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Highlights

  • Fletcher Construction JV with Acciona reaches settlement over COVID-19 and weather-related delays on the Puhoi to Warkworth (P2W) project.

  • The group will receive ~$56 million in FY25 but expects to record a ~$16.4 million loss on claims receivable.

  • Final project outcome remains subject to insurance negotiations and resolution of other minor issues.

Fletcher Building (ASX:FBU) has announced that Fletcher Construction Company, together with Acciona—its 50% partner in the design and construction of the Puhoi to Warkworth (P2W) motorway—has reached a settlement with the New Zealand Transport Agency (NZTA) and the Northern Express Group (NX2) regarding claims over project delays.

The Construction Joint Venture (JV) submitted claims to NZTA and NX2 related to costs incurred from project delays primarily caused by the New Zealand Government’s COVID-19 response, as well as additional weather-related disruptions. The project, originally scheduled for completion in December 2021, experienced significant inefficiencies, ultimately opening in June 2023.

The claims were previously under an agreed dispute resolution process, which has now been concluded with a negotiated agreement. While the settlement amount is lower than the anticipated recovery previously provisioned by Fletcher Building, it allows the company to avoid a prolonged dispute. As a result, the Group expects to recognise a loss on claims receivable of approximately NZD 16.4 million in its FY25 results. This will also impact FY25 EBIT before Significant Items, as the loss relates to revenue already recognised over the course of the P2W project and had not been factored into earlier earnings guidance.

Despite this accounting impact, Fletcher Building will receive further cash proceeds of around NZD 56 million from the project in FY25. The company views the settlement as a practical and commercial resolution to a longstanding contractual issue.

Managing Director and Group Chief Executive Officer Andrew Reding stated, “This represents further progress in closing out the legacy project issues that have absorbed significant management time and cost.”

In parallel to the settlement, the Construction JV has also submitted material claims under its Contract Works Insurance policy for damages caused by landslips and weather events during construction. These insurance claims are currently under negotiation with insurers and remain unresolved.

In addition, a number of less material matters still need to be addressed to determine the final project outcome.