4 Jun 2019

Fletcher Building lowers earnings guidance on Formica sale

11:51 am on 4 June 2019

Fletcher Building has downgraded its earnings expectations for the year after the sale of its Formica business.

Fletcher Building announces a $486 million increase in the projected losses for Fletchers' troubled Building and Interiors (B&I) division on 16 major construction projects.

Fletcher Building announces a $486 million increase in the projected losses for Fletchers' troubled Building and Interiors (B&I) division on 16 major construction projects. Photo: RNZ / Dan Cook

The company confirmed it had completed the sale of Formica Group to Dutch company Broadview Holding for $US840 million, with the net sale proceeds expected to translate to $NZ1.185 billion.

But the sale meant earnings from Fletcher's international business would be NZ$30m lower than forecast.

That left total forecast earnings guidance in the range of $620m-$650m, down from $650m-$700m.

Fletcher Building chief executive Ross Taylor said the sale was the last step in the company's strategy to get out of its non-core overseas businesses.

"Our strategy is to refocus Fletcher Building's capital and capability behind our New Zealand and Australian businesses, with building products and distribution at our core."

The company has been selling assets and restructuring, since losing close to $1 billion in its building and interiors division because of delays and cost blowouts on major projects.

Fletcher returned to profit in December, reporting a half year net profit of $89m compared with the previous year's loss of $273m.

Mr Taylor said the company would indicate what it intends to do with the proceeds of the Formica sale at a later date.