At last some good news for Fletcher Building.

The deal to sell Formica still has some boxes to tick but it does represent progress for a company looking to reset strategy after a disastrous couple of years.

And at least Fletcher will get more than it paid for Formica when it bought the business 11 years ago.


Back in 2007 former Fletcher chief executive Jonathan Ling bought Formica for $947m to create an international division that also included Australian wallboards manufacturer Laminex Group.

But the acquisition was bedevilled from the start and was described as a "bloody scandal" by one former Formica executive who accused Fletcher of over-paying, poor timing and choosing the wrong target company.

Two years later Fletcher had taken $200m in write-offs on the business after half Formica's revenue evaporated in the aftermath of the global financial crisis.

Ironically it was Ling's eventual replacement at Fletcher, Mark Adamson, who was credited for turning around Formica when he was in charge of the group's laminates and panels unit.

Formica's earnings improved and Adamson became boss of Fletcher, a move that backfired dramatically as losses mounted from its Buildings + Interiors division, forcing it to raise capital and sell assets.

It's a long road to recovery for Fletcher but the Formica sale for about $1.2 billion will allow the company to focus on domestic and Australian businesses and supplying building materials for other construction firms.

So, after years of distraction caused by failed acquisitions and diversification away from core operations, Fletcher is back where it started with a new board and management team to boot.

The announcement of reinstating dividends will have cheered investors but the board needs to take care of its balance sheet first.


Chief executive Ross Taylor did say the company would take a prudent approach but the board has confidence in Fletcher's return to profitability in 2019.

Has it turned the corner?

Perhaps, but Fletcher is still not out of the woods, especially if building markets deteriorate further against the backdrop of slowing economic growth.

It also needs to get this Formica sale over the line.

But after years of shareholder wealth destruction finally Fletcher appears to have caught a break.