Property editor of the NZ Herald

Fletcher eyes Mainzeal jobs rescue

Situation of frozen building sites a 'mess' but chief executive keen to save livelihoods of subcontractors.

Fletcher Building chief executiveMark Adamson says Fletcher Building doesn't want the Mainzeal subcontractors to go bust. Photo / Dean Purcell
Fletcher Building chief executiveMark Adamson says Fletcher Building doesn't want the Mainzeal subcontractors to go bust. Photo / Dean Purcell

Fletcher Building engineers are assessing Mainzeal Property & Construction sites and the company hopes to finish some of the 40 jobs and employ subcontractors and some members of Mainzeal's 400 staff.

"It's a mess," said Fletcher chief executive Mark Adamson of the abandoned, frozen jobs by the business in receivership.

"Economically, I'm not that motivated because they were not great contracts but we don't want subcontractors to go bust.

"We need those subbies going forward so we're looking to take some of the contracts and to broker a deal with the receiver to save the subbies," he said, indicating a strong interest in the abandoned Manukau Institute of Technology job, Princes Wharf's Shed 10, Hobson St's twin-towers leaky Hobson Gardens and earthquake repair work in Christchurch.

"We'd look to complete the jobs but we have to be careful. It's a bit of a minefield. We're working closely with [receiver] PwC. We're extremely keen to try to see these projects to completion because the Government are our customers as well," he said.

Adamson was announcing Fletcher's $146 million half-year result, up on the previous $144 million, greeted by Deutsche Bank analysts Emily Behncke and John Hynd as in line with their $145.6 million expectations.

Fletcher has already said it expects to make between $560 million and $610 million in the full year, which Adamson reiterated yesterday.

"Management advised it expected strong New Zealand residential conditions to continue into the second half of 2013," Behncke and Hynd said.

"In Australia, management expects the weak approval levels in commercial construction will impact underlying trading conditions in the second half.

"Conditions are expected to improve in North America, while Europe remains challenging.

"Management did not quantify the extent of the [cost-cutting] programme which is currently under way. We factor in $75 million of cost reductions by 2015."

Morningstar's Nathan Zaia said the result was slightly below expectations, but not alarmingly so.

New Zealand construction activity was improving, buoyed by Canterbury activity, but Australian residential and commercial activity was still relatively weak, Zaia said.

Management expects the recovery to pick up pace in the second half and cost-cutting initiatives would help in Australia, he said, expressing disappointment in the Crane division's performance.

Adamson is promising big cost savings via a project dubbed Fletcher Building Unite which the board has backed and which analysts expect to result in $75 million cost cutting by 2015.

Adamson will establish an Auckland-headquartered Australasian shared services for procurement, distribution, logistics, operations and a digital strategy for the company's 50 separate business units.

"If I'm honest, I have done this many times before and this is not being particularly clever," he said, indicating job losses amongst subsidiaries in the hundreds not thousands.

Auckland, and the building opposite Fletcher Building's HQ at 810 Great South Rd, had been earmarked over Australia because of a better tax system and lower labour rates.

Adamson cited Hamilton as a good example of an area ripe for rationalisation where Fletcher had "23 individual footprints in that small city".

Fletcher shares closed down 45c yesterday at $8.87.

- NZ Herald

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