How Fletcher Building Halved Debt Amid a $419 Million FY25 Loss

Financial Performance Under Pressure

Fletcher Building Limited has released its full-year results for the 2025 financial year, revealing a challenging operating environment marked by declining revenue and profitability. The company’s revenue fell by 9% to $7.0 billion, reflecting subdued demand across its markets in New Zealand and Australia. Earnings before interest and tax (EBIT) before significant items dropped by $125 million to $384 million, pushing the EBIT margin down from 6.6% in FY24 to 5.5% in FY25.

The net loss widened substantially to $419 million, nearly doubling the previous year’s $227 million loss. This deterioration was driven by a combination of weaker trading conditions, cost inflation, and one-off significant items including legacy issue settlements and strategic restructuring costs.

Balance Sheet Strengthened Through Capital Raise and Divestments

Despite the operational headwinds, Fletcher Building made notable progress in strengthening its balance sheet. Net debt was halved from $1.77 billion to $999 million by 30 June 2025, primarily due to a successful capital raise and the divestment of non-core assets such as Tradelink. The company also maintained disciplined capital expenditure, reducing investment spend from $420 million to $313 million.

These financial moves have improved credit metrics, with the senior leverage ratio falling to 1.6x from 2.4x and interest cover ratios improving, underpinning the company’s investment-grade credit rating affirmed by Moody’s.

Strategic Portfolio Simplification and Legacy Issue Resolution

Fletcher Building is actively reshaping its portfolio to focus on core strengths in manufacturing and distribution of building products. The company has initiated strategic reviews of its Construction and Residential & Development businesses, aiming to simplify operations and unlock shareholder value. While no transactions are guaranteed, any benefits from these reviews are expected to materialize from FY27 onwards.

On legacy issues, Fletcher Building reached a settlement with the New Zealand Transport Agency on the Puhoi to Warkworth motorway project and resolved related insurance claims. The New Zealand International Convention Centre project is nearing completion, with handover expected in 2025 ahead of its 2026 opening. In Australia, remediation efforts for Western Australian plumbing issues are progressing, with over 50 homes fully remediated and thousands fitted with leak detectors.

Operational Highlights and Market Outlook

Operationally, divisions such as Construction showed improvement with EBIT up 86%, while others like Distribution and Residential & Development faced volume declines and margin pressure. The company achieved $200 million in gross cost savings during FY25 and announced further structural cost reductions for FY26.

Looking ahead, Fletcher Building anticipates subdued market volumes in New Zealand throughout FY26 and mixed signals from Australia, making near-term demand uncertain. The company’s focus remains on cost control, operational discipline, and capital allocation to navigate these headwinds and position for sustainable growth when market conditions improve.

Leadership Perspective

CEO Andrew Reding acknowledged the demanding year, highlighting progress on the strategic repositioning and thanking employees and shareholders for their resilience and support. The company paused dividends until net debt targets are met, underscoring its commitment to financial stability.