Crane.

Crane is the Australasian leader in the manufacturing and distribution of plastic pipeline systems, plumbing and electrical supplies and non-ferrous metal products. It is comprised of three major divisions: Pipelines, Trade Distribution and Industrial Products. Crane was acquired by Fletcher Building in 2011, with 100 percent achieved on the 6th May.

Performance overview

For the full year net earnings before unusual items of $92 million were five percent ahead of 2010 earnings of $88 million on revenue of $2,437 million. Lower earnings from the 40 percent investment in Mitchell Water Australia were offset by improved earnings in the Pipelines and Distribution divisions and reduced corporate costs in the last quarter of 2011. For the three months since the acquisition, sales revenue was $623 million and operating earnings before unusual items were $29 million. Due to the nature of the acquisition a formal due diligence programme was not completed, however the results have met expectations and no issues of substance have arisen.

The year saw a number of significant achievements. Pipelines secured the first major Coal Seam Gas contract tendered in Queensland. This will be supplied during the 2011 – 2012 year. Kingston Bridge Engineering secured and commenced supply of polyethylene pipe and fittings to the Gorgon Gas Project in Western Australia. Tradelink opened or upgraded 18 branches in key growth areas. Hudson Building Supplies, with 15 branches, was purchased in November 2010.

The Pipelines Division is a manufacturer and distributor of plastic pipeline systems in Australia and New Zealand. Pipeline products, under the market leading brands Iplex, Key Plastics, Crevet and KBE are supplied into the water infrastructure, civil, building, telecommunications, mining and gas markets. Revenue for the full period was seven percent ahead of last year and earnings were 12 percent ahead. Revenue increases were from improved sales into the telecommunications and mining and gas sectors. Sales into the civil and building products sectors declined. Kingston Bridge Engineering had a 31 percent increase in revenue and lifted their profits by $6 million. The New Zealand business units had an 11 percent increase in revenue and an 18 percent increase in earnings. Revenue in the Australian business was flat and earnings declined with margins under pressure in the high volume building products segment.

Trade Distribution revenue was $1,575 million, five percent ahead of last year. Trade Distribution operates over 300 trade and retail outlets across Australia and New Zealand. In Australia the division operates three businesses: Tradelink, Northern's and Hudsons (acquired in November 2010). In New Zealand the division operates under the three brands; Mico, Master Trade and Corys Electrical. The major market segment is the supply of plumbing solutions to plumbers and builders. Revenues in the base business fell in both New Zealand and Australia by three percent reflecting reduced activity in the housing and renovations markets. The Hudson Building Supplies acquisition from November 2010 lifted revenues ahead of last year. Crane Distribution New Zealand (CDNZ) delivered a lift in earnings of $2 million as work on the turnaround strategy continued. With the inclusion of Hudson and the uplift in CDNZ, overall Trade Distribution earnings lifted by nine percent. Hudson Building Supplies revenue since the acquisition has met expectations and is expected to be a source of revenue growth in the 2012 year.

Industrial Products revenue of $378 million was one percent ahead of last year. The Crane Copper Tube business manufactures copper tube in Penrith, NSW for supply in Australia, New Zealand and overseas markets. The Austral Wright Metals business in Australia and Mico Metals business in New Zealand specialise in the distribution of non-ferrous metals products into manufacturing businesses. Earnings declined by $3 million due predominantly to increased competition in the Australian market. In New Zealand Mico Metals revenue was 16 percent ahead of prior year and as a result earnings lifted by 12 percent. In Australia whilst revenue fell by two percent earnings declined much more sharply as competition put increased pressure on selling margins.

Corporate cost savings originally identified in the acquisition have largely been achieved. The relocation of the corporate office will occur in the second half of 2011 to a new Fletcher Building Australia corporate office in Sydney.

Back to topLooking ahead

Trading conditions in Australia are expected to remain weak in the housing sector in the short term. This is expected to be off-set by mining and infrastructure growth. In New Zealand market conditions are expected to be weak due to a continued decline in the housing market.

Crane divisions will be looking to capitalise on the exposure across multiple market segments combined with initiatives already underway to focus on earnings growth. Safety programs will be maintained, and integrated with the Fletcher Building approach.