Fletcher Building disaster: How it will affect you

  • 15/02/2018

There are fears the growing Fletcher Building disaster will spread, wiping out retirement savings and leading to job losses.

Fletcher Building has recently announced its total expected loss will skyrocket to a staggering $660 million - about $500 million more than previously thought.

The news has led to its share price tumbling and the halting of new large construction projects - while sub-contractors could end up out of work.

Financial commentator Bernard Hickey blames "poor management" for the disaster.

"They bid their prices too low then the price of construction materials and subbies [sub-contractors] exploded," he told The AM Show on Thursday.

Milford Asset Management senior analyst Frances Sweetman told Newshub the losses are "very disappointing".

"Despite Chairman Sir Ralph Norris having made it clear that further provisions were not inevitable, the magnitude of the expected loss announced today was unexpected," she says.

"It once again reminds us that Fletchers is a large and difficult business to manage effectively."

Here are the different ways it could affect you.


The construction union, E tū, says it fears the worst for workers' jobs.

"We're trying to find out what happens next, but we will have members affected by this - though it's currently unclear how many," says Ron Angel, E tū's industry coordinator for engineering and infrastructure.

Mr Angel says union organisers had visited Fletcher sites in Christchurch on Wednesday, where members had been told to expect closure once work is finished on company projects.

"Our immediate focus is to protect our members' interests. We hope if there are redundancies our members can be redeployed in other Fletcher divisions. Some will be entitled to redundancy pay, but others won't."


Fletcher Building shares have tumbled 13 percent since Sir Ralph Norris said he will step down as chairman. They have fallen 23 percent in the past 12 months.

This could be devastating for small shareholders who have over-invested and failed to diversify.

However Ms Sweetman says it's unlikely to impact on retirees' KiwiSaver funds.

"While this is not an insignificant move, its impact on a well-diversified KiwiSaver fund is relatively limited," she says.

"Some KiwiSaver managers, such as ourselves, will also hold a smaller weight than Fletchers weight in the index. The impact on our clients' KiwiSaver balances is negligible."


Fletchers says it is now focused "on project delivery only" and was ceasing all bidding on skyrise construction projects in New Zealand.

"The B+I [Building + Interiors] sector remains characterised by high contract risk and low margins. Unless these dynamics change we will no longer work in this sector," says new chief executive Ross Taylor.

Mr Hickey says this means Fletchers can now focus on residential homes.

"KiwiBuild is coming and Fletcher Building no doubt is going to play a big role in that in some form or another," he says.

"Fletcher Building's history - back to the '30s - was all about helping the government build those state houses.

"They will no doubt focus on that, the Government will be pleased with that."

However Ms Sweetman warns that overall the construction boom might have reached its peak, lowering the capacity for further earnings.

"Although construction activity remains at very high levels, there is likely limited growth in construction activity going forward," Ms Sweetman says.

"This has been a major tailwind for Fletchers earnings, and so the outlook is not as bright now as it has been for the past few years."