Fletcher Building eliminates standalone Australian division

Friday, 16 May 2025

A strategic review begun at Fletcher Building in August last year has ended with the company deciding to disestablish its Australian Division and absorb its businesses into two new trans-Tasman groupings.

After last year’s losses, which have only widened in the company’s half year result in February, Fletcher took a closer look at the constituent parts of its business, seeking to possibly find buyers for parts of it. There were rumours at one point the company might seek to completely sell-off its Australian division, which investment bank Jarden had valued at $1.58 billion.

While one of the Australian businesses - laminate and cabinetry firm Laminex Australia - was considered an attractive purchase, another, pipes and drainage play Iplex Australia, had been embroiled in a significant dispute over leaking pipes, particularly in Western Australia. Iplex pipes installed in approximately 12,000 homes between 2017 and 2022 were found to be prone to leaks, leading to Fletcher having to put aside some $200m to cover potential payouts and remediations.

In the end, the company has decided to absorb all its Australian concerns, which together generate $1.9 billion in revenue, into two new, trans-Tasman groupings. Within ‘light building products’ will be most of Fletcher Building’s New Zealand building products businesses (Comfortech, Winstone Wallboards, Iplex, Laminex and Wood Products), now combined with sink manufacturers Oliveri Australia, and Fletcher Insulation.

Heavy Building Materials, meanwhile, will encompass the concrete-related businesses (Winstone Aggregates, Golden Bay Cement, Firth Concrete and Humes), the New Zealand steel businesses, as well as roll formed steel building products firm, Australia’s Stramit.

Chief executive of the Australian division, Gareth O’Reilly, will stand down.

Asked about other potential job losses, a spokesperson told The Post the company was not in a position to quantify any potential impact on roles at this stage. In terms of changes to any other parts of the business, he said portfolio composition was part of the strategic review underway.

Fletcher Building’s other three divisions (Distribution, Construction and Residential & Development) and executive team roles remain unchanged.

Cost out

Chief executive Andrew Reding said Fletcher’s operating companies were “deeply embedded in their local markets, giving them strong insight into customer needs, agility in decision-making, and the ability to respond quickly to changing market dynamics.

“We want to leverage these strengths, evolving Fletcher Building into a more decentralised, high-performing portfolio company.”

There were already $200m in cost out being undertaken for the current financial year, and the company said the restructuring outlined above would see costs reduced by a further $15m each year.

But cost cutting was likely to remain a focus for the foreseeable future. Although today’s news signalled the company continued to cut its cloth to the overall economic environment, Reding said that environment had not materially improved since the company last addressed the market.

“Since our interim results, our businesses have seen no significant improvement in market conditions, with market volumes continuing to be challenging due to macroeconomic uncertainties and the lack of any material momentum in the recovery of New Zealand’s economy,” he said.

“Our businesses operating in the commercial and infrastructure segments continue to face reduced or deferred spending, partly due to recent weather events and reduced sub-division activity. Meanwhile, residential property sales also remain at subdued levels, reflecting lower levels of liquidity across the market.”

In the company’s half year results released mid-February, it reported revenue of $3.6 billion in its continuing operations, down 7% on the prior comparative period, and net losses of $134m, which had increased from the $120m in the first half of the 2024 year.

Doing its best

Greg Smith, head of retail at Devon Funds and a contributing markets analyst for The Post, described the changes as “re-centralising” the business, although rather than along geographical lines, along product lines.

He said synergies would come from it, in terms of cross-selling (where businesses encourage existing customers to purchase additional, complementary products or services) as well as the $15m in costs that had been identified.

“Any cost savings are good,” he said.

“You could say it’s reshuffling the deck a bit, but there are savings there.”

The biggest takeaway for Devon, Smith said, was the fact the company had highlighted the macroeconomic environment was still challenging, infrastructure spend remained weakened, and the property market had not not improved greatly.

“Here’s a cyclical business, obviously doing what it can to right the problems it has internally, but also to facing increasingly severe macro-economic headwinds. Times like this necessitate taking cost out even more, especially when they are not seeing signs of recovery.”