Fletcher posts $322m loss in latest half-year results

Ross Taylor, Fletcher CEO, at last week's media briefing. Photo/Greg Bowker

Fletcher Building made an operating earnings loss of $322m in the latest half-year to December 31, 2017, a big turn-around on its previous $310m profit.

An NZX announcement just out said it made revenue of $4.8b in the latest half year.

"Fletcher Building today announced an operating earnings loss of $322 million for the six months ended 31 December 2017, down from a $310m profit before significant items for the first half of FY17. Revenue for the first half was $4,889m up 6 per cent versus the prior corresponding period. Net earnings before significant items were ($273) million, down from a profit of $187m in HY17.

"These results incorporate $631m of Building + Interiors (B+I) losses, with an additional $29 million of overhead and transition costs expected in 2H18, resulting in an expected full-year loss for B+I of $660 million.

"Excluding B+I, operating earnings were $309m, down 13 per cent versus the first half of FY17," the company announced.

Ross Taylor, chief executive, 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.

"In the Infrastructure and South Pacific businesses of our construction division we are rolling off major projects from FY17, and we are only in the early stages of new ones. In Building Products we have seen gross margins compress as a result of higher input costs and costs associated with increasing supply chain capacity to meet increased demand."

The company said: "The Building Products Division reported a 13 per cent increase in gross revenues from $1,108 million in HY17 to $1,250 million in FY18. Operating earnings declined 9 per cent from $129 million in HY17 to $118 million in HY18. This was driven by additional costs incurred in various businesses to alleviate capacity constraints, increased energy costs, one-off redundancy costs in Fletcher Insulation Australia and a fire at Humes' Penrose site.

Fletcher Building will suffer losses of nearly $1b in two years. Photo/Natalie Slade

Taylor said: "Earnings in the International Division are largely flat, while Distribution and Residential continue to post strong growth."

The company had a market capitalisation of $5.1b before this month's ASX trading suspension and NZX trading halt but today is worth just $4.7b.

The business announced last week its Buildings + Interior division would lose nearly $1b in the two years to June 30, 2018.

Bevan McKenzie, chief financial officer, said last Wednesday that the division had lost $292m in the June 30, 2017 year but a further $660m of losses were projected in the current June, 2018 year. That would result in actual and forecast losses of $952m in the two years, he said.

Sir Ralph Norris who will leave this year. Photo/Greg Bowker

Sir Ralph Norris, the Fletcher chairman who announced last Wednesday that he was leaving the business before this year's annual meeting, cited quantity surveyor estimates, as much as 100 percent wrong, rising building costs and the flow of communication from management to the board as just some of the reasons.