Fletcher Building rejigs annual earnings guidance

Fletcher Building rejigs annual earnings guidance after completion of Formica sale

By Rebecca Howard

June 4 (BusinessDesk) - Fletcher Building rejigged its full-year earnings before interest and tax guidance after completing the sale of its Formica business ahead of schedule, effectively lowering the top end of that guidance.

The US$840 million sale of Formica to Broadview Holding was announced in December last year and is part of Fletcher's strategy to exit non-core international businesses.

“We are pleased to have completed the Formica sale process ahead of schedule, which has been enabled by an effective collaboration between the Broadview and Fletcher Building teams. We wish all Formica employees the very best under the new ownership of Broadview," said chief executive Ross Taylor.

The completion of the sale means that Fletcher will now account for 11 months of earnings from the Formica business in the current financial year, rather than the 12 months previously envisaged.

Fletcher previously said it expected ebit before significant items of $650 million to $700 million.

The impact of excluding the June earnings from Formica - which is a large trading month for the business - and some recent softer performance in Formica Europe and North America, means the international division is expected to now contribute earnings of approximately $80 million to the full year result, down $30 million from the previous annual forecast, it said.

As a result, Fletcher now expects ebit before significant items to be in a range of $620 million to $650 million.

According to Fletcher Building, the lower end of the range is consistent with its original earnings guidance when adjusted for the $30 million Formica impact "with the range narrowed to reflect year-to-date trading across the balance of the company."

The company reiterated that the agreed sale price of US$840 million for Formica is subject to certain deductions, principally transactions costs and debt-like items retained in Formica, and a working capital adjustment.

Based on a preliminary estimation of the working capital adjustment, and the average exchange rate applicable to the proceeds, the net sale proceeds are expected to be approximately NZ$1.19 billion. This will be subject to finalisation of post-completion accounting, Taylor said.

The stock last traded at $5.25, and has gained 7.6 percent so far this year.

(BusinessDesk)

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