FIRST CUT: Ralph Norris steps down as Fletcher chair after new $486M provision in B+I
By Jonathan Underhill
Feb. 14 (BusinessDesk) - Ralph Norris will step down as chairman of Fletcher Building after the company took a further $486 million provision for project losses at its Building + Interiors unit and said 14 of the unit's 73 projects, worth $2.3 billion, are loss-making or 'on watch'.
Fletcher shares are due to resume trading this morning after being halted last week for the announcement. The projected 2018 loss for B+I has been widened to $660 million on an earnings before interest and tax basis from a previous estimate of $160 million, while guidance for group ebit excluding B+I was reiterated at $680 million to $720 million.
Norris said he will step down at the 2018 annual meeting toward the end of the year. Chief executive Ross Taylor, who conducted a review of Fletcher's strategy after taking the job last November, said the new provisions "was informed by a review of 16 B+I projects, accounting for about 90 percent of the construction backlog."
B+I was now focused "on project delivery only" and was "ceasing all bidding on vertical construction projects in New Zealand," Taylor said. "While our broader construction businesses continue to benefit from favourable market conditions and strong growth, the B+I sector remains characterised by high contract risk and low margins. Unless these dynamics change we will no longer work in this sector."
A $20 million restructuring provision to exit B+I has also been recognised, with key resources to be redeployed to other construction division businesses as B+I projects are completed.
Fletcher said it has obtained a waiver from its commercial banking syndicate after breaches the terms of its loans. Taylor said the strength of Fletcher's remaining business and the phasing of the cash impact of the B+I provisions "meant the company remains well capitalised and solvent."
Fletcher shares last traded at $7.77 and have tumbled 23 percent in the past 12 months.