Market braces for equity raise by Fletcher Building

Fletcher Building has told the market it expects its pretax costs to rise to $NZ180m.

There’s talk in the market that the $3.3bn Fletcher Building could be assessing a possible move to raise capital as early as next week amid concerns a recent lift in costs could place further pressure on its balance sheet.

The share price of the Australia and New Zealand listed company that sells and manufacturers building materials on both sides of the Tasman and is one of New Zealand’s largest civil contractors and property developers, is down almost 8 per cent since the start of the week.

This is after the company told the market it expected its pretax costs to rise to $NZ180m, including $NZ165m to complete the New Zealand International Convention Centre after a fire and $NZ15m for remediation quality issues at Wellington International Airport Carpark.

Potentially offsetting the costs are $NZ100m in claims from the insurer for the fire, although the insurer has challenged this.

Shares have drifted about 24 per cent lower in the past six months, and shares typically fall before any raising is announced to the market.

Some believe that UBS may be on hand to assist with any raise, given it is close to the company.

Fletcher Buidling did not comment on the speculation on Tuesday but released a statement to the market Wednesday saying it was “inaccurate” that it was weighing up an equity raise.

Fletcher last tapped the market in a big way during 2018 when it asked investors for $NZ750m to repay debt following building construction projects blowouts (it has now staged an exit from vertical construction).

Shares were then sold at $NZ4.80 each. The Fletcher Building share price closed on Tuesday at $NZ4.24. or $3.95.

In August, DataRoom reported that concerns were growing about the need for an equity raise for Fletcher Building as it entered a troubled time in the housing market while shouldering $NZ1.4bn of net debt and facing potential liabilities from pipe product defects sold in Western Australia by its Iplex unit.

Fletcher Building will announce its half-year result on February 14.