This article is from the Australian Property Journal archive
DUAL Australia and New-Zealand listed construction products manufacturer and home builder Fletcher Building swung to a loss in FY24, as weak results in its materials and distributions divisions dragged down revenue, while the company said it is exploring capital partnership options.
EBIT came in at $509 million, within guidance range, but was 35% below FY23’s $785 million. Margins came down from 10.2% to 6.6%.
Group revenue came in at $7.683 billion. Higher revenues in residential and development and construction offset by “significantly lower” revenues in materials and distributions.
After factoring in the discontinued operations of its plumbing supplies and distribution business Tradelink, Fletcher swing to a net loss after tax of $227 million, compared to net earnings of $235 million in FY23. Return on funds employed (ROFE) before significant items was 10.0%, down from 17.1%.
It announced last week it had struck a deal to sell Tradelink to Metals Manufacturers (MM), a subsidiary of US-based Blackfriars Corporation, for $170 million.
Fletcher had flagged lower earnings for FY24 in May, with market conditions remaining weak across the company’s materials and distribution divisions, which prompted credit ratings agency Moody’s to downgrade the company’s rating.
Its share price, which has been pummelled over the past 12 months, rose to as high as $3.16 during yesterday’s trade before falling back to $3.01.
“We think it is the right time to explore capital partnership options for residential and development, to invest in and drive the next phase of the business’s success. Consequently, we have engaged Jarden to explore options with both local and international investors,” said Fletcher Building acting CEO Nick Traber.
“We expect the year ahead to remain challenging, with macro-economic pressures likely to persist through the year. At this point, we are planning for FY25 market volumes in our materials and distribution businesses to be 10% to 15% lower year-on-year compared to FY24, however we remain vigilant to further market weakness.”
Market volumes declined materially in FY24. In New Zealand, market volumes fell 25% and, in Australia, market volumes fell 15%, each compared to the first half of FY23, resulting in substantial revenue declines in our materials and distribution businesses,” said Traber.
Its New Zealand residential business still managed to sell 886 units, up from 617.
“Disappointingly, total significant items for continuing operations for FY24 were $333 million. This was primarily due to a $117 million non-cash impairment and write-down in the carrying value of the Higgins business, and the $180 million additional provisions required on our legacy Construction projects announced at HY24,” Traber said.
Traber said strong cash flow performance and tight control of working capital have been key priorities over the past year. Trading cash flows from continuing operations, excluding legacy and significant items, lifted from $537 million to $784 million Overall cash flows from operational activities were $398 million, up slightly on FY23. Its debt of $1.8 billion was better than guidance, and it had liquidity of $1.1 billion.
There has been rapid change at the top. CEO Ross Taylor exited after the poor half-year result, and Fletcher this week unveiled Andrew Reding as its new CEO and managing director.
Reding has had numerous operational leadership roles in the construction materials and building products sectors over the past 35 years, including 11 years at Fletcher. In that stint he held the roles of chief executive of building products and steel from 2001 to 2006 and managing director of Fletcher Wood Panels from 1997 to 2001.
Meanwhile, chief financial officer Bevan McKenzie is also on the way out, and chairman Bruce Hassell also left, while directors Rob McDonald and Martin Brydon both brought forward their exits from the board.
Fletcher also announced the sale of half of its business in Fiji for NZ$20 million, and is expecting to take non-cash impairment of around NZ$15 million on the business.
