The stars of Fletcher Building’s half year to 31 Dec 2015 were Distribution and Building Products, both showing double digit growth in EBIT over the previous half year, despite marginal top line results.

The stars of Fletcher Building’s half year to 31 Dec 2015 were Distribution and Building Products, both showing double digit growth in EBIT over the previous half year, despite marginal top line results.

To recap, following the early February restructuring of Fletcher Building, the shape of these two divisions is now as follows:

• Distribution – building materials, plumbing supplies and steel distribution activities in New Zealand and Australia with Dean Fradgley as CEO. Includes the Stramit and Tasman Sinkware businesses in Australia, and Dimond Roofing in New Zealand.
• Building Products – light and heavy building materials manufacturing in New Zealand and Australia, led by Matt Crockett, previously CEO of the Heavy Building Products division.

Under the new structure, from a top line of $1.67 billion (+1%), the Distribution division’s overall half year EBIT was $64 million (+14% on last year), with the EBITs (in NZ$m) of its four key components as follows:

                                              2014    2015    Change          

• NZ Building Supplies    29        39        +34%
• NZ Steel Distribution    15        17        +13%
• AU Building Supplies    6          (2)        –8%
• AU Steel Distribution    6          10        +67%

In the NZ Building Supplies businesses, gross revenue was $781 million (+10%), within which PlaceMakers revenue was $643 million (+10%), a record level for the business. Both PlaceMakers’ and Mico’s EBITs were +34% on the prior corresponding period.

The blue sheds saw growth in all trade-related segments of the market and double digit sales growth in both commercial and frame & truss, while Mico also experienced strong revenue growth ahead of the market overall.

Three new PlaceMakers stores and a new frame & truss site were opened during the period, during which the collocation programme continued for Mico and PlaceMakers, with 7 sites currently collocated and others planned.

The NZ Steel Distribution businesses saw good EBIT growth, with record domestic volumes produced at Pacific Coilcoaters and record order book levels at Fletcher Reinforcing.

Across the ditch, Australian Building Supplies reported a loss of NZ$2 million, thanks mainly to restructuring costs and the inclusion of the Hudson Building Supplies business prior to its divestment in the prior period earnings.

Revenue from the Aussie Tradelink business was negative (–3% in AU$) “as a result of market competition” in the period, although its underlying sales margin improved.

Looking ahead for Tradelink, on top of growth in commercial plumbing, the next period could/should benefit from a new Customer Service Promise (like we’ve seen adopted by PlaceMakers and Mico in New Zealand) and a much flatter management structure which has enabled investment in more sales people and customer centric activities.

In Australian Steel Distribution, the big bottom line improvement was largely driven by improvements in the Stramit roll-formed steel building products.

See today's FBU half year results in full here.