February 13, 2018 / 8:32 PM / a year ago

CORRECTED-UPDATE 2-NZ's Fletcher flags bigger loss for buildings business; chairman to resign

(Corrects amount in first bullet point to NZ$660 million from NZ$600 million)

* Fletcher expects losses of NZ$660 million in building business

* Chairman to step down

* Shares fall more than 13 pct after trading halt lifts

Feb 14 (Reuters) - New Zealand’s biggest construction company Fletcher Building said on Wednesday that it expected its embattled commercial building unit to post a NZ$660 million ($480.22 million) loss in fiscal 2018, causing its shares to plummet.

Shares in the company - the country’s second largest by revenue - dropped 13.8 percent to a two-year low of NZ$6.70 after it lifted a trading halt that had been in place since Thursday.

Fletcher also said that its Chairman Ralph Norris would step down no later than its 2018 annual shareholders meeting. The company had flagged a loss of NZ$160 million for its buildings and interiors business in October last year.

The projected loss has resulted in a breach of Fletcher’s financial covenants given to its commercial banking syndicate and U.S. private placement noteholders, the company said in a statement.

Fletcher’s 2018 earnings guidance, excluding the buildings segment, remains at NZ$680 million to NZ$720 million, the company said.

The company said it had received a waiver from its commercial banking syndicate for the breach, and that it was in discussions with its U.S. private placement noteholders for a similar waiver.

The company had a total of NZ$3.1 billion in funding facilities, it said, with just over a third over that coming from a commercial banking syndicate, and another third from its U.S. private placement.

“While our broader construction businesses continue to benefit from favourable market conditions and strong growth, the B+I (buildings and interior) market sector remains characterised by high contract risk and low margins. Unless these dynamics change we will no longer work in this sector,” Chief Executive Ross Taylor said.

The company also said it would not declare an interim dividend for fiscal 2018. ($1 = 1.3744 New Zealand dollars) (Reporting by Ambar Warrick in BENGALURU and Charlotte Greenfield in WELLINGTON. Editing by Jane Merriman and Peter Graff)

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