Fletcher Rises Most in Four Years on Earnings: Wellington Mover

Fletcher Building Ltd., New Zealand’s largest supplier of wallboard and concrete, gained the most in four years after full-year profit beat estimates and the company said it will review its dividend policy.

Net income rose to NZ$326 million ($260 million) in the year ended June 30 compared with analysts’ average forecast of NZ$318 million, the Auckland-based company said today. The stock rose 6.2 percent to NZ$8.72 at the 5 p.m. close in Wellington, its biggest gain since Aug. 12, 2009.

Fletcher is benefiting from an increase in construction in New Zealand, where rebuilding after earthquakes in Christchurch and new infrastructure projects have stoked demand. The company will review its distribution policies in the next six months in light of low levels of debt and strong cash flows, Chief Financial Officer Nick Olson told reporters.

“It’s prudent to consider what’s possible and to try out appropriate gearing targets for the current environment,” Olson said on a conference call. “A review of that sort of policy is important but not urgent. I don’t have any particular issue with where we are placed today.”

Net debt at June 30 fell to NZ$1.78 billion from NZ$2.06 billion a year earlier, and the ratio of debt to debt-plus-equity was 33 percent, the lowest in three years.

Chief Executive Officer Mark Adamson, who started in the role in October, said the balance sheet strength gives the company options as growth opportunities arise.

Cash Generation

Still, “the next few years is about cash generation rather than consumption,” he said on the call. “Certainly for a couple of years we’re looking to trim the portfolio and get more earnings from the existing assets. Beyond that there would be aspirations to continue the growth of recent years, and potentially acquisitions.”

Investors had been “bruised” by recent acquisitions that hadn’t performed well, and management had a duty to boost confidence by getting more performance from existing businesses before embarking on a big purchase, Adamson said.

The company has some non-core or under-performing units earmarked for sale. It is also ready to make smaller acquisitions, and looked at two businesses in Australia bought by Bluescope Steel Ltd. this week, Adamson said.

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