Fletcher Building: New Zealand’s Residential Downturn a Double-Edged Sword

We maintain our fair value estimate of NZD 6.00 (AUD 5.50) per share for no-moat Fletcher Building following its annual shareholders meeting and trading update. In the New Zealand materials and distributions business, Fletcher reported volumes from residential customers are expected to be about 5% softer over fiscal 2024 than prior guidance, due to slower demand for residential housing. Despite this, Fletcher’s own residential construction business is reporting strong year-to-date sales, reflecting its positioning as a lower-cost housing provider, enabling it to maintain demand through the downturn. We have lifted our fiscal 2025 volume estimates for the residential development business, offsetting a fiscal 2024 decline in volume in the materials and distribution business.