Laminates and panels division chief executive Mark Adamson said all manufacturing would be undertaken at Formica's Valencia plant with the Bilbao plant being closed.
The review process had identified significant overcapacity across the two Spanish plants.
"Our volumes in Spain have decreased significantly over the past four years and it is now simply not viable to maintain and support both facilities running considerably below full capacity."
Fletcher Building remained committed to manufacturing in Spain. By rationalising its operations, it would allow Formica to remain competitive in what was still a very tough economic climate, he said.
Craigs Investment Partners broker Chris Timms said the one-off cost of the closure would add between $8 and $9 million to the Formica Europe's before-tax earnings in the second year.
"When things are tough in the market, you have to look at things that you can change and cutting costs is one of those things. It has been tough going for Formica but it has been tough for everyone in Europe," he said.
Mr Adamson said the company was talking to about 180 staff about alternative employment and other opportunities within the group. Some core administrative staff would remain at the Bilbao site.
Formica would retain its European production base in Valencia, along with its other facilities in Kohio, Finland, and in the United Kingdom.
"Following the consolidation of our operations in Spain, we believe we will then have a better manufacturing base for Formica's European operations," Mr Adamson said.
Spain's Parliament has given final approval to a 2012 budget that foresees a record 27 billion ($NZ42.7 billion) in austerity measures to slash the public deficit.
Prime Minister Mariano Rajoy's ruling conservative Popular Party used its outright majority to approve a series of amendments from the Senate on Thursday, clearing the tight-fisted Budget.
Budget Minister Cristobal Montero said the Budget was a "guarantee" that Spain would meet its target of axing the public deficit to 5.3% of economic output this year from 8.9% last year.
To achieve the goal, the central government would have to contain its deficit to 3.5% of output, regional governments to 1.5% and municipalities to 0.3%.
Mr Timms said Spain's economy was in a recession with unemployment at 24.4%, complicating the deficit task as tax income was constrained and expenses mounted for items such as benefits.
The International Monetary Fund had cast doubt over the 2012 goal in a report on Spain's economy this month, saying it "will likely be missed".
IMF staff projected Spain's deficit would "significantly overshoot targets and fall only gradually over the medium term," warning state revenue might be weaker than expected.
The IMF said Spain lost credibility last year by missing its target of reducing the deficit to 6% of output. That was exacerbated by Spain insisting until almost the end of the year that all was well.
