Strategy & outlook

Strategy

Fletcher Building’s long term strategy continues to be to improve earnings reliability through geographical and product diversification, to maintain and improve internal capabilities, and to pursue acquisition opportunities where these meet key investment criteria.

In New Zealand, the focus is on maintaining and growing existing businesses and pursuing means of strengthening distribution capability.

Australia remains the key geography for pursuit of the group’s growth aspirations. The strategy is to continue building on existing positions in the building products and construction materials sectors over time.

The proposed acquisition of Crane Group Limited is consistent with this strategy. Its businesses are complementary to Fletcher Building’s, and successful completion of the transaction will see an extension to the group’s range of building products and expansion of its distribution footprint across Australia and New Zealand.

Beyond Australasia, the priority remains developing the laminates business, particularly with regard to extending Formica’s footprint in Asia. While Australasia is the principal area of focus, Fletcher Building is committed to maintaining a leading position globally in laminates through Formica and Laminex.

Outlook

The outlook for the 2011 financial year continues to be mixed as to the pace with which economic conditions are improving around the world and as to the impact of the Queensland floods and the Canterbury earthquake on activity levels.

In New Zealand, residential house building activity is not expected to improve in the second half given the recent consenting data, however, there have been more encouraging trends seen in commercial construction consents. Work on rebuilding Canterbury following the earthquake in September 2010 has been hampered by the severe earthquake on 22 February 2011. The government’s scheme to facilitate the remediation of tens of thousands of leaky homes is now not expected to get underway until the 2012 financial year.

Infrastructure spending by the government is forecast to be lower this year due to the timing and implementation of larger projects, but based on government estimates, will increase in the 2012 financial year.

In Australia, conditions are expected to remain relatively favourable driven by the continued strength in the mining and resources sectors. However, new housing starts and commercial construction activity levels may weaken in the near term. Investment in infrastructure is expected to continue around current levels. The consequence of the recent flooding and cyclone damage in Queensland and Victoria may cause some negative impact in the current year although repair and rebuilding work should contribute more significantly in the 2012 financial year.

Further afield, South East Asian markets and mainland China are expected to continue strong growth, while North Asian markets are likely to remain subdued. European volumes overall are not expected to show growth. Businesses in North America are well placed for any pick up in volumes but there remains considerable uncertainty as to the timeframe for a sustained recovery in the US.

Ralph Waters
Chairman of Directors



Jonathan Ling
Managing Director