Fletcher Building starts ‘balance sheet strengthening’ capital raise

Monday, 23 September 2024

Fletcher Building is seeking to raise $700 million to strengthen its balance sheet.

Hot on the heels of a substantial capital raise at Auckland Airport last week, Fletcher Building has today followed suit, saying it would seek to raise $700 million to strengthen its balance sheet.

The raise would comprise a fully underwritten $282m placement with institutions, lead by Jarden, and a $418m offer to existing shareholders through the creation of new shares. The raise will allow the company to reduce its leverage down to 1.22x debt to equity from 1.99x, allowing it to maintain its investment grade credit rating and meet its requirements from its lenders.

Fletcher’s said the raise would improve financial stability and resilience in the current challenging environment.

Incoming Group Managing Director and CEO Andrew Reding said the equity raising bolstered the company’s financial position, “assisting us to better endure near-term market headwinds. With a strengthened balance sheet, the company can focus on executing key operational initiatives in preparation for a market recovery.

“In addition to the equity raising, Fletcher Building remains committed to ongoing cost reduction initiatives to manage profitability in the current operating environment, and we have targeted approximately $180m in cost savings to be delivered in FY25.”

Fletchers has lodged an investor presentation and offer document with the NZX and ASX today.

The company’s shares are in a trading halt until the opening of trade on Wednesday morning or earlier if the placement and offer is filled.

In Fletcher results announced in late August, the company said market volumes had declined materially in the year – in New Zealand down 25% and in Australia down 15% compared with the same time last year resulting in substantial revenue declines in its materials and distribution businesses.

Despite these factors, residential unit sales and construction revenue had increased in the year with a slight uptick in revenue to $7683m, versus $7679m in the year prior.