Fletcher Building losses worsen

Fletcher says losses from its building division will be $NZ486m, worse than forecast, as chairman Ralph Norris resigns.

Outgoing Fletcher chairman Ralph Norris, pictured when he was CEO of Commonwealth Bank

Building and construction materials company Fletcher Building says losses from its building division will be $NZ486 million, worse than it had told the market about in October last year.

The New Zealand based, Australian-listed company (FBU) came out of a trading halt and said the total earnings before interest and tax loss for the buildings and interiors division which has suffered setbacks for major projects such as a convention centre in Auckland and the Justice Precinct in Christchurch would now be $NZ660 million for the 2018 fiscal year.

Fletcher also said Sir Ralph Norris, a former Commonwealth Bank boss, will step down as chairman later this year.

“As chairman of Fletcher Building, our shareholders place significant faith in me to act in their best interests,” Mr Norris said. “I also know shareholders expect accountability from the board for all aspects of the company’s performance.

“In this context, I wish to announce that I will stand down as chairman.”

Fletcher has begun stripping out its group earnings from the buildings and interiors division, and said that excluding the construction losses, earnings guidance for fiscal 2018 remains between $NZ680 million and $NZ720 million, which was announced in October 2017.

Fletcher Building CEO Ross Taylor said in the regulatory filing the new loss provisioning was informed by a review of 16 buildings and interiors projects, accounting for approximately 90 per cent of the company’s construction backlog, and incorporating external input from independent construction experts and the auditor KPMG.

Mr Taylor said Fletcher’s focus was now on finishing the delayed projects within the bounds of these new loss provisions.

To achieve this, it is refocusing the entire buildings and interiors business on project delivery only, “and ceasing all bidding on vertical construction projects in New Zealand.”

“This will allow us to direct all resources in B+I to the completion of the current book,” Mr Taylor said.

Mr Taylor said the buildings and interiors market sector was plagued by high contract risk and low margins.

“Unless these dynamics change we will no longer work in this sector,” he said.

Meanwhile, Fletcher Building said it had received a waiver from a banking syndicate after the losses saw it breach lending covenants, and that the parties would renegotiate the terms. Still, the company won’t pay an interim divided this fiscal year.

Dow Jones Newswires