Construction News

Mon June 01 2020

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Fletcher Building to cut 1500 jobs

20 May Fletcher Building is set to cut about 1,000 jobs in New Zealand and 500 in Australia to reduce costs in response to the impact of Covid-19.

“While we looked at all parts of our business to remove costs, regrettably we believe we will not be able to support the same number of people,” said Fletcher Building chief executive Ross Taylor. “We have to make some very difficult decisions which include looking at reducing the number of people we employ by approximately 10%.”

This will equate to around 1,000 positions across New Zealand. In Australia, the company is undertaking a review of its operations and expects this to result in a workforce reduction in the order of 500. “I acknowledge this news will be hard to hear and that this is an unsettling time for all involved,” added Taylor. “Moving ahead as proposed would mean losing talented and hard-working people from Fletcher Building. Any of our people affected will have made a difference to our company, their teammates and our customers; these decisions are not a reflection of their value or contribution.”

The job losses were announced as part of an update on trading and measures it is taking to respond to the impact of coronavirus on the group.

Taylor said the impact of the COVID-19 restrictions over the past two months had been significant, especially in New Zealand as a result of the earlier ‘Level 4’ lockdown, which has now been eased to ‘Level 2’. “Our New Zealand businesses were closed throughout Level 4, except for small parts of the Distribution and Construction divisions which were asked to provide essential services,” he said. “We shut down over 400 operating sites at the end of March, quickly and safely thanks to the great work of the whole of our New Zealand team. We restarted our operations on 28 April under Level 3, which was also done safely and effectively through very detailed, site level planning. Again, I’ve been extremely proud of the dedicated response of our people. We have been taking a phased approach to the restart in New Zealand, working closely with our customers and our suppliers as they too return to work and ramp-up their operations.”

As outlined in an update provided on 25th March, the group’s businesses had until then traded largely in line with expectations. However, with no revenue across most New Zealand operations during the Level 4 lockdown and Australia revenues running at around 90% of pre-Covid-19 expectations, the group recorded a loss in terms of operating earnings before interest and taxes (EBIT) for April of about NZ$55m (£27m), unaudited and prior to significant items. Costs incurred during this period relate mainly to employee costs, with about 90% of New Zealand employees placed on the Group’s Bridging Pay Programme. This ensured that employees who were not working received at least 80% of their base pay for the first four weeks, and a minimum of 50% for the subsequent four weeks.

Taylor said: “Providing certainty for our employees during this period was a priority and the New Zealand Government’s wage subsidy scheme made a significant difference, enabling us to retain our people during that time.”

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Since the move to Level 3 on 28 April, the New Zealand construction sector has been able to return to work. The group’s New Zealand businesses are currently trading at around 80% of forecasted revenues in May, while Australia continues to trade at around 90% of pre-Covid-19 expectations.

Taylor said that Covid-19 would likely have a significant impact on the Group’s markets in both New Zealand and Australia. “While there is a lot of uncertainty over the economic outlook, we expect Covid-19 will lead to a sharp downturn in FY21 and potentially beyond,” he said. “Looking to the next financial year, we are planning for an environment that will see a shrinking economy, substantially reduced customer demand across all our businesses and sustained lower levels of productivity.”

Mr Taylor said that it is imperative that the group is positioned for the expected market downturn, which has meant making some very difficult decisions including reviewing the number of people it employs. “Like any business facing much lower revenue ahead, we need to reduce our spending to prepare for these tough times,” he said. “Our first goal has been to implement cost-saving measures that would allow us to retain as many of our people as possible. These include looking hard at our operational footprint, exiting some offices to make better use of the space we have in places like the group’s Penrose headquarters, making improvements to the efficiency of our supply chains so that we need fewer warehouses and depots, and ceasing some unprofitable product lines. We will also reduce spend in discretionary areas such as external fees, marketing and travel and we will not be paying any short-term incentives across our businesses for FY20. Reductions of 30% to board and CEO pay will remain in place through to the end of September 2020.”

In terms of the job losses, consultations will begin this week. “In New Zealand, we will honour our obligations under the Government Wage Subsidy scheme by retaining our people through the 12-week subsidy period ending 26 June 2020,” he said. “We are committed to supporting our people as they leave us and will endeavour to do what we can to help them secure their next opportunity. This will include every permanent employee leaving Fletcher Building being paid their redundancy entitlement under the terms of their employment or a payment equivalent to 4 weeks’ base salary, whichever is higher, to recognise and support our people given the exceptional circumstances. We will also be providing a comprehensive range of outplacement and other support services.

“The redundancy and restructuring activities will result in some one-off costs which are yet to be determined but will be disclosed as part of the Group’s FY20 full-year results in August.”

Taylor concluded that the decisions being taken by the group are difficult but necessary to ensure a strong future in New Zealand and Australia. “As a major employer, we need to ensure our business is resilient and can support economic growth in the longer-term, just as we have done for more than 100 years. While this has meant having to make tough decisions, we want to thank all of our people for their valuable contribution to Fletcher Building.”

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