Fletcher Building shares drop after writedowns

The news: Building products supplier Fletcher Building expects its half-year results to be hit by further provisions against troubled construction projects for SkyCity in Auckland and at Wellington Airport.

The numbers: Fletcher said due to increasing costs it will make an additional provision of NZD165 million ($154 million) in its half year results on the NZ International Convention Centre project in Auckland that it is building for SkyCity. It will also provision an extra NZD15 million on the Wellington International Airport car park project.

The context: The NZX and ASX-listed Fletcher has been troubled by repeated problems at the Auckland project since the construction site caught fire in October 2019 and has been forced into extensive remediation. It said the provision would cover the increased costs primarily due to higher levels of subcontractor resource required as well as a portion of the company’s claims against the project Contract Works Insurance that may not be recoverable. Fletcher said it continues to pursue recoveries under the NZICC Third Party Liability insurance policy of more than NZD100 million.