News | Business
22 Feb 2018 4:01
NZCity News
NZCity CalculatorReturn to NZCity

  • Start Page
  • Personalise
  • Sport
  • Weather
  • Finance
  • Shopping
  • Jobs
  • Horoscopes
  • Lotto Results
  • Photo Gallery
  • Site Gallery
  • TVNow
  • Dating
  • SearchNZ
  • NZSearch
  • Crime.co.nz
  • RugbyLeague
  • Make Home
  • About NZCity
  • Contact NZCity
  • Your Privacy
  • Advertising
  • Login
  • Join for Free

  •   Home > News > Business

    Formica may be saleable asset for Fletcher

    Analysts say Fletcher Building should sell off businesses that sit outside its core operations.


    Fletcher Building paid US$700 million to buy Formica Corp from private equity owners Cerberus Capital Management and Oaktree Capital Management in 2007.

    It may be a good time to sell a business that sits outside its core operations, Morningstar says.

    In a note released after Fletcher announced wider losses in its construction business and breaches of lending covenants on Wednesday, the research firm said it anticipates "the divestiture of assets, especially those earning low returns with no synergies across the rest of the business".

    "These should be the focus as long as they can be realised at attractive prices," Morningstar analysts said. "In our opinion, Formica fits the bill on both criteria."

    In detailing further provisions at the Building + Interiors unit of the construction division, chief executive Ross Taylor said that he expected to unveil a revamped business strategy for Fletcher by June, including "what bits, if any, we want to trim".

    Former Fletcher CEO Jonathan Ling bought Formica in 2007, adding to the existing Laminex business in Australasia, with the aim of creating "a truly global laminates platform" and further diversifying the group's earnings exposure.

    Cerberus and Oaktree had bought Formica out of Chapter 11 bankruptcy in the US and had chalked up three years of earnings growth before selling to Fletcher at 7.2 times forecast 2008 normalised earnings including expected synergy benefits, including rationalisation of Australasian manufacturing and streamlining of raw material procurement.

    Formica sits in Fletcher's international division alongside Laminex and Roof Tile Group. Formica operating earnings before one-time items jumped 42 per cent to $88 million in 2017, contributing to a 27 per cent gain in earnings for international as a whole.

    Morningstar values the international division at $1.36 billion or 7.5 times estimated 2018 earnings before interest and tax.

    "Applying these same multiples to just Formica, we think a sale of Formica alone would have to fetch $730 million to be neutral to our valuation and would also lead to lower gearing and provide greater certainty about the business."

    It says Fletcher's focus should be on businesses where it has the strongest competitive advantage - building materials and distribution (which includes the Placemakers chain).

    "A sale of the Formica business would achieve those goals.''


    NZN




    © 2018 NZN, NZCity


     Other Business News
     21 Feb: Kiwi gains against Aussie after weak data
     21 Feb: Super Fund divests 'risky' carbon exposure
     21 Feb: Fletcher Building shares hit 5-year low
     21 Feb: A2 shares jump 25pc on Fonterra deal
     21 Feb: Fairfax shedding 28 NZ papers
     21 Feb: Spark 1H profit falls as rejig costs hit
     21 Feb: GDT prices slip for first time this year
     Top Stories

    RUGBY RUGBY
    Fit-again Rodda to play Reds' rugby opener More...


    BUSINESS BUSINESS
    Kiwi gains against Aussie after weak data More...



     Today's News

    International:
    Cape Town's Day Zero pushed back, but authorities say drought threat still real 23:35

    Law and Order:
    Police assess search for man near Bulls 21:55

    Entertainment:
    Francia Raisa says Selena Gomez feels like her "family" now 21:35

    Law and Order:
    China cracks down on funeral strippers hired to entertain mourners, attract larger crowds 21:25

    Rugby:
    Fit-again Rodda to play Reds' rugby opener 21:15

    Entertainment:
    Liam Payne and Cheryl Tweedy are yet to agree on which football team their son will support 21:05

    Entertainment:
    Maya Jama isn't "ignorant to the fact" that people only know her because of her relationship with Stormzy 20:35

    Environment:
    Gita hits New Plymouth's water supplies 20:05

    Entertainment:
    Justin Theroux and Jennifer Aniston kept their properties separate when they married 20:05

    Entertainment:
    Kelly Brook proposed to her boyfriend Jeremy Parisi - but he rejected her 19:35


     News Search






    Power Search


    © 2018 New Zealand City Ltd