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Fletcher Building has raised its operating earnings guidance for FY26 after stronger-than-expected performance in its manufacturing and distribution businesses. The revised outlook pushed the company's shares to a four-month high during early trading. While improved sales volumes and expected earnings from surplus property sales supported the upgrade, the company cautioned that higher input costs and economic uncertainty could affect recovery in FY27. It also highlighted delays and cancellations of new commercial projects amid rising inflationary pressures and increasing borrowing costs in New Zealand.
Fletcher Building has increased its operating earnings outlook for the financial year 2026, supported by improved performance across its core manufacturing and distribution businesses. The revised guidance lifted investor sentiment, with the company's shares rising 2.3 per cent to NZD 3.50 in early trading, marking their highest level in four months. The broader NZX 50 Index remained largely unchanged during the session.
The New Zealand-based construction materials company has faced weaker demand over the past year, particularly in its materials and distribution division, which supplies construction and plumbing products along with cement and concrete. The slowdown had weighed on the company's earnings as construction activity moderated across key markets.
The company stated that improved sales volumes across its manufacturing and distribution operations had supported the decision to raise its earnings outlook. Fletcher Building also expects surplus property sales to contribute around NZD 52 million to earnings during FY26, excluding significant items estimated at around NZD 9 million.
Based on the stronger operating performance, Fletcher Building now expects earnings before interest and taxes (EBIT) to be between NZD 400 million and NZD 403 million for FY26, equivalent to around USD 228.04 million to USD 229.75 million. This represents an increase of nearly 6.5 per cent from its earlier guidance of NZD 375 million to NZD 380 million.
Despite the improved outlook, the company cautioned that uncertainty around input costs remains a key concern. It said prolonged cost pressures could affect the pace of recovery during the first half of FY27, even though existing construction activity continues to support demand.
The company also indicated that broader economic uncertainty and rising costs are delaying several planned developments, while some new commercial projects have been cancelled. Fletcher Building attributed these challenges to inflationary pressures and higher project costs, which continue to affect investment decisions across the construction sector.
Fuel price volatility linked to the ongoing conflict in the Middle East has also remained an important cost factor for the company in recent months, adding pressure to operating expenses.
The outlook revision comes after the Reserve Bank of New Zealand increased its benchmark cash rate for the first time in more than three years during the past week. The central bank indicated that inflationary pressures remain elevated and signalled that further monetary tightening could be considered as economic activity strengthens. Higher interest rates generally increase borrowing costs for developers and businesses, which can influence construction activity and project timelines.
Fletcher Building has been implementing measures over the past year to improve operational efficiency and strengthen profitability as New Zealand's construction market gradually recovers from a prolonged slowdown. The company continues to focus on improving performance across its core businesses while managing cost pressures and changing market conditions.
Source Reuters
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