The red ink is flowing across Fletcher Building's balance sheet and outgoing chief executive Mark Adamson says he is "disappointed" to finish his time now.
SkyCity says the $700 million convention centre which Fletcher Building is building for the company is now expected to finish later than first anticipated.
In an announcement to the stock exchange this afternoon, SkyCity said that Fletcher Construction has provided an updated programme of works for the New Zealand International Convention Centre (NZICC) in Auckland's CBD.
"The updated programme currently indicates practical completion for both the NZICC and the Hobson Street hotel around the middle of 2019."
SkyCity had earlier said that the project was due to finish in the first three months of 2019.
"SkyCity remains comfortable with the contractual arrangements we have with Fletcher Construction and the project remains on-budget," the company said.
"This slight delay will not impact on any of the NZICC's confirmed bookings to date."
Earlier Fletcher Building revealed that the company was dealt a triple-whammy on construction projects but two caused three-quarters of the loss which prompted today's earnings downgrade.
The company also revealed that its chief executive Mark Adamson is departing immediately.
Chief financial officer Bevan McKenzie, speaking on a conference call which started after 11am this morning, told how three major factors had caused the latest surprise operating earnings guidance downgrade from $610m-$650m to $525m for the year to June.
The first factor was due to further losses on a major contract now nearing completion which he said had incurred higher costs. That represented half the total change in FY17 earnings, McKenzie said.
Fletcher Building chief financial officer Bevan McKenzie. Photo/Dean Purcell
The second was an update on a major project due to be completed in 2019 "due to a change in the programme" which had led to estimated losses accounting for a quarter for the earnings reduction, he said.
McKenzie said the third factor was a reduction in profitability of other projects to be finished in the next six to nine months which made up the remainder of the reduction.
When Fletcher announced its earlier profit downgrade in March, a Citi Research Equities analyst believed one project was the $700m NZICC SkyCity project. The second, due to finish soon, was said to Christchurch's Justice and Emergency Precinct.
Today McKenzie referred to the second unnamed project as having advanced and said the building structure was emerging.
McKenzie said Fletcher's gearing ratio was expected to be at 36 per cent, well within the 30 per cent to 40 per cent target range.
Fletcher is also building Precinct's Commercial Bay office tower and shopping centre on the Auckland waterfront, with an $850m projected end value.
Analysts this morning asked about problems in the NZ construction sector and how much that had hit profitability.
"The key issues we have had and key costs have largely been around programme over-runs and design management and that continues to be the case, certainly in the case of the two major projects costing more to complete," McKenzie said.
Construction sector inflation was not the principal influencing factor, he stressed.
Kar Yue Yeo of First NZ Capital asked about dividends for 2017 and 2018.
Sir Ralph Norris, Fletcher chairman, said the board had not come to a "resting point" on the dividends and that full year audited accounts were not yet received.
Kar Yue Yeo also asked about the construction division under chief executive Michele Kernahan. McKenzie said the business had much better oversight on the governance around bidding for projects.
Brook Campbell-Crawford of JPMorgan asked about changes to the FY18 result.
McKenzie said specific guidance wouldn't be provided today but construction would make a "significant" loss in the June 2017 year.
"We fully expect construction to be back in profit by FY18 as a whole," McKenzie said.
Campbell-Crawford asked about a third major project in the building and interiors division and Fletcher's Philip King said that was "very large, proceeding on timetable. The risk around cost overrun is not significant on that project - quite a different story to the other two major projects where programme delays and cost overruns have featured."
King said Fletcher had not bid on a lot of work lately, although there was one contract that was "circa $100m" but the business was concentrating on the projects it had already won, he emphasised.
Norris finished the call just before 11.45am, expressing disappointment about the situation.
