21 Jun 2018

Heavy losses force Fletcher Building back to basics

11:36 am on 21 June 2018

Fletcher Building is to streamline its business and focus on the basics as it looks to recover from heavy losses in its building division.

Highrise construction generic, multistory building generic, construction generic

Photo: 123RF

After a review of its operations it is now planning to concentrate on New Zealand and Australia, and in core markets where it can increase its share.

"We don't expect these markets to experience the same levels of growth they have seen in recent times, we do expect them to remain stable, and with only 15 percent share of the New Zealand market and 1 percent in Australia, there is plenty of opportunity to deliver more from our existing operations," chief executive Ross Taylor said.

He said Fletcher Building would simplify operations, cut costs by around $30 million a year for the next three years and concentrate on roading, infrastructure, housing and building products.

It is also combining all its Australian businesses in one structure and has revamped its management team.

"With successful implementation of the strategy we aim to deliver above-market revenue growth and improved operating margins over the medium term," Mr Taylor said.

The company is recovering after losing nearly $1 billion dollars over the past two years on big construction projects, including Christchurch's justice precinct and the International Convention Centre in Auckland.

As a result, it breached the conditions of its borrowing agreement with banks and was forced to beef up its finances through a $750m sale of shares.

Fletcher Building said there were no more unexpected losses from construction projects and reaffirmed its forecast of pre-tax earnings of $680m to $720m, which excludes $660m of losses from the building division.

However, the latest restructuring plan covering redundancies will cost it between $85m to $95m, along with a write-down in the value of several assets.

The company said it also expected to reveal changes to its board of directors this week.

The board has been strongly criticised for the company's troubles and the chair Sir Ralph Norris has already resigned.

Several directors have announced they would not seek re-election.

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