Fletcher Building has posted a net loss of $134 million for the first half of the 2025 financial year (HY25), widening from the $120 million loss reported in the same period last year. The company attributed the decline to ongoing market challenges, including a broad-based slowdown in demand, heightened competition, and persistent inflationary pressures.
Revenue Decline and Market Pressures
Revenue from continuing operations dropped 7% to $3.58 billion, down from $3.86 billion in HY24. The company cited weak market conditions as a key factor in the downturn, with volumes in its New Zealand Materials and Distribution divisions falling between 5% and 10%, while Australian market activity contracted by 15%.
Fletcher Building CEO Andrew Reding acknowledged the difficult operating environment, stating, “The first half of the 2025 financial year continued to be a challenging period for our businesses as very difficult trading conditions continued across all our segments.”
The residential sector was particularly affected, with the company selling 115 fewer housing units compared to the previous half-year. Additionally, Fletcher noted a 2% drop in average market prices. However, the company pointed to a 17% increase in new housing sign-ups between September and December 2024, compared to the July-August period, as a sign of potential improvement.
Earnings and Cash Flow Challenges
Earnings before interest and tax (EBIT) from continuing operations, excluding significant items, fell to $167 million—$96 million lower than HY24. The decline was largely driven by weaker performance in the Materials and Distribution divisions, which saw EBIT fall by $80 million. The company’s Construction division, however, provided some relief, posting a $21 million EBIT increase, buoyed by higher work volumes from major infrastructure projects.
Fletcher also reported an operating cash outflow of $5 million, impacted by lower earnings, seasonal working capital investments, and $134 million in legacy project-related costs.
Strategic Responses and Cost Management
In response to ongoing challenges, Fletcher Building undertook a $700 million capital raise, applying $511 million toward repaying bank debt and $169 million to reduce outstanding U.S. private placement (USPP) debt. The company also reported that its cost-reduction program was ahead of schedule.
Reding emphasised that the company remains focused on optimising operational performance and controlling costs, saying, “We are pleased with the progress achieved to date on our key priorities which have been: resetting governance and leadership roles of the Group; the ongoing strategic review; the Group-wide cost reduction programme; cash; being prudent with capital expenditure; and progressing the resolution of outstanding legacy issues.”
Segment Performance: Residential, Australian, and Concrete Divisions Struggle
Several business segments reported declining revenues and earnings. The Residential and Development division saw a 32% drop in revenue, with unit sales falling from 419 to 304. Fletcher cited challenging market conditions and price competition in the housing sector as key factors.
In Australia, revenue fell 12%, reflecting a 13% decrease in sales volume. Meanwhile, the Concrete division posted a 5% revenue decline to $536 million, with EBIT dropping from $70 million to $49 million.
The Construction division was a rare bright spot, with revenue increasing 16%, largely due to major infrastructure projects such as the Auckland Airport expansion.
Future Outlook and Market Adaptation
Looking ahead, Fletcher Building expects macroeconomic pressures to persist, with economic activity remaining subdued for the remainder of the financial year. However, the company remains focused on executing its strategic initiatives, including operational efficiency improvements, cost discipline, and capital management.
Forsyth Barr analysts noted in a research report that while cyclical challenges were well understood, investor attention would now shift to the new management team’s strategic direction and operational adjustments.
Fletcher is also progressing toward resolving legacy construction issues, with the New Zealand International Convention Centre project now in its final stages and a handover scheduled for June 30, 2025.
Despite the challenging conditions, Reding remains cautiously optimistic about the company’s ability to navigate uncertainties. “We remain focused on what we can control: delivering operational excellence, tightly managing costs, prioritising safety, and providing the best possible service to our customers,” he said.