Monday, 1 Mar 2021

Fletcher forecasts 312% operating profit rise, sector faces recruitment pressures

Fletcher Building has bounced back, forecasting it will make $610 million to $660m operating profit for the full year, up on the previous year’s pandemic-hit $160m.

Last year, the business reported a net earnings loss so this year’s anticipated result is a huge turnaround for New Zealand’s largest building materials manufacturer, supplier and builder.

But the latest forecast rise is not as spectacular if one looks back to 2019, when it made $549m operating profit.

Still, the company exceeded even its own forecast top-end range this week. It had said that in the half-year to December 31, 2020, it would make $305m to $320m but it came in $3m above that at $323m and surprised the market by declaring it would reinstate dividends and pay shareholders 12cps next month.

After the result was announced, Taylor told the Herald his five-year plan, announced in Sydney in 2018, was now paying off.

But he also acknowledged constraints, including the pandemic’s effect on immigration constraining the sector’s hunt for staff qualified to run and work on big construction and infrastructure projects.

Taylor said the competition was stiff.

“Generally, it’s a very tight market and particularly for Fletcher Construction and big building and infrastructure projects. Project management has become a very hot market. There’s a lot of inter-company poaching. This hasn’t manifested itself in the labour or trade market yet. But white-collar working area is very tight,” he said.

The Herald heard of one project manager earning more than $150,000 being offered more than $250,000 by a rival business. Taylor said while he couldn’t comment on specific cases, labour shortages were certainly acute in some areas of the sector.

“That sort of thing characterises the challenge. It’s very difficult. Everyone is fishing in the same pond.”

Fletcher employs around 9000 people here, 5000 in Australia and around 800 in the Pacific Islands.

Asked about the five-year plan, Taylor said: “It’s paying off. There’s something to be said for laying out what you are going to do and doing it and we keep pointing to it. Fletcher needed to rebuild credibility.”

The business is selling its Rocla Pipes & Concrete Products in Australia. That is a pre-cast pipe business. Taylor said further impairment costs were incurred. No price nor buyer details have been revealed.

Taylor said that every quarter, he would continue to move between Australia and New Zealand. Last month, he spent a fortnight in the Jet Park Hamilton Airport.

“In early April, I’m going back but it’s always flexible to some degree, otherwise we can’t plan the diary.”

He sees an end to his isolation stays “when Australia and New Zealand are vaccinated in the next six months and we’re back to normal”.

The Australian has now done one-and-a-half months in Covid isolation: first in Rotorua last winter, late last year in Sydney and in January in Hamilton.

He indicated he had had enough: “It gets a bit long in the tooth by day 10.”

On his routine during these stays, those remain the same. He shuns the cooked breakfast for a lighter continental breakfast, takes all the exercise he can get, doesn’t watch TV, puts up a printed paper chart on the wall and marks each day off with a red X and he continues to work.

“I’ve been living my strange, set existence in there. I enjoy this job and a lot of others have it a lot tougher,” he said.

Fletcher’s new South Auckland Clever Core plant produced components for around 34 homes in the latest half-year, “but we expect the run rate to get up to 100 to 120 by the end of the financial year. It’s around 10 to 15 houses a month.”

Fletcher said Clever Core at Wiri was New Zealand’s largest purpose-designed offsite home manufacturing plant. The plant is a 5000sq m or half-hectare warehouse Fletcher leases from NZX listed Property For Industry on Cavendish Dr.

Prefabrication of a house can be done in one day, transport to a site on a second day and it could take only about six weeks to do all the finishing, guests learned on a tour, the Herald reported when the plant opened in 2019.

Fletcher had been trading on the NZX at around $6.44, up $1.20 or 23 per cent in the last year, giving it a market capitalisation of $5.3b. On the ASX, it is at A$5.98, up on November’s A$5.33.

But after yesterday’s half-year result, it shot to $6.55 on the NZX.

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