Andrew Reding: Fletcher Building CEO on the company posting a multi-million dollar net loss

Fletcher Building has confirmed a new focus on building materials.

The construction giant's announced a net loss of $419 million for the past year, compared to a loss of $227 million last year.

It's already been looking for buyers for its construction division and some other subsidiaries.

Fletcher CEO Andrew Reding says this is the toughest things have been since the GFC.

"It's highly unusual when you get both your residential infrastructure and your commercial market segments all crashing down at the same time."

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Episode Transcript

Speaker 1 (00:00):
Now things have unfortunately gone from bad to worse for
Fletcher Building. The company announced a net loss of nearly
four hundred and twenty million dollars for the year, worse
than last year's two hundred and twenty seven million dollar loss.
No dividend will be paid. The company today announced it's
looking to indicate it rather, it's looking to sell off
both its construction but also its residential and development operations.
Andrew Reading is the Fletcher Building managing director and CEO.

(00:22):
Hey Andrew, Hi, how are you? Yeah, I'm very well.
Thank you.

Speaker 2 (00:25):
Tough year, Yes, the markets have not been kind.

Speaker 1 (00:30):
How tough?

Speaker 2 (00:32):
Ah, this would be the worst we've seen since the GFC,
and that's in Australia and New Zealand. It's highly unusual
when you get both your residential infrastructure and commercial market
segments all crashing down at the same time, and that's
happened in both of the geographies.

Speaker 1 (00:50):
As bad as bad as the GFC, or worse then
worse than Okay, what because I'm trying to get a
handle on how bad this thing is that we have
come through, or hopefully I come through. How far back
in your mind do you have to go to find
a comparable tough period.

Speaker 2 (01:05):
Oh you're taking me back to the recessions of the
late eighties. I mean it is really tough. Yeah, and
I don't think we appreciate quite how hard the man
on the street is doing it at the moment.

Speaker 1 (01:22):
Do you think so?

Speaker 2 (01:23):
Yeah, I agreed. Yeah. What makes you think then, ah, well,
you don't see people walking around with smiling and spending
a lot of money these days though, I think I
think people are scrubbling for every penny they can get.
And I think let's go back to the interest rate
drops we saw at the end of last year that
created a bit of a lift in foot traffic, for

(01:45):
example through our residential and development division, a bit of
a lift, but then come earlier this year, that's all
just fizzled out.

Speaker 1 (01:53):
Yeah, I think you might be right.

Speaker 2 (01:54):
Now.

Speaker 1 (01:54):
Look, how are you going with the sale of Flucher Construction.

Speaker 2 (01:58):
So we're in a process and we've had some approaches
from interested parties and we're just working our way through
discussing with them how serious their interest is. And there's
a larger number of them than we'd originally expected. But yes,
it's going, it's going along.

Speaker 1 (02:19):
And are you serious about selling residential and development or
just kind of kicking the tires on it.

Speaker 2 (02:25):
So we haven't made that decision yet. So we're doing
a strategic review of it, which is about finding out
what options we have with the division. So that may
result in some divestment options, or it may not.

Speaker 1 (02:39):
If you do go ahead with it, well what does
it leave you guys, as you're basically an Australia based
business and here you're just doing retail or products.

Speaker 2 (02:47):
Oh no, no, no. So if you look at our
strategic review, we've said that the our medium term intention
is to be a building materials and distribution companying materials
and manufacturing distribution company, and we have significant operations in
both Australia and New Zealand.

Speaker 1 (03:06):
Yeah, okay, I mean that is that's a mess of
there's a mess of downscaling, isn't it.

Speaker 2 (03:12):
We would be smaller, more nimble, and one would expect
more profitable.

Speaker 1 (03:17):
Do you think is this an admission then that the
growth that Fletcher just grew far too fast and got
too ambitious.

Speaker 2 (03:25):
I think that we have historically made some inappropriate acquisitions
which may have been done just to get bigger, and
then we have made some other management decisions which have
resulted in too much corporate cost. And I think we
made the mistake of trying to grow through the construction division,

(03:46):
which always counted with its a significant element of risk.

Speaker 1 (03:50):
How's it going with the Convention Center? Is it due
to be open? Is it we still on track for
February next year?

Speaker 2 (03:55):
Yes? Yes, no, so we're into the final commissioning phase
at the moment. Construction work is complete, we're just going
through all the paperwork and commissioning at the moment, so
we're looking forwards to handing over what will be an
iconic building to SkyCity.

Speaker 1 (04:09):
Yeah, Andrew. If this year is tough and as tough
as you say, and I suspect I totally actually believe
that you're right, then that that would suggest this is
not something we're going to come out of super fast. Right,
So next year is probably going to be tough too.

Speaker 2 (04:21):
Yes, I think it will be. All the signs we've
got at the moment are that the patchingess that we've
been experiencing in the second half of trailing of financial
year twenty five is continuing into financial year twenty six. Yeah,
and Australia may be showing signs of lifting a bit earlier,

(04:42):
but it's still very very difficult to see when that
will actually any of those precursors will come through and.

Speaker 1 (04:50):
Just cor great activity in the market. Is this just
a Fletcher story. Is this a construction story or is
this an economy story.

Speaker 2 (04:58):
I think it's a construction and an economy story. And
I think it's driven by the interest rates we've had
over the past few years and the change in net
migration rates probably so that that used to create qualort
of demand in the housing market.

Speaker 1 (05:13):
Which is the same courses. Yeah, which has dropped off.
But then Andrew, that's to say it will survived to
twenty five. Now let's get through to twenty six. But geez,
we may have to wait until what like late twenty
six twenty seven until we start to really feel good.

Speaker 2 (05:25):
Yes, I mean, look, there will be a significant amount
of work coming out in the infrastructure space in New
Zealand and Australia. But the trouble with that is that
you get that by the time people have done the
design and actually got shovels into the ground, you're talking
about twelve eighteen months away, and then for that's become
serious activities six months post that so we think financial

(05:45):
year twenty six flat and then we might start to
season benefit and financial year twenty seven.

Speaker 1 (05:51):
You're killing me, okay, but yeah, it's better to know.
I suppose get the medicine upfront. Andrew, When does it
get better for Fletcher? What do you have to put
behind you the sale of the construction, the core cases,
get the get into a better state with the economy.
What else?

Speaker 2 (06:04):
Well, we've got the legacy, most of our legacy projects
behind this now, so that's that's that's one tick. We
have been downsizing the corporate center here, so we're getting
structural costs down to the business. So that's another tick.
We've been devolving empowerment to the business units, so making
them take on more more responsibility and accountability, but making

(06:24):
them quicker to react to the things they see in
the marketplace. So all of those things coming together, if
we got a lift in the market, would see a
significant lift in improvement.

Speaker 1 (06:35):
Andrew, it's good to talk to you, groom. But good
Andrew Ridding, Managing director and group CEO of Flitcher Building.

Speaker 2 (06:42):
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