Fletcher Building announces $227m net loss

Wednesday, 21 August 2024

Fletcher Buidling has announced a sharp decline in profit over the 2024 financial year.

Fletcher Building’s bad year has continued with the announcement of a $227 million net loss after tax, a sharp decline on last year’s profit.

The company revealed the drop from a net profit after tax of $235m last financial year in its results for the full year to the end of June, released to the NZX on Wednesday.

It pointed to the $180m additional costs required for legacy construction projects announced earlier this year, and losses on its civil business Higgins and on its soon to be sold Australian plumbing business Tradelink as the reason.

The company’s earnings before interest, tax, and depreciation (Ebit) were down 35% to $509m from $785m last financial year, and its Ebit margin was 6.6%, down from 10.2%.

But group revenue was $7.683b, compared with $7.679b in the last financial year, it said.

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Fletcher Building acting chief executive Nick Traber said market volumes declined materially over the 2024 financial year.

In New Zealand, market volumes fell 25% and, in Australia, market volumes fell 15%, each compared with the first half of 2023, resulting in substantial revenue declines in the materials and distribution businesses, he said.

That had been offset by the New Zealand residential business selling 886 units, compared with 617 in the 2023 financial year, despite the tough housing market.

The backdrop was one of slowing demand, and inflationary and competitive pressures, he said.

“Despite the challenges, the focus of the business has been on optimising our operational performance and tightly managing the things within our control.

“These focus areas include costs, cash, capital expenditure, extending the tenor of our debt facilities and obtaining more favourable terms for covenant testing, selling Tradelink and resolving outstanding legacy issues.”

The company’s focus on costs in the softer market had been a key priority across the group, and gross overhead cost reductions for the year were $111m, he said.

That offset the impact of overhead inflation of $91m and restructuring costs of $16m.

Former Fletcher Building chief executive Ross Taylor resigned after the company reported a $120 million loss in its half-year results.

Traber said the company expected the year ahead to remain challenging, with macro-economic pressures likely to persist through the year.

“At this point, we are planning for FY25 market volumes in our materials and distribution businesses to be 10% to 15% lower year-on-year compared to FY24.”

But the company would remain vigilant to further market weakness, and would have a continued focus on tightly managing costs and cash flows, he said.

“We will also focus on protecting our people, delivering on our promise to customers and positioning our businesses well for when our markets return to growth.”

The company had completed works on the Pūhoi to Warkworth motorway, and its last remaining construction legacy projects were the International Convention Centre and the Wellington International Airport car park, which were on track for completion over the next financial year.

It would be focussed on resolving the leaky pipe problems involving its Australian subsidiary Iplex in Perth, and on exploring capital partnership options for its residential and development divisions, it said.

On Tuesday Fletcher Building announced the appointment of its new chief executive and managing director Andrew Reding.

It came six months after its former chief Ross Taylor, along with the board’s chairperson Bruce Hassall, said they would be leaving their roles after the company posted a $120 million net profit loss in its half-year results.