Fletcher building hit by Golden Bay shutdown and Australian residential market

Fletcher Building Ltd's performance has been impacted by trading conditions and a four-week shutdown of subsidiary Golden Bay Cement which cost in the range of NZD8-11m (US$5.4-7.5m).

The company has downgraded its full-year EBIT by 10 per cent to NZD20m. "The 10 per cent lower ebit was a reflection of Australian trading conditions, the Golden Bay Cement issue and timing of sales in its New Zealand residential business,'' said Craigs Investment Partners broker Peter McIntyre.

In addition, Fletcher Building saw a softening of demand in its Australian business where it has high-operating leverage businesses which were very sensitive to changes in price, demand or cost.

In Australia residential activity accounted for about 40 per cent of Fletcher's market exposure.
''Here we have seen a sharp contraction in new residential consents in the most recent quarter,'' said Fletcher Building's CEO, Ross Taylor.

Hardest hit was the apartment or multi-family share of the market. Fletcher's turnaround plans for the Australian business were now factoring in a weaker Australian residential market than previously assumed.

However, in Fletcher's other New Zealand markets, infrastructure and commercial construction activity remained ''solid'', added Mr Taylor.