Fletcher profit up 33 p.c.

Press, 11 September 1986, Page 22

Fletcher profit up 33 p.c.

PA Wellington Fletcher Challenge, Ltd, (FCL) has become the first New Zealand company to exceed the $2OO million profit mark by posting a 33 per cent increase in profit to $240.7 million (including extraordinaries of $l4 million) for the year ended June 30. In a statement to the Stock Exchange, the FCL directors recommended a final dividend of 12.5 c a share, payable on November 13. New shares issued in the latest l-for-5 cash issue, for which the first instalment only was paid, will not rank for the final dividend. The record profit was despite a 3.2 per cent fall from last year’s record turnover of $4.4 billion to $4.3 billion. Turnover within New Zealand increased by 5.4 per cent to $2.5 billion but a reduction in offshore revenue caused by the higher New Zealand dollar and the lower level of construction activity more than offset this, the chairman, Sir Ronald Trotter, said.

Export sales other than those of Tasman Pulp and Paper increased 8 per cent to $259.3 million. Increases from meat, Wrightson NMA, and fishing more than offset minor declines in timber and steel.

Revenue from wood panels, building materials, and construction was relatively stable, Sir Ronald said. He blamed the group’s 12.7 per cent fall in total exports to $451 million ($517 million last year) on industrial disruption within the Tasman Pulp and Paper subsidiary. Sir Ronald said a key element in this year’s result was the $B2 million reduction in funding costs to $194 million, from $276 million last year. This was attributable to lower interest rates, higher New Zealand-United States exchange rates, the lower level of debt and the increase in shareholders’ funds arising from group earning. Extraordinary gains added $l4 million to the result.

Expanding on this, Sir

Ronald said extraordinary gains of $5l million in the first half arose mainly from disposals of investments and subsidiaries, augmented by a further $lB million in the second half. ‘‘However, these were substantially offset by extraordinary losses which include a $47 million provision for costs of restructuring being undertaken by various companies in the group,” Sir Ronald said. The extraordinary loss provision was made against the background of a more open and competitive market brought about by the economic policies of the Government Reflecting this, the provision. included: $lB million for industries affected by rural restructuring: $l3 million for those exposed to restructuring through the removal of subsidies and tariffs; and $l6 million related to discontinued activities, including some in Australia. Investments and subsidiaries sold included the group’s finance company interests, which were sold because of the deregulation and internationalisation of finan-

cial markets. By last December, the company had divested itself of Marac Holdings, Broadbank and Challenge Computers. Broadlands (Perth) was sold In the second half. Other divestments included minority interests in Wilkins and Davies (24 per cent), Consolidated Metal Industries (21 per cent), Steel and Tube Holdings (25 per cent), Grosvenor Properties (20 per cent), Rockgas (100 per cent) and Liquigas (16 per cent). Expenditure of $377 million allowed the group to expand and improve its competitive position. Acquisitions in a number of sectors enhanced the core business by providing extension in product range or geographical coverage. Sir Ronald said “significant sums” were spent to improve quality and for customer services. New operations at Fletcher Wood Panels’ medium density fibreboard plant and Fletcher Brownbuilt were successfully commissioned. Long term debt, including bank overdrafts, fell $1,882 million to $1,658 million while the ratio of that debt to

shareholders’ funds fell from 172 per cent to 123 per cent Outlook, Sir Ronald said, was uncertain because of the unknown impact of GST and the coming wage round. Another factor would be the outcome of the dispute at the Tasman Pulp and Paper plant at Kawerau. “It is essential for both Tasman Pulp and Paper, and its employees, that the plant reach international levels of competitiveness, particularly with regard to manning levels, efficient work practices, the utilisation of new

technology and continuous operations.” But the directors were confident that the strength and diversity of its earning base would enable FCL to achieve a performance comparable to this year. The group adopted accounting standard SSAPI7 of the New Zealand Society of Accountants. Accordingly, the revaluation of investment properties tenanted by nonFCL companies was brought into earnings. These revaluations increased profits $9.5 million.

Movements in sector results Earnings $ million Return on equit] 1986 / pc 1985 1986 1985 Construction, property 58.6 24.4 49.3 19.7 Forestry, wood prod. 61.8 37.7 38.3 28.9 Building materials 22.2 13.4 33.1 24.0 Steel 14.3 17.4 18.3 20.3 Rural and trading 17.1 37.1 10.3 25.6 Financial services 4.5 18.0 11.3 19.3 Pulp and paper —15.2 41.8 - -10.7 28.8 North America 50.1 11.1 15.6 4.4 Corporate 13.3 —5.2 Extraordinaries 14.0 —14.8 Total 240.7 180.9 *20.8 *19.0 *Total return calculated on ordinary equity.