Despite the mounting costs, which are expected to be offset by asset sales and $30million annual savings in overheads, Fletcher retained its full year guidance of delivering earnings before interest and tax (ebit) in a range of $680million-$720million.
The ebit is being kept separate from the restated estimated loss from the Building + Interiors (B+I) division of $660million this financial year, which over two years is expected to amount to a total of $952million.
At a conference in Sydney yesterday, Fletcher's new chief executive Ross Taylor said a decision had been made to focus Fletcher's portfolio by divesting its Formica and Roof Tile Group businesses, and focusing capital and capability within the New Zealand and Australian markets.
"While we don't expect these markets to experience the same levels of growth they have seen in recent times, we do expect them to remain stable.
"With only a 15% share of the New Zealand market and 1% in Australia, there's plenty of opportunity to deliver more from our existing operations," Mr Taylor said.
Divisional changes include all businesses in Australia coming under one division, newly created divisions of Concrete and Steel, and largely unchanged Residential, Construction and Distribution divisions.
Chief financial officer Bevan McKenzie reiterated the unchanged full-year financial guidance, scheduled for release on August 22, saying only there "may be some slight changes".
Fletcher recently completed raising $750million and renegotiated its lending terms.
In New Zealand, the focus would be growing core operations in building products and distribution, leveraging its strong positions in the concrete value chain and residential construction and returning construction to sound operating performance, Mr Taylor said.
That would be achieved by completing the outstanding Building + Interiors projects within contractual provisions, and profitably growing Fletcher's infrastructure and roading businesses.
He said an example was Fletcher's planned $15million-$20million investment in a new Auckland panelisation [prefabricated panels] plant, to deliver homes more efficiently for the supply-constrained market, within a year.
An Auckland site was yet to be found for the panelisation plant, which would boost Fletcher's annual output from 700 Auckland homes a year to more than 1000, which could eventually see build timeframes cut from 22 weeks to nine weeks.
Once proven, that model could be taken into the Australian market, Mr Taylor said.
In Australia, Fletcher was targeting a significant improvement in the operating and financial performance of existing businesses, and in time, to expand its portfolio as had been done in New Zealand through targeted acquisitions, he said.
He wanted to "recapture" market share lost from Australia in recent years.
In the conference call, Mr Taylor was quizzed on the need for more offshore acquisitions, which had not always gone to plan.
He said Fletcher was not "going on a buying spree", and would be "disciplined", but noted there were opportunities out there for "bolt-on, [earnings] accretive" companies for consideration.
Mr Taylor declined to talk about individual B+I projects, citing commercial sensitivity.
He did say of the 16 B+I contracts, most of which were taken on fixed price contracts, seven had been completed, five more would be by the end of the year and four would be completed next year, including the Auckland conference centre, which had one of the largest cost blowouts.
Similarly, he declined to talk specifics of the Formica and Roof Tile Group sale.
Analysts have earlier speculated the $700million Formica asset values could potentially be in the $1.3 billion-$1.5 billion range, if time were taken to sell Formica.
Fletcher has sworn off large commercial construction projects.
"We're comfortable to go after and bid for infrastructure projects," Mr Taylor said.
Fletcher was later asked if it had any intention of becoming involved with Dunedin's $1.4billion hospital build. A spokeswoman responded there was "no change at this point in time" to Fletcher's earlier decision not to bid for any "vertical construction projects"; large commercial projects.
