Construction giant Fletcher Building announce $660m expected loss, Sir Ralph Norris resigns as chairman

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Source:

NZN

Sir Ralph Norris will step down as chairman of Fletcher Building after the company took a further $486 million provision for project losses at its Building + Interiors unit.

NZ's biggest construction company has also taken a hit on the stock market.
Source: 1 NEWS

The country's largest building company also says 14 of the unit's 73 projects, worth $2.3 billion, are loss-making or "on watch".

Fletcher shares are due to resume trading this morning after being halted last week for the announcement.

The projected 2018 loss for B+I has been widened to $660m on an earnings before interest and tax basis from a previous estimate of $160m, while guidance for group ebit excluding B+I was reiterated at $680m to $720m.

Sir Ralph said he would step down at the 2018 annual meeting toward the end of the year.

Chief executive Ross Taylor, who conducted a review of Fletcher's strategy after taking the job last November, says the new provisions were informed by a review of 16 B+I projects, accounting for about 90 per cent of the construction backlog.

B+I was now focused "on project delivery only" and was "ceasing all bidding on vertical construction projects in New Zealand," Mr Taylor said.

"While our broader construction businesses continue to benefit from favourable market conditions and strong growth, the B+I sector remains characterised by high contract risk and low margins. Unless these dynamics change we will no longer work in this sector."

A $20m restructuring provision to exit B+I has also been recognised, with key resources to be redeployed to other construction division businesses as B+I projects are completed.

Fletcher said it has obtained a waiver from its commercial banking syndicate after breaches the terms of its loans.

Mr Taylor said the strength of Fletcher's remaining business and the phasing of the cash impact of the B+I provisions meant the company remained well capitalised and solvent.

Fletcher shares last traded at $7.77 and have tumbled 23 per cent in the past 12 months.

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