Fletcher Building wary of interest rate uncertainty amidst an ‘inflationary spiral’, while the CEO says selling off its troubled construction unit has removed ‘financial drain’ from the rest of the business

Fletcher Building’s boss says selling off its troubled construction division is one less financial problem the building industry giant has to deal with.

Andrew Reding, the company’s managing director and chief executive, told analysts on Wednesday during a call about Fletcher Building’s annual financial results that the construction business had caused “significant distractions” from the rest of the company's business.  

“I don't think anyone should underestimate what coming out of that does for our ability to perform as a group. As well as the financial drain, construction was costing the whole organisation a lot in time and attention,” Reding said.

“Monitoring its risk profile, managing their legacy projects, and negotiating settlements were significant distractions from our core divisions.”

Fletcher Building sold the problematic construction division to French company VINCI Construction, part of the VINCI Group, for $315.6 million in January. The wider international VINCI business operates in more than 100 countries, and describes itself as a global operator in concessions, energy services and construction. 

The transaction was structured as the sale of Fletcher Construction Holdings together with its three New Zealand business units: Higgins, Brian Perry Civil and Fletcher Construction Major Projects.

Fletcher Building said the $199 million in net earnings from continuing operations it made in the June year, up from a $330 million loss in 2025, was buoyed by the gain on the sale of its construction division. It reported total net earnings of $228 million for the June year, a marked improvement from the $419 million after-tax loss for the June 2025 year, and the $227 million loss in the 2024 year.

Reding told analysts there was still more to do in order to get the best outcome for shareholders, but Fletcher Building was “getting closer to an optimal balance.”

“[...] I can assure you we are still running the ruler over everything,” he said.

'I’d allowed myself to breathe a bit of a sigh of relief – and then the war kicked off'

The business will be monitoring interest rate moves closely in the 2027 financial year. 

This came up after Reding and chief financial officer Will Wright were questioned over why the building industry giant isn’t expecting meaningful recovery in its underlying market volumes until the 2027 calendar year. This is despite the company reporting market volumes had “recovered gradually” through the six months to June 30. 

“Even though interest rates are uncertain, they are still stimulatory at the moment in New Zealand. So I think there’s some supportive tailwinds there,” Reding said.

“It’s the headwinds that are causing us to be deferring meaningful volume recovery until 2027, and that’s obviously the situation in the Middle East, the uncertainty caused by the election coming up. Going forward, there is some uncertainty about where interest rates are going to end up if the Middle East continues its inflationary spiral.”

Asked what the financial guidance for the first half of the 2027 financial year was expected to look like, Wright said: “There’s a reason why we don’t provide guidance at the moment; it’s just really uncertain.”

He also added that at the end of February, “I’d allowed myself to breathe a bit of a sigh of relief – and then the war kicked off.”

“It is a really uncertain macro environment. It’s also coming into election year in New Zealand as well, and so the market tends to soften as we go into the election in November.”

Fletcher Building’s board did not declare a dividend for the 2026 financial year, the third year in a row the company hasn’t declared one.

“We will look to reset the dividend policy once we begin generating positive, sustainable free cash flow and balance sheet targets are met,” Reding said.

The group will also have to reach the “lower half” of its net debt target range of between $400 million and $900 million before it starts paying dividends again. Fletcher Building’s net debt was $637 million in the 2026 financial year, down $362 million from $999 million in the 2025 year.