Bumper NZ Housing Consents to Be a Slow Burn for Fletcher

We lower our fiscal 2022 revenue and operating income forecasts for no-moat Fletcher Building by 4% and 13%, respectively, following Fletcher’s annual shareholder meeting which included a September quarter trading update. While no quantitative guidance was provided, Fletcher has been impacted by varying degrees of coronavirus restrictions across New Zealand and Australia during the September quarter. These restrictions have resulted in a temporary slowing of operations and consequent operating deleverage. Moreover, we surmise that capacity constraints currently persisting within the New Zealand building sector are delaying the conversion of housing consents to sales within Fletcher’s various building-exposed businesses.