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Further provisional losses of $486m have been announced from the Buildings and Interiors business, "leading to a total projected loss of $660m. Fletcher Building chairman announces he will step down no later than the 2018 annual shareholders meeting. No interim dividend payment for half-year 2018," the company says.
"Following a review of projects in the Building + Interiors (B+I) business of the Construction Division, Fletcher Building today announced a further provision of $486m for project losses," the company said.
"Combined with provisions previously announced in October, as well as overheads and other costs, this leads to a projected $660 million EBIT loss for B+I in FY18.
"Earnings guidance for the Fletcher Building group excluding B+I remains $680 million to $720 million as announced in October."
Ross Taylor, chief executive, said the new provisioning was informed by a review of 16 B+I projects, accounting for approximately 90 per cent of the construction backlog, and incorporating external input from independent construction experts and KPMG.
"The provisions we have announced today are informed by a considerable amount of further project analysis, and while we continue to target agreed completion dates across the portfolio, we have factored in significant cost and timeline contingencies," Taylor said.
"Our absolute focus is finishing our remaining B+I projects within these provisions and to a high quality for our customers. To achieve this, we are refocussing the entire B+I business on project delivery only, and ceasing all bidding on vertical construction projects in New Zealand. This will allow us to direct all resources in B+I to the completion of the current book.
"While our broader construction businesses continue to benefit from favourable market conditions and strong growth, the B+I market sector remains characterised by high contract risk and low margins. Unless these dynamics change we will no longer work in this sector."
The company said projected B+I EBIT loss has resulted in a breach of Fletcher Building's financial covenants given to its commercial banking syndicate and US Private Placement noteholders. However, the strength of the broader business and the phasing of the cash impact of the B+I provisions means the Company remains well capitalised and solvent.
"In a separate statement made today Fletcher Building chairman Sir Ralph Norris confirmed he will step down as Chairman no later than the 2018 annual shareholders meeting, allowing an orderly transition to a new chairman and the completion of the board refresh process already commenced," the business said.
More details are expected to be released after a 10am press conference today.
The business with a market capitalisation of $5.1b has already cut guidance for its full-year earnings by around $415m in a series of announcements throughout last year.
The series of downgrades were:
• In February, it lowered expectations from that division by $20m;
• In March, it downgraded operating earnings by a further $110m (operating earnings downgraded from $720m to $760m to $610m to $650m);
• In July, it cut earnings by $85m to $125m;
• In October, it cut guidance by a further $160m.