The Fletcher Building Limited (ASX: FBU) share price was down today in early trade following the announcement of an on-market share buyback and the release of an Investor Presentation to the ASX.
About Fletcher Building
Fletcher Building is one of New Zealand’s largest businesses, as a manufacturer, home builder, and partner on major construction and infrastructure projects. Some of its divisions include Building Products, Distribution, Concrete, Steel, Residential and Land Development, and Construction.
With its origins dating back to 1909, Fletcher Building has a long history and employs over 16,000 people in New Zealand, Australia and the South Pacific. The company’s shares are dual listed on the ASX and NZX.
Investor Presentation
The company is holding an investor day in Sydney and some of the highlights include an in-depth presentation on the Australia Division, discussion on the company’s current capital structure and announcements regarding the use of the Formica sale proceeds.
Their vision is to be the undisputed leader in NZ and Australia building solutions with products and distribution at their core. Fletcher wants to refocus on its NZ core, strengthen Australia and exit non-core businesses.
Pleasingly for shareholders, management confirmed that they are on track to achieve FY19 guidance of NZ$620-650 million in EBIT (before significant items).
CEO Ross Taylor said the outlook for FY20 was for “slightly softer but still healthy market conditions in NZ, and ongoing contraction in the key residential market in Australia”.
On-market Share Buyback
Following the sale of its Formica laminate business for NZ$1.2 billion, Fletcher had decided to use some of the proceeds to undertake a NZ$300 million on-market share buyback. Other uses of the cash include reducing their NZ$600 million pile of debt and cash outflows towards existing projects.
Are Fletcher Shares A Buy?
Building activity can be cyclical and a number of ASX listed companies including Stockland Corporation Ltd (ASX: SGP), Bingo Industries Ltd (ASX: BIN) and Mcgrath Ltd (ASX: MEA) have all recently said the slowing property market is impacting profits.
So, if you’re after businesses with reliable and consistent earnings, then Fletcher shares may not be for you.
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Disclosure: At the time of writing, David does not have a financial interest in any of the companies mentioned.
