New Zealand's biggest builder says it plans to lay off around 1000 staff in New Zealand, equating to around 10 per cent of its workforce, and has slashed capital expenditure in response to Covid-19.
Fletcher Building announced the move this morning while also updating the market on its outlook for activity, including an expected 30 per cent drop in residential building consents.
Shares in the manufacturer, builder and distributor were this morning trading around $3.34, down 6c today but a big drop from the $5.46 the company was trading at on the NZX last May.
Chief executive Ross Taylor said the layoffs were about resetting the business for the future.
"While we looked at all parts of our business to remove costs, regrettably we believe we will not be able to support the same number of people. We have to make some very difficult decisions which include looking at reducing the number of people we employ by approximately 10 per cent. This will equate to around 1000 positions across New Zealand," he said in a statement to the NZX.
The business has not specified which areas of the business or which sectors the job losses are in.
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Around 500 Australian jobs are also on the line.
"In Australia we are undertaking a comprehensive review of our operations and expect this would result in a workforce reduction in the order of 500. I acknowledge this news will be hard to hear and that this is an unsettling time for all involved. Moving ahead as proposed would mean losing talented and hard-working people from Fletcher Building. Any of our people affected will have made a difference to our company, their teammates and our customers. These decisions are not a reflection of their value or contribution," Taylor said.
The Penrose-headquartered business is beginning consultation with staff and unions this week, he said.
A search today of the Government's wage subsidy scheme showed today that by Monday this week, Fletcher Building Shared Services had received $67.6 million for 9694 paid employees.
"In New Zealand, we will honour our obligations under the government wage subsidy scheme by retaining our people through the 12-week subsidy period ending June 26. We are committed to supporting our people as they leave us and will endeavour to do what we can to help them secure their next opportunity," he said.
Every permanent employee leaving would be paid their redundancy entitlement or four weeks' base salary, whichever is higher, "to recognise and support our people given the exceptional circumstances. We will also be providing a comprehensive range of outplacement and other support services."
The company also updated the market on its outlook, saying at the time of the level 4 lockdown New Zealand residential consents were tracking at all-time highs of around 37,000 per annum.
"As we look ahead, our base case estimate for residential consents in New Zealand is that they will drop by around 30 per cent to about 25,000 in the year to June 2021."
The company expects News Zealand commercial building activity to be impacted by a reduced project pipeline in the private sector, with a base case factoring in an approximate 15 per cent decline in the value of commercial work put in place in financial year 2021.
"Meanwhile we expect the New Zealand Government commitment to infrastructure spend to support our businesses exposed to that sector, however we expect work put in place to decrease by [approximately] 10 per cent in FY21 as new projects take time to ramp-up.
"Like any business facing much lower revenue ahead, we need to reduce our spending to prepare for these tough times. Our first goal has been to implement cost-saving measures that would allow us to retain as many of our people as possible. These include looking hard at our operational footprint, exiting some offices to make better use of the space we have in places like the group's Penrose headquarters, making improvements to the efficiency of our supply chains so that we need fewer warehouses and depots, and ceasing some unprofitable product lines.
"We will also reduce spend in discretionary areas such as external fees, marketing and travel and we will not be paying any short-term incentives across our businesses for FY20. Reductions of 30 per cent to board and CEO pay will remain in place through to the end of September 2020."
Fletcher said it continued to focus on preserving cash and liquidity through the lockdown period and beyond, noting it had already cancelled its interim dividend payment and suspended its on-market share buyback programme.
The group has revised its capital expenditure outlook, reducing to around $60m in 2020.
That means total expenditure for FY20 is now expected to be $240m compared to a pre-Covid-19 expectation of about $300m.
In financial year 2021 the group expects its core capex envelope to be in a range of $125m to $150m, focused on only the most important investments in safety, maintenance and key strategic initiatives.
In addition, $50m will be invested in the new Winstone Wallboards plant in Tauranga in 2021.
Fletcher expects one-off costs from the layoffs which will be revealed when the full-year result is out in August.