Infrastructure

Infrastructure’s operating earnings for the first six months were $90 million, up 20 percent compared with $75 million in the prior corresponding period.

Earnings growth was achieved through cost savings, productivity improvements, the favourable timing in the completion of construction contracts, and a significant increase in the number of house settlements.

Operating earnings in the concrete businesses in New Zealand were $6 million higher than the prior corresponding period. Softer demand meant readymix concrete and masonry products volumes were 4 percent and 5 percent lower respectively than for the prior corresponding period. Aggregate and concrete pipe volumes were up due to infrastructure and roading activity particularly in the Auckland region. Cement volumes were steady and prices increased, but pricing pressure was experienced for most other products. Cost reduction and efficiency initiatives mitigated the impact of lower volumes and prices.

In Australia, pipeline products experienced softer market conditions with volumes down 19 percent. A favourable sales mix, cost reductions and other business improvements limited the reduction in earnings to $3 million. Quarry volumes were significantly higher with demand in Western Australia up substantially, and ahead in all regions for most products. Earnings in the quarry business were $2 million higher than last year.

Construction earnings were $4 million higher than the prior corresponding period. The construction backlog was $885 million at the end of December. In addition, Fletcher Construction was named as preferred contractor on a further $440 million of projects not included in the backlog. Major contracts won in the period include the ASB head office in Auckland, and project management of the Earthquake Commission claims resulting from the Canterbury earthquake.

Operating earnings from property sales were $13 million compared to $7 million in the prior corresponding period. Residential house sales were up 42 percent and earnings increased by $7 million, driven by the greater availability of finished house stocks and strong demand at the Stonefields subdivision in Auckland. Market conditions elsewhere remained weak.

The purchase of Australian Construction Products Pty Ltd, a manufacturer and supplier of roading products in Australia, was completed in September, while in November a new construction and commercial waste facility in Auckland was commissioned.