5 Questions With Fletcher Building CEO
Heavily criticized acquisitions and recurring earthquakes have stacked the odds against one of New Zealand's largest listed companies Fletcher Building. Following the recent slowdown in the Australasian housing market, the company announced Thursday that it has downgraded its earnings outlook for the first-half of 2012. CEO Jonathan Ling spoke to CNBC's Christine Tan before the earnings forecast about his contingency plan.
Q. Reconstruction in New Zealand is now hampered by aftershocks and protracted insurance claims. How problematic is that for you in terms of planning?
I think the real issue is around the aftershocks, rather than the other things. While the aftershocks are still providing further damage, obviously it’s making the claims resolution complex. Bearing in mind that so far we’ve done over 20,000 emergency repair jobs, and we’ve already completed some 5,000 or 6,000 permanent repair jobs, a lot of work is happening anyway even despite the aftershocks.
Q. Who's going to foot the massive reconstruction bill?
That’ll get sorted out. The EQC (Earthquake Commission of New Zealand) estimates of what it’ll cost them has gone up. But they’re underwritten by the government. The government has come and said they’ll underwrite it. So one way or another the funding for the repairs will happen. The New Zealand government is absolutely committed to making sure that Christchurch does get rebuilt. So I’m very confident. Yes, there will be issues between the reinsurers and insurers and the government going on for many, many years. But that’s no different to any other disaster of this magnitude around the world. I think the government will ensure that funding flow continues for the repair in Christchurch.
Q. It's a lot of work in terms of mobilizing the resources and labor for the reconstruction. What are you going to find most challenging?
I think, probably in the end it’s going to be around labor. It’s interesting, even though we’re in the early stages of the rebuild, we already have nearly 6,000 contractors and trade employees on the books in Christchurch and it’s building every day. But I think once we hit our peak loads for work in probably two or three years time, my guess is that a shortage of skills will be the single largest issue.
Q. There's still a lot of uncertainty coming from the U.S. as well as Europe. There's so much talk on global slowdown, global economic recession, and the markets have been so volatile. As CEO, how does this impact the way you craft out the overall strategy for the company?
There’s no other place I’d rather be at this moment in the world in terms of Australia and New Zealand. They’re terrific compared to what it’s like elsewhere.
Q. So no plans to scale it back further?
We’re not scaling it back further. We’ve hit the bottom, I think in both U.S. and Europe. In the building industries, anyway, you lose over half your volume. It’s not getting any better quickly but it hasn’t got a lot worse and so we’re comfortable where we are at the moment and are not too fearful about where the U.S. and Europe are.
This is an excerpt taken from CNBC’s longest-running feature program Managing Asia. Catch the show with anchor Christine Tan over the weekend on CNBC.