Fletcher sells Roof Tile Group for US$39M
By Paul McBeth
Nov. 1 (BusinessDesk) - Fletcher Building has sold its Roof Tile Group business to Canada's IKO group for US$39 million and expects to exit its Formica laminated panels business this financial year.
The sale was below Roof Tile's carrying value, meaning Fletcher will book a non-cash loss of $15 million to $20 million. However, the firm said this won't impact its underlying earnings outlook.
"The sale is in-line with Fletcher Building’s five-year strategy to divest our international operations to focus our capital and capability behind our New Zealand and Australian businesses, with building products and distribution at our core," chief executive Ross Taylor said. "Once both sales have been completed we will review our capital structure and capital requirements and then determine how the funds will be allocated."
The shares fell 3.3 percent to $5.84.
The country's biggest construction firm put its international businesses up for sale after getting caught by escalating costs totalling on some major projects. That led to a series of multi-million-dollar write-downs and forced it to raise equity at a discount and renegotiate some lending terms.
The Formica sale process is still underway and Fletcher expects to have that completed in the year ending June 30 2019.
Fletcher surprised some investors in October when it made a play to buy rival Steel & Tube at what the steel products maker said was an opportunistic price. A higher bid wasn't immediately welcomed, and Fletcher subsequently walked away.
Separately, Fletcher got a positive endorsement from Precinct Properties New Zealand at Precinct's AGM today, despite delays in at least one major project. Fletcher is the primary contractor on the Commercial Bay retail development in downtown Auckland, which is running behind schedule and won't open in September next year.
Precinct chief executive Scott Pritchard said Fletcher kept the company abreast of the status of the project, which was beneficial in what is a challenging environment for construction firms.
"Importantly we believe Fletchers is maintaining a high standard of quality on this project and Precinct remains comfortable with the provisions of its construction contract, which protect it from potential losses from delay caused by the main contractor," Pritchard told shareholders.
The real estate investor committed to the $72 million second stage of its Wynyard Quarter development in Auckland, hiring Hawkins as primary contractor on a fixed-price contract. Construction is expected to start later this month and be completed in 2020.
Downer EDI, which owns Hawkins, noted strong demand for Hawkins' services in non-residential commercial construction at its annual meeting today.
Precinct shares fell 0.7 percent to $1.40.