Golden Bay cement boat breaks down, Fletcher earnings forecast cut $10m-$30m

The Golden Bay Cement bulk carrier was named the MV Aotearoa Chief at a ceremony in Auckland in 2016. Photo / John Stone

A boat breakdown will cost Fletcher Building’s Golden Bay cement business up to $30 million, the company said today.

Aotearoa Chief, the vessel which carries cement around the North Island from Fletcher’s Golden Bay Portland base, has broken down, the company told the NZX this morning.

The boat is owned by China Navigation Company, an operating arm of the Hong Kong-headquartered Swire.

The vessel chartered since 2016 is docked at Northport while the owner makes inspections after Friday’s breakdown.

But how long repairs will take is unknown, Fletcher said.

The problem could cut Fletcher’s earnings for the June 30, 2025, year by $10m to $30m, the company forecast today.

Golden Bay is talking to its customers and has contingency plans, which include using alternative transport options to distribute cement.

That includes the use of its existing coastal barge and the greater use of road and rail options.

Fletcher is also investigating longer-term solutions, which include potentially sourcing alternative cement supplies from domestic and offshore suppliers along with securing the use of a replacement ship if required.

“Fletcher Building’s preliminary assessment is that it expects the impact on FY25 earnings due to the disruption to be in the range of $10m-$30m, driven by the anticipated increased costs of supply from the range of mitigating actions expected to be adopted by it,” it said.

However, the actual impact will depend on many variables that are not yet known, including the duration of the issue, mitigation actions available, third-party costs associated with those mitigating actions and the impact on operations, Fletcher said.

The company is due next month to announce its annual result to June 30, 2024.

In May, it said poor trading conditions, intense price competition and lower building product sales prompted it to downgrade its full-year profit forecast from $540m to $640m Ebit before significant items to $500m to $530m.

Trading conditions in the company’s second half of the full financial year prompted the announcement on May 13.

“As a result of the trading conditions in 2H24, the company now expects lower FY24 earnings,” it said then.

Although the material and distribution divisions had experienced softer revenues due to the market conditions, the company’s updated guidance was mostly driven by factors including challenging conditions in the distribution division, given its exposure to the residential sector, which the company said caused intense price competition.

Shares have been trading 40% down annually, around $3.32.

Anne Gibson has been the Herald’s property editor for 24 years, written books and covered property extensively here and overseas.