Fletcher asks for credit rating to be withdrawn

11:01 am today

The company has Moody's lowest investment grade rating of Baa3 rating.

Photo: Fletcher Building

Fletcher Building has asked ratings agency Moody's to withdraw its credit rating of the company, as it reports continued pressures on its business and looks to cut debt.

The company has Moody's lowest investment grade rating of Baa3 rating, below which is considered a speculative grade and outside the limits for most institutional investment.

Fletcher said it was working to get its net debt into a range of between $400m-$900m, in order to meet "target investment grade credit metrics" and to ultimately transition to a simplified capital structure.

"Following the settlement of the Construction division divestment and the other completing property sales, Fletcher Building will have significantly reduced its net debt," the company said in a statement to the New Zealand Exchange.

It said it expected to be "marginally above" the middle of its $400m-$900m net debt target range by the end of the June year.

"With the transition to a more stable capital structure now well advanced, Fletcher Building has notified Moody's that it wishes to withdraw its credit rating. Fletcher Building will continue to target investment grade credit metrics," it said.

"This is about removing an administrative layer that no longer serves a practical purpose, not a change in our financial discipline or approach to managing the balance sheet," a spokesperson said separately.

The company forecast a full year underlying profit between $375m and $380m this financial year, excluding discontinued operations, but including $40m of earnings from property sales.

It said six recent divestments and property sales would deliver cash of about $450m, which would reduce debt levels.

Trading conditions

The company warned it was still facing trading headwinds.

"Notwithstanding the recent announcement of an agreement to end hostilities between the United States and Iran, there are a number of operational and financial issues that still present material risk and uncertainty," it says.

"Fletcher Building's assessment is that existing construction projects continue to progress, supporting ongoing demand for materials. However, rising fuel costs and broader cost inflation are leading to delays and, in some instances, cancellations of new projects - particularly within the commercial sector.

"If sustained, this trend is likely to weigh on Group performance in the first half of FY27 (ending 31 December 2026)."

The company forecast a full year underlying profit between $375m and $380m this financial year, excluding discontinued operations, but including $40m of earnings from property sales.

It said six recent divestments and property sales would deliver cash of about $450m, which would reduce debt levels.

Fletcher's chief executive and chief financial officer were unavailable to take questions.

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