Fletcher's Adamson says construction unit could be split, management changes 80 percent complete

Thursday 17th October 2013

Fletcher Building chief executive Mark Adamson says he is about "80 percent" through his management overhaul at New Zealand's biggest listed company after 12 months in the job and is mulling whether to split out home building from the construction division.

Adamson, former head of Fletcher laminates, has installed a new chief financial officer and general counsel, added executives for distribution in Australia and New Zealand, hired a chief information officer, shifted his steel boss across to laminates as his replacement, and bought one of his former managers across as CEO of business strategy. He also has changed reporting lines for steel products, infrastructure and building products, restructured the Crane business, sold assets and embarked on a multi-year cost-cutting plan.

"About 80 percent of the management changes are done," Adamson told BusinessDesk after the company's annual meeting in Auckland. "You've got to have your own people. You don't want to spend years and years trying to get people to adopt your philosophy."

He declined to elaborate on potential further changes in management. But further changes may be pending for the company's construction division, which he referred to as "a big behemoth of infrastructure and residential." It was a broad business structure that we may "look to separate."

Adamson said no firm decisions have been made about the construction business and there are no plans to divest the business. The review was looking at how the residential business operated within the group and was part of a wider strategic review of all Fletcher's operations.

"The residential development business has very different characteristics from our other construction and engineering activities," he said. "We have previously stated our desire to grow the residential business, which will require more resources, capital and management focus."

The Auckland Housing Accord aims to free up enough land for 39,000 homes in the next three years, while 12,000 new homes that may be built in Canterbury in the same period. Reserve Bank deputy governor Grant Spencer said this week that building activity would need to be 9 percent higher than at the height of the recent housing boom, even assuming no growth in the rest of the country, if those targets were to be met.

Adamson told shareholders at Fletcher's annual meeting yesterday that he saw opportunities to expand in the Auckland housing market through increased medium and high-density developments. The company completed its first apartment building, in Auckland's Stonefields subdivision, in the latest year and has several more planned.

One-time items in the current year are likely to amount to about $20 million including restructuring costs and lease exits. Milestones in the 2013 year had included establishing a centralised property team across ANZ, an assessment of group IT needs and amalgamation of head office functions.

Fletcher shares climbed 1.4 cent to $9.53 after the AGM yesterday, where the company told shareholders that earnings before interest and tax would rise to between $610 million and $650 million in the 2014 financial year from $569 million last year.

The company said the first quarter has seen a continuation of conditions in the 2012 year. Weak trading in Australia was being compounded by a strong kiwi dollar, which is likely to shave $15 million off earnings.

BusinessDesk.co.nz

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