A grim-faced Sir Ralph Norris resigned as chairman of Fletcher Building saying the board had to be accountable for the troubled building group's massive construction losses.
Norris had planned to stay in the job until next year, but decided at the weekend to step down in the face of a $486 million increase in the projected losses for Fletchers' troubled Building and Interiors (B&I) division on 16 major construction projects.
"It's fair to the shareholders for somebody to take accountability," Norris said.
Fletcher Building shares dropped by 13 per cent when trading restarted on Wednesday.
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They fell $1 to $6.67 each on NZX, an hour after the company said B&I losses had increased to a total expected loss of $660m in the current financial year.
Explaining what went wrong, Norris said: "There is no single point of failure." He brushed off any suggestions of fraud, saying it was "incompetence" that led to the financial woes.
"One of the significant issues is the information flows through to the board were not as fulsome as they possibly could have been."
Also, he said, the whole major project construction sector had seen a massive transfer of risk from clients to builders like B&I.
The building boom had also seen prices rise, Norris said.
Norris was clear that his departure was his decision and said he had the support of the board had he wished to continue.
He said many parts of Fletcher Building were in better shape than when he had arrived.
"There are many parts of this business that have underperformed over the years," Norris said.
There had, prior to his appointment, been some questionable acquisitions by Fletchers.
"Nearly all those businesses have improved over the last three to four years," Norris said.
Norris' career has included successful stints as managing director of ASB, chief executive of Air New Zealand, Commonwealth Bank of Australia, and he is currently chairman of Contact Energy.
He would remain as Fletcher chairman until his replacement was found.
As for his future, Norris said he was realistic enough to accept that the B&I events would attach a stigma to his name and reputation.
He was undecided about future governance roles, simply saying "I hope very happy and eventful life going forward" and that, in time, he hoped people would judge his legacy on his successes.
Chief executive Ross Taylor said the B&I division would be restructured to focus just on completing current projects and that it would not bid for new work.
But, Taylor said there would be no fire sale of assets, and the building giant's lenders remained supportive.
Negotiations with its lenders were ongoing as it had breached its banking covenants.
It expected to have completed negotiations on new lending terms by the end of March.
At the press conference announcing the losses, Norris was tight lipped and grim faced, in contrast with Taylor who exuded confidence and smiled.
Taylor, who has been in the top job for just 10 weeks, said he believed there would be no further increases in projected losses on the 16 troubled construction projects that have generated Fletchers' losses.
He said the provisions on the projects were very conservative, and that he would be aiming to bring the projects to completion with lower losses.
The scale of the losses on SkyCity was particularly extreme.
Other troubled projects included Auckland's Commercial Bay, Christchurch's Justice Precinct and Christchurch Airport Hotel.
Taylor stressed that excluding the B&I business, Fletchers was performing well, and that the losses announced today would be spread over the coming three years.
He said: "While our broader construction businesses continue to benefit from favourable market conditions and strong growth, the B&I market sector remains characterised by high contract risk and low margins. Unless these dynamics change we will no longer work in this sector."
The overall Fletcher Building company had strong cash flows and that the increased B&I losses had no effect on the firm's ability to trade or pay its bills.
Taylor said the new numbers on expected losses followed a review of 16 B&I projects, accounting for approximately 90 per cent of the construction backlog, and included input from KPMG.
The Justice and Emergency Services Precinct and the New Zealand International Convention Centre (NZICC) projects continue to be the main contributors to the losses.
In addition to these two projects the Company reviewed Commercial Bay, Auckland East Prison, Auckland Airport, Christchurch Airport Hotel, Wellington Airport Carpark, and a remaining group of smaller projects.
Questions have been swirling in Australian investment circles that a bid might be made for all or part of Fletcher's businesses.
Harbour Asset Management research analyst Shane Solly said that was a call for new chief executive Ross Taylor.
"We need to be open to the fact that the company is going through a review process and that maybe parts of the business are no longer [going to] be appropriate to retain within the broader group.
The fact that the company was expecting total earnings of $680m to $720m, in line with guidance last October, signalled that the rest of the company remained profitable, he said.
Solly said the depth of the losses were significant, but the company did appear to be dealing with its challenges.
"The disclosure is helpful and the company's certainly taking a pretty rigorous approach here. There's obviously an ongoing tale here, but it does appear to have addressed the substantial issue. "