For the current financial year (FY2018) this means a total projected EBIT loss for B+I of $660 million, which means the B+I business will have lost over $950 million in the last two years.
A review of 16 current large scale projects has reconfirmed that the Justice & Emergency Services Precinct and the New Zealand International Convention Centre (NZICC) projects are the main contributors to the B+I losses.
Having revealed this additional negative it was also announced that the FY18 EBIT for the Fletcher Building Group – excluding B+I – is nevertheless forecast to remain in the region of $680-720 million and that a waiver had been received following a breach of banking covenants.
In a statement to the NZX this morning, Fletcher Building CEO, Ross Taylor, added by way of reassurance: “We have strong and predictable cash flows across the Fletcher Building group.
“While the B+I provisions are large, they are phased over a number of years and do not impact our ability to trade with our customers or suppliers or pay our bills.”
The FBU CEO also said that B+I would focus on finishing its current projects and that it would cease all bidding on “vertical construction projects” in New Zealand pending their completion.
As to looking ahead with the B+I business, Ross Taylor warned: “While our broader construction businesses continue to benefit from favourable market conditions and strong growth, the B+I market sector remains characterised by high contract risk and low margins. Unless these dynamics change we will no longer work in this sector.”
It is also stated that, as the current B+I projects are completed, B+I "key talent" will be redeployed to other areas within Fletcher Construction.
Worryingly, Fletcher's exit would leave a massive gap in the country's capacity to satisfy demand for commercial and institutional building.
The B+I business is part of the otherwise positive Fletcher Construction division that also comprises Infrastructure, Higgins and South Pacific.
In a separate statement Fletcher Building Chairman, Sir Ralph Norris, confirmed he will step down as Chairman no later than the 2018 Annual Shareholders Meeting.