Fulton Hogan Lifts Annual Profit 43%

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Privately held construction firm Fulton Hogan has lifted annual earnings 43 per cent as it cut its costs in the face of falling Australian revenue and increases diversification.

Net profit rose to $138.2 million in the 12 months ended June 30 from $96.5m a year earlier, the Christchurch-based company said in a statement.

Revenue fell 11 per cent to $3.24 billion as a strong New Zealand dollar eroded export earnings, and on reduced Australian construction activity as the federal government clamps down on spending.

Still, the construction firm achieved an increased profit after several troublesome projects were completed and it saved $26m from better procurement processes.

Part of the gain came from Fulton Hogan expanding its new units in water, rail and airports beyond its traditional road business, and they now account for between 10 and 15 per cent of the group’s revenue.

“We’ve made significant traction around the diversification of our brand and our activities this year, particularly into the rail, which we’d commenced last year, water, and airports space again,” managing director Nick Miller told BusinessDesk.

“The driver there strategically is whilst roading will always be at the heart of our DNA, building a broader capability is critical in terms of our long-term future growth.”

Fulton Hogan’s Australian businesses underpinned its bounce in earnings last year after profit in the prior year was eroded by impairment charges on distressed projects, including the problematic Pacific Highway joint venture in New South Wales, which has since been completed.

Mr Miller said the company was taking a cautious approach to Australian construction projects to reduce risk.

That means it won’t participate in major public-private partnerships such as the $4b East West Link project in Melbourne. Rather, Fulton Hogan will seek to manage its exposure by taking elements of projects.

He confirmed the company had almost completed its buyback of shares from former cornerstone investor Shell, and should wrap that up with a final payment in December.

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