Shareholders to receive lower dividends as Fletcher Building reports earnings decline

Company News

by Glenn Dyer

Shareholders in Fletcher Building (ASX:FBU) are set to receive reduced final and full-year dividends following a significant drop in earnings for the year ending on June 30.

The decrease in earnings was anticipated due to write-downs on two troubled projects and a slight decrease in revenue, totaling $NZ8.469 billion (compared to $8.498 billion in 2021-22).

The final dividend has been established at 16 NZ cents per share, marking a 27% decrease from the 22 NZ cents paid in the previous year. As a result, the full-year payout has declined by 15% to 34 NZ cents per share.

Although the company reported a 7% increase in EBIT to $NZ798 million (excluding one-off items), net after-tax earnings declined to $NZ235 million from $432 million due to significant items amounting to $NZ301 million from write-downs.

The EBIT fell short of the guidance provided at the October AGM, which projected $NZ855. This estimate was later adjusted to "around $NZ800 million" during the investor day in June.

CEO Ross Taylor commented, "Our 2023 results continue to build upon the progress we have achieved in both EBIT levels and EBIT margins over the past several years."

"Despite the softer residential markets in New Zealand and Australia, along with significant weather events in the latter half of the year, Group EBIT before significant items grew by 6% in FY23 to $798 million. The Group EBIT margin increased from 8.9% in FY22 to 9.4% in FY23, demonstrating strong performance in a slowing market. Our return on funds employed (ROFE) remained above the target at 17.1%."

Taylor also mentioned, "Net profit after tax reached $235 million, impacted by significant charges totaling $301 million. These charges were mainly related to additional provisions of $255 million for the New Zealand International Convention Centre and Hobson Street Hotel ('NZICC') project."

Looking ahead to 2024, Taylor expressed confidence, stating, "Anticipating FY24, we anticipate further volume tightening, which places our focus on maintaining strong customer performance, controlling costs, and adhering to pricing disciplines across our businesses. Our demonstrated capability to perform consistently throughout cycles positions us well."

The company's release added, "Our cost base and working capital have been adjusted for a softer FY24 to ensure robust margins and cashflows." FBU disclosed having $NZ1.4 billion of available liquidity.

"We also remain committed to looking beyond the current cycle. We are currently well into our growth investment program of $800 million (with $NZ308 million spent in 2022-23) spanning from FY23 to FY26. Opportunities that meet stringent criteria, including surpassing our ROFE target rates of 15%, have been identified. These opportunities encompass the Laminex Taupo wood panels plant, Comfortech insulation, a new Frame & Truss plant, and the acquisitions of Tumu and Waipapa Timber."

Taylor concluded, "These ventures will progressively mature over the next couple of years, and by FY27, we anticipate an EBIT uplift of approximately $120 million to our underlying earnings base."

Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

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