Fletcher Building Share Price Fell 8.95% Today


Fletcher Building Ltd [ASX:FBU] dropped 8.95% today, and is currently trading at $6.51.

Why did the FBU share price drop?

Fletcher Building announced a trading halt on 8 February, which was later extended to 13 February.

Trading recommenced today following an announcement that the company is expecting further losses of $486 million in its Buildings + Interiors division.

The company is projecting a loss of $660 million for FY18, which saw the share price drop sharply. Fletcher Building has also stated that it will not be declaring a half-yearly dividend for 2018.

Ross Taylor, the Fletcher Building CEO, said:

The provisions we have announced today are informed by a considerable amount of further project analysis, and while we continue to target agreed completion dates across the portfolio, we have factored in significant cost and timeline contingencies.

…We have strong and predictable cash flows across the Fletcher Building group. While the B+I provisions are large, they are phased over a number of years and do not impact our ability to trade with our customers or suppliers or pay our bills.

While our broader construction businesses continue to benefit from favourable market conditions and strong growth, the B+I market sector remains characterised by high contract risk and low margins. Unless these dynamics change we will no longer work in this sector.’

In addition, Fletcher Building chairman Sir Ralph Norris has announced that he intends to step down by October. He told The Australian Financial Review:

The situation here is a complex one and it’s not a situation where there’s a single point of failure

One of the significant issues is the information flows through to the board were not as fulsome as they possible could have been.

The AFR reports that Norris decided to step down as shareholders were looking for someone to take accountability for the company’s losses.

What’s next for Fletcher Building?

The company is focused on finishing remaining Buildings + Interiors projects.

In order to do so, FBU is focusing on project delivery, ceasing all bidding on construction projects in New Zealand. This will allow resources to be put towards the completion of their current book.

Fletcher Building has stated that the company is strong enough to recover from the losses and remain well capitalised, but that remains to be seen.


Kris Sayce,
Publisher, Money Morning       

Danielle Rawlings,
For Money Morning                                                                

PS: Our analyst Vern Gowdie believes that Australia is primed to fall into a recession as soon as this year! If you’re interested in learning about what you could do now to protect your wealth, you can download our free report The Aussie Recession Survival Guide’ here.

Kris Sayce

Kris is never one to pull punches when discussing market developments and economic events that can affect your wealth. He’ll take anyone to task — banks, governments, big business — if he thinks they’re trying to pull a fast one with your money. Kris is also the editor of Microcap Trader — where he reveals the best opportunities he’s discovered in the markets. If you’d like to more about Kris’ financial world view and investing philosophy then join him on Google+. It's where he shares investment insight, commentary and ideas that he can't always fit into his regular Money Morning essays.

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