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Why the Fletcher Building (ASX:FBU) share price could rocket higher today

The Fletcher Building Limited (ASX:FBU) share price could charge higher today after the release of a positive trading update…
The post Why the Fletcher Building (ASX:FBU) share price could rocket higher today appeared first on Motley Fool Australia. –

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The Fletcher Building Limited (ASX: FBU) share price looks set to take off on Tuesday following the release of a trading update.

Over in New Zealand, the company’s NZX-listed shares are currently up a sizeable 13%.

What was in Fletcher Building’s trading update?

The building products company has started FY 2021 in a positive fashion and delivered growth on both the top and bottom lines.

According to the release, for the four months ended 31 October, Fletcher Building’s group revenue was up 1% on the prior corresponding period.

This was supported by resilient trading conditions in both New Zealand and Australia, particularly in the residential sector. The company notes that demand for new houses has been robust, with 342 units taken to profit in the Residential business, consistent with its objective of achieving 700-800 house sales for the full year.

Things were even better for its earnings, with group earnings before interest and tax (EBIT) before significant items up NZ$80 million or 54.4% to NZ$227 million.

This was driven by a 2.9 percentage point increase in its EBIT margin to 8.4%. Management advised that this margin expansion reflects the operational performance and efficiency programs implemented over the last two years.

At the end of the period the company’s cash flow and balance sheet remained strong, with net debt at NZ$388 million and liquidity of NZ$1.4 billion.

Management commentary.

Fletcher Building’s CEO, Ross Taylor, commented: “Through all the disruption and uncertainty of the past year, our people have adapted and responded superbly, maintaining a focus on delivering for our customers. We were heavily impacted in FY20 by the COVID-19 restrictions, resulting in a significant earnings loss for the Group of NZ$196 million, so we are pleased to have begun the new year well.”

“As we look ahead, our customers are pointing to volumes remaining at current levels through to the start of the new calendar year. However, there is uncertainty in the second half of the financial year, with the impact of broader macro-economic factors on our markets in New Zealand and Australia not yet clear.”

“Also, December and January are always lower trading and earnings months for the Group. At our Annual Shareholders Meeting on 25 November 2020, we intend to provide earnings guidance for 1H21. We will update further on trading conditions at our half-year results announcement on 17 February 2021 and at an investor day planned for May 2021,” he concluded.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The post Why the Fletcher Building (ASX:FBU) share price could rocket higher today appeared first on Motley Fool Australia.

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