Latest / Best of Business / Andrew Reding: Fletcher Building CEO on the company posting a multi-million dollar net loss

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

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  Speaker 1: You're listening to a podcast from News Talk SEDB. Follow
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  Speaker 2: Things have unfortunately gone from bad to worse for Fletcher Building.
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  Speaker 2: The company announced a net loss of nearly four hundred
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  Speaker 2: and twenty million dollars for the year, worse than last
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  Speaker 2: year's two hundred and twenty seven million dollar loss. No
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  Speaker 2: dividend will be paid. The company today announced it's looking
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  Speaker 2: to indicate it rather it's looking to sell off both
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  Speaker 2: its construction but also its residential and development operations. Andrew
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  Speaker 2: Reading is the Fletcher Building Managing director and CEO.
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  Speaker 3: Hey Andrew, Hi, how are you?
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  Speaker 2: Yeah, I'm very well, Thank you.
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  Speaker 3: Tough year, Yes, the markets have not been kind.
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  Speaker 2: How tough?
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  Speaker 3: Ah, this would be the worst we've seen since the GFC,
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  Speaker 3: and that's in Australia and New Zealand. It's highly unusual
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  Speaker 3: when you get both your residential infrastructure and commercial market
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  Speaker 3: segments all crashing down at the same time. And that's
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  Speaker 3: happened in both of the geographies.
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  Speaker 2: As bad as bad as the g see all worse
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  Speaker 2: then worse than Okay, what because I'm trying to get
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  Speaker 2: a handle on how bad this thing is that we
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  Speaker 2: have come through, or hopefully are coming through. How far
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  Speaker 2: back in your mind do you have to go to
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  Speaker 2: find a comparable tough period.
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  Speaker 3: Oh, you're taking me back to the recessions of their
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  Speaker 3: late eighties. I mean it is really tough. Yeah, and
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  Speaker 3: I don't think we appreciate quite how hard the man
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  Speaker 3: on the street is doing it at the moment.
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  Speaker 2: Do you think so?
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  Speaker 3: Yeah, I agreed. Yeah.
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  Speaker 2: What what makes you think then?
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  Speaker 3: Ah, Well, you don't see people walking around with smiling
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  Speaker 3: and spending a lot of money these days though, I think.
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  Speaker 3: I think people are scrubbling for every penny they can get.
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  Speaker 3: And I think let's go back to the interest rate
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  Speaker 3: drops we saw at the end of last year that
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  Speaker 3: created a bit of a lift in foot traffic, for
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  Speaker 3: example through our residential and development division, a bit of
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  Speaker 3: a lift. But then come earlier this year or we'll
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  Speaker 3: just fizzled out.
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  Speaker 2: Yeah, I think you might be right. Now. Look, how
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  Speaker 2: are you going with the sale of Fletcher Construction.
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  Speaker 3: So we're in a process and we've had some approaches
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  Speaker 3: from interested parties and we're just working our way through
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  Speaker 3: discussing with them how serious their interest is. And there's
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  Speaker 3: a larger number of them than we'd originally expected. But yes,
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  Speaker 3: it's going along.
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  Speaker 2: And are you serious about selling residential and development or
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  Speaker 2: just kind of kicking the tires on it?
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  Speaker 3: So we haven't made that decision yet. So we're doing
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  Speaker 3: a strategic review of it, which is about finding out
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  Speaker 3: what options we have with the division. So that may
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  Speaker 3: result in some divestment options or it may not.
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  Speaker 2: If you do go ahead with it, well what does
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  Speaker 2: it leave you guys as you're basically an Australia based
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  Speaker 2: business and here you're just doing retail or products.
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  Speaker 3: Oh no, no, no. So if you look at our
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  Speaker 3: strategic review, we've said that our medium term intention is
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  Speaker 3: to be a building materials and distribution company building materials
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  Speaker 3: and manufacturing distribution company, and we have significant operations in
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  Speaker 3: both Australia and New Zealand.
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  Speaker 2: Yeah, okay, I mean that is a that's a mess
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  Speaker 2: of there's a mess of downscaling, isn't it.
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  Speaker 3: We would be smaller, more nimble, and one would expect
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  Speaker 3: more profitable.
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  Speaker 2: Do you think is this an admission then that the
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  Speaker 2: growth that Fletcher just grew far too fast and got
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  Speaker 2: too ambitious.
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  Speaker 3: I think that we have historically made some inappropriate acquisitions
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  Speaker 3: which may have been done just to get bigger. And
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  Speaker 3: then we have made some other management decisions which have
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  Speaker 3: resulted in too much corporate cost. And I think we
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  Speaker 3: made the mistake of trying to grow through the construction division,
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  Speaker 3: which always countered with it a significant element of risk.
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  Speaker 2: How's it going with the conventions or is it due
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  Speaker 2: to be open?
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  Speaker 1: Is?
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  Speaker 2: Are we still on track for February next year?
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  Speaker 3: Yes? Yes, no, so we're into the final commissioning phase
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  Speaker 3: at the moment. Construction work is complete. We're just going
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  Speaker 3: through all the paperwork and commissioning at the moment, so
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  Speaker 3: we're looking forwards to handing over what will be an
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  Speaker 3: iconic building to SkyCity.
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  Speaker 2: Yeah, Andrew, if this year is tough and as tough
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  Speaker 2: as you say, and I suspect I totally actually believe
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  Speaker 2: that you're right, then that that would suggest this is
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  Speaker 2: not something we're going to come out of super fast. Right,
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  Speaker 2: So next year is probably going to be tough too.
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  Speaker 3: Yes, I think it will be. All the signs we've
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  Speaker 3: got at the moment are that the patchingness that we've
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  Speaker 3: been experiencing in the second half of trading of financial
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  Speaker 3: year twenty five is continuing into financial year twenty six. Yeah,
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  Speaker 3: and Australia may be showing signs of lifting a bit earlier,
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  Speaker 3: but it's still very very difficult to see when that
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  Speaker 3: will actually any of those precursors will come through and
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  Speaker 3: just all great activity in the markd.
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  Speaker 2: Is this just a Fletcher story. Is this a construction
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  Speaker 2: story or is this an economy story.
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  Speaker 3: I think it's a construction and an economy story. And
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  Speaker 3: I think it's driven by the interest rates we've had
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  Speaker 3: over the past few years and the change in net
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  Speaker 3: migration rates probably so that that used to create quoort
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  Speaker 3: of demand in the housing market.
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  Speaker 2: Which is the same yeah, which has dropped off. But
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  Speaker 2: then Andrew, that's to say it will survived to twenty five.
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  Speaker 2: Now let's get through to twenty six. But geez, we
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  Speaker 2: may have to wait until what like late twenty six
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  Speaker 2: twenty seven until we start to really feel good.
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  Speaker 3: Yes, I mean, look, there will be a significant amunter
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  Speaker 3: of work coming out in the infrastructure space in New
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  Speaker 3: Zealand and Australia. But the trouble with that is that
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  Speaker 3: you get that by the time people have done the
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  Speaker 3: design and actually got shovels into the ground, you're talking
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  Speaker 3: about twelve eighteen months away, and then for that's become
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  Speaker 3: serious activities six months post that, so we think financial
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  Speaker 3: year twenty six flat and then we might start to
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  Speaker 3: seize some benefit and financial year twenty.
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  Speaker 2: Seven you're killing me, okay, but yeah, it's better to know.
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  Speaker 2: I suppose get the medicine upfront. Andrew, When does it
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  Speaker 2: get better for Fletcher? What do you have to put
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  Speaker 2: behind you the sale of the construction, the court cases,
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  Speaker 2: get the get into a better state with the economy.
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  Speaker 2: What else, Well, we've.
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  Speaker 3: Got the legacy, most our legacy projects behind this now,
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  Speaker 3: so that's that's that's one tick. We have been downsizing
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  Speaker 3: the corporate center here, so we're getting structural costs down
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  Speaker 3: to the business. So that's another tick. We've been devolving
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  Speaker 3: empowerment to the business units, so making them take on
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  Speaker 3: more and more responsibility and accountability, but making them quicker
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  Speaker 3: to react to the things they see in the marketplace.
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  Speaker 3: So all of those things coming together, if we've got
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  Speaker 3: a lift in the market, would see a significant lift
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  Speaker 3: in improvement.
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  Speaker 2: Andrew, it's good to talk to you, groom, but good
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  Speaker 2: Andrew Ridding, Managing director and Group CEO of Flitcher.
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