Aussie housing lull hits NZ’s biggest builder
NEW Zealand’s largest builder, Fletcher Building, has forecast weaker earnings for fiscal 2019 due to further headwinds from Australia’s slowing residential sector, prompting its shares to tumble to a more than nine-year low.
The company has announced refinancing plans, reviewed loss-making businesses and replaced top executives this year as massive cost overruns and project delays led to steep losses.
Underlying earnings before interest and tax were expected to drop by 10 per cent in the first half of 2019, Fletcher said.
Underlying EBIT for fiscal 2019 was expected to be in the range of NZ$630 million to NZ$680 million (A$590.7m to A$637.6m), lower than NZ$710 million (A$665.76m) in 2018.
Fletcher’s shares traded 8.8 per cent lower at 2340 GMT, while the broader market weakened 0.4 per cent.
“Market expectations were for EBIT in a NZ$690 million region,” said Grant Davies of investment adviser Hamilton Hindin Greene.
“There’s plenty of headwinds in Australia at the moment. The housing markets particularly in Melbourne and Sydney have weakened during the past 12 months and that’s going to have an impact when you’re a property developer.”
Weakness in Australia’s cooling residential market was widely expected after three of the big four banks hiked mortgage rates earlier in the year.
Laggard wage growth, as well as increased scrutiny towards home loan providers, have also contributed to a softer housing market.
Fletcher’s Australian business accounted for about a third of its overall revenue in fiscal 2018.
Residential activity makes up about 40 per cent of turnover in Australia.
Fletcher had swung to a net loss in 2018 due to mounting costs at its commercial construction unit and impairment charges.
It did not pay a dividend.