Auckland, March 20, 2017 – Fletcher Building has today provided an update on earnings guidance for the 2017 financial year.
The company now expects operating earnings before interest, tax and significant items (“EBIT”) to be between $610 million to $650 million for the year ending 30 June 2017. This compares with the previous EBIT guidance range of $720 million to $760 million.
The revised guidance is due to the identification of additional estimated losses and downside risk in the Buildings and Interiors (“B+I”) business unit of the Construction division.
A thorough review of the B+I business and projects began in late calendar year 2016 and led to new management and governance processes. A significant loss was recorded for B+I in the half-year results based on the best estimate available at the time. However, management has now identified an increase in the estimated loss on the major construction project which was referenced at the time of the announcement of the H1 17 results, and the identification of downside risk on other B+I projects, with the majority being a provision for expected losses on one other major project.
Chief Executive Mark Adamson stated that it was extremely regrettable that expected profitability for FY17 in the Construction division has worsened since comments made at the time the H1 17 results were reported.
“It is very disappointing that the review of the B+I business unit has found weaker performance than we had previously understood.”
All other business units within the Construction division have continued their strong trading performance. However, taking into account the new estimates of profitability for the commercial construction projects, it is now expected that the Construction division as a whole will report a loss at the EBIT level for FY2017.
Trading for Fletcher Building’s other divisions remains in line with expectations previously discussed in the first half earnings commentary.