As expected, Kiwi construction giant, Fletcher Building has reported a big plunge in net profit for the year to June, thanks to a large loss in its troubled construction arm and the writing down of two of its big Australian assets, Tradelink and Iplex.
The construction loss and the impairments in Australia were highlighted several weeks ago in a surprise trading update from the company that also saw then CEO, Mark Adamson fired by the board.
The $NZ292 million loss in its construction arm, was due to a series of problems, particularly two major projects in Christchurch and Auckland.
Net profit was further cut to just $NZ94 million after the $NZ222 million impairment to Iplex and Tradelink in Australia.
As a result net profit before one off items plunged 23% to $321 million for the year to June 30, despite a 4% rise in revenue to $NZ.9.4 billion.
Underlying operating earnings were $NZ525 million, also down 23%.
Interim chief executive Francisco Irazusta said in a statement that while the result was disappointing, he was confident the troubled division would improve with new leadership.
"Following a complete review of the B+I portfolio a significant amount of change has already been implemented – including improved project governance and processes for current and future projects and enhanced bidding rigour."
He said that stripping out the impact of B+I division, the company’s earnings had increased by about 20 per cent and its New Zealand portfolio’s earnings were up by about 30 per cent.
In commentary the company blamed a “combination of complex design issues, inadequate project management and stretched resourcing” in a booming building market that is lacking workers and faces big price increases.
However, the company said other parts of the business were growing strongly, with its building products arm up 6%, its international division up 27%, distribution up 10% and residential and land development up 55%.
Despite the weak results and write-downs, the company is paying an unchanged full year dividend of 39 NZ cents a share, with a steady final of 19 cents.
