Fletcher Building revenue tumbles amid 'prolonged' downturn
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The news: Construction materials manufacturer Fletcher Building saw revenue in September track 12% lower year-on-year as gross margin pressure weighted on its Q1 result.
The numbers: In a trading update, Fletcher said the 12% dip in September revenue followed smaller year-on-year declines of 7% in July and August, as gross margin pressure continues in a "highly competitive environment", particularly in New Zealand.
Fletcher's materials and distribution business saw market volumes fall 10% to 15% year on year during the September quarter.
In the company's residential and development division, house sales averaged 17 per week in the first quarter compared to 23 per week in the previous corresponding period. September saw an improvement in house sales to 21 per week compared to 14 per week in July and August, but margins were lower year on year due to a decline in New Zealand house prices over the past six months.
Fletcher said it continues to expect FY25 market volumes in its materials and distribution businesses to be around 10% to 15% lower than FY24, and expects FY25 EBIT before significant items to be 60% weighted to the second half of the year.
The context: Fletcher said that while the fundamentals of its business "remain sound", it is experiencing downside risks in the form of further deterioration in materials and distribution market volumes and lower-than-target house sales.
Elsewhere, Fletcher's acting chair Barbara Chapman announced her intention to step down from the board on the appointment of a new chair.
Chapman, who was appointed acting chair in March after the abrupt departure of Fletcher's previous chair and director Bruce Hassall, said it was "disappointing" the company hasn't found a permanent chair yet and expects to make an appointment by the first quarter of the next calendar year.
Chapman called the past financial year a "frustrating and challenging" period for shareholders, amid "one of the deepest and most prolonged market downturns in recent history, and one that is affecting all of our businesses and industries".
Earlier this month, Fletcher completed a NZD700 million ($642 million) equity raising, aimed at strengthening the company’s balance sheet and improving its financial stability and resilience.
What they said: "The performance of the company, as reflected in its share price and dividend payouts, is not where any of us want it to be, and shareholders have rightly expressed their concerns and disappointments," Chapman said.
"Although we had expected a pull back from the FY23 and FY24 activity levels, it is fair to say that the market turned down more quickly, and more deeply, than we, our customers, and our external economics advisors, had anticipated and the impact on our financial performance has been significant," she said.
The source: ASX announcement
