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 weekly</h2>
<h3>New Zealand</h3>
<ul>
<li><strong>Concrete production bounces back</strong> (3Q20): +36.7% qoq, +4.4% yoy (previous -15.3% qoq, -26.9% yoy), with strong post lockdown rebounds in regional North Island + 24% yoy, Wellington +12%, and regional South Island +9% while Auckland was -1% with the second lockdown likely to have weighed on activity.</li>
<li><strong>FBU: Cost out sees FY21 off to a strong start</strong>: FBU’s 4M21 update saw group revenue/EBIT lift +1%/+54% respectively, as resilient construction activity and a reset cost base translated into strong bottom line growth. FBU remains cautious on where 2H21 activity will land, given little visibility beyond its forward order book that “looks good” into early CY21.</li>
<li><strong>Signs of slippage at Pūhoi to Warkworth</strong>: <a href="https://www.rnz.co.nz/news/national/430161/risk-of-slips-on-new-highway-north-of-auckland-increased-due-to-covid-19-hiatus-report" target="_blank" data-saferedirecturl="https://www.google.com/url?q=https://www.rnz.co.nz/news/national/430161/risk-of-slips-on-new-highway-north-of-auckland-increased-due-to-covid-19-hiatus-report&amp;source=gmail&amp;ust=1605151731884000&amp;usg=AFQjCNHsM5LDP5aWy4OAX9rRtLHN7Euvaw" rel="noopener">Risk of slips on new highway north of Auckland increased due to Covid-19 hiatus</a></li>
<li><strong>Concerns of low-ball bidding</strong>: “From recent discussions with industry participants, the early trends of lower margins arising from COVID identified in the survey are continuing, which is concerning and dangerous”. <a href="https://www.bdo.nz/getmedia/67759155-3b59-4893-bf15-454fd42350ca/Construction-Survey-2020-x3.pdf.aspx" target="_blank" data-saferedirecturl="https://www.google.com/url?q=https://www.bdo.nz/getmedia/67759155-3b59-4893-bf15-454fd42350ca/Construction-Survey-2020-x3.pdf.aspx&amp;source=gmail&amp;ust=1605151731884000&amp;usg=AFQjCNFP_KJejlaqhJLkhEpMFs26V7yRRA" rel="noopener">The BDO 2020 construction survey report</a></li>
<li><strong>Russell McVeagh survey highlights rising disputes</strong>: “Almost 61% of respondents overall considered that disputes in the construction sector are likely to increase over the next two years”. <a href="https://www.russellmcveagh.com/getmedia/d6d37360-331b-424b-9d62-a1eb193ff326/Building-Up-New-Zealand-s-Construction-Industry-digital.pdf/" target="_blank" data-saferedirecturl="https://www.google.com/url?q=https://www.russellmcveagh.com/getmedia/d6d37360-331b-424b-9d62-a1eb193ff326/Building-Up-New-Zealand-s-Construction-Industry-digital.pdf/&amp;source=gmail&amp;ust=1605151731884000&amp;usg=AFQjCNEuuj9YlpIvzBsoBNfZIDrpV7UroA" rel="noopener">Building Up New Zealand’s Construction Industry</a></li>
</ul>
<h3>Australia</h3>
<ul>
<li><strong>Housing activity strong, but commercial weakening</strong> (Performance of Construction Index, Oct.): 52.7 (previous 45.2; contraction &lt;50&lt; expansion) with apartments 47.1 (previous 43.3), houses 61.3 (previous 56.9), commercial 39.5 (previous 45.8) and engineering 44.1 (previous 29.5).</li>
<li><strong>James Hardie reports strong volume growth</strong> (2Q21): 2Q North America volume growth of +11% yoy, Asia-Pacific +2% including Australia +4%, and Europe +7%. No change to full year NPAT guidance of US$380-420m.</li>
</ul>
<h3>International</h3>
<ul>
<li><strong>US: Residential construction activity remains buoyant, non-residential ticks lower</strong> (Sep.): Residential +2.7% mom, +10.1% yoy (previous +3.2% mom, +7.9% yoy), non-residential -1.6% mom, -4.4% yoy (previous -0.9% mom, -1.5% yoy).</li>
</ul>
<p><strong>Chart of the week: Two thirds of construction firms have had (or expect) confirmed projects to be cancelled or deferred</strong><br>The impact of COVID on previously confirmed construction projects</p>
<figure class="editor-figure mceNonEditable"><img src="https://mail.google.com/mail/u/0?ui=2&amp;ik=f57c39853c&amp;attid=0.2&amp;permmsgid=msg-f:1683032981614607871&amp;th=175b55946667bdff&amp;view=fimg&amp;sz=s0-l75-ft&amp;attbid=ANGjdJ_3p01dUZsjvN2v0C7ZITxXBSAMRnI4kvQ6viTR3Db05iBy4h592mmUDIwc_gk0cfAwvlaUym7g5TPLvQmAsfcAsnZi4jwk7F0nYhpeFyFFn52lls3kNkK362s&amp;disp=emb" width="571" height="400" class="editor-image img-responsive" data-image-whitelisted=""></figure>
<p>Source:&nbsp;BDO,&nbsp;Forsyth Barr analysis</p>
<p>Rohan Koreman-Smit&nbsp;<br>Senior Analyst, Equities</p>
<figure class="editor-figure mceNonEditable"><img src="https://mail.google.com/mail/u/0?ui=2&amp;ik=f57c39853c&amp;attid=0.1&amp;permmsgid=msg-f:1683032981614607871&amp;th=175b55946667bdff&amp;view=fimg&amp;sz=s0-l75-ft&amp;attbid=ANGjdJ_DqHh2bt0frJc4SpdUUkxI62rhRbWuT97LmdHFBFeDg50RrtRlLrlbj8My1pNFWkhlcIIIca4sl1TL3VhvJ1QjysZ1xdeYb4rmGtWzIPFs3fcA5zlLYqFvRPk&amp;disp=emb" class="editor-image img-responsive"></figure>
<p><br>P: +64 9 368 0085 | TF: 0800 367 227&nbsp;<br>Level 23, Lumley Centre, 88 Shortland Street, Auckland</p>

Building weekly
New Zealand

Concrete production bounces back (3Q20): +36.7% qoq, +4.4% yoy (previous -15.3% qoq, -26.9% yoy), with strong post lockdown rebounds in regional North Island + 24% yoy, Wellington +12%, and regional South Island +9% while Auckland was -1% with the second lockdown likely to have weighed on activity.
FBU: Cost out sees FY21 off to a strong start: FBU’s 4M21 update saw group revenue/EBIT lift +1%/+54% respectively, as resilient construction activity and a reset cost base translated into strong bottom line growth. FBU remains cautious on where 2H21 activity will land, given little visibility beyond its forward order book that “looks good” into early CY21.
Signs of slippage at Pūhoi to Warkworth: Risk of slips on new highway north of Auckland increased due to Covid-19 hiatus
Concerns of low-ball bidding: “From recent discussions with industry participants, the early trends of lower margins arising from COVID identified in the survey are continuing, which is concerning and dangerous”. The BDO 2020 construction survey report
Russell McVeagh survey highlights rising disputes: “Almost 61% of respondents overall considered that disputes in the construction sector are likely to increase over the next two years”. Building Up New Zealand’s Construction Industry

Australia

Housing activity strong, but commercial weakening (Performance of Construction Index, Oct.): 52.7 (previous 45.2; contraction &lt;50&lt; expansion) with apartments 47.1 (previous 43.3), houses 61.3 (previous 56.9), commercial 39.5 (previous 45.8) and engineering 44.1 (previous 29.5).
James Hardie reports strong volume growth (2Q21): 2Q North America volume growth of +11% yoy, Asia-Pacific +2% including Australia +4%, and Europe +7%. No change to full year NPAT guidance of US$380-420m.

International

US: Residential construction activity remains buoyant, non-residential ticks lower (Sep.): Residential +2.7% mom, +10.1% yoy (previous +3.2% mom, +7.9% yoy), non-residential -1.6% mom, -4.4% yoy (previous -0.9% mom, -1.5% yoy).

Chart of the week: Two thirds of construction firms have had (or expect) confirmed projects to be cancelled or deferred The impact of COVID on previously confirmed construction projects

Source:&nbsp;BDO,&nbsp;Forsyth Barr analysis
Rohan Koreman-Smit&nbsp; Senior Analyst, Equities

 P: +64 9 368 0085 | TF: 0800 367 227&nbsp; Level 23, Lumley Centre, 88 Shortland Street, Auckland

Fletcher Building

Building Weekly