Fletcher Building sees further 'material losses' at B+I, expects to breach bank covenants; stock halted

Fletcher Building chairman Sir Ralph Norris at last year's AGM. Photo / Jason Oxenham.

Fletcher Building said it expects further "material losses" at its building and interiors (B+I) business and expects to be in breach of its banking covenants once the losses are quantified.

Its stock and capital notes were halted pending a review of B+I projects.

Shane Solly, portfolio manager and analyst at Harbour Asset Management, said investors would be disappointed and would want a lot more detail from the company.

"Whenever a company breaches its banking covenants, it's an important event," he said.

"Although the project reviews are not yet complete, the current expectation of the board is that there will be further material losses in the B+I business beyond what was provided for in October 2017," the Auckland-based company said in a statement.

"Once the extent of those further losses is determined and provided for, it is expected that this would result in a breach of one or more of the covenants in the group's financing arrangements."

Fletcher said it is in the process of reviewing key projects at B+I as it prepares its first-half account. The trading halt will be lifted at the start of trading on Monday February 12, by which time it will have made the results of the review public.

In October, Fletcher chair Ralph Norris apologised to shareholders for the company's mistakes as the company took a further $125 million provision against problematic construction contracts including the Convention Centre and the Justice Precinct in Christchurch and said its B&I unit would report a full-year loss of $160m.

Losses on the Convention Centre and the Justice Precinct accounted for about two-thirds of the $292m loss recorded for B&I in 2017.

Its 2018 full-year earnings guidance, excluding B+I loss, is $680m to $720m, suggesting full-year earnings including B+I could be as low as $520m.

Fletcher dumped chief executive Mark Adamson amid the problems at B+I. His replacement, Ross Taylor, started in November.

Fletcher shares last traded at $7.77 and have tumbled 23 per cent in the past 12 months.