New Zealand: Fletcher rivals “attacking our market”

Fletcher, with a market capitalisation of NZD4.2bn (US£3.4bn), is under attack from firms undercutting prices by up to a third and aiming at Christchurch's post-quake rebuild.

Stephen Hudson, Macquarie Equities Research analyst, said new import-based competition had emerged in cement products, insulation, wallboard, laminates and steel categories.

Hudson said construction of a new third-player clinker grinding facility had begun in New Zealand and Ling said this Tauranga business was a challenge to Fletcher and the rival Holcim cement businesses.

"There's a group of ready-mix concrete businesses in Tauranga proposing to import clinker and grind it up to make cement but it's only about 50,000t out of a market of 1Mt so it's just 5%. But it's still a threat and competition. We have full cement works and Holcim has full cement works and we make clinker out of limestone," Ling said.

Fletcher's cement division holds Firth Industries, Golden Bay Cement, Humes Pipeline Systems, Winstone Aggregates and Concrete Industries.

Hudson said the rival clinker business would start up soon.

"The construction of a rival NZD50m clinker grinding facility in the North Island has commenced and will be in production by year-end.

"The duopolistic cement market has therefore fractured into a three-player market with pricing likely to be more aligned to import parity," he said.

"We understand that the current pricing being offered is around 30% cheaper than domestic priced volumes," Hudson said.

Fletcher’s chief executive Jonathan Ling said the company took the threats “very seriously” and that analysts had learned of the issues after a briefing from the company this month. “They’re attacking our market,” Ling said of the rivals to Fletcher.

He blamed the high Australian and New Zealand dollars, saying some transtasman-made Fletcher products were under fire by goods from cheaper rival regions with weaker currencies, making them more attractive to buyers.