New Zealand's largest builder Fletcher Building has forecast weaker earnings for fiscal 2019 due to further headwinds from Australia's slowing residential sector, prompting its shares to tumble to a more than nine-year low.
The company has announced refinancing plans, reviewed loss-making businesses and replaced top executives this year, as massive cost over-runs and project delays led to steep losses.
Underlying earnings before interest and tax were expected to drop by 10 per cent in the first half of 2019, Fletcher said in a statement ahead of its annual general meeting on Tuesday.
Underlying EBIT for fiscal 2019 was expected to be in the range of NZ$630 million to NZ$680 million (A$590.7m to A$637.6m), lower than NZ$710 million (A$665.76m) in 2018.
Fletcher's shares traded 8.8 per cent lower at 2340 GMT, while the broader market weakened 0.4 per cent.
"Market expectations were for EBIT in a NZ$690 million region," said Grant Davies of investment adviser Hamilton Hindin Greene.
"There's plenty of headwinds in Australia at the moment.
"The housing markets particularly in Melbourne and Sydney have weakened over the last 12 months and clearly that's going to have an impact when you're a property developer."
Weakness in Australia's already cooling residential market was widely expected after three of the big four banks hiked their mortgage rates earlier in the year.
Laggard wage growth, as well as increased scrutiny towards home loan providers, have also contributed to a softer housing market in the country.
Fletcher's Australian business accounted for about a third of its overall revenue in fiscal 2018.
Residential activity makes up about 40 per cent of the company's turnover in Australia.
Fletcher had swung to a net loss in 2018 due to mounting costs at its commercial construction unit and impairment charges.
It did not pay a dividend.
Material and labour costs grew as projects were delayed, turning high-profile contracts into liabilities.
"While FY18 was a very challenging year for the company, it also triggered significant change which had to be made to reset for the future," Chairman Bruce Hassall said in a statement to shareholders at the annual general meeting.
Hassall said the company was aiming to recommence a dividend payment in fiscal 2019, which would come within its existing payout policy of 50 to 75 per cent of net earnings.
Fletcher's shares have fallen nearly 24 per cent this year.
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