Fletcher Building (ASX:FBU) reported broadly flat year-on-year performance for the six months ended December 31, 2025, as management pointed to continued weakness in New Zealand building activity and ongoing margin pressure, partially offset by cost reduction efforts and market share gains in several core products.
Management framed the half as “tough,” with early turnaround progress
Chief executive Andrew Reding said conditions remained “tough,” particularly in New Zealand, and described first-half performance as mixed, with a second-quarter volume improvement not fully offsetting first-quarter weakness. He said the company is seeing early operational and efficiency improvements from its strategic plan, while emphasizing “we still have a long way to go.”
- Mixed performance, with Q2 improvement unable to fully offset Q1 weakness
- Resilience in core businesses despite subdued markets
- Disciplined capital allocation
- Additional cost-out initiatives, expected to increasingly benefit the second half
- Progress on portfolio simplification, including the divestment of construction
Construction divestment: NZD 315.6 million headline price, proceeds to reduce debt
Reding said Fletcher Building’s planned divestment of its construction business is a “major step” in simplifying the portfolio and strengthening the capital structure. The announced headline sale price is NZD 315.6 million, with a potential increase of up to NZD 18.5 million subject to contract outcomes. After transaction costs and adjustments, the company expects net proceeds of around NZD 300 million to NZD 315 million, all to be applied to debt reduction.
Regulatory approvals are underway, and management’s “current best estimate” is completion during the first quarter of FY2027. Reding said VINCI “knows Fletcher Construction well” and called it an “excellent long-term owner” for the business.
Group results: revenue flat at NZD 2.9 billion; continuing EBIT NZD 145 million
On a group basis, Reding said performance was “creditable” given the weak New Zealand and Australian building sectors in the first quarter. Revenue was NZD 2.9 billion, down 0.5% year-on-year. Continuing operations EBIT was NZD 145 million, “nearly flat” compared to the prior period.
Including discontinued operations, like-for-like EBIT was NZD 151 million versus NZD 167 million in the first half of FY2025, which management attributed primarily to lower construction earnings. Net profit from continuing operations was NZD 45 million, which Reding said was the company’s first positive result since June 2023.
Chief financial officer Will Wright said the result reflected a challenging first quarter, but highlighted progress in cost reduction, cash generation, and efforts to build a “more resilient balance sheet.” He said warehouse/distribution and SG&A expenses reflected an annualized structural cost decrease of NZD 63 million, with about NZD 31 million of benefit in the first half.
Cash flow improved; net debt rose to NZD 1.16 billion amid land commitments
Net cash flows from operating activities improved to NZD 156 million from NZD 87 million in the prior period. Management attributed the improvement to strong EBITDA conversion, disciplined working capital management, and legacy construction cash inflows, noting that residential working capital was impacted by historical land purchase commitments.
Net debt increased to NZD 1.16 billion from NZD 999 million at June 2025. Wright said the primary driver was NZD 151 million of residential land purchases during the half. He added that excluding construction proceeds, the company expects full-year FY2026 net debt to be “broadly flat” compared to FY2025 due to stronger expected operating cash flows in the second half.
Wright also detailed future land purchase obligations, stating the company expects NZD 65 million of additional purchases in the second half, plus further commitments of about NZD 100 million in FY2027 and around NZD 35 million in FY2028. On the call, management said these commitments were signed years ago and had already been flexed as much as possible, with options for addressing them forming part of the ongoing residential and development strategic review.
Markets, business trends, and outlook: New Zealand recovery not expected until 2027
Operationally, management cited a number of initiatives and milestones across the group during the half, including Firth’s new batching plant in Auckland, Humes adding three new branches, Winstone Aggregates advancing recycling initiatives and establishing a quarry joint venture, and Laminex Australia delivering NZD 14 million of cost-out.
By division, Reding described results as a “mixed bag,” with Light Building Products growing EBIT, Heavy Building Materials experiencing margin pressure from softer volumes and cost inflation, and Distribution remaining challenged with margin weakness—though the company said it saw early signs of stabilization toward calendar year-end. Residential and Development volumes were materially lower due to development phasing and product mix changes, while Construction (now discontinued) saw reduced activity as projects completed and pipeline timing shifted.
In New Zealand, management said demand remained subdued, particularly in the first quarter. Aggregates volumes were down more than 13% due to weak roading activity and project delays, while wallboards volumes were broadly flat with “very gradual improvement” in daily sales. In Australia, management described volumes as more positive, with Laminex Australia reporting 6.6% growth supported by residential renovation activity and competitor supply constraints, and Fletcher Insulation volumes benefiting from a shift toward higher density products under updated building codes.
Looking ahead, Reding said New Zealand volumes are expected to remain soft, with “meaningful improvement” not expected until calendar 2027. In Australia, he said early volume trends in Laminex and Fletcher Insulation were encouraging, though conditions remain mixed. Management said margin compression will likely persist, but expects the cost-out program to help offset pressures. Wright and Reding also discussed an additional NZD 100 million cost-out initiative (with a run rate of about NZD 50 million), while noting the timing and magnitude of second-half benefits would depend on market conditions and maintaining operational capacity where demand improves.
About Fletcher Building (ASX:FBU)
Fletcher Building Limited, together with its subsidiaries, manufactures and distributes building products in New Zealand, Australia, and internationally. It operates through Building Products, Distribution, Concrete, Residential and Development, Construction, and Australia segments. The Building Products segment manufactures, markets, and distributes building products used to build homes; and buildings and infrastructure, including insulations, plasterboards, laminate surfaces, and plastic and concrete piping for the commercial and residential markets.
