Fletcher Building Forecasts FY26 EBIT of $375m-$380m Including Property Gains
Fletcher Building expects FY26 EBIT of $375m-$380m, bolstered by $40m in property sale gains, while executing significant divestments to reduce net debt. The company will withdraw its Moody’s credit rating as it targets a simpler capital structure.
- FY26 EBIT forecast steady at $375m-$380m including property gains
- Six divestments and property sales to generate ~$450m cash
- Net debt set to fall near midpoint of $400m-$900m target range
- Moody’s credit rating withdrawal planned despite maintaining investment grade metrics
- FY27 outlook clouded by inflation and geopolitical risks affecting new projects
Debt Reduction Drives Moody’s Rating Withdrawal
Fletcher Building (NZX:FBU) is stepping away from its Moody’s credit rating following a series of asset sales that have slashed net debt and simplified its balance sheet. The construction and building materials giant expects to close FY26 with net debt hovering just above the midpoint of its $400 million to $900 million target range, a significant improvement from previous levels.
After completing the sale of its New Zealand Construction division for approximately $315 million and several other divestments and property sales, Fletcher Building has amassed around $450 million in cash proceeds in the second half of FY26. This cash will be directed towards debt repayment, underpinning the company’s aim to maintain investment grade credit metrics despite withdrawing from Moody’s rating coverage.
Stable Earnings Despite Market Headwinds
Fletcher Building anticipates FY26 earnings before interest and tax (EBIT) between $375 million and $380 million, excluding discontinued operations such as Construction, Reinforcing & Wire, and CSP. Included in this forecast is around $40 million of earnings from recent property sales, notably from assets in South Australia, Cheltenham, and Felix Street, each contributing gains between $10 million and $14 million.
While FY26 performance has been relatively stable, the company remains cautious about FY27. Rising fuel costs and broader inflationary pressures are causing delays and cancellations in new commercial projects, which could dampen demand for building materials. Additionally, ongoing geopolitical tensions in the Middle East, despite a recent ceasefire agreement between the US and Iran, add layers of operational and financial uncertainty.
Divestment Program Nears Completion
The company’s divestment strategy is nearing completion with six transactions announced in the second half of FY26. Three have already settled, including the major New Zealand Construction sale and the Fiji joint venture exit, while two more are expected to settle before year-end. The final divestment, Fletcher Reinforcing and Wire, is scheduled to conclude in the first half of FY27 for $15.7 million.
These moves align with Fletcher Building’s previously stated goal of simplifying its capital structure and focusing on core operations. The proceeds from these sales not only reduce leverage but also provide liquidity to navigate the uncertain economic environment ahead.
Bottom Line?
Fletcher Building’s debt reduction and credit rating withdrawal mark a pivotal shift, but inflation and geopolitical risks leave FY27 prospects uncertain.
Questions in the middle?
- How will Fletcher Building manage inflationary pressures and project delays in FY27?
- What impact will withdrawing from Moody’s rating have on investor perception and borrowing costs?
- Will the final divestments complete on schedule and deliver the expected proceeds?
