Having shed 1100 jobs world-wide by February, Fletcher said yesterday it was considering more restructuring, which cost it $15 million in the first half of the year and is estimated to cost $25 million to $45 million, after tax, during the second half.
Fletcher chief executive Jonathan Ling said while the company's capital position was "strong" it was prudent to strengthen its balance sheet and adopt a "more conservative capital structure", noting if $465 million was raised, Fletcher's debt-to-equity ratio would fall from 41.3% to 35.2%.
"This [share issue] will ensure the company remains well positioned for current market conditions and is able to access growth opportunities as markets recover," Mr Ling said in a statement.
For its half-year trading to December, Fletcher booked a 27% decline in after-tax profit, down from $235 million for the corresponding period last year to $172 million, reflecting the building downturn and recession in Europe, the United Kingdom, United States, Spain and New Zealand.
Mr Ling reiterated earlier financial guidance that Fletcher expected to book an after-tax full-year profit at the lower end of analysts' predictions of between $289 million and $336 million, "assuming" there was no further deterioration in trading conditions.
In offering the issue at $5.35 per share, which is a 12.5% discount, Fletcher has set aside $405 million of fully underwritten new shares for institutional placement, plus an offer of up to $100 million new shares for shareholders, with up to $60 million underwritten, and capped at the $100 million.
However, if the $100 million is not achieved there is a further "top-up offer" of $20 million to a small number of eligible shareholders.
Shares in Fletcher last traded at $6.20 before being put on a 24-hour trading halt yesterday.
ABN Amro Craigs broker Peter McIntyre said Fletcher was focusing on "tight capital management" and being "pro-active" raising cash, having signalled in guidance its profit expectations were at the lower end of expectations because of deteriorating trading conditions.
By slashing its debt-to-equity ratio, it meant any further asset writedowns this year which could push up that ratio and potentially breach banking covenants, as has happened to several other listed companies, would be covered by the capital raised and debt paid.
Mr McIntyre said the 12.5% discount price was likely to have a "strong take-up" by investors.
Forsyth Barr broker Peter Young said Fletcher wanted to raise the cash to further strengthen its financial position, through debt reduction increase its financial flexibility and restructure its operations to improve performance.
"Fletcher is increasing its focus on cash retention and will be reducing its final dividend [from 24.5c to 14c]."
Fletcher, much relied on by investors for reliable dividend payouts, would "do everything possible" to maintain acceptable shareholder returns, Mr Young said.
