Shares in NZ’s Fletcher Building tumble on profit downgrade

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Shares in New Zealand’s biggest construction and building supplies company fell more than 10 per cent after losses at two key projects prompted management to downgrade earnings guidance.

Fletcher Building said it now expects operating earnings before interest, tax and significant items (Ebit) to fall between NZ$610m to NZ$650m ($429m to $457m) for the year ending June 30 owing to identification of additional forecast losses and downside risks in the Buildings and Interiors unit of the company’s construction division.

At the lower end, that is a drop of 15.2 per cent from its previous guidance range.

The Buildings and Interiors unit already recorded a significant loss in the recent half-year results, but management said it has now increased its estimate for a loss on a major construction project, and also identified other downside risks for projects within the overall business unit. The company refrained from naming the two projects.

Mark Adamson, chief executive, said:

It is very disappointing that the review of the B+I business unit has found weaker performance than we had previously understood.

The company said all other business units within the Construction division have continued their strong trading performance, and that Fletcher’s other divisions are expected to perform in line with previous guidance.

NZ-listed shares in Fletcher were down 11 per cent to their lowest level since late June and had been down as much as 13.2 per cent in morning trade. In Australia, where the company has a secondary listing, shares were down 10 per cent.

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