KEY POINTS:
Giant materials manufacturer and distributor Fletcher Building has shed 600 workers in the past three months but a further 200 jobs could go at PlaceMakers if the economy continues to deteriorate.
Jonathan Ling, Fletcher chief executive, revealed that the big building downturn was taking a huge toll on
the company's workforce which stands at 18,500 people internationally and about 9000 people in New Zealand.
"We're now about 600 people less in the last three months," Ling said. "We are reducing labour numbers and the reduction will depend on activity in the marketplace."
The Fletcher layoffs are part of a spate of job cuts and come after Carter Holt Harvey's announcement, this week, that 300 workers would lose their jobs at sawmills in Putaruru and Mt Maunganui. A string of other businesses in retail, finance, media, manufacturing and banking have also said they are cutting workforces.
Ling said Fletcher's policy was to take a compassionate approach and shed its casual and temporary staff initially, followed by reducing the amount of overtime worked by permanent staff, then relying on natural attrition before being forced to resort to redundancies.
Most of the 600 jobs shed so far had been casual, temporary or part-time staff as well as natural attrition, Ling said.
The staff lost had been working at national building trade and DIY hardware chain PlaceMakers and manufacturers Winstone Wallboards and Laminex, Ling said.
PlaceMakers had already shed about 200 jobs and much worse could be in store for those selling timber, wallboard, flooring, paint, appliances, hardware, hand tools, power tools, outdoor living, kitchens, bathrooms, laundries, cladding, aggregates, concrete and steel.
Ling said Placemakers was suffering heavily in the building downturn and he quoted figures showing new-home starts dropped from a peak of about 32,000 houses in 2004 to the current rate of 16,000 new-house starts.
"If it continues to decline at the rate we're going, yes it could be as many as 400 people," Ling said of the PlaceMakers job cuts.
PlaceMakers, with more than 50 stores from Kaitaia to Invercargill, sells 74,000 product lines and has 20 manufacturing plants for frames and trusses. Fletcher owns the PlaceMakers stores as joint ventures with local business partners, a formula started in 1991.
Those partners run their business but Fletcher gives them backup as a major player in the building industry.
Fletcher is one of the country's oldest and largest listed businesses and now has a market capitalisation standing at $3.1 billion, behind the $4.4 billion Telecom Corporation and the $4.2 billion Contact Energy.
Fletcher is also New Zealand's biggest building firm. It is a sole manufacturer of gypsum plasterboard, a big player in the steel industry, the world's largest steel roof tile manufacturer and the world's largest manufacturer of decorative surfaces and high-pressure laminates.
After almost a decade of pure profit growth, Ling announced a $17 million profit slide in August.
At the same time, he signalled the possibility of factory closures, shift reductions and even asset sales in the face of tougher times, although last week, Fletcher said it had gone into a conditional deal to buy steel business Fielders Australia which has 809 staff and annual sales of $314 million.
Fletcher's shares on the NZX have taken a 53 per cent chop, from $12.38 in the past year to just $5.80 and analysts said it was trading at a 34 per cent discount to conservative discounted cashflow valuations.
Fletcher was this week trading at around A$5.38 on the ASX.
"Fletcher Building will survive, we've got a very strong balance sheet," Ling said. "If the world all crashes, we'll be one of the last to go.
"We haven't got a huge amount of debt and we don't have to refinance until 2011 so the business has got two years' headroom and good spare unused debt facilities."
But he is concerned and not just about falling domestic construction.
"Not only is new housing falling but all the speculative or commercial work has also fallen because they can't get finance," Ling said.
Fletcher's $1 billion punt on the United States market with its iconic brand Formica has also worried analysts but Ling said US sales accounted for just 7 per cent of group sales.
European sales were at similarly low levels, he said.
Analysts this week mulled over the implications of a rapidly falling New Zealand dollar, continual weakening in the New Zealand building cycle and rapid deterioration in Formica's markets.
But Matt Henry, analyst at Goldman Sachs JB Were, upgraded his Fletcher recommendation from "hold" to "buy", confident of upside from a global market rally.
One senior institutional investor said he was not surprised about the Fletcher jobs being axed: "We're experiencing the classic economic cycle and job cuts are just part of that," he said.
Predictions are also emerging that falling construction could leave New Zealand with a critical housing shortage in the second half of next year.
Tony Alexander, Bank of New Zealand chief economist, said a housing shortage was just a year away.
Building consent numbers have dropped by more than 40 per cent since last year but New Zealand still has more people arriving than leaving.
That, combined with more births than deaths, resulted in us gaining 40,000 citizens in the past year, according to Statistics NZ.
Big Australian-headquartered hardware chains with expansion ideas here are also doing it tough.
Mitre 10 Australia - separately owned from Mitre 10 NZ - admitted this month that lack of finance and the structure of its organisation had restricted its capacity to compete with chains, such as fellow transtasman rival Bunnings.
Mitre 10 said this month that it was seeking a cash injection or a buyer.
Retailer Woolworths is tipped to be interested in a deal that could be worth up to A$1 billion.
Bunnings is taking a predatory approach, writing to Mitre 10 operators in Australia, asking them to consider selling.
Consultants Rider Levett Bucknall today released a construction commentary saying continually high interest rates and the global credit crunch were squeezing the building business.
Workload levels were high now but it questioned the viability of new projects and said low spending levels could curb new shopping projects.
Even the office sector, robust all this decade, shows "noticeably less confidence which impinges on project feasibilities", said Brian Dackers, Rider's chairman in Auckland.
Government and infrastructure might save the day, he predicted, providing some consistent workflow.
WHO'S GONE?
Thousands more could lose their jobs. The recent tally is:
* Fletcher Building: just shed 600 staff and more could be gone soon.
* Citi NZ, part of US giant Citigroup: said this week it would cut about 6 staff.
* Carter Holt Harvey: this week, said it would cut 300 workers at two North Island mills.
* Pumpkin Patch: this month, said it would cut 30 jobs at its Auckland head office.
* ANZ: last month, said it might call for voluntary redundancies, affecting hundreds.
* Fairfax Media: In August, said 160 job would be cut in New Zealand.
* Telecom: looking to cut about 500 jobs, outsourcing call centres to the Philippines.
* Fisher & Paykel: closing its Mosgiel plant with the loss of 430 jobs in the area.
