• Revenue: Down 7% to $3.6 million for the half year.
• EBIT: $167 million, $96 million lower than the prior period.
• EBIT Margin: Decreased to 4.7% from 6.8% in the prior period.
• Net Loss: $134 million for the first half of FY25.
• Trading Cash Flow: $138 million compared to $225 million last year.
• Net Debt: Reduced to $1.1 billion at the end of the half year.
• Cost Reduction: Achieved a first half benefit of $91 million, with $61 million from general overheads and $30 million from COGS.
• Capital Raise: $700 million applied to repaying bank debt and reducing USPP debt.
• Return on Funds: Declined to 8.4%.
• Basic Earnings Per Share: Negative $0.143.
• Funding Costs: $63.5 million, expected to be $100 million to $105 million for the full year.
• CapEx: $114 million for the half year, with base CapEx at $47 million.
• Leverage Ratio: Improved to 1.4 times.
• Dividend: No interim dividend declared due to volatile market conditions.

• Warning! GuruFocus has detected 7 Warning Signs with FCREY.

Release Date: February 18, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Fletcher Building Ltd (FCREY) has completed a governance and board reset with the appointment of experienced industry experts, enhancing leadership quality.
• The company achieved significant improvements in sustainability, with a 21% reduction in emissions compared to the 2018 baseline.
• The cost-out program is ahead of schedule, with a better-than-expected first-half benefit of $91 million.
• Fletcher Building Ltd (FCREY) successfully divested the trade link business, contributing to a more robust balance sheet.
• The construction division reported improved revenue due to higher work volumes from key infrastructure projects.

Negative Points

• Fletcher Building Ltd (FCREY) faced a 7% decline in overall revenue due to challenging trading conditions and lower market volumes.
• The company recorded a net loss of $134 million in the first half of FY25, impacted by provisions and non-cash losses.
• EBIT for continuing operations was $96 million lower than the prior period, with a significant adverse impact from lower market volumes.
• The residential and development division saw a slowdown with 115 fewer units contracted and sold versus the prior period.
• The company decided not to declare an interim dividend due to volatile market conditions and financial performance pressures.

Q & A Highlights

Q: A year ago, the CEO and Chairman resigned due to issues within the company. Can you explain what went wrong and why we have to wait until June for more information? A: I can't speak to past issues as I wasn't here, but our focus is on moving forward and ensuring effective communication between management and the board to drive the business in the right direction.

Q: The New Zealand distribution division is down 5% to 10%. Is this due to market share loss? A: Yes, there has been some market share loss.

Q: What improvements are needed in the operating model to enhance customer and pricing focus? A: It's too early to provide detailed comments, but we are focusing on empowering business units to exceed customer expectations and using net promoter scores to identify areas needing improvement.

Q: Can you explain the significant decline in EBIT for the placemakers division despite a smaller revenue decline? A: The decline is due to high fixed costs from leased sites, market share loss, inefficiencies in delivering frame and trust, and a deviation from the operating model. We are addressing these issues with cost reductions and increased focus on supply relationships.

Q: Are you confident in operational improvements and volume recovery in the business cycle? A: We are not forecasting a boom in the second half of the financial year. The market remains volatile, and we are cautious about downside risks in materials volumes and residential development.

Q: Given the improvement in New Zealand volumes, why is guidance still for a 10% to 15% decline? A: The guidance reflects a range of volume outcomes across different businesses, with some areas experiencing more significant declines.

Q: How are you managing working capital given industry concerns about late GST payments? A: We have a credit management team working closely with customers, and while there is industry distress, we haven't seen elevated bad debts.

Q: Can you provide an update on the cost savings target and the impact on future costs? A: We initially targeted $180 million in cost savings but are now on track to achieve near $200 million. The ERP projects are on hold, and we are reviewing future requirements to ensure appropriate scale for our businesses.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.