11 Aug 2020

Fletcher Building expects to make a loss of $196m

9:35 am on 11 August 2020

Fletcher Building expects to make a loss of $196 million for the year ended June, mostly due to the hit from the Covid-19 pandemic.

Speaking on impact of SkyCity Convention Centre fire

Fletcher Building chief executive Ross Taylor. Photo: RNZ / Claire Eastham-Farrelly

Subject to a final audit, sign off of the full results will be released next week.

Chief executive Ross Taylor said significant lost revenue, lower productivity once restrictions were eased, as well as restructuring costs have hit Fletcher's bottom line.

Last year the firm made a $164m profit.

Taylor said the firm had to make some tough, but necessary, decisions during the year.

"Anticipating lower market activity ahead, we have taken some difficult but decisive actions to reset the cost base of the business.

"This has included closure of some supply chain and manufacturing facilities, ceasing of some unprofitable product lines, a reduction in office space and, regrettably, a planned reduction in our workforce by around 1500 positions."

He said the changes would save the company around $300m in 2021.

Earnings before interest, tax (EBIT) and significant items - which included implementing the cost-saving measures - was expected to be $310m this year, compared to last year's $631m.

Taylor said the EBIT result had also been reduced by the decision to increase provisions to complete historical construction projects.

"Three factors have led to these increased provisions. Around 50 percent is due to reduced productivities on key legacy projects, which were significantly disrupted by Covid-19 in FY20, and we expect ongoing challenges in 2021 across our supply chains and project resourcing.

"Around 20 percent of the additional provisions are due to issues which have arisen on a handful of historically completed projects. The final 30 percent consists of a prudent risk provision across our portfolio of legacy work."

He said the company had maintained a strong cash flow and balance sheet position throughout the pandemic and net debt was expected to remain within the target range.

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