August 20, 2013 / 11:53 PM / in 4 years

UPDATE 1-Fletcher Bldg profit jumps, weak Australia market clouds outlook

(Recasts and adds analyst comment)

* Full year net profit NZ$326 mln vs consensus of NZ$317 mln

* NZ market shows sustained pick up

* Australia soft and uncertain, US conditions mixed

WELLINGTON, Aug 21 (Reuters) - New Zealand’s biggest listed company, Fletcher Building Ltd, logged a forecast-beating 76 percent jump in annual profit on the back of a strong domestic housing market, sending its shares to a one-month high.

It said it expected further earnings growth on the back of the pick up in New Zealand, but added that soft conditions in Australia remained a concern.

The biggest building products firm in Australasia said net profit for the 12 months to June 30 jumped to NZ$326 million ($260 million), above a consensus estimate of about NZ$317 million.

In the previous year, it logged a profit of NZ$185 million after an asset writedown and restructuring costs.

The profit recovery was driven by a 38 percent lift in earnings in New Zealand, where the pace of economic growth has picked up. But its Australian earnings slid 22 percent, hit by a soft housing market and a slowdown in mining and resources investment.

“We’re very bullish about New Zealand, (but) the same cannot be said for Australia,” Chief Executive Mark Adamson told a briefing.

“We’re currently taking capacity out of Australia. We can’t see a particularly large improvement in the first half.”

Adamson said conditions in the United States had improved but were still mixed, while Europe was weak. The business had eased in China, he added.

Shares in Fletcher Building, which declared an unchanged dividend of 17 cents a share, rose 4.4 percent to a one-month high of NZ$8.57.

Rickey Ward of Tyndall Asset Management, said the strength of the market reaction may have been short covering.

“There are question marks over large parts of the business, Australia in particular, and the rise in the share price after the result doesn’t square with the outlook,” he said.

Fletcher Building, the lead contractor in the earthquake rebuild programme for Christchurch, makes a broad range of building products from steel roof tiles to timber products. It also has significant construction interests.

It said its programme to contain costs and improve efficiency in back room operations had softened the impact of a strong New Zealand dollar and is expected to deliver NZ$75 million to NZ$100 million in savings a year from 2015. ($1=NZ$1.2540) (Reporting by Gyles Beckford; Editing by Edwina Gibbs)

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