A drop off in Australian residential construction has caused New Zealand-based Fletcher Building to warn of lower than expected annual earnings.
The dual-listed firm noted in a presentation on Wednesday that there had been a “sharp decline in the (Australian) residential market, plus higher input costs, leading to price and margin pressure”.
New Zealand’s largest builder said its Australian business, which accounts for about a third of the company’s revenue, would benefit from an anticipated return to growth in the residential building sector in the 2021 financial year.
Fletcher Building forecast Australia would have between 150,000 and 160,000 residential commencements in financial year 2020, a 30 per cent drop from a total of 230,000 starts in the 2018 financial year.
“Through FY20 we expect slightly softer but still healthy market conditions in NZ, and ongoing contraction in the key residential market in Australia,” the company said in its outlook.
The company said it also expected both the broader Australian non-residential building pace and infrastructure work on the country’s east coast “to remain broadly flat” in the next financial year.
Fletcher Building’s Australian earnings before interest and tax for the 12 months to June 30 were expected to be $NZ55 million ($52.4 million), about half of its reported $NZ114 million earnings in the prior financial year.
The Auckland-headquartered firm confirmed its overall FY19 earnings guidance of $NZ620 million to $NZ650 million on Wednesday and said it was planning a share buyback of up to $NZ300 million after it releases its full-year results in August.