Fletcher Building Limited FBU| Big, diverse but low barriers

Fletcher Building Limited FBU| Big and diverse but low barriers to entry keep the competition coming

Morningstar Recommendation: Reduce
Nathan Zaia, Morningstar Analyst

Fletcher Building’s current strategic focus is it too grow earnings regardless of economic conditions, this doesn't necessarily mean increasing size for size sake, but focusing on operational performance improvements. CEO Mark Adamson is responsible for the Fletcher Unite Strategy, concentrating on rationalising support functions such as finance, human resources and IT, as well as greater group coordination when sourcing supplies. In New Zealand there are over 50 businesses with their own independent back office functions, and NZD 800 million is spent on third-party supplies across the group each year. It is odd Fletcher has not utilisied its scale, both to run more cost efficiently but also take advantage of cross selling opportunities. Last week's decision to restructure the Crane group is another step in that direction. The Iplex pipelines and Crane tubes businesses will report to the Infrastructure division, bringing all pipe and tube businesses together.

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ENDS

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