Setbacks for rebuild giant firm Fletchers

Fletcher Building, one of the biggest players in the Christchurch rebuild, has endured a horror day that saw a profit downgrade, the departure of chief executive Mark Adamson and a delay to a major project.

The construction giant’s shares fell sharply after it announced yesterday morning that its operating profit for the year to the end of last month would be $525 million – about $100m below its previous guidance of $610m to $650m. Adamson announced his resignation at the same time.

Fletchers has endured months of financial turmoil following an earlier profit downgrade of $150m in March, caused by cost blowouts on two major projects. One of those is thought to be the much-delayed justice and emergency precinct in central Christchurch.

The $300m anchor project was initially due to be finished last year but that was pushed back several times and the building is now expected to open in the final quarter of this year.

A Justice Ministry spokesman said there had been no further change to the completion date.

The other project is the $700m International Convention Centre in Auckland. SkyCity confirmed yesterday it would open later than expected in 2019 because of problems Fletcher Building has had with the project.

Fletchers has been a major presence in Canterbury’s earthquake recovery since 2011.

Along with the justice precinct, its subsidiary, Fletcher Construction, was project manager for the Earthquake Commission’s Canterbury Home Repair Programme, which employed 12,000 staff. Another subsidiary, Fletcher Living, is leading the residential development in the east frame and building nearly 200 homes in and around Welles St in central Christchurch as part of the housing accord between the Government and the Christchurch City Council. Fletchers was also a major rebuild benefactor, giving $4m to the restoration of the Arts Centre and $8m to other heritage and building initiatives.

Canterbury Registered Master Builders president Ivan Stanicich said the company was undoubtedly one of the biggest operators in Canterbury.

‘‘I don’t believe they’ll go anywhere but clearly they’re in some distress and that’s not good for New Zealand. The justice precinct, they’ve really tripped themselves up big time there. Clearly [the east frame] is not running to its original schedule.

Fletchers chairman Sir Ralph Norris said yesterday the company was having its ‘‘share of pain’’ but the industry as a whole was really struggling with ‘‘so much work on’’.

That was being reflected in subcontractors’ rates and ‘‘the availability of resources for jobs’’, he said.

‘‘There is an unprecedented level of activity and if you don’t manage it carefully – as we can attest – it hurts you.’’

Adamson said in a statement that he was disappointed to finish his tenure on the back of ‘‘a challenging result’’ for Fletchers’ construction division.

‘‘However, I am proud of what has been achieved over the last five years – most notably the turnaround of Formica, double-digit earnings growth in distribution, our acquisition of Higgins and the significant progress in our residential development division .. . . ’’

His base salary was about $2m.