Fletcher Building did not breach disclosure rules in relation to two forecast earnings downgrades last year, the New Zealand stock exchange has found.

In a statement published on Thursday morning, NZX Regulation said its investigation found the company acted promptly in releasing material information after management and directors became aware of it, in both March 2017 and July 2017.

On March 20, 2017, Fletcher cut its 2017 earnings forecast by $110 million, or about 15 per cent.

Trading in the stock was halted on March 17.

NZX Regulation said Fletcher had become aware there was a material risk it would miss guidance on the evening of March 16 and applied for the trading halt while it sought further information.

The timing and duration of the trading halt were appropriate and the disclosure prompt, NZX Regulation said.

On July 20, 2017, Fletcher again slashed its full-year earnings forecast by between $85m and $125m, or 14 per cent to 19 per cent.

It also dumped chief executive Mark Adamson.

NZX found Fletcher had become aware it would miss guidance on the evening of July 19, and “when information was provided to FBU executive officers as a result of regular project reviews, regarding projected losses in various of those projects”.

The board discussed the issue with management and its auditors before releasing the announcement the next morning.

The investigation found Fletcher had given particular attention to the B+I unit after the March downgrade, but “events accelerated in July 2017”, leading to the material information coming to light on July 19.

The board first became aware of issues in the unit in late 2016, following a monthly operational review of its construction division, with the review continuing through the first quarter of 2017.

The regulator said information about the losses within the B+I unit was not separate material information for Fletcher, as market expectations of the company’s financial performance were set by the published group-level earnings forecasts.

The report said a number of articles published by media about issues within the B+I unit did not create a disclosure obligation on Fletcher and it found no evidence Fletcher’s management or directors had any material information as a result of speculation.

Fletcher shares dropped 29 per cent last year, plunging after each downgrade.


By Sophie Boot