As the costs of labour and materials rise, more construction companies will "fall on their swords," expert warns
In a sign of the troubles faced by the construction sector, two Queensland building firms collapsed in as many days as experts warned that more construction companies would soon “fall on their swords.”
Surfers Paradise-based Pivotal Homes, formerly a sponsor of the Gold Coast Titans, went into liquidation Thursday, according to a report by The Australian. Cleveland-based Solido Builders, which specialised in custom luxury homes, has also gone into liquidation.
The news comes as Metricon, Australia’s largest home builder, announced that it had received a $30 million capital infusion from its owners.
There had been speculations that Metricon’s financial health was shaky since the unexpected death of founder and chief executive Mario Biasin earlier this month, The Australian reported. Acting CEO Peter Langfelder told the publication that the ongoing rumours were beginning to impact the company, and the owners wanted to demonstrate their confidence in Metricon’s future.
“This significant injection of capital by the owners demonstrates to our customers, employees, subcontractors, and suppliers our confidence in the viability, profitability and future of the Metricon business,” Langfelder said. “We hope it may help cultivate a groundswell of support for Metricon, which is a great Australian success story.”
Metricon also announced that its banking partner, Commonwealth Bank, had approved a 100% increase in the company’s existing working capital facility.
The construction sector has been shaken by a spate of high-profile collapses over the past year, including Privium, BA Murphy, Probuild and Condev, according to The Australian.
Pivotal Homes managing director Michael Irwin told the publication that he was devastated to be placing the company into liquidation.
“Unfortunately, the rising costs that are impacting many in the industry throughout Australia have made our operations unviable,” Irwin said. “In my 30 years’ experience, I have never seen a set of circumstances like this.”
Irwin said that all creditors, contractors and subcontractors had been paid in full.
Lawyer Derek Cronin, who is acting on behalf of Pivotal Homes, told The Australian that the builder’s only option was to appoint a liquidator.
“The decision for Pivotal Homes to go into liquidation has been based on forward projections dictated by the increasingly challenging market conditions, including the exponential rise in material costs,” Cronin said. “It is an unfortunate set of circumstances that is impacting the industry across Australia.”
Solido founder John Hattink said that the skyrocketing costs of labour and materials were hitting all builders.
“Margins were already thin, especially for smaller builders,” Hattink told The Australian. “We made a loss on a few projects and decided the best thing was to wind things up. Our subbies have been paid and we have not just pulled the rug out from under people.”
Russ Stephens, co-founder of the Association of Professional Builders, told The Australian that the fact that Pivotal Homes and Solido had promised to pay all subcontractors in full showed that they had decided to “fall on their sword” in a calculated judgment that the companies couldn’t continue viably in the current market.
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Meanwhile, Langfelder said that while industry conditions were tough for the entire sector, Metricon was confident it could weather the storm.
“Metricon executives will continue talks with all key stakeholders in relation to support packages aimed at assisting the entire construction industry,” the company said.
Metricon employs approximately 2,500 people across Australia’s eastern seaboard, The Australian reported. The company currently has 4,000 houses under construction.
