Fletcher Building (ASX:FBU) is actively considering the sale of its under‑performing construction division, including the Higgins, Brian Perry Civil, and Fletcher Construction Major Projects business units.
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This follows “strong and renewed interest” from potential buyers and deepening cost‑cutting measures across its portfolio.
The New Zealand company has appointed financial advisers to help evaluate options.
Chief Executive Officer Paul Reding confirmed inquiries have landed since June, and discussions are in the embryonic stages. “We have received ongoing inbound inquiries from parties interested in our businesses, including the construction division,” he said in a brief ASX statement today, while underscoring: “No decisions have been made to sell any of Fletcher’s businesses.”
The construction division has weighed heavily on group performance. In the half‑year interim report in February, the company flagged $251 million in writedowns tied to its Australian plumbing arm Iplex, and hinted at further non‑cash and cash “significant items” totalling between $300M and $500M.
At an investor day on June 24, Fletcher’s outline of full‑year significant charges was raised to between $573M and $781M, offsetting an expected FY25 EBIT of $370M to $375M.
The company has also suspended all dividends until net debt falls within its target band of NZ$400m to $900m. In mid‑July, net debt remains elevated, at around NZ$1.1 billion.
In a bid to arrest the ballooning debt, Fletcher has restructured into a leaner, decentralised model. In mid‑May, it discontinued its standalone Australian division in favour of trans‑Tasman business units.
The move was aimed at cutting annualised structural costs by about NZ$15 million and achieving total FY25 gross savings of NZ$200 million.
Further transparency emerged in its July quarterly volume update, the first of its kind, revealing that Q4 FY25 volumes, indexed to a 2019 baseline, have generally declined across plasterboard, cement, and concrete, with market activity “challenging” and no material recovery expected before FY27.
A divestment of the construction arm would align with Fletcher’s pivot toward higher‑margin manufacturing and distribution businesses.
On that, Mr Reding said: “Empowered divisional leaders will be measured against industry‑specific weighted average cost of capital (WACC) hurdles.”
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With legacy project write-downs coming to a head and balance‑sheet repair underway, Fletcher appears poised to streamline its operations. The construction division is squarely in the crosshairs, but as Mr Reding cautioned, “There will be no ‘fire‑sale’ divestments.”
FBU has been trading at $2.78.
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