The Fletcher Building Limited (ASX: FBU) share price will be one to watch on Wednesday.
This morning the building products company released its half year results and revealed a decline in profits.
How did Fletcher Building perform in the first half?
During the first half of FY 2020, Fletcher Building reported a 5% decline in revenue to NZ$3,961 million. This was in line with expectations and due to reduced revenue on legacy construction projects and tougher market conditions in Australia.
The company's earnings before interest and tax (EBIT) before significant items was NZ$219 million, down 11.7% on the prior corresponding period. Net profit after tax was also on the slide during the half. It came in at NZ$82 million, down 7.9% from the same period a year earlier.
Despite this, the Fletcher Building board declared an interim dividend of 11 NZ cents per share. This was a 40% increase on FY 2019's interim dividend of 8 NZ cents per share.
Management commentary.
Fletcher Building's chief executive, Ross Taylor, appeared to be pleased with the half.
He said: "HY20 results are in line with our expectations and those set out at our Annual Shareholders' Meeting in November 2019. Our business is now stabilised and focused, providing the foundation to drive consistent performance and growth into the future."
Mr Taylor notes that the New Zealand business was largely on form during the half.
He commented: "Our New Zealand core businesses outside of Steel delivered a solid performance, with earnings in line with last year and improved operating margins in several areas. In Steel, trading conditions remain challenging, though we have seen volumes and margins improving as we enter the second half."
In Australia conditions are tough, but the company is benefiting from its cost cutting.
"In the context of a challenging Australian market, we are seeing the benefits of the cost out programme, as well as our investments in digital and product innovation flowing through. With the reset well advanced, we have assessed our portfolio and decided to divest the Rocla business and are now focused on driving growth and operational performance in our other Australian businesses. The sale process is expected to be completed through calendar 2020," the chief executive added.
Outlook.
The company has reiterated the guidance it provided at its annual shareholder meeting in November.
Fletcher Building continues to expect EBIT excluding significant items to be in the range of NZ$515 million to NZ$565 million. It notes that its earnings will be weighted to the second half, owing to the Australian cost out programme benefit, residential settlements, and improved steel performance flowing through.
