Fletcher staff ‘did lose their jobs’

"I'll be honest, not in our wildest dreams … did we expect to find what we have found." Mark Adamson Fletcher Building chief executive

Workers at Fletcher Building have lost their jobs over the possible $150 million profit hit caused by cost blowouts on two major projects.

Fletcher Building refused to say which two projects were behind the company’s large profit downgrade, but chief executive Mark Adamson said yesterday that ‘‘people did lose their jobs’’.

‘‘It’s inappropriate to mention names,’’ he said.

Adamson said yesterday that the company started a review of its building and interiors (B&I) business, which was responsible for the losses, late last year.

‘‘We brought the new people and processes in because we felt this business was off track and we needed to bring it back on. I’ll be honest, not in our wildest dreams back when we did this did we expect to find what we have found.’’

Shares in the country’s largest construction firm fell 10 per cent yesterday after it warned profits would be up to $150m lower than the guidance it gave last month.

Adamson refused to name the projects, citing client confidentiality, but said one would be completed in a couple of months, while the other was due for completion in 2019.

He indicated the company would seek compensation for the programmes coming off track, but the focus at present was on getting the jobs finished in better shape than they were now.

‘‘But there is no doubt the board and I and others who are in the business are preparing for compensation,’’ Adamson said.

‘‘Let’s just leave it at that. We’re not taking this lightly.’’

It was understood the two projects could be the Justice and Emergency Precinct in Christchurch and Auckland’s Skycity International Convention Centre.

Skycity Entertainment Group spokesman Colin Espiner said the casino company had a mostly fixed-price contract with Fletchers and that the project was ‘‘on time and on budget’’ to open in the first three months of 2019.

‘‘We’re not privy to the internal workings of Fletcher Building,’’ Espiner added.

Both the Minister of Justice’s office and the Justice Ministry declined to comment on the Christchurch project, saying it was Fletcher Building’s place to talk about its financial situation.

It was understood incorrect costings may have been carried out on that project to the tune of $40m.

Fletcher was also building the Commercial Bay project in downtown Auckland, which was due to be completed in 2019 for Precinct Properties.

Precinct chief executive Scott Pritchard said the project was all on track with no delays, and was going ‘‘very, very well’’.

Fletcher Building, which is listed on the New Zealand and Australian stock exchanges, went into a trading halt on Friday, saying it was reviewing the financial performance of its construction division.

Last month it flagged losses on a major project but yesterday the company revealed those losses had widened.

It also signalled losses on a second big construction project, as well as noting some ‘‘downside risks’’ in smaller jobs.

Fletcher Building’s profit before interest, tax and significant items was now likely to be between $610m and $650m for the 2017 year, down from previous guidance of between $720m and $760m, a possible drop of up to $150m.

After lifting the trading halt, the company’s shares fell in mid-morning trading by $1.13 or 12 per cent to $8.09.

On a conference call with analysts yesterday morning, Adamson said the problem contracts were two of its three largest projects in its B&I unit. The third project was running profitably.

The B&I division controls up to $1.5 billion of Fletcher’s $2.7 billion order book.

One analyst said that while the news was ‘‘disappointing’’, construction was ‘‘a tough game’’.