Fletcher Building Plans Asset Sales; Shares Drop on Lower Profit

Fletcher Building Ltd., New Zealand’s biggest construction company, said it has as many as four business units ready for sale as it reviews the value of previous acquisitions, particularly in Australia.

“We are in a divest phase,” Chief Executive Office Mark Adamson said on a conference call. “There are a number of businesses where we are fairly confident that their earnings under our ownership have maxed out and that we’re looking at potential divestment.”

Fletcher is cutting costs and reviewing its portfolio of businesses as a slowdown in Australia hurts earnings. The company said Wednesday that group first-half earnings slumped 26 percent and full-year profit will be at the low end of its guidance range, sending its shares lower.

The stock fell 5.5 percent to NZ$8.26 at 3:27 p.m. in Wellington, headed for its biggest fall since May 2013.

Adamson declined to identify the three or four businesses ready for sale, citing concern for their workers. The companies are in both Australia and New Zealand, he said.

Operating earnings in the year through June 30 will be at the lower end of the NZ$650 million ($490 million) to NZ$690 million range, the Auckland-based company said Wednesday.

Net income fell to NZ$114 million in the six months ended Dec. 31 after the company included the cost of closing plants and wrote down the value of some businesses. It said more impairments may follow in the second half.

‘Dramatic Downturn’

Adamson said sales of concrete products to Australia’s mining companies, and demand for plastic pipes from the coal seam gas industry, have been hit hardest by a “dramatic downturn” in those sectors.

In 2011, Fletcher bought Australia’s Crane Group, whose portfolio includes the Iplex plastic pipe business, Tradelink plumbing centers and concrete-product manufacturing plants. Fletcher also bought steel fabricator Stramit in 2005.

“Fletcher’s position in Australia was largely purchased in the last 10 years by fairy aggressive merger and acquisition, and we’re now doing a full exercise to look at the value of those businesses,” Adamson said. “We have to face reality. Some of those assets we can no longer justify carrying at the value they were purchased at.”

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