Disappointment dominates at Fletcher Building AGM

Revenue declined 12% year-on-year in September, down further from a 7% decline in July and August, while pressure on margins was continuing in the current highly competitive environment, he said.

House sales in the residential development division were down to an average of 17 a week in the September quarter compared to 23 per week over the same period last year.

The update comes not long after the company’s financial results for the year to June revealed a $227 million net loss after tax.

Earnings before interest, tax, and depreciation (Ebit) were down 35% to $509m from $785m last financial year, and its Ebit margin was 6.6%, down from 10.2%, the results showed.

Fletcher Building acting chair Barbara Chapman, who plans to step down from the board once a new chair is appointed, acknowledged it had been a frustrating and challenging period for shareholders.

“The performance of the company, as reflected in its share price and dividend payouts, is not where any of us want it to be, and shareholders have rightly expressed their concerns and disappointments.

“We share that concern and disappointment.”

The impact of the deep and prolonged market downturn was affecting all the company’s businesses and industries, and the impact on its financial performance had been significant, she said.

“Fletcher Building is clearly not alone in facing a difficult macro environment. However, we are particularly exposed to residential construction activity levels in our markets.”

More than 50% of the company’s revenue is weighted to residential construction.

But there had been a decline of between 30% to 40% in Australia and New Zealand residential sector activity from their respective market peaks to June 2024, she said.

“To give you a sense of scale, this decline is greater than we experienced in the global financial crisis.”

Fallout from legacy project cost blowouts, notably on the NZ International Convention Centre in Auckland and the Wellington International Airport car park building, and the Western Australian leaky pipe crisis have also impacted on the company’s performance.

Chapman said the issues were complex and had consumed a great deal of time and resources, but there had been meaningful progress on the two most significant legacy issues facing the company.

An in-principle agreement had been reached with the Western Australian Government and builders over the leaky pipes issue, while the Convention Centre car parks and the hotel had been handed over and the centre was on track for completion this financial year.

Shareholders have previously raised concerns about Fletchers’ recent $700m equity raise to repay existing debt, and there were questions about it at the meeting.

But Chapman said while needing a capital raise to shore up the balance sheet was disappointing, in the circumstances it was the right thing to do, and it was executed well.

“It’s my own view that our legacy issues are now largely behind us, and the company now has the opportunity to build on our current momentum.”

Reding said market volumes in the materials and distribution businesses were expected to be 10% to 15% lower in the 2025 financial year than in 2024.

But cost savings of at least $180m were expected to be weighted in the second half of the financial year, and about 170 to 180 more house sales were expected when compared with the first half, he said.

“Despite all the noise and distractions, the fundamentals of the business remain sound and we are well positioned to deliver through the cycle.

“We have well-positioned, quality businesses that operate in appealing markets. And we have strengthened our balance sheet which allows us to focus on executing operational and strategic initiatives.”

Fletcher Building was a company with enormous potential and opportunities, managed and operated by people who are passionate about what they do, he said.

“Our goal is to fulfil our potential and to build a company that our people, customers, communities, and you, our shareholders, can be proud of.”

Shareholder questioning covered board renewal, further risks from legacy issues and significant events, such as the Western Australia leaky pipes crisis, and the lack of dividend guidance provided.