Fletchers racks up half-year $322m loss
"The rest of the Fletcher business we can improve [excluding the B&I division], but it is performing pretty solidly."
Chief executive Ross Taylor
Construction giant Fletcher Building has announced an operating earnings loss of $322 million for the six months ended December 31.
The loss compares to a $310m profit before significant items for the last six months of 2016.
Earlier this month Fletcher flagged its growing losses, and said the board had suspended the payment of an interim dividend.
The expected losses of $660m from the building and interiors (B&I) division led Fletcher chairman Sir Ralph Norris to resign, though he will remain in the role until his successor is found.
The losses result directly from
16 large construction projects undertaken by B&I, including the New Zealand International Convention Centre in Auckland, and Christchurch’s Justice Precinct.
However, Fletcher chief financial officer Bevan McKenzie said that in the last six months of
2017 the company got a tax benefit of $117m as a result of the massive B&I losses.
The remainder of the B&I losses falling in 2018, 2019 and 2020 were expected to be tax deductible in the coming years, he said.
In an announcement to the New Zealand stock exchange yesterday, Fletcher said revenue for the first half was $4.9 billion, up 6 per cent on a year earlier.
The company repeated its forecast that full-year group operating earnings, excluding B&I, would be between $680m and $720m.
Taylor told media earlier this month he did not expect B&I’s losses to increase any further.
Chief executive Ross Taylor said: ‘‘Outside the challenges experienced in B&I, the broader Fletcher Building business continues to perform to guidance.
‘‘While it is pleasing to see an increase in sales revenues, operating earnings have decreased due to lower profits in the construction division, outside of B&I, as well as the building products division.’’
Taylor said a strategic review of the whole business, including possible ‘‘portfolio’’ changes, might signal that some asset sales could take place.
There had been a rise in ‘‘central costs’’ in the business, he said, which presented an opportunity.
Excluding B&I, Taylor said: ‘‘The rest of the Fletcher business we can improve, but it is performing pretty solidly. It’s how we can focus it and move it forward more strongly. I’m quite optimistic we will be able to move with pace.’’
Discussions continued with Fletcher’s lenders in New Zealand and overseas following breaches of its lending covenants brought about by B&I’s losses.
McKenzie expected them to conclude by the end of March.
Taylor revealed that big project losses were not limited to B&I.
The company’s residential and land development division posted strong growth, he said, but revealed a loss of $12m as a result of costs blowing out on the Atlas Quarter apartment development in Christchurch, combined with the individual apartments selling for less than expected.
Taylor also addressed the possibility of Fletcher Building taking legal challenges to the B&I contracts in a bid to reduce its losses.
He said the company was reviewing the contracts, but it wasn’t going to adopt a threatening stance to clients.
‘‘You’ve either got a legitimate claim or you haven’t. It won’t be a model of being provocative and thumping our chest.’’