Fletcher first-half profit $98.9M

Press, 14 March 1985, Page 30

Fletcher first-half profit $98.9M

The group net profit of Fletcher Challenge, Ltd, rose 53 per cent to $98.9 million in the six months ended December 31, the directors announced yesterday. Last year FCL, New Zealand’s largest industrial corporation, earned $64.5 million in the corresponding period; this included $30.2 million deferred income. The directors said that the profit was excellent and continued the significant upward trend of the past three half years. “The result reflects the depth of the group and the strength of the competitive positions now held by each of the subsidiaries with a number of them achieving record earnings,” they said.

The result represents an annualised return on shareholders’ funds of 21.4 per cent as against 16 per cent last year. Turnover was $2194 million (last year, $1669 million). Nearly 50 per cent of revenue was earned from exports or from overseasbased activities.

Exports were $255 million, up 59 per cent. FCL said this reflected the benefits of devaluation and the group’s strong commitment to exporting. Tax was $19.9 million (credit of $2.3 million). Earnings included extraor-

dinaries of $2.1 million ($700,000). Minorities took $3.2 million ($4 million). FCL had already declared an interim dividend of 10.5 cps tax-free, or 9.45 cps on shares partly-paid to 45c. The directors said there was a combination of factors that made the half year a uniquely favourable trading period. The international trading situation improved significantly, with strong growth in the USA and Australia. Benefit was also received from election year stimulation of the domestic economy, the favourable immediate impact of devaluation, and the continuation of export incentives. Climatic conditions were very conducive to farming and forestry activities. These favourable factors more than offset a significant loss of market pulp production because of the rebuild of the main recovery boiler and losses in the meat division owing to a delayed start to the killing season caused by disputes over the introduction of new technology. The good North American performance basically reflected the move into profit by Crown Forest Industries. As previously stated, accounting for North America had been on a “normal operations basis” from July 1, 1984. This meant that not

only had amortization of deferred income ceased from that date but that for reporting purposes North America had been allocated a notional equity as is done for New Zealand sectors. FCL said that in line with the policy of focusing attention on mainstream activities the group’s subsidiaries outlaid $177 million in capital expenditures, mainly to enhance their competitive position.

The directors also confirmed that the group would be spending $45 million on a medium density fibreboard plant scheduled for completion in late 1985.

Divestments of peripheral activities continued, with the sale of Morrison Industries and the Zonepak/Airite operations. The steps the Government was taking to improve the competitiveness of the economy, reduce the fiscal deficit and control inflation were likely to lead to a fall in domestic spending in the final quarter of this financial year, they said. Exports were holding up well although there had been a softening in prices for pulp. “In spite of this we are confident that our performance for the year to June 30 will comfortably exceed the forecast profit of $l6O million given last November,” the directors said.