"It's terrible out there"

Hutchinson Builders, one of Australia's largest private building firms, has reported a significant drop in profit, highlighting the challenging conditions in the sector.

Despite a nearly $500 million increase in revenue to $3.12 billion, Hutchinson Builders’ net profit for the 2023 financial year fell by almost 93% to $1.34 million, according to a report by The Australian.

Scott Hutchinson, the chairman of Hutchinson Builders, expressed his concerns about the current state of the industry.

“It’s terrible out there,” Hutchinson told The Australian. “We did not make much money this year and next year we may scramble into the black. The problem is that building costs have gone up 30-40% in the past year.”

He also cited difficulties in hiring an adequate number of tradespeople as an ongoing challenge for builders.

Hutchinson attributed the surge in costs to a building boom centred around the Gold Coast in 2021, which adversely impacted the company.

“It sounds counterintuitive, but in construction when turnover goes up profit can go down, because you are caught in these fixed-price contracts,” he told The Australian.

The chairman predicted more failures in the industry as trading conditions continue to worsen. However, he assured stakeholders that Hutchinson Builders, with its 111-year history, maintains financial stability and a significant cash reserve. While the company remains resilient, Hutchinson said that the industry as a whole is facing a challenging situation, describing the past few years as a struggle.

Hutchinson Builders' profit in 2022 was $21.2 million, and in 2021, it stood at $27.7 million. The building industry has experienced a perfect storm of labour shortages and material price hikes in the past three years, leading to the collapse of major builders such as Probuild, Condev, Privium Homes, and Pivotal Homes.

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Adding to the industry's woes, Sydney-based National Projects recently appointed voluntary administrators, resulting in the shutdown of major projects nationwide, The Australian reported. The company was responsible for various projects across Brisbane, NSW, Victoria, Western Australia, the Australian Capital Territory, and South Australia.

According to the latest figures from ASIC, there were 815 construction-related company failures from July 1 to Oct. 8, representing a 28% increase compared to the same period last year. Construction failures account for nearly 31% of all company failures so far this financial year, according to The Australian.

In response to the challenging environment, Hutchinson Builders has started to bring more tradespeople in-house rather than relying heavily on subcontractors, The Australian reported. The company established a team of 106 concrete form workers from former subcontractor employees who had gone into liquidation. This move follows previous efforts by Hutchinson Builders to establish its own in-house trades, such as cranes, hoists, and scaffolding, in order to mitigate the impact of industry shortages.

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