Earnings loss of $190m for Fletcher Building

Ross Taylor
Ross Taylor
Fletcher Building managed to leave unchanged its expected $660 million Building + Interiors' (B+I) loss for the past financial year.

In reporting its full-year operations to June yesterday, Fletcher reported a net earnings loss of $190million, compared with a $94million profit a year ago; excluding the $660million B+I loss.

B+I losses over the past two financial years have amounted to $952million, from 16 projects which were mainly undertaken on fixed price contracts.

No dividend will be paid for 2018, but Fletcher said subject to trading performance this financial year it expected to resume dividends in 2019.

Shares in Fletcher, down more than 13% on a year ago, fell about 10c following the announcement yesterday, to trade around $6.80, but ended the day down 39c at $6.51.

Revenue for the year was up 0.8% to $9.47billion, driven by a solid sales performance across core businesses in New Zealand and Australia, but that was offset by a reduction in construction revenues.

Earnings before interest and tax (ebit) declined 90.5% from $525million a year ago to $50million.

Forsyth Barr broker Damian Foster said the ebit result was in line with his and market expectations.

However, below the ebit line was ''a mess'' with asset writeoffs, tax impacts from construction losses, asset sales and pending sales, restructuring and redundancy costs.

He said given that the B+I construction loss provision was unchanged, and despite Fletcher's ongoing issues and further project delays, it appeared the company had correctly picked its losses, as declared in February.

Fletcher chief executive Ross Taylor said he was pleased to finish the financial year meeting earnings guidance, and in containing B+I losses within provisions announced in February.

''We've seen volume and revenue growth across a number of our New Zealand and Australian businesses, but these gains have been more than offset by increased costs and our need to invest ahead of plan to meet higher than anticipated market demand,'' he said.

Fletcher's focus during full-year 2019 would be on growing its core businesses, continuing to stabilise the construction division, and completing divestment of non-core businesses, Formica and Roof Tile Group, he said.

Mr Foster said both of those businesses had deteriorated, which would not be helpful as Fletcher sought to sell them.

The Roof Tile Group ebit last year was a $13million profit, but this year it was a $2million loss, he said.

Cash flow from operations of $396million was up $153million from the year before, which Mr Taylor said reflected improved working capital management, which was offset partly by continued outflows on the B+I projects.

He said ''significant items'' during the past year included a $168million charge, from group restructuring charges of $91million and impairment charges of $114million, which were partially offset by gains on divestments of $37million.

''In both New Zealand and Australia we expect activity in the residential sectors to decline slightly, while activity in the non-residential, commercial and infrastructure sectors is likely to increase,'' Mr Taylor said.

Mr Foster said no specific financial guidance was given and at divisional level across New Zealand expectations were for flat to modest growth, with growth in Australia.

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