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Fletcher Building share price on watch after announcing NZ$300 million share buyback

The Fletcher Building Limited (ASX: FBU) share price could be on the rise on Wednesday following the release of a positive announcement ahead of its investor day event.

Across the ditch the building products company’s shares are up around 2.5% in early trade.

What was announced?

This morning Fletcher Building announced that it will undertake a capital return to shareholders of up to NZ$300 million via an on-market share buyback which will commence following the release of its full year results in August.

The company made the decision to return funds to shareholders following the completion of the Formica sale for NZ$1.2 billion and the positive progress it has made in reducing its debt.

According to the release, the company revealed that it is well below its target leverage range and has around NZ$600 million of debt that will be repaid over the next 12 months.

In addition to this, the company has NZ$250 million of cash outflows to complete the legacy B+I projects and remains confident that these projects will be completed within the current provisions.

Based on these factors, it estimates that it will have upwards of NZ$300 million in surplus cash to distribute to shareholders in August. This was deemed to be the most effective method of returning these funds to shareholders.

Trading update.

Fletcher Building also confirmed that it is on course to achieve its FY 2019 guidance of EBIT (before significant items) of NZ$620 million to NZ$650 million.

It will also continue to pay out between 50% and 75% of its net profit after tax (before significant items) as dividends.

Today’s announcement will be welcome news to shareholders who have had to watch the Fletcher Building share price sink lower over the last 12 months whilst the market as a whole charged higher. Since this time last year the Fletcher Building share price is down around 23%.

Elsewhere in the industry, the CSR Limited (ASX: CSR) share price will be on watch today after it released its AGM presentation this morning.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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