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Fletcher reiterates 2017 earnings guidance

NZ NewswireNZ Newswire 5 days ago Jonathan Underhill

Fletcher Building reiterated its forecast for 2017 operating earnings while lifting the amount it plans to spend on land for housing as it chases a target of boosting the number of homes it brings to market each year.

Fletcher chief executive Mark Adamson told shareholders at their annual meeting in Christchurch that the construction and building products group is on track to lift earnings to a range of $720 million to $760m, from $682m in 2016.

The Auckland-based company is focusing on lifting earnings from existing assets rather than seeking acquisitions - a strategy affirmed by chair Ralph Norris, who said while Fletcher remains open to acquisitions, such opportunities "are likely to be limited in number".

Fletcher spent $89m on land and work in progress in its 2016 year, acquiring "land inventory" to enable the company to bring to market 1,500 homes a year by the 2018 financial year, from 300 in the latest 12 months, Adamson said.

Fletcher expects to invest a further $160m in the 2017 year, he said on Tuesday.

The diversified company has completed restructuring the business, selling off unwanted assets and is now turning to what it dubs the "Accelerate" programme: essentially getting more out of what it has and completing the turnaround of under-performing businesses such as Iplex and Tradelink in Australia and Formica Europe.

It also involves beefing up external procurement to take more advantage of Fletcher's scale and introducing manufacturing efficiencies.

Incremental earnings from the Higgins road construction business acquired for $303m "are expected to fully offset the loss of earnings from Pacific Steel, Rocla Quarries and Fletcher EQR," he said.

Fletcher shares fell 1.6 per cent to $10.33 and have soared 44 per cent so far this year.

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