Latest / Best of Business / Sam Trethewey: Milford Asset Management Portfolio Manager on Fletcher Building reporting a multi-million dollar net loss

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Sam Trethewey: Milford Asset Management Portfolio Manager on Fletcher Building reporting a multi-million dollar net loss · Best of Business

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  Speaker 2: Fletcher Building today announced a two hundred and twenty seven
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  Speaker 2: million dollar net loss after tax. Not going well. It's
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  Speaker 2: already warning of a challenging year ahead. Sam Trathuiz from
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  Speaker 2: Milford Assett Management OSAM good evening. Either did the company's
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  Speaker 2: performance meet the investor expectations or not?
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  Speaker 3: I think it would be fair to say investor expectations
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  Speaker 3: were not at all high going to the result, given
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  Speaker 3: what has been going on in the economy and also
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  Speaker 3: within Fletcher itself. So look, the headline numbers reported were weak.
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  Speaker 3: If you strip down the business and look at the
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  Speaker 3: core profitability, looking at earnings before interest, tax and all
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  Speaker 3: the big one offs that are going on within Fletcher's
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  Speaker 3: it was just above five hundred million, So that's down
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  Speaker 3: nearly three hundred million on the prior year. There were
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  Speaker 3: a few new big one offs in there, one hundred
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  Speaker 3: million dollar impairment against the Higgins runing business, but fortunately
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  Speaker 3: no new issues arising from some those legacy construction projects.
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  Speaker 3: I think the outlook was probably the key area of
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  Speaker 3: interest and the reasons that shares. The share price of
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  Speaker 3: Fletcher's did trade lower today initially, so they indicated that
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  Speaker 3: they are planning for volumes in the year ahead to
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  Speaker 3: be down ten to fifteen percent across their materials and
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  Speaker 3: distribution businesses. That's getting worse on last year, essentially signaling
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  Speaker 3: that the weakness there is more weakness to come, there's
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  Speaker 3: more earnings pressure in the year ahead.
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  Speaker 2: Do you think Fletcher's management has just been conservative here
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  Speaker 2: or do you reckon they are being realistic about what's
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  Speaker 2: going on.
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  Speaker 3: Often when there is significant management change in listed companies,
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  Speaker 3: it's pretty common to see a clearing of the decks.
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  Speaker 3: So essentially a reset of investing expectations or very conservative
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  Speaker 3: guidance statement or outlook statement going forward that is really achievable.
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  Speaker 3: But in this case, I think it is a realistic
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  Speaker 3: of view rather than that conservative statement. Fitcher's CFO Bevn
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  Speaker 3: McKenzie indicated that they really are seeing those volumes lines
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  Speaker 3: at present over the last month or so compared to
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  Speaker 3: last year of that ten to fifteen percent range, and
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  Speaker 3: its products at the earlier stage of the building cycle,
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  Speaker 3: so rather than those finishing trades. So the challenge for
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  Speaker 3: investors the market is to think about how that could change.
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  Speaker 3: Is that say like that all yeh? And the key
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  Speaker 3: there really being what impact will the OCR cuts, the
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  Speaker 3: interest rate cuts from the Arvin's you'd have on the business,
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  Speaker 3: on the residential market, the construction market, and how quickly
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  Speaker 3: will that come through?
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  Speaker 2: Heither Sam the new CEO incoming obviously not there yet,
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  Speaker 2: Andrew reading, what do you expect his priorities are going
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  Speaker 2: to be?
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  Speaker 3: Look for Andrew, he was actually part of Fletcher's old
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  Speaker 3: Guard you could call back in the early two thousands
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  Speaker 3: before doing some time at Graham Heart's Rant Group. He
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  Speaker 3: knows the business, but I think initially there's a decent
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  Speaker 3: list of issues still requiring a big fix, and it
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  Speaker 3: came through pretty clearly today that at the top of
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  Speaker 3: that list will be the balance sheet or the debt
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  Speaker 3: that they have. And the company has received several waivers
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  Speaker 3: on its banking covenants and spending is being pulled back,
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  Speaker 3: but it's very much at the top end of where
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  Speaker 3: they would like it to be. So they're thinking about
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  Speaker 3: what business units can be sold or perhaps capital taken
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  Speaker 3: out of. Maybe something like the Fletcher Living Home to
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  Speaker 3: building division could be one that is sort of prime
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  Speaker 3: for that opportunity, so that's number one issue for him.
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  Speaker 3: Number two is probably sorting out IDEX pipes, so the
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  Speaker 3: faulty pipes over in Western Australia that they are facing
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  Speaker 3: a few problems with, so plenty for him to fix
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  Speaker 3: before he can really get onto thinking about growing and
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  Speaker 3: returning the business to what it will used to be.
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  Speaker 2: So right, Hay, Sam, thank you very much appreciated mate.
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  Speaker 2: As always, samra Thu, we have Milfed Asset Management.
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