Fletcher first half profit up to $133.2M

Press, 13 March 1986, Page 26

Fletcher first half profit up to $133.2M

Large extraordinary profits and a turn-around in the tax provision helped Fletcher Challenge, Ltd, increase its half-yearly profit 34.7 per cent to $133.2 million.

The figures, included $47.9 million in gains from investments in subsidiaries and associate companies, the chairman, Sir Ronald Trotter, said. They also included a tax credit of $5.5 million compared with a charge of $19.9 million for the corresponding period last year. Trading profits for the six months ended December 31 from all sectors, excluding Tasman Pulp and Paper, increased 28.1 per cent to $9B million. Industrial disruption at the Tasman Pulp and Paper operation in Kawerau reversed earnings from me mill, causing a 6-month loss of $16.3 million in contrast to $20.1 million profit for the same period in 1984, Sir Ronald said.

Rural and Trading earnings fell $10.9 million to $2.8 million because of the decline in the rural economy and the strength of the dollar. This hurt earnings in Wrightson N.M.A, meat, Fletcher Fishing, and motor gas and applicances sectors. The result was achived on reduced turnover of

$2117 million ($2194 million) and represents an annualised return on shareholder funds of 24.1 per cent compared with the 21.4 per cent last year. Domestic turnover rose 11 per cent to $1250 million.

Export turnover at $177 million was affected adversely by the strong New Zealand dollar and industrial disruptions. Returns were down $78.5 million on the same period for 1984. Tasman Pulp and Paper disruption cost $67 million in export sales.

The profit represents a record annualised return of 24.1 per cent as against 21.4 per cent last year. Many of the group businesses attained record levels of returns on funds underlining the strength of the group and the success of its competitive strategy, Sir Ronald said. Earnings a share rose from 26.6 c (diluted for issues) to 33.7 c a share. An unchanged interim dividend of 10.5 c a share (21 per cent) has been declared. “These gains arise from an aggressive approach to asset management which is an integral part of Fletcher Challenge’s philosophy,” Sir Ronald said.

“Because of the ongoing nature of asset realisations and the fact that any profit or loss affects shareholders’ equity, the effect of these transactions on shareholders is shown through the earnings statement.” A review of FCL’s interests in financial services resulted in the sales of its investments in Marac Holdings Ltd, Broadbank, Challenge Computers and Broadlands Perth.

"“Reacting to trends in the current economic environment also led to a re-evaluation of other investments and where they were no longer strategically appropriate they were sold," Sir Ronald said.

The sales included Wilkins and Davies, Ltd (24 per cent), Consoli-

dated Metal Industries, Ltd (21 per cent), Steel and Tube Holdings, Ltd (25 per cent), Grosvenor Properties, Ltd (20 per cent) and, since balance date and subject to Commerce Commission consent, Liquigas (16 per cent) and Rockgas.

Sir Ronald said the group outlook is for “an exciting performance for the full year.” He expects earnings of $lOO million for the second six months of the year as a result of good performances from Crown Forest and a higher-than-expected growth rate in New Zealand’s trading partners. “We expect trading conditions within New Zealand to become more difficult during the current half year as the economy tightens further and the downturn in the rural sector becomes more widely felt,” he said. “Nevertheless a number of our businesses can be expected to continue to have a good level of earnings in this period.” Capital expenditure was concentrated on moves which enhanced the strength of the core business through acquisitions (Produce Markets, Ltd, Moore and Crawford, Barrow Box, C. E. Daniell and the minority interests in New Zealand Wire) and through installation or commissioning programmes, including the $5O million medium density fibreboard plant. Since balance date progress had continued with the acquisition of Group Rentals.

The biggest sector rise in domestic operating earnings was in forestry and wood products to $32.6 million ($16.9 million). Buoyancy in the domestic building industry, which offset difficult export markets, was mainly responsible for both Tasman Lumber and Fletcher Wood Panels performing better. Good growing conditions and improved operational efficiencies benefited Tasman Forestry’s result.