Overview

Directors are pleased to present the unaudited financial results for the six months ended 31 December 2010.

Net earnings were $166 million, 8 percent higher than for the prior corresponding period. Operating earnings (earnings before interest and tax) increased to $285 million, from $271 million in the same period in the previous year. Cashflow from operations was $202 million compared with $317 million in the prior corresponding period.

Sales increased by 2 percent to $3,468 million from $3,393 million. Building Product’s sales were adversely impacted by the termination of the insulation subsidy programme in Australia. Distribution had positive growth in sales but this was impacted by the business disruption in Canterbury following the earthquake, and by a slowdown in new house building activity. Infrastructure recorded growth in its concrete operations in New Zealand and in its Australian sand quarry activities, while construction revenues and residential house sales were also up. Strong growth in Australia and Asia more than offset weaker volumes in Europe for Laminates & Panels. Steel had good growth in distribution revenues in New Zealand.

Earnings per share were 27.3 cents, up 7 percent compared with 25.5 cents in the prior corresponding period.

This is a strong result in the context of mixed market conditions. In New Zealand the recovery in residential house building activity has stalled, but high infrastructure work levels and good cost containment aided earnings growth. The stronger Australian economy has meant that most group businesses there have achieved pleasing earnings growth. Beyond Australasia, Formica has continued to lift its earnings through continued growth in Asian revenues and higher North American margins despite flat volumes in that market.

Overall, this result reflects the group’s geographic and product diversity. It is especially pleasing that earnings growth of 8 percent has been achieved despite subdued trading conditions in New Zealand and the US, and weakness in many European markets.

The Canterbury earthquake and continued aftershocks have negatively impacted Fletcher Building’s New Zealand businesses in the first half of the year, and repair and reconstruction efforts have been hampered by the severe earthquake on 22 February 2011. Similarly, there has been business disruption in January as a result of the Queensland and Victorian floods but activity is expected to pick up later in the year as rebuilding work gets underway.