* NZ building firm posts HY profit of NZ$89 mln
* Turnaround from loss and cancelled dividend previous year
* Australian construction slowdown to continue into 2020-CEO (Re-casts, adds CEO comments, market reaction)
By Charlotte Greenfield
WELLINGTON, Feb 20 (Reuters) - Fletcher Building Ltd FBU.NZ , New Zealand's largest builder, on Wednesday flagged that a slowdown in Australia's construction market was heightening competition, sending its shares down as much as 5.7 percent.
The warning overshadowed news that the company had returned to posting a half-year profit as it stemmed spiralling costs.
Chief Executive Ross Taylor told reporters on a call that the slowdown in Australia - which accounts for a third of Fletcher's revenue - was expected to continue into the 2020 financial year as demand in the country's residential market continued to slow.
The company posted net earnings of NZ$89 million ($61.25 million) for the six months ended Dec. 31, compared with a loss of NZ$273 million a year earlier.
"The result in Australia was pretty disappointing," said Brian Gaynor, head of Auckland-based fund Milford Asset Management, which owns Fletcher Building's shares.
"The expectation was they would be able to improve their performance in Australia but this shows the opposite."
Fletcher Building joined a long line of companies across the Tasman sea that are exposed to the real estate market and hit by Australia's dwindling building boom.
Earlier this month, Boral Ltd BLD.AX , Australia's largest building materials supplier, cut its domestic outlook, while real estate classifieds firm REA Group REA.AX reported plunging listings and slowing revenue growth with no near-term improvement in sight. lending, higher taxes on foreigners and an apartment glut have driven the steepest real estate value drops in a generation in Australia and dulled construction activity.
Shares fell to a 12-day low of NZ$4.98 after the results were released.
QUICKER SLOWDOWN
Fletcher Building's Australian earnings before interest and tax sunk 38 percent to NZ$33 million in the six-month period. Australia is the company's biggest division in terms of revenue, but sixth in terms of profit.
The Auckland-based firm, which has been shutting and selling loss-making units to rein in costs in New Zealand, previously warned of weak earnings this year. activity had come off faster than the company's expectation, particularly in larger projects around the Sydney area, Taylor told reporters.
The firm has been revising its Australia strategy to improve operating efficiencies and has appointed a new chief executive for its Australia division.
In December, the company signed an agreement to sell Formica Group to Netherlands-based Broadview Holding BV for $840 million, which Taylor said was expected to be finalised by the end of the 2019 financial year. Building announced a dividend of 8 New Zealand cents per share for the first half, after failing to pay an interim dividend for the first time in its history last year.
It raised its guidance for full-year earnings before interest and tax, excluding one-time items and including Formica earnings, to NZ$650 million to NZ$700 million from NZ$630 million to NZ$680 million.