The Fletcher Building Limited (ASX: FBU) share price fell 3.5% to $3.02 in early trade following a disappointing FY 2020 earnings release. At the time of writing, the Fletcher Building share price has recovered slightly to now be trading at $3.05. This came following news that the company's bottom line results were significantly impacted by the coronavirus pandemic.
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Revenue and earnings decline in challenging operating environment
Fletcher Building announced today a net earnings loss of $196 million for FY 2020. This compared with a profit of $164 million in the prior financial year.
On a more positive note, the group reported strong operating cash flows of $410 million. In addition, it ended the financial year having a strong balance sheet with $1.6 billion cash on hand.
Total revenue for Fletcher Building amounted to $7,309 million, which was a fall on the $8,308 million of revenues that it generated in FY 2019.
EBIT before significant items amounted to $160 million, while net loss after tax came in at $196 million. The latter compared to a profit of $164 million during the prior financial year. Net debt totaled $0.5 billion.
Fletcher Building CEO, Ross Taylor, said:
Fletcher Building's FY20 performance was characterised by the impacts of COVID-19 and the actions we took to ensure we were well positioned to successfully navigate the market uncertainty in FY21 and beyond. Prior to March 2020, the business was trading in line with expectations and making good progress with operating efficiencies. The subsequent lockdown in New Zealand and restrictions in Australia had a significant impact on our FY20 revenues and profitability.
Market outlook and strategic priorities
Fletcher Building noted that it expects challenging times ahead and, as a result, was forced to make some very difficult decisions. Fletcher Building has resized its business for a market downturn of around 20% in Australia and 25% in New Zealand.
This will see a reset in the cost base of the organisation and, as such, the company anticipates a permanent reduction in its cost base in FY 2021 of around $300 million per annum.
It further admits that there is a high level of uncertainty, even with this reduction. A lot will depend on the impact on the coronavirus pandemic over the next 12 months.
However, as a result of recent actions to realign its business for a post-COVID operating environment, Fletcher Building believes it is now better positioned to achieve its future strategic outcomes. The company will continue to make investments in its digital strategy. It will also aim to grow its market share, underpinned by a solid balance sheet.
Fletcher Building noted that it has not declared a final dividend for FY 2020.
About the Fletcher Building share price
The Fletcher Building share price is currently trading more than 44% lower than the pre-pandemic levels seen in late January. The Fletcher Building share price has recovered just 1.7% from its May low and has fallen 27.6% over the last 12 months.
