Unfortunately for its shareholders, the Fletcher Building Limited (Australia) (ASX: FBU) share price has once again been one of the worst performers on the market.
In morning trade the building materials company's shares are down almost 6% to $7.04. This extends its year-to-date decline to in excess of 31%.
Why have its shares fallen today?
This morning Fletcher Building surprised the market by announcing its second profit downgrade in just four months.
In March the company advised that expected full-year earnings before interest, tax, and significant items (EBIT) to be in the range of NZ$610 million and NZ$650 million. This was down from its previous guidance of between NZ$720 million and NZ$760 million.
The revised guidance was due to the identification of additional estimated losses and downside risk in its Buildings and Interiors business unit of the Construction division.
Unfortunately it doesn't appear as though the company did a thorough job at identifying these losses.
This morning the company announced that full-year EBIT is now expected to be NZ$525 million, approximately 14% to 19% lower than its revised guidance.
According to the release, it has become apparent that the losses in its Buildings and Interiors business unit will now exceed its previous expectations.
This is largely the result of a major project that had been subject to previous write-downs needing an increase in project resourcing and a second major project where construction timelines have been extended.
In addition to this, the company's Iplex Australia and Tradelink business units are expected to be subject to an impairment charge of approximately $220 million.
CEO departure.
It may not come as a great surprise to learn that after a disastrous year there will be a change at the top.
Fletcher Building's Chief Executive Officer and Managing Director, Mark Adamson, has departed the company and will be replaced on an interim basis by Francisco Irazusta.
Chairman Sir Ralph Norris stated that: "The Board believes it is the right time for Mark to leave the Company, to allow a new CEO to lead Fletcher Building through this period and into the next phase of its strategy."
Should you invest?
There's no doubt that FY 2017 has been an utter disaster and this is reflected in the 31% drop in its share price.
Whilst it would be tempting to pick up shares on the cheap, I would suggest investors stay clear of the company until there are signs of improvement. In the meantime I would recommend taking a look at industry peers Boral Limited (ASX: BLD) or Brickworks Limited (ASX: BKW) instead.
