher hot property as payouts exceed $1b

ALAN WOOD
Last updated 05:00 29/01/2013

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Fletcher Building's share price has rebounded in the last six months as the company gains traction on Christchurch earthquake repair work.

Subsidiary Fletcher EQR has paid out more than $1 billion to contractors, with $72 million worth of repair work paid for in December alone.

Fletcher chief communications manager Barry Akers said for most of the year, the company was putting between $60m and $70m a month into the Canterbury economy in payments to contractors to fix houses.

By the end of 2012 the running payout total had reached $995.8m. In the first week of this month that figure crossed the $1b mark - roughly a third of the way through the repair programme that will fix nearly 31,000 homes.

Fletcher EQR, which works for the Earthquake Commission, is part of NZX-giant Fletcher Building, which has seen its share price trend up since the middle of 2012. Yesterday the shares closed 1c higher at $9.21. At their highest, in 2007, the shares reached $13.42.

Hamilton Hindin Greene broker Grant Williamson said investors viewed Fletcher Building "as probably the No 1 stock if you want to get exposure to the Christchurch rebuild".

The company would be receiving a clip of the ticket all the way through the rebuild process, which would likely continue for quite some time.

"What we're seeing already [in Christchurch] is drawing plans for a number of commercial buildings. That's obviously where a lot of future growth is going to come from for Fletcher Building."

Akers said the company was working under a contract with EQC for the residential rebuild, giving it a 3.5 per cent project fee.

Based on a back of the envelope calculation, that fee on a project worth $3 billion would be worth more than $100m to the company.

Fletcher general manager investor and media relations Philip King said shares spiked after the September 2010 earthquake, but then slumped before a recent surge that was related to the Christchurch rebuild, but also to better residential housing approvals in Auckland and better performances by Australian construction peers.

After the first big quake, in September 2010, Fletcher was appointed to manage repairs for about 60,000 homes with between $10,000 (now $15,000) and $100,000 in damage.

Since then the job has grown to around 90,000 homes. The total residential rebuild, including the $3b of Fletcher work plus new residential homes to replace those demolished as a result of the earthquakes, is put at $13b.

Fletcher plans to finish 80 per cent of its work on the residential repairs by December 2014 and the bulk of the work by the end of 2015.

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"We are on track to achieve the targets," Akers said.

Canterbury Earthquake Recovery Minister Gerry Brownlee said the $1b of work equated to the completion of 30,748 full scope repairs on homes.

In addition, more than 47,000 emergency repairs had been completed and 18,000 heating units installed.

EQC had now paid out $4.16b for all Canterbury earthquake related claims to date, including $3.8b for building exposures, $380m for contents, and $25.9m for land exposures. Fairfax NZ

- © Fairfax NZ News

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