Another major builder in trouble - Metricon

err, this seems a bit murky!

Russ Stephens, co-founder of the Association of Professional Builders, has estimated around 50 per cent of Australian building companies are currently trading insolvent – which means they can’t pay their bills.

https://www.news.com.au/finance/bus...s/news-story/80e08e8d771d3b572458070c39205c6e

Zombie companies have been propped up by low interest rates, sympathetic credit policies where the ATO and creditors were forced to put a hold on collecting debts and financial help from government, which has allowed them to continue, he added.

“They really should have ben restructured or liquidated many years ago, but more recently with Covid and the significant government economic policies, that has allowed companies to continue on and make little to no profit. Instead, they are just keeping their head’s above board with assistance from government and low interest rates,” he told news.com.au.

“I think with it all winding down you will see this phenomenon will start rearing its head. We will start seeing companies be more exposed, but zombie companies are not solely an area of the small to medium enterprises, it’s also the big end of town.

“There’s a good percentage of ASX-listed companies that are in that similar situation, which you can see if you go through different financial reports of these companies.

 

Can I ask how you knew about it back then? Are you in the building industry?

 

Yes I am.

 

I know a few people who won’t be disappointed if they go bust.

we could do with some more trades on our builds.

I have done work for them in the past and they aren’t the best company to contract to.

I have heard that Mario did commit suicide which is sad for anyone that knew him and it was from mental health issues. I have also heard that it wasn’t because the company is under financial stress.

I don’t know how true this is but I have heard that Metricon renews their contracts every 6 months with clients and pass on any price increases to their customers.

 

It has been a very testing time in the building industry over the past 2 years.

I am surprised there hasn’t been more builders close up. I know of a few large builders in Sydney who have laid off a lot of staff in 2021.

 

It is a profit-less boom. Trades working as hard as they can.

 

Another one it seems:

https://www.news.com.au/finance/bus...&utm_medium=Facebook&utm_content=SocialBakers

 

To be clear. Not every builders are in trouble out there.
But no builder will show you their P&L statements if you ask them. Maybe they don’t even know themselves until their cash flow comes under pressure.

New or would be new home construction customer should keep their toes and finger cross it doesn’t happen to them.

I suspect there will be a string of company insolvency flooding in 2022 to 2024.
I hope I am totally wrong with my predictions.

 

I think the issue is that a builder can be trading profitably one day then not the next. All it takes is suppliers increasing their costs, had one clients builder ask for more money as their framing supplier put the price of frames up 12% without any warning.
Add on top of that the rising labour costs, bricklayers hourly rate has doubled in some cases, and demand is high for all trades
Most volume builders are trying to stick to a quote they provided 6+ months ago when the supplies were cheaper and this is worsened by delayed land settlements due to the consistent wet weather we've been having in SE QLD. A 200sqm house quoted in December for $280K is now being quoted at $360K, an $80K increase 6 months.
.
It's a combination of factors from all fronts, supplies and labour costs cannot keep increasing, something has to give.

 

Yep this is correct.

What we are going to see...is something where demand for new home builds falls off the cliff.

I am in this camp...and expect that we are midnight or near on this crisis. In the coming months...less people will build which will ease supply issues and labour issues. This is in fact is what will cause companies to go under as they hired a lot of people...and now need to let them go as their cashflow bleed is higher than cashflow coming in. Most of the larger builders have increased their prices by 30% and no longer are willing to pay more for trades. This is what is happening.

 

It is about time for things to normalise

Seen this all happen before, and the fun has not even started yet, people will start to panic if it all unwinds as I think it will.

 

A few clients are just holding on to their blocks of land and not proceeding with the build right now. Their thinking is to wait it out until the dust settles a bit.

 

You missed one.

REMI Capital

"An Australian company with offices in Melbourne and Brisbane has collapsed impacting hundreds of people and property projects as it was revealed it owed an estimated $70 million."

https://www.news.com.au/finance/bus...m/news-story/70869cee3e563afbcdbc4fc7ee4e63eb

 

Yea Nah - more getting added daily to the Gonski report

https://www.news.com.au/finance/rea...ws-story/b55efa1894bd52aa4b7daeeae9a5d842?amp

as someone said - insolvency can often be the best way to restructure

seems like a lot of ‘restructuring’ going on

 

@sash i note you love your H&L, how do you mitigate the risks of building delays, no fixed price contracts, and builders going bust

 

There is no way to prevent delays but have managed to get fixed price with no increases or small ones. So far still building good spec 4x2x2 for under 240k but these were signed up last year.

There are many different tricks to doing this

 

@sash Ahh, so you will be holding off any more builds this year I assume?

 

Maybe... as I have 4 in progress. Maybe 1 more.... depending on I I can sell the land at a decent price

 

Metropole construction site still indicates it is business as usual.

 

https://www.news.com.au/finance/bus...t/news-story/540b67a1ff4244675b31a6b53a838861

Another bite the dust.
What did I say before?