August 21, 2018 / 9:04 PM / 2 months ago

UPDATE 1-NZ construction group Fletcher Building posts loss as cost overruns weigh

(Adds revenue and dividend details, background)

Aug 22 (Reuters) - New Zealand’s Fletcher Building on Wednesday posted an annual loss due to mounting costs at its commercial construction unit and impairment charges from the consolidation of its Australian operations.

The country’s largest builder posted a net loss for the 12 months ended June 30 of NZ$190 million ($126 million), compared with a profit of NZ$94 million the previous year. Seven analysts polled by Thomson Reuters I/B/E/S on average expected a loss of NZ$120.61 million.

Excluding the building segment, earnings before interest and tax came in at NZ$710 million, at the upper end of the company’s forecast range between NZ$680 and NZ$720 million.

The company, which has announced it will wind down its loss-making Buildings and Interior unit, said net debt fell to NZ$1.27 million at the end of June compared with NZ$1.95 billion a year before. It had forecast an increased debt level for the year due to the piling losses.

Cost blowouts at Fletcher have been blamed on a fast-growing material and labour costs amidst project delays, which turned high-profile contracts that assigned price risks with Fletcher into liabilities as wage bills ballooned.

To mitigate that, the company undertook a NZ$1.25 billion refinancing plan and agreed to temporarily pay higher interest on its debt to assuage creditors, among other measures.

Fletcher had flagged an NZ$85 million to NZ$95 million restructuring charge related to the consolidation of its Australian business to be included in the fiscal 2018 results.

The commercial buildings unit recorded a loss before interest and tax of NZ$660 million, in line with the company’s forecast. Fletcher said its annual revenue came in at NZ$9.47 billion, down 1 percent from a year ago.

The company did not pay a final dividend as flagged earlier in the year, but maintained it would resume dividend payments in 2019 at a payout ratio of 50 to 75 percent of net earnings before significant items.

The company said it expects to complete the divestment of its Formica and Roof Tiles business in fiscal 2019. Fletcher had announced the divestment plan in April this year.

$1 = 1.5069 New Zealand dollars Reporting by Susan Mathew in Bengaluru Editing by David Holmes

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