February 21, 2018 / 2:52 AM / 10 months ago

RPT-UPDATE 2-NZ's Fletcher Building records half-year loss, misses estimates

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* Fletcher posts net loss of NZ$273 mln in HY2018

* Firm’s performance dragged by losses in commercial building unit

* Negotiating with lenders over breached finance covenants

By Charlotte Greenfield

WELLINGTON, Feb 21 (Reuters) - New Zealand’s largest construction company Fletcher Building Ltd reported a half-year loss on Wednesday and did not pay an interim dividend for the first time in its history as the firm grapples with massive cost overruns in its commercial building unit.

Fletcher posted a net loss of NZ$273 million ($200.41 million) for the six months to Dec. 31 compared with a net profit of NZ$176 million for the same period the previous year. That compares with a Thomson Reuters I/B/E/S estimate of NZ$79 million profit.

Reeling from spiralling costs and deep losses in major projects, New Zealand’s second-largest company by revenue had flagged earlier in the month that losses were even larger than anticipated last year and that it was exiting the commercial construction business.

The builder did not provide any new details in its earnings update over the losses and reiterated that it was negotiating with lenders to rework financing covenants that would be breached by the losses.

“It is regrettable that the underlying strength of Fletcher Building continues to be masked by losses in the Building + Interiors (B+I) business of the Construction Division, which will make a total projected EBIT loss of $660 million in FY18,” said outgoing chairman Ralph Norris, who announced last week he was stepping down.

Shares slipped 1.6 percent to NZ$6.750 after the earnings announcement. Shares have dropped around 12 percent since the company announced the worsening outlook the previous week.

Fletcher maintained its full-year earnings guidance, excluding the buildings segment, at NZ$680 million to NZ$720 million.

First-half revenue came in at NZ$4.89 billion up from NZ$4.61 billion a year ago, while underlying earnings excluding the buildings and interiors unit fell 13.4 pct to NZ$309 million.

Fletcher, which has two major projects under construction in Auckland and Christchurch, warned of cost overruns three times last year. In October it had projected a loss of NZ$160 million.

The warnings shook confidence in company management for failing to benefit from New Zealand’s building boom, which was the biggest in living memory but also pushed up prices as an intense demand for workers lifted wages.

Chief Executive Officer Ross Taylor, who took the helm in November, reiterated in the company’s interim report that he was carrying out a strategic review of Fletcher Building and would announce the results in June. ($1 = 1.3622 New Zealand dollars) (Reporting by Susan Mathew in BENGALURU and Charlotte Greenfield in WELLINGTON; editing by Edmund Blair and Grant McCool)

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