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Highlights
- Fletcher Building announced to invest in the New Zealand wood sector.
- Following the news, Fletcher Building’s shares dropped by 2.436% at 3:38 PM AEDT.
- The project operations are expected to commence by FY26.
New Zealand-based building products manufacturer Fletcher Building Limited (ASX:FBU) announced the confirmation of two strategic investments in the wood market. These investments were made because the company feels its role in the wood industry is underrepresented.
Shares of Fletcher Building reacted negatively to the announcement and were spotted trading 2.436% lower on the ASX. One share of Fletcher Building was priced at AU$4.605 as of 3:38 PM AEDT, 16 December.
Following today’s decline, the share price of Fletcher Building has plunged 2.95% in the last five trading sessions, alongside declining 1.71% in a month. On the contrary, Fletcher Building’s shares witnessed a 7.71% increase in value over the previous six months. Additionally, shares of Fletcher Building dropped by 34.14% on year-to-date (YTD) and 32.60% over the course of a year.
A glance at Fletcher Building’s investments in wood sector
According to the company’s official ASX filing, New Zealand’s wood sector is backed by strong macrotrends linked to current building techniques, helping the nation reach its goal of a circular economy with low carbon emissions.
Fletcher Building has planned to go forward with the NZ$275 million capital project of constructing a new wood panels plant at its current Laminex location in Taupo. The investment is anticipated to be flexible enough for providing overseas markets and serve New Zealand’s market potential.
As per the ASX report, Fletcher Building has received all necessary approvals, and the project is anticipated to be finished in about 2.5 years. Its operations are anticipated to begin in FY26. Through this investment, the company expects its mid-cycle EBIT of about NZ$40 million after a ramp-up phase and a return on funds employed (ROFE) of at least 15%.
Fletcher Building has also planned to acquire Waipapa Pine Limited and Renewable Wood Fuels Limited to access a cash consideration of NZ$97 million.
The purchase will be funded by the loan arrangements already in place at Fletcher Building and is additional to the company's previously stated capital expenditures. The transaction, subject to Overseas Investment Office approval, is projected to be finished in the last quarter of FY23.
Commenting on these investments, Ross Taylor, CEO of Fletcher Building, said:
Image Source: © 2022 Kalkine Media ®
Data Source: Company announcement dated 16 December 2022
