Fletcher Building divests Australian plumbing arm for $170m

The news: Fletcher Building has agreed to divest its Australian plumbing supplies and distribution business Tradelink to Metal Manufactures.

The numbers: The troubled build products supplier will receive $170 million for the Tradelink, consisting of a cash payment of $160 million payable on settlement around end-September and $10 million deferred cash payment based on achieving separation milestones. This will be subject to stranded costs and separation costs totalling $30 million.

It expects to record a non-cash impairment of $32.5 million in its FY24 accounts and another NZD54 million ($49.2 million) cash loss from the derecognition of the Foreign Currency Translation Reserve on completion.

The context: The divestment follows a comprehensive strategic review in February.

Fletcher cut its FY24 earnings guidance in May amid a slowing market, prompting a downgrade of its credit rating as well as lower earnings estimates by analysts. The NZX and ASX-listed company has seen several top management departures in recent months, as it faces shareholder discontent over weak share price performance and a half-year loss. The company also divested half of its Fiji construction business to two local partners in June.