This article first appeared on GuruFocus .
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Revenue:Revenue from continuing operations increased 7.3% to just under $6 billion.
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Net Earnings:Net earnings were $228 million, compared with a loss of $419 million in the prior year.
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EBIT:EBIT before significant items increased by $85 million to $414 million; excluding pre-announced property sales, EBIT was $362 million, an 11% improvement on FY25.
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Earnings Per Share:Earnings per share were positive at $0.212, the first positive EPS result since FY23.
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Net Debt:Net debt was $637 million, down from $999 million, placing it inside the $400 million to $900 million target range.
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Operating Cash Flow:Net cash from operating activities increased to $715 million, up from $214 million in the prior year; normalized operating cash flows were $707 million.
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ROIC:Group ROIC was 5.3%, or 4.7% excluding land sales; 13 of 19 core business units improved ROIC compared with FY25.
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Capital Expenditure:Capital expenditure came in below guidance at $288 million in FY26; excluding OSB and divested operations, it was $138 million.
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Divisional Earnings Growth:Light Building Products earnings grew 22%; Heavy Building Materials earnings grew 8%.
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Wallboard Volumes:Wallboards grew volumes 4% on strong South Island demand.
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Urban Quarry Tonnage:Tonnage was up 28% and clean fill up 35%.
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Release Date: August 18, 2026
For the complete transcript of the earnings call, please refer to the full earnings call transcript .
Positive Points
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Fletcher Building Ltd ( FRCEF ) delivered its first positive net earnings result since FY23, with net earnings of $228 million versus a loss of $419 million in the prior year.
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Net debt was reduced significantly to $637 million, down from $999 million, bringing it within the target range of $400 million to $900 million.
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Group ROIC improved to 5.3%, with 13 of 19 core business units improving their ROIC year-over-year, and several divisions achieving double-digit ROIC.
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Operating cash flows were strong, increasing to $715 million from $214 million, driven by improved earnings and lower legacy project outflows.
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The company made significant strategic progress, including the divestment of the construction division, which reduces risk and allows management to focus on core operations.
Negative Points
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The macro environment remains challenging, with economic momentum in New Zealand and Australia negatively impacted by Middle East events, leading to uncertainty and delayed project starts.
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Group ROIC at 5.3% remains well below the cost of capital, indicating that returns are still inadequate.
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The company expects no meaningful recovery in underlying volumes until calendar year 2027, with the first half of FY27 likely to be weak due to elections and geopolitical uncertainty.
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There is a risk of volume pull-forward in the second half of FY26, particularly in Iplex Australia and New Zealand, which could lead to softer demand in the first half of FY27.
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The residential development market remains subdued, with elevated inventories and pricing pressures, and the company is still working through strategic options for this division.
Q & A Highlights
Q: Can you help us bridge the earnings gap into the first half of FY27, given the meaningful step-up in second-half earnings? What level of permanent cost out carries into the first half, and what are the offsetting factors from volume pull-forward? A: Andrew Reding (CEO) and William Wright (CFO) declined to provide specific first-half guidance due to high market volatility. They noted structural cost reductions of approximately $50 million, with a net $23 million benefit realized in FY26. The company is constantly taking costs out to fight inflation that isn't fully recovered through price increases. The key uncertainty is how much of the last quarter's volume recovery was genuine market improvement versus share gains or customers buying ahead of price increases, which could lead to softer volumes in the first half.
Q: Given the strong recovery in the Distribution business in the second half, how should we think about seasonality there, and what is the base for the first half of FY27? A: William Wright (CFO) explained that the Distribution business is weighted to the second half due to volume-based rebates that flow in May and June, which represent a larger-than-normal percentage of earnings given the low earnings base. However, the business has improved materially since a very poor Q1 FY26, and the company expects a slightly better first-half result this year.
Q: You've made good progress simplifying the business, but ROIC is still tracking well below the WACC target. What specific levers are you looking to pull in the year ahead to improve returns? A: Andrew Reding (CEO) stated that all underperforming businesses have improvement plans. Significant opportunities include the new Taupo OSB plant, which becomes operational at the end of the calendar year, and the performance improvement of PlaceMakers. William Wright (CFO) added that businesses that went backwards in ROIC did so for strategic investment reasons, such as Laminex New Zealand (OSB plant), PlaceMakers (frame and truss site), and Humes (distribution network expansion). The company is targeting further ROIC improvement in FY27.
Q: Regarding the second-half volume pull-forward, were there limits on pre-buying that cap the potential pull-forward? And what was the impact of diesel price moves on the second half and the outlook for FY27? A: Andrew Reding (CEO) confirmed that both Iplex New Zealand and Iplex Australia placed quotas on customers, limiting orders based on historic patterns plus a percentage, which would have capped some pull-forward. However, significant upstocking by merchants and those with projects underway is still expected to result in softer volumes in the first half of FY27. Regarding diesel, the impact of the net 55% increase was minimal due to fuel adjustment factors in all businesses, which were widely accepted by customers as being outside supplier control.
Q: Can you provide color on what you think longer-term sustainable ROICs are for the businesses and the level of invested capital needed? A: Andrew Reding (CEO) and William Wright (CFO) preferred to focus on getting ROIC up to WACC first before discussing longer-term targets, citing a track record of setting ambitious targets and not hitting them. The improvement in FY26 was pleasing but off poor levels. The businesses that went backwards did so due to strategic investments, and the company is targeting further improvement into FY27.
Q: With the new IFRS 18 accounting standard, should we look at $414 million or $373 million as the comparable earnings figure going forward? A: William Wright (CFO) said the company will discuss this with the market over the next six months and wants to reach consensus across industrial stocks. Under IFRS 18, operating margin will be a prominent number but will exclude items like JV income. Significant items will be broken into categories such as restructuring costs. The company is one of the first to move on IFRS 18 and will test and adjust its approach.
Q: Are you seeing any reversal of the Q4 volume pull-forward, particularly in Iplex New Zealand, so far in the first quarter? A: William Wright (CFO) confirmed that volumes have pulled back in both Iplex New Zealand and Iplex Australia so far in the current quarter, indicating the expected reversal of the pre-buying activity.
Q: Looking at Fletcher's trading history around elections, what do you expect in terms of softer volumes pre-election? A: William Wright (CFO) said it's hard to put a specific data point on it, but the broader uncertainty, including the election, is causing developments to be put on hold and pushed into next year. Examples include CBD developments and new warehouse space, with a notable pullback in the forward order book for pouring piles for warehouses.
Q: Can you quantify the various non-macro tailwinds for FY27, including incremental cost out, turnaround of underperforming businesses, the OSB plant startup, and the exit of reinforcing and wire? A: William Wright (CFO) clarified that costs associated with exited businesses are in the discontinued line, so the continuing operations P&L is the go-forward view. The new OSB plant is expected to have a net zero impact in FY27, as any positive contribution will be offset by setup costs. The company continues a constant performance improvement program across all businesses, including cost out, manufacturing excellence, and restarting exports to gain overhead recoveries.
Q: Is there a capital gain still sitting in the book value assessment of the residential and development division's $811 million invested capital, and how many units are held for sale? A: William Wright (CFO) stated the land bank is held at historical cost, and the company is not willing to provide an assessed cash flow gain figure while going through a strategic review process. He estimated approximately 120 units are held for sale at balance date, but will need to confirm the exact number.
Q: Is the $10 million of legal costs for the Iplex Western Australia saga an ongoing number until the court case is over, and how is the case progressing? A: Andrew Reding (CEO) said the level of legal costs will be what it will be, as the company is responding to other parties' positions. The provision for Western Australia is adequately provided for, with leak rate modelling within original bounds. There are 58 builders in the industry response, but Buckridge has not yet joined, and the legal costs are mainly in response to Buck
For the complete transcript of the earnings call, please refer to the full earnings call transcript .
