Fletcher Building Settles $16.4m COVID-19 Delay Claim on Puhoi to Warkworth Project
Fletcher Building and its joint venture partner have resolved a longstanding dispute with NZTA over COVID-19 and weather-related delays on the Puhoi to Warkworth motorway, resulting in a $16.4 million EBIT loss in FY25 but securing $56 million in cash proceeds.
- Settlement reached with NZ Transport Agency and Northern Express Group
- Project delayed from December 2021 to June 2023 due to COVID-19 and weather
- Fletcher Building to record a $16.4 million loss on claims receivable in FY25
- Approximately $56 million in further cash proceeds expected in FY25
- Insurance claims for weather damage remain under negotiation
Background on the Puhoi to Warkworth Project
The Puhoi to Warkworth motorway, a critical infrastructure project in New Zealand, was originally slated for completion in December 2021. However, the project faced significant delays, primarily due to the New Zealand Government’s stringent COVID-19 pandemic response measures and adverse weather conditions. These challenges extended the completion date to June 2023, impacting timelines and costs for Fletcher Building and its joint venture partner Acciona.
Settlement Details and Financial Impact
Fletcher Construction Company and Acciona, operating as a joint venture, lodged claims with the New Zealand Transport Agency (NZTA) and the Northern Express Group (NX2) to recover costs associated with these delays. After a protracted dispute resolution process, the parties have reached a commercial settlement. While the agreed settlement amount is less than Fletcher Building’s initial expectations, it avoids a drawn-out legal battle and provides clarity on the project’s financial position.
The settlement will result in Fletcher Building recognising a loss of approximately $16.4 million against the project’s claims receivable in the fiscal year 2025 earnings before interest and tax (EBIT). This loss relates to revenue previously recognised over the project’s duration and was not anticipated in earlier earnings guidance. Despite this, the company expects to receive around $56 million in further cash proceeds from the project during FY25, providing a positive cash flow outcome.
Ongoing Issues and Future Outlook
Beyond the settlement, Fletcher Building’s joint venture continues to pursue material claims under the Contract Works Insurance policy for damage caused by landslips and weather events during construction. These insurance negotiations remain unresolved and could influence the final financial outcome of the project. Additionally, a range of less significant matters related to the project are still being addressed.
Managing Director and CEO Andrew Reding emphasised that the settlement marks meaningful progress in resolving legacy issues that have consumed considerable management attention and resources. The resolution brings greater certainty to Fletcher Building’s infrastructure portfolio and earnings outlook, although some uncertainties remain until all claims and minor matters are settled.
Bottom Line?
While the settlement closes a major chapter, ongoing insurance claims and minor issues keep the Puhoi to Warkworth project’s final financial picture in flux.
Questions in the middle?
- What is the potential financial impact if insurance claims for weather damage are not fully recovered?
- How will the $16.4 million EBIT loss affect Fletcher Building’s overall FY25 earnings guidance?
- What are the remaining minor matters, and could they lead to further costs or delays?
