Coronavirus: Fletcher Building job cuts paint grim picture of economy, analyst says

Fletcher Building's plans paint a dark picture of the future of New Zealand's economy, an investment analyst says.

Fletcher Building has proposed to cull 1000 jobs in New Zealand and 500 in Australia, which equates to about 10 per cent of its workforce.

Forsyth Barr's David Price said considering Fletcher Building's balance sheet was in good shape, its plans raised concerns about the country's recovery from Covid-19.

"Fletcher Building's plans will only have a knock-on effect on other businesses. We're likely to see more restructures as we come out of the lockdown levels," Price said.

Price said the economy had been sluggish before the Covid-19 alert level 4 lockdown, which had made it even more difficult for businesses to operate post-lockdown.

"While we've been in our bubble we've been in a state of suspended animation. Now that we're out of our cocoons we'll see how the businesses are going to adapt and survive," Price said.

"House prices will fall. It's not a matter of if, it's a matter of by how much they will."

Amalgamated Workers Union national secretary Maurice Davis said workers were nervous about the future of their jobs.

"Given that construction is meant to be the vehicle to drive back the economy, we've got New Zealand's largest construction companies doing this," Davis said.

"The last industry workers didn't think would fall over was construction. That doesn't bode well for confidence of the future."

Fletcher Building chief executive Ross Taylor said if the situation worsened more jobs could be lost.

Taylor said it was a "sombre day". He said Fletcher Building was not interested in financial support from the Government.

"It is really important for New Zealand to have strong independent companies and it's not sustainable for all the companies in New Zealand to be dependent on government subsidies for the long term. It just doesn't work. It is important we are independent and on our own two feet."

Taylor said "no part of the business would be immune to the cuts".

The impact of the Covid-19 restrictions over the past two months was "significant", Taylor said, especially in New Zealand as a result of the level 4 lockdown.

"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. We shut down over 400 operating sites at the end of March," he said.

Fletcher had suffered a roughly $55 million loss in April in New Zealand and roughly broke even in Australia. However, Taylor said as at April 30, Fletcher Building had $1.5 billion in liquid assets.

Taylor said the residential market would shrink by about 30 per cent, to 25,000 consents per annum.

He said work on Auckland Airport's domestic jet terminal and the SkyCity International Convention Centre (NZICC) would be affected.

The NZICC project was given a new long stop date of January 2, 2025 earlier this month, and while the project could be completed within that time frame, Taylor said there may be some delays.

Taylor did not give specifics on which other projects would be impacted.

"We're impacted on our pipe-line projects."

He said social distancing restrictions under level 2 had impacted productivity at its Commercial Bay building project.

"Before [level 4 lockdown] we could have about 1800 people now its more like 800 now.

Article supplied by Anuja Nadkarni at Stuff