Further write-downs for Fletcher Building

By Phil Boeyen, ShareChat Business News Editor

Thursday 17th May 2001

Fletcher Building (NZSE: FBU) is warning that potential asset write-downs of up to $100 million are expected to impact its accounts to the end of June.

The company is planning to prepare a pro-forma set of accounts for the 12 months ended June to allow for year on year comparisons, although it is only required to report for the three months from March 23.

That's when Fletcher Building became a stand-alone company under the Fletcher letter stock restructuring and began trading under the FBU ticker code.

Interim CEO Michael Andrews says impairment reviews of certain assets, including some New Zealand manufacturing activities, and the investments in South America, are being undertaken.

"Potential write-downs (non-cash) in the carrying values of these assets in the order of $70 to $100 million are expected.

"This is as a result of a reduction in value of certain manufacturing activities in New Zealand and the likely impact on asset values in South America of both the Peruvian and Bolivian economies performing below our previous expectations."

Mr Andrews says there will also be a charge of $5 million for restructuring and redundancy costs and an additional $10 million required as a result of the $50 million settlement of the dispute with AXA Pacific related to a co-generation power project in Victoria.

The company has previously flagged a $110 million write-off relating to a tax benefits either transferred or no longer available, as well as the costs of the separation process.

The process is estimated to have cost the company $45 million, $12 million of which was expensed in the interim accounts.

Despite the write-offs Mr Andrews says the company is seeing an improvement in earnings for its maiden quarter.

"At this point in time our expectations are that the earnings before interest, tax, and unusual items for second half (January to June 2001) will be approaching twice the level of the first half earnings."

Mr Andrews has also confirmed that an asset sales programme is underway and says divestments will be announced as they occur.

Steel and Tube (NZSE: STU) has been given Commerce Commission clearance to buy Fletcher Steel but has not yet confirmed whether it will make the acquisition.

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