Fletcher posts $419m loss after ‘demanding’ year

Wednesday, 20 August 2025

A particularly “demanding” year has left Fletcher Building declaring an annual net loss of $419 million after tax, and the company is now exploring the sale of its residential division as it refocuses the business.

The construction giant announced the loss, a steep decline on its after tax loss of $227m last financial year, in its results for the year to the end of June on Wednesday.

It was primarily driven by the difficult trading environment and one-off significant items previously signalled to the market, the company said.

In June it revealed that it expected the total cost of the significant items would be between $573m and $781m over the 2025 financial year.

The announcement also showed revenue for the year was $7 billion, down 9% on the previous financial year, which it said reflected softer demand across all its markets.

Its earnings before interest, tax, and depreciation (EBIT) before significant items was $384m, and that was $125m lower than the previous year.

Significant items costs totalled $702m, with $644m relating to continuing operations. The items included Fletcher’s response to the Western Australian leaky pipe crisis, its Tradelink sale and additional costs for the NZ International Conference Centre build.

Fletcher Building managing director Andrew Reding said the 2025 financial year had been one of the most demanding years in recent memory - for the company and the industries in which it operated.

“Our businesses faced tough market conditions, as well as undertaking significant internal change, and addressing legacy issues.”

But the company’s balance sheet had been strengthened, with net debt reduced to $999m from $1.77 billion, he said.

That was due to a successful capital raise, the divestment of Tradelink and a focus on cost control and heightened discipline with respect to capital expenditure.

Reding said significant progress had been made on the strategic plan to reposition the business for more sustainable returns going forward.

Fletcher has signalled big changes were ahead for the company several times in recent months.

At its Investors Day, it unveiled a move to a streamlined, decentralised organisational structure and a turnaround strategy that would build on its “core strengths” in the manufacturing and distribution of building products.

But confirmation it was exploring options around the sale of its construction division, which includes the Higgins, Brian Perry Civil, and Fletcher Construction businesses, has attracted most attention.

On Wednesday, Reding announced the company was moving to undertake a strategic review of its residential and development division, which includes Fletcher Living and Vivid Living.

It could result in more divestment options, he said.

Asked about the move at post-announcement presentations, he said the company wanted to be a building material manufacturing and distribution company, and the residential division did not fit into that operating model.

That had led the company to carry out the review, but it had no intention of selling the business below value, he said. “It’s an exploratory look at what our options are.”

It was a complex process to go through, involving a lot of detail and due diligence, and there was no certainty it would lead to sales, he said.

“But any potential cashflow and cost-out benefits are expected to begin flowing through from FY27, further strengthening our position for long-term growth.”

Reding said the company was committed to positioning the business for the realities of the current market and to maximise leverage in any cyclical upturn, and to reshaping it for long-term success.

It had made solid progress in addressing its longstanding legacy issues, he said.

That included reaching a settlement with the New Zealand Transport Agency on the Puhoi to Warkworth motorway project, and completed work on the NZ International Convention Centre for handover later this year.

Looking ahead, Reding said a prolonged period of low market volumes and subdued demand was expected in New Zealand.

Mixed indicators in Australia meant it was too early to tell if recent signals might translate into greater activity and volumes there, he said.

“Our focus on cost control, operational discipline, effective capital allocation and portfolio simplification is positioning the company well to navigate current headwinds and deliver stronger returns over the medium to long term.”

Forsyth Barr senior equities analyst Rohan Koreman-Smit said there were no major surprises in Fletcher’s results, as the big reported loss was largely as expected with write-downs signalled at the Investor Day.

There was something in the result for both the bulls and the bears, he said.

“For the bulls, the result was ahead of guidance, there was a greater than expected reduction in net debt, costs are being reduced with more to come, and legacy issues are largely tracking to plan.

“For the bears, the core materials and distribution divisions were weaker than expected, the result was saved by construction which they are in the process of divesting, and outlook comments suggest another relatively flat year ahead.”

A few years back the company had announced a plan to review the residential division with a view to potential sales, but could not find an investor at the price they wanted, he said.

“It would be interesting to know what is different now. Is there a change in the expectation around the value of the division, given changes to management and the board?

“Or is it that they are now looking at a wider range of outcomes? As last time they were just looking for a joint venture partner.”

Fletcher had set out its goal of being a building product manufacturer and distributor, and reviewing the options for the residential division aligned with that, Koreman-Smit said.