Two major construction projects - the Sky City development in Auckland and Christchurch's Justice Precinct - are thought to be behind Fletcher Building's $110 million downgrade.
The downgrade rocked the company's share price, knocking $651 million off its market capitalisation.
Fletcher is overhauling how it bids for projects, the majority of which are at present fixed price and guaranteed.
Following a trading halt on Friday, Fletcher shares reopened on Monday and initially plunged 12%, or $1.12, to $8.10 on news of the downgrade. They traded up slightly yesterday, around $8.36.
The Fletcher plunge dragged the NZX50 down 1.4%, its largest one-day decline since October last year.
Fletcher's full-year earnings have now been reset at between $610 million and $650 million.
The $700 million Sky City development in Auckland, including the international convention centre, is thought to account for $55 million of the $110 million downgrade and the $300 million Justice Precinct in Christchurch is the other $55 million.
Craigs Investment Partners broker Peter McIntyre said in addition to the $55 million attributed to the Justice Precinct, there was also an earlier $31 million downgrade, with total losses for that project standing at $86 million.
''We think the downgrade is disappointing, given the company appeared to be certain the losses outlined at its first-half trading result were contained at about $31 million,'' he said.
However, there was ''some comfort'' in knowing the precinct was due for completion by the end of the year, he said.
Craigs had cut its underlying after-tax profit forecast for Fletcher's current full year by 20% to $387 million, and for the following year by 11% to $469 million.
Despite the share-price plunge, Mr McIntyre believed the level of risk had now been priced in and Craigs maintained a ''buy'' recommendation on Fletcher stock.
Mr McIntyre noted Fletcher management had also outlined that in full-year 2018 there would be a further negative impact of around $10 million, probably related to cost overruns on the Sky City project.
He said key risks for Fletcher included any escalation in costs, a prolonged downturn in the New Zealand or Australian housing markets, and any weakening in demand or pricing in the commercial or infrastructure sectors.
Fletcher's building and interiors division represents $1.5 billion of the overall construction divisions' $2.7 billion backlog of work.
''All but one of Fletcher's major projects at present under way in buildings and interiors is a fixed price, guaranteed contract,'' he said.
Mr McIntyre said Fletcher management had noted more stringent processes had been put in place around bidding and contract management, with an expectation of a shift towards more infrastructure projects.
''The bidding criteria for major construction projects has become more stringent, including upfront budgeting, more in-depth consideration around the nature of the contract, the client and the balance of risk and reward,'' Mr McIntyre said.
Employee changes include appointment of a chief operating officer of construction, a new head of risk and governance and a new general manager of building and interiors.
Based on the downgrade, Mr McIntyre said Fletcher expected its debt-to-equity ratio to be around 34% at the end of full-year 2017.
While Fletcher management had not provided a copy of its banking covenant, management had said the company was ''comfortably'' within banking covenants and target debt metrics, he said.
