New Zealand Professional Investment Services Firm

Forsyth Barr

We are proud to be a New Zealand owned firm, with 21 offices throughout the country and over 300 employees. We assist personal, institutional and corporate clients providing a full range of investment services.

Forsyth Barr is a foundation New Zealand Exchange firm (NZX) and accredited market participant. We have been confirmed by the Financial Markets Authority as a Qualifying Financial Entity (QFE).

Research is the cornerstone of our advice. We have one of New Zealand's leading teams of analysts. Our global affiliations ensure comprehensive research coverage of all major investment markets.

New Zealand Professional Investment Services Firm, Forsyth Barr

Equity Bottom-Up

<h2>Building Sector<br>Ready-Mix Concrete&nbsp;— Strong End to 2021</h2>
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<p>December quarter ready-mix concrete (RMC) production was a record, bouncing back strongly from the locked down September quarter. As a result, despite the significant disruption (particularly in Auckland), 2HCY21 volume was only down slightly on the prior year. Commentary from industry participants suggest there was an extended holiday break but that activity has returned to prior run-rates. While the pipeline of work to be done remains robust with continued catch-up on delayed work, historically high residential consents, and improving non-residential construction, 1HCY22 construction activity will likely be impeded by Omicron at some point.</p>
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<h3>Q4 volumes bounce out of&nbsp;lockdown</h3>
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<p>December RMC volumes of 1.29m3​​​​​​​ were +33%&nbsp;qoq&nbsp;(seasonally adjusted) and +11%&nbsp;yoy&nbsp;as construction activity rebounded strongly out of&nbsp;lockdown. Notably, production in the December quarter was the highest on record. While some of this will be catch-up work, it is clear the pipeline of work to be done remains robust despite a slowing&nbsp;residential housing market. Growth was broad based across the majority of&nbsp;New Zealand with Wellington (-5%&nbsp;yoy) and Canterbury (+3%) being the notable exceptions.</p>
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<h3>Underlying demand remains strong</h3>
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<p>RMC production is the first indicator of 4QCY21 activity levels and has also&nbsp;proven&nbsp;to be a useful guide of Fletcher Building's (FBU)&nbsp;NZ core revenue&nbsp;growth (ex. construction and residential development) in the past. At its October AGM FBU suggested post&nbsp;lockdown&nbsp;volumes would track above the prior period but growth of +11%&nbsp;yoy&nbsp;is potentially stronger than expected. Despite significant disruption (which accounted for 20% of the half in Auckland and 8% in the rest of NZ) total RMC production over the December half was only -1%&nbsp;yoy. FBU provides its 1H21 result on 16 February and Steel and Tube (STU) on 23 February.</p>
<p>Looking forward, RMC volumes continues to highlight that outside of&nbsp;lockdowns&nbsp;demand should not be a current problem for NZ building-related companies. Anecdotes&nbsp;suggest that while there has been an extended holiday break activity levels have rapidly returned to where they ended 2021. Disruptions caused by Omicron absenteeism will impact activity&nbsp;over 1HCY22 with Vulcan Steel (VSL) seeing a 20–30% drop off in demand over a 4–5 week period&nbsp;during the NSW and VIC outbreaks.</p>
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Building Sector Ready-Mix Concrete&nbsp;— Strong End to 2021


December quarter ready-mix concrete (RMC) production was a record, bouncing back strongly from the locked down September quarter. As a result, despite the significant disruption (particularly in Auckland), 2HCY21 volume was only down slightly on the prior year. Commentary from industry participants suggest there was an extended holiday break but that activity has returned to prior run-rates. While the pipeline of work to be done remains robust with continued catch-up on delayed work, historically high residential consents, and improving non-residential construction, 1HCY22 construction activity will likely be impeded by Omicron at some point.


Q4 volumes bounce out of&nbsp;lockdown


December RMC volumes of 1.29m3​​​​​​​ were +33%&nbsp;qoq&nbsp;(seasonally adjusted) and +11%&nbsp;yoy&nbsp;as construction activity rebounded strongly out of&nbsp;lockdown. Notably, production in the December quarter was the highest on record. While some of this will be catch-up work, it is clear the pipeline of work to be done remains robust despite a slowing&nbsp;residential housing market. Growth was broad based across the majority of&nbsp;New Zealand with Wellington (-5%&nbsp;yoy) and Canterbury (+3%) being the notable exceptions.


Underlying demand remains strong


RMC production is the first indicator of 4QCY21 activity levels and has also&nbsp;proven&nbsp;to be a useful guide of Fletcher Building's (FBU)&nbsp;NZ core revenue&nbsp;growth (ex. construction and residential development) in the past. At its October AGM FBU suggested post&nbsp;lockdown&nbsp;volumes would track above the prior period but growth of +11%&nbsp;yoy&nbsp;is potentially stronger than expected. Despite significant disruption (which accounted for 20% of the half in Auckland and 8% in the rest of NZ) total RMC production over the December half was only -1%&nbsp;yoy. FBU provides its 1H21 result on 16 February and Steel and Tube (STU) on 23 February.
Looking forward, RMC volumes continues to highlight that outside of&nbsp;lockdowns&nbsp;demand should not be a current problem for NZ building-related companies. Anecdotes&nbsp;suggest that while there has been an extended holiday break activity levels have rapidly returned to where they ended 2021. Disruptions caused by Omicron absenteeism will impact activity&nbsp;over 1HCY22 with Vulcan Steel (VSL) seeing a 20–30% drop off in demand over a 4–5 week period&nbsp;during the NSW and VIC outbreaks.


Building Sector: Ready-Mix Concrete — Strong End to 2021