Aust overhaul likely in FBU 5-year plan

Ross Taylor
Ross Taylor
Fletcher Building is unveiling its five-year restructuring plan in Sydney on Thursday and it is likely Australian operations are in for an overhaul.

What may, or may not, be on the chopping block and any update on the mounting losses will be eagerly awaited by analysts and the industry.

Beleaguered Fletcher project-managed its way into $952million of actual and accumulated losses over two years in its Building + Interiors division, prompting the need to launch a $750million recapitalisation plan, which was successfully completed a month ago.

Fletcher is also selling its US-based divisions Formica and Roof Tile, estimated to be worth more than $US700million.

To secure work around New Zealand, Fletcher went into 16 mainly fixed-price contracts, including the international convention centre and hotel in Auckland and Christchurch's justice precinct, both of which accounted for the lion's share of subsequent losses.

It cost former chief executive Mark Anderson his job, followed by the resignation of chairman Sir Ralph Norris, whose replacement is is yet to be announced.

While committed to completing the troubled B+I projects by the end of next year, Fletcher is not tendering for large commercial construction projects.

New chief executive Ross Taylor will host the briefing in Sydney. He said after the recapitalisation the company could now ``significantly reduce'' group debt and improve its capital structure.

As a diversified building company, Fletcher has more than 30 businesses with operations spanning the entire building supply chain.

Craigs Investment partners broker Peter McIntyre said it was possible Fletcher could sell Formica for $NZ1.2billion to $NZ1.5billion, noting it was purchased for $US700million in 2007.

``That would solve all its debt, banking covenants and US [lenders] issues,'' he said.

While he did not rule out the sale of Australian assets, he believed it was unlikely, given Fletcher wanted to refocus its efforts in New Zealand and Australia.

Exiting some areas such as the US, Europe and Asia could come at a cost to growth.

The ``key risk'' for Fletcher would be its outlook on the respective Australian and New Zealand construction cycles.

``The building cycles in New Zealand and Australia are mature; there's limited potential for growth,'' Mr McIntyre said.

The market was also expecting an update on Thursday on Fletcher's $2.3billion of forward work, as at last December, as infrastructure accounted for about $680million.

Fletcher's Australian building products operations generate about $A3billion ($NZ3.2billion) in annual sales.

Mr Taylor told the Australian Financial Review in April he would appoint one executive to oversee the entire Australian business, the NZ Herald reported.

The Tradelink plumbing business, Iplex pipes, Rocla concrete, an insulation business and Stramit steel products, which were all bought during the past 10 years, are expected to be substantially restructured.


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