TTI/Milwaukee 2022H1 results show continued growth

CEO Joe Galli announces new advance in tool software development

TTI reported good growth of 10% for the six months to June 30 2022. It has launched a new generation of Milwaukee M18 and M12 FUEL drills and impact drivers, as well as a Milwaukee Track Saw. The big news, however, is how the company is using AI to help develop new features.

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    Hong Kong listed power tool and floorcare company Techtronic Industries (TTI) makers of the Milwaukee and Ryobi brands of power tools, has released its results for its first half of 2022. The results were in line with expectations, both for the company, and for the industry as a whole.

    Sales for the half were USD7034 million, up by 10.0% on sales for the previous corresponding period (pcp), which was the first half of 2021. Gross profit was USD2747, up by 11.4%, which resulted in a gross margin of 39.1%, up 0.5% on the pcp.

    Earnings before interest and taxation (EBIT) and net profit both outperformed the sales increase, at USD633 million (up 10.7%) and USD578 million (up 10.4%) respectively.

    For the company's main divisions, in power equipment both sales grew by 12.8% (14.9% in local currencies), and operating profit grew by 14.4%. The other division, floorcare, saw a decline in sales by 17.8%, or 16.4% in local currencies. It's worth noting that in contrast to sales for the first half of 2020, sales in floorcare have risen by 3.0%. As the company's CEO, Joe Galli, pointed out during his presentation, sales of vacuum cleaners reached a peak during the COVID-19 lockdowns, and will likely take some time to recover.

    In its individual brands, Milwaukee too increased overall sales by 26% on the pcp. North America increased by 25%, Europe by 23% and "rest of world" (including Australia) grew by 35%.

    The company is forecasting mid-single digits sales for all of 2022, though Mr Galli also believes that Milwaukee will see sales increase by 20%.

    Company activity

    This half-year result was very much in the category of "housekeeping" announcements, coming as the markets - and therefore TTI itself - resets somewhat after the drama of the peak pandemic years.

    Well, housekeeping with one exception, which we will get to.

    One aspect of TTI that Mr Galli chose to emphasise was the company's operational excellence - a message, in part, that while the past two years have required extraordinary measures, the company is back on track to tighter management.

    In particular, Mr Galli highlighted the company's management of its outstanding stock-keeping units (SKUs). As he described that process:

    A great example of operational excellence you can see in our disciplined SKU management process. So every year we've been doing this for a decade, every year, every quarter, we sit down in our interviews with every business unit. And the president level executives in these units have to cover their SKU progress plans and status. So for example, a president will say how many SKUs they have at the start of the quarter. How many they plan to add that quarter. How many they plan to discontinue and what's the new net total.
    Now, we've been doing this for a decade. So we don't have to have a massive SKU cleanup process in the company because we do this every quarter. That's why we have no obsolete inventory. If we discontinue an item. And we we are ruthless about this if an item no longer makes sense, strategically, we will discontinue it and we move the inventory immediately.

    That's likely in part a side comment about some of the difficulties that sprawling companies such as Stanley Black & Decker have run into, as their product lines increase across multiple evolving brands.

    Mr Galli also covered off on the major update to the topline tools in both the M12 FUEL and M18 FUEL ranges. These have followed industry trends, becoming lighter, smaller and a notch more powerful. He also mentioned some of Milwaukee's new product innovations, including its Utility Stapler, aimed at utility company linesmen, a top handle chainsaw, and, of course, Milwaukee's long-awaited Plunge Track Saw - a great favourite for speculation on many YouTube power tool channels.

    Mr Galli also emphasised the spread and reach of TTI's consumer/handyman Ryobi power tool line One+.

    So remembering back when we launched, the company launched, Ryobi One+ cordless system in 1996. This product line, the One+ system, the battery interface has not changed since we launched the program. And because of that, we have achieved 42% household penetration in the US. And that number is actually higher in Australia, 42% household penetration for the Ryobi One+ cordless system.
    So think about that, almost one out of every two households in the US already have a Ryobi One+ cordless system installed, and in use in the house. So Ryobi One+ cordless system products that we launched now are pre-sold to almost half the country. So when these people walk into Home Depot, they are already predisposed to buy the new products we roll out in One+. And as I said it's a very powerful system in the US. But also, it's number one in Canada, number one in Australia and New Zealand. And it's got a very strong leadership position in Europe.

    He also reminded investors of the new line of Ryobi ride-on mowers, which feature a unique joystick control, making them easier to use, and appealing to a new generation of homeowners.

    The quiet announcement

    One way to spot the truly experienced, battle-hardened CEOs is how they time announcements in their results presentations. This time Mr Galli saved what is actually a major announcement for a position about half-way through the presentation. One reason for this is that this announcement is very technical - but it is also the most important announcement, in terms of the future of the power tool industry, for the past five years.

    When One-Key was originally announced, HNN did suggest that one side-benefit of the Bluetooth-enabled tool management system would be monitoring the performance of a wide fleet of tools, which would help to problem solve and inform new tool development. The sensors could report back to a central database, and analysing that data would reveal opportunities in product development.

    That's very much what Mr Galli had to announce. In particular the newly released Gen 4 of Milwaukee's M18 FUEL drill drivers has benefitted from feedback generated through One-Key.

    We have rolled out the first ever power tool with machine learning. That was an element of the design of this product. So how machine learning works here is we collected thousands and thousands of data points about when a tool encounters an obstruction. Maybe it's a knot [in wood], or maybe it's a different kind of obstruction. Tools today automatically shut down when they encounter that kind of resistance. There's a highly frustrating shutdown mode, Auto Stop Mode, on tools. And users hate this. Users want to be safe, but they don't want to be "safe" when there's no need for the tool to shut down, meaning they have to start up again.
    So what this machine learning has allowed us to do, is to create an algorithm that is built into this unit in the software on board. And it tells the unit when a sudden event is something that is not an issue, versus a sudden event where the drill does need to shut down. So we keep our users even safer, but without the irritating frustration of these shutdowns in the case of an unnecessary event.

    That's a really major announcement. It's significant not just in itself, but because it really does signal the start of a different era in future tool design. It's also significant for TTI, as it indicates what has always been at the base of Mr Galli's management style: a very far seeing approach. One-Key was released in 2016. Mr Galli's not only collecting on that development six years later, he's doing it, quietly, half-way through the results announcement.

    You could think of this as essentially the "pivot-point" for AI-driven tool development. To open up a new field like this, it really does take six years of background development. And the full effect of this capability will only be felt over gradually over the six years to come. That makes it invaluable.

    The core thing to consider in relationship to this announcement is, what will TTI's competitors do? We wouldn't be surprised if we see some press releases from competitors in the next couple of months regarding their specialised development labs, or some such.

    There is a real question to be asked in terms of what the company's competitors have actually been doing. We've seen "me also" One-Key copy systems emerge from both Stanley Black & Decker and Bosch Power Tools - and, belatedly, Hilti - but these don't equal breadth and depth of Milwaukee's One-Key.

    If we look in particular at the two main Japanese companies, Makita and Hikoki, we really do have to ask what their alternative development plans are for the future? While Makita prides itself in particular on power tools that provide reliability, repairability, balance and precisions - with some justification - it's hard not to see it as placed on a pathway towards obsolescence in another five to ten years.

    It really seems as though only TTI could produce this particular statement by Mr Galli:

    Why are we number one? Because for a decade, we've been obsessively maniacally focused on rolling out a myriad of new products that harvest the benefit of our advanced technology, our software development engineering. So we now have 144 leadership products in subcompact, we have 259 in the full size M18 range and 13 already in the light equipment business. And those numbers will double in the next three years based on the plans we have today, we are going to relentlessly attack and build out these platforms, and again build ourselves into an even more commanding leadership position.

    The key words in that statement are "software development engineering". That is where the real potential for growth rests and, seemingly, TTI remains the only company to fathom this.

    As usual, HNN has provided a full transcript, with some illustrations, of the results announcement. It's really worth a read, as it does provide a neat summary of where TTI is headed, and some hints as to the future shape the power tool industry is taking.

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    companies

    Retail update

    Tool Kit Depot opens its doors in Melrose Park (SA)

    A new Mitre 10 Trade Centre in Dubbo (NSW) is making it easier for local tradies to pick up their building supplies

    Tool Kit Depot has announced the opening of its newest store in South Australia which will replace the existing Adelaide Tools store in St Mary's, a suburb of Adelaide.

    The new Tool Kit Depot stores are built to provide everything trade customers need - with more than 10,000 products across tools, safety gear, outdoor power equipment, workwear and much more - all under one big roof.

    The Melrose Park store is more than double the size of the existing St Mary's store, offering an extended range of speciality tools and equipment, and a new layout with hands-on displays that make it easy for customers to find exactly what they're looking for.

    A Battery Bar, tool hire, and a tool servicing and repairs workshop are available in store to keep existing tools in good shape. Customers can access on site tool repairs to keep their business moving, including blade replacements, tool sharpening and test and tag.

    The latest store opening marks the completion of the program to transition all existing Adelaide Tools stores in SA to the Tool Kit Depot trading name. Refits at the Lonsdale, Gawler, Parafield and Mile End stores were completed earlier this year.

    Tool Kit Depot Melrose Park store manager, Luke Helps, said the team is looking forward to welcoming the community to the new store and meeting local tradies and tool lovers in the area.

    We're excited to show customers just how much more we have to offer here at our Melrose Park location. We want this store to be the ultimate one-stop-shop for busy trade professionals who love what they do and need great quality tools and service to do it.
    We've got twelve experienced team with specialist knowledge to help with all jobs big and small, such as Max who is an auto mechanic and experienced welder, Bel who joined us from Bunnings wanting a new challenge and Ethan who is a qualified carpenter.

    Tool Kit Depot's next SA store will be located South of Adelaide in Seaford Meadows, with additional SA stores to be launched as part of the national rollout strategy. Further locations will continue to open in West Australia, before seeking new locations in other states.

    Tool Kit Depot Melrose Park is located at 1031-1037 South Road, Melrose Park SA. It officially celebrated the store opening with the local community and former Adelaide Football Club player Mark Ricciuto.

    Related

    Tool Kit Depot opens in Albany, WA - HNN Flash #101, July 2022

    Mitre 10 Trade Centre

    Petrie's Mitre 10 Trade Centre manager Brad Petrie said its new giant warehouse at the northern end of Fitzroy Street in Dubbo (NSW) recently held a "soft" opening and received rave reviews. He told Dubbo Photo News:

    It was great, we think we probably had anywhere from 80 to 100 people ... We had breakfast on, we had a coffee van and we had a lot of good feedback from the builders relating to the stock, and the accessibility to drive into the yard.

    Originally part of a truck depot, Mr Petrie said there is a lot of space for tradies with trailers, small and medium trucks or even semi-trailers to have ease of access to the stock, with the loading bay able to accommodate many varied vehicles at the one time. So there's little likelihood of getting caught in a traffic jam and wasting time off the tools.

    Mr Petrie also said it is a facility designed for quick load movements.

    It's impressive to have the sheer size of land and the shed. Being a logistics yard, it was designed for trucks to be loaded and unloaded, so when a builder comes in they're able to pull up wherever, we can load them and there's still space for other builders to access it as well. So the original design use of this shed is really going to be a benefit for us.
    We're currently organising the line-markings for our traffic management plan which will consist of a number of parking bays, and we've overserviced regarding space from the get-go so we should be able to get our customers in and out quickly.
    We know from our old site - we didn't have a very good yard - if you pulled one car up no-one else could get past them, so having this ability now, it's premium for Dubbo.

    Related

    New trade centre at Petrie's Mitre 10 Dubbo branch - HNN Flash #95, May 2022
  • Sources: Bunnings Media and Dubbo Photo News
  • retailers

    Big box update

    Kyneton locals considering court action to fight Bunnings development

    Victoria's planning tribunal has allowed a complex that includes a Bunnings to be built in Kyneton, but some residents fear it will detract from the town's country charm

    Macedon Ranges residents are considering Supreme Court action following a state planning tribunal decision to overturn a council vote to put a stop to a development for a Bunnings store, a McDonald's outlet, another restaurant, and a 24-hour service station. It was approved by the Victorian Civil & Administrative Tribunal (VCAT) after the applicant decided to challenge the council's decision and the conditions imposed.

    Susan McNab is one of the locals leading the fight against the development and said residents were disappointed by the tribunal's actions. She said the group would look at viable options to counter the decision, but accepted that a loss in the Supreme Court would be costly. She told ABC Premium News:

    Naturally, we don't feel the decision is to the benefit of Kyneton. That part of the town is the main access to nearby reserves and people often go out that way climbing and for classic car rallies and cycling. It's difficult for many residents to not be considered at VCAT.
    It's been about the economics of the matter. The council said that area would be developed at some point, but this particular style of development works against Kyneton's character.

    The decision almost confirms the introduction of commercial development in Kyneton, which one community group has labelled the "tide of overdevelopment". Residents fear the big brands will take away the small country charm that the town is known for, with small businesses and well-known eateries losing out. However VCAT's decision said:

    The proposal will not detract from the rural character of the Shire. The proposal will reinforce the rural character of the Shire by its location [in a commercial zone] within the protected settlement boundary; [and the] containment of its impacts within the subject land.

    The decision by VCAT attracted hundreds of submissions regarding concerns about traffic and safety, and the effect the development could have on the nearby environment and local economy. Ms McNab wrote to the group:

    Our options on a personal and group level are very limited. We can attempt to appeal the decision on a matter of law ... within 28 days. That is incredibly expensive, and we would have to pay the other party's costs if unsuccessful. It's down to what the shire council may be able to do now.

    Macedon Ranges Shire Council said it was not considering pursuing legal action. A spokesperson told the ABC:

    An appeal of a VCAT decision is made to the Supreme Court of Victoria and must be on a point of law. Council has received communication for the community expressing their disappointment in the decision.

    The council's design guidelines from 2012 showed the council's aim was to "reinforce" the rural character of the Macedon Ranges, particularly in areas that were visible from main roads, the Calder Freeway, rail corridors, and key public viewing areas and from adjoining rural and residential areas.

    Several residents have asked for a review of VCAT's decisions after a similar development in regional Victoria was not allowed to go ahead. Some also said it was difficult for small-town community groups and residents to fight organisations and businesses with access to a lot of money.

    The tribunal has ordered VCAT to remove multiple signs, and reduce the height of one, and resubmit the plans to show those and other changes.

    Related

    VCAT approves Bunnings build in Kyneton (VIC) - HNN Flash #105, August 2022
  • Source: Australian Broadcasting Corporation
  • bigbox

    Construction update

    QLD government grant for manufacturing company

    A recently released Forest and Wood Products Australia (FWPA) report has found that Australia could be 250,000 house frames short by 2035

    Rockhampton-based business Manuplex received $500,000 through the state government's Queensland Manufacturing Hubs grants.

    This has enabled the company to buy four steel roll-forming machines that will allow it to make steel house frames and trusses to help meet the demand of the commercial and residential construction sector.

    Manuplex director Glen Donnellan told The Courier-Mail they hoped to produce one house worth of frames and trusses a day.

    Managing director of Manuplex Matt Jurkic said they were also hoping to make things more sustainable for their customers. He told The Courier-Mail:

    We don't want to just keep raising prices around materials, so if we can do things in house and use the manufacturing hub and grants like this, we can create sustainability and pricing for our customers rather than just keep raising prices while all these global pressures are on us.

    Rockhampton MP Barry O'Rourke said it was great to see more manufacturing coming into Central Queensland.

    Anything to do with the housing industry, I really want to see it progress as quickly as possible.
    As we know, the housing market is extremely tight and we're having lots off difficulties accessing materials, through this investment it will open the opportunity right up.

    Regional development and manufacturing minister Glenn Butcher said manufacturing contributed $20 billion a year to the state's economy.

    The hubs are bringing together stakeholders to collaborate and grow regional manufacturing. Building local businesses, strengthening their capacity and capability help local economies by delivering good long-term, local jobs.
    Australian companies are increasingly looking to local manufacturers to step up and fill gaps exposed in supply chains, so it's fantastic to see these manufacturing businesses in regional Queensland build and grow, to meet demand.

    Timber report

    Australia's housing construction sector faces a serious timber supply gap by mid-century if the nation doesn't move quickly to implement the billion new production trees plan, according to a new Forest and Wood Products Australia (FWPA) report.

    The Australian Forest Products Association (AFPA) and Master Builders Australia (MBA) said the final report reveals the demand for new housing will rise from an average of 183,000 new dwellings per annum to an average of 259,000 per annum by 2050, driving huge demand for timber.

    To bridge the supply gap, Australia needs to meet the One Billion New Production Trees goal and not just rely on vastly increased imports to fill the gap. In a statement, AFPA CEO Ross Hampton said:

    International demand for timber continues to surge as governments demand more timber in buildings and fibre to replace plastics to meet laudable climate goals. This is a good thing but will make it even harder to source imports to fill our own expanding timber demands.
    Australia has vast areas of land suitable for timber production, yet our plantation estate has been stagnant - and has even been going backwards in some places - for the last two decades. That has to be reversed and there is no time to lose.
    Forest industries look forward to working quickly with the Albanese Government to commence the rollout of the $86 million committed during the election campaign as the first tranche of funding required to get seedlings into the ground.

    Master Builders Australia CEO Denita Wawn said:

    The severe timber shortages experienced by the industry have put a huge strain on thousands of building and construction businesses and contributed to the inflationary pressures that our industry has been experiencing for many months. The case for increasing the supply of locally grown timber is compelling and will remain so even as COVID related supply chain disruption eases. It's a move that will support jobs and economic activity in the nation's residential building sector.
  • Sources: The Courier-Mail, Australian Forest Products Association and Master Builders Australia
  • companies

    Retail update: Highgrove Bathrooms

    It is expanding its Gold Coast head office and warehouse

    The bathroom products business generated $140 million in annual revenue in the last financial year

    After starting out as a small outlet in Southport (QLD) in 2004, Highgrove Bathrooms now has 50 stores around Australia.

    Managing director James Sinclair said the company - started by his father Lindsay - had seen some "crazy exponential growth". He told The Courier-Mail:

    Year-on-year we've recorded 20-40% growth and we opened our 50th store in Rockhampton earlier this year.
    One of our biggest challenges is being able to manage that sort of growth year on year and being able to expand the business and the infrastructure that goes with it.

    Mr Sinclair said there were more growth plans with Highgrove building stores in Darwin, Ballina, Bathurst and Tweed Heads. The company is also looking to establish a distribution centre in Sydney within the 12 months.

    At the moment we are waiting to see what happens in the property market, but despite uncertainty sales remain strong. We're still facing cost pressures from incredibly high overseas freight prices, (but they) are slowly subsiding.

    Mr Sinclair said Highgrove had tapped into the homeowner renovator market, including DIYers as well as tradies and new-home builders.

    There are a lot of companies that incorporate bathrooms, but there aren't many national companies that specialise only in bathrooms. That's the big point of difference for us.
    Most of our customers don't renovate often or have never renovated, so we offer personalised service and advise people who come and visit our stores.
    Our ethos hasn't changed over the years. It has always been our goal to offer our customers the best in design at an affordable price point.

    During the pandemic, Highgrove recorded a 30.5% rise in revenue in 2019-20 to $100 million; 30.2% in 2020-21 to $130 million; and 8% to $140 million in 2021-22. Mr Sinclair said while there was a home renovation boom during COVID, a key driver of Highgrove's growth was ensuring its stores and warehouses were well stocked. Mr Sinclair explains:

    When COVID was first disrupting everything we were getting pressure from stakeholders to hold off ordering from overseas as no one knew what was going to happen.
    Not knowing what was going to happen, we kept our normal orders in place with the belief that the risk of being overstocked was easier to deal with than not having stock.
    This proved to be fortunate as stock shortages with competitors helped us to achieve record results, leaving us short on stock anyway. Since then, given the uncertainty in supply chains, we have focused on increasing stock levels nationally both in our stores and distribution centres.

    When Lindsay Sinclair - who remains actively involved in the business - opened Highgrove's first store, it was focused on furniture, but the Sinclairs quickly recognised the opportunity in specialising in bathroom products.

    The company now has 350 staff and a head office and warehouse in Molendinar on the Gold Coast and a distribution centre at Dandenong in Melbourne's outer south eastern suburbs.

    In 2021-22, Highgrove sold about 20,000 baths, 44,000 toilets, 53,000 vanity units and 46,000 basins.

    The company designs products in-house, gets them manufactured mostly in China and Vietnam, and sells their own brands through their stores. Importantly, most of their stores operate under a partnership arrangement with individuals who are part of the local community, which has seen it build relationships with groups such as The Smith Family and Rural Aid.

    Mr Sinclair also said the impact of home renovation television shows on his business could not be understated.

    With the popularity of TV renovation shows, people are looking for a bespoke designer look for their bathrooms.
    People are looking for a far bigger variety of finishes when it comes to baths and we're offering a far bigger range of finishes and textures these days than what we were offering previously.
    Eight years ago it was enough to offer a matte black range, four years ago a range of products in pastels. Today the market is far more discerning and fastidious.

    Buyers now were seeking products such as brushed nickel tapware and accessories, concrete baths and basins, and a range of high-end timber vanities. Mr Sinclair said the company needed to be "flexible" to be unique.

    We're constantly re-engineering ourselves to keep up with an ever-evolving market. Recently one of our main focuses has been on the introduction of interchangeable components, allowing every customer to tailor a bathroom that is totally unique to them.
  • Source: The Courier-Mail
  • retailers

    New products: Workwear

    Hard Yakka teams up with Thrills

    The collection closes the gap between workwear and modern streetwear, all using sustainable-focus materials

    Aussie workwear brand Hard Yakka has joined forces with cult Byron Bay streetwear line Thrills on their first exclusive collaboration. It spans 33 pieces of apparel and 10 accessories.

    Hard Yakka is one of the most recognised workwear names in the country and its brand and content manager, Kathryn Dawson-Lee said the collaboration is not only a first in the brand's history, but one to go down in history, too. She said:

    For over 90 years, Hard Yakka have built a strong legacy on being Australia's most-loved workwear brand and, even with overwhelming success, we're continually on the lookout to push the boundaries.
    From the very first meeting with Thrills in 2018, we knew we'd work like a well-oiled machine. It was a new opportunity and major leap for us to widen our brand breath to an entirely new generation of cult Hard Yakka followers.
    Together we've spent over a year developing durable pieces tough enough to withstand Australia's harsh conditions yet flexible enough to fit into any and all situations, spanning from men's and women's denim, shirts and tees to pants and accessories in Hard Yakka's iconic colourways.

    Thrills designer Steve Fontes explained that each part of the project has been considered, from the timeless quality down to the consciously-chosen sustainable fabrications. He said:

    The purpose behind the collection is far greater than the pieces; it's about taking accountability and doing our part to transform the industry through transparency and reduce our footprint on the planet.
    Our greatest tool in the shed is organic cotton, which continues to give back to the world in more ways than one; being grown without the use of toxic fertilisers, capturing carbon and conserving biodiversity,
    What we choose to wear says both who we are and what we stand for, so we wanted to give our customers the opportunity to express the kind of future they want to live in.
  • Source: Shop Eat Surf
  • products

    Rate increase shows little hardware revenue impact

    ABS hardware retail stats to June 2022

    While the strong growth rates of FY2021 are almost absent from FY2022 hardware retail revenues, the past gains have been retained. Only VIC has shown a tendency to go backwards in revenue terms, while SA has seen strong growth.

    The Australian Bureau of Statistics (ABS) has released hardware retail revenue stats for June 2022. Looking at the trailing 12-months to their numbers provides us with the standard financial years of July to June.

    The two major issues that hardware retailers are concerned about is how the increase in interest rates from the Reserve Bank of Australia (RBA) will affect sales volumes, and what the mid-term effects of increasing inflation will be on their profitability and market share.

    In terms of the first issue, we've already seen - as HNN and a wide range of other sources have been predicting since early 2021 - a decline in dwelling prices, with further declines likely as the cash rate edges up over 3.0%. It's also quite possible that by January 2023 the inflation rate will exceed 8.0%.

    While these are important issues, the really interesting attribute of the current economy isn't its vulnerabilities, it's the unexpected robustness that it is showing. Unemployment remains at historical lows and demand remains generally high. That is despite inflation, largely caused by limited supply brought on by interruptions to the supply chain at the high point of the COVID-19 pandemic, coupled with international events such as Russia's invasion of Ukraine, and several recent natural disasters in Australia itself.

    One possibility is that the Australian economy has survived as well as it has because it had been plunged into a low-growth period since around 2017 or so. That's the only real explanation as to why Australia has very low growth in the Wage Price Index, despite very low unemployment and surging vacancies in businesses. It's worth remembering that right before the COVID-19 pandemic, the federal government policy was dominated by a low-spending, low-stimulus plan, which was being marketed by then Prime Minister Scott Morrison and then Treasurer Josh Frydenberg as "back in the black".

    Australia

    Chart 1 shows the cumulative revenues for the states and territories over the historical financial years. (Note that recent historical numbers for both Tasmania and the Northern Territory are not available, so we've combined these into a single number, derived by subtracting the totals from the rest of Australia from the total for Australia. This is slightly inaccurate, as there are some revenues obtained outside of the states and territories, but is a reliable estimate.)

    This shows that the major growth period was between FY2020 and FY2021, at 10.7%, while the most recent growth, from FY2021 to FY2022 was less that half of that, at 5.3%. For the states, South Australia (SA) had the strongest growth to FY2022, at 12.8%, a lift in revenue of $179 million, followed by Western Australia (WA) at 8.6% ($206 million) and New South Wales (NSW) at 6.8% ($485 million - the highest dollar amount gain). In contrast, Victoria (VIC) actually saw a decline, of 0.2%, and the Australian Capital Territory (ACT) managed only a 1.3% gain.

    Chart 2 shows the percentage change year-on-year for the hardware revenue.

    If we exclude the often volatile results for the ACT, it's evident that the most recent results show a wider spread across the states and territories than FY2020 and FY2021.

    Chart 3 shows a year-to-year comparison for Australia.

    This illustrates what is by now a familiar story. There is the sharp kick upward in revenues at the start of the pandemic for March in FY2020 (the green line), which continues on into FY2021 (the blue line), until it reaches March 2021, and growth goes negative as the early highs are averaged down. For FY2022, there is only modest growth through the first half, then a steady pickup from February 2022, with growth holding at just under 10%.

    In terms of coping with inflation in statistical terms, though we are quite lucky to have the ABS break out hardware retail numbers, that luck doesn't quite extend to getting revenues in chain volume terms, which would give us better idea about performance with null inflation. It is quite possible that these numbers, and the detailed numbers for the states, really show less than 50% of the indicated growth.

    New South Wales

    Chart 4 shows the financial year numbers for NSW. This is the state that most closely echoes the national numbers.

    Perhaps the most outstanding indication is simply that the revenues do not appear to reflect much influence from the increased interest rates for the May and June FY2022 figures.

    Victoria

    The VIC numbers reflect a less-positive picture than those for NSW. While the state had a similar sharp rise in revenues for FY2020, its performance in FY2021 moderated more swiftly, and 2022 saw lower revenues than FY2021 for nine out of the 12 months, as indicated by Chart 5.

    There is also some evidence in these numbers that the increase in interest rates has had some moderating influence, pushing growth into negative territory for June 2022.

    Queensland

    The revenue results for QLD continue to sit somewhere between those for NSW and VIC, as shown in Chart 6.

    While the initial kick in the second half of FY2020 is stronger than for those other two states, and remains at a high level through to January 2021, it falls steeply through to May 2021, and returns to positive growth in August 2021. It remains subdued through to February 2022, then lifts growth for the final four months of FY2022.

    South Australia

    The revenue numbers for SA show unexpectedly robust performance for the second half of FY2022, with growth peaking at 35% for June 2022, as shown in Chart 7.

    In fact, results for FY2022 outperformed those of FY2021 for 11 of the 12 months.

    Western Australia

    WA showed the steadiest and most consistent growth through FY2022, from August 2021 onwards, as Chart 8 shows.

    That said, there is something of a slight decline for the final two months of FY2022, which could indicate some sensitivity to interest rates.

    Australian Capital Territory

    For the ACT April 2021 through to October 2021 proved an underperforming period, with some months returning pre-pandemic levels of revenue.

    From November 2021 through to the end of FY2022 the growth performance has been around 10%.

    Analysis

    The reality of the current global situation - which directly affects the supplychain - is that the COVID-19 pandemic is very far from being over, as illustrated by growing supply problems out of China. In Australia, the state and federal governments are currently banking on the very high death rates from COVID-19 - equalling the high numbers from earlier peaks - coming down as the current wave diminishes.

    However, it is worth noting that the worst preceding wave took place in January 2022, and there is no guarantee that another deadly wave will come back for the next Australian summer. The other fear that goes with this is that while it seems to be the case currently that builders are able to work through the projects that have already been booked with them, despite delays due to material shortage and limited availability of skilled tradies, there is no guarantee that will last.

    If the delays continue to get longer, even as new projects fade away with higher interest rates, the construction industry could face a difficult market.

    statistics

    Big box update

    VCAT approves Bunnings build in Kyneton (VIC)

    The tribunal disagreed with council the new store would be inappropriate for a site located on Edgecombe Road

    The Victorian Civil and Administrative Tribunal (VCAT) has dismissed a claim that a Bunnings store cannot be built in Kyneton (VIC).

    In 2021, developers took the Macedon Ranges Shire Council to VCAT after it failed to make a decision fast enough on their application for a Bunnings store 1.6km away from the centre of town in Kyneton. It would be the anchor tenant for a collection of retail premises.

    The council told VCAT that if it had made a decision, it would have opposed the Bunnings on a number of grounds, according to a report in the Bendigo Advertiser.

    It argued the Bunnings building would clash with the area's unique, rural township character and detract from a gateway into Kyneton, in part because motorists would be able to see it from the Calder Freeway. The council told VCAT:

    While the proposal is an appropriate use of the site, the development response fail [sic] to recognise the sensitivities of the site.

    Witnesses for the developers argued the building's design was one Bunnings had used at other regional locations.

    VCAT described the building as a generally typical Bunnings Warehouse design, with a low-pitched roof, dark green metal cladding walls and white panelling along the lower portion of the facades.

    VCAT said the land was not at the town's border and was in an area zoned for commercial use, with industrial lots already visible to people entering that part of town. It also expected the rural feel of the area would change over time, and that building designs and landscaping would soften the Bunnings' visual impact.

    The council lodged a number of other objections that failed to sway VCAT. They included arguments that more landscaping was needed, especially to soften the building and car parking from roads like the Calder Highway.

    The council also argued designs for a 190-odd space car park could be more pedestrian-friendly.

    VCAT found current landscaping plans and car parking would be appropriate. It ordered developers to submit updated plans to planning authorities.

    In Star Weekly, the council said it was "disappointing" a Bunnings is now on the way to the outskirts of Kyneton.

    Last year, the council knocked back two separate proposals for land at the intersection of Edgecombe Road and Pipers Creek Road, which included plans for a Bunnings Warehouse. It received more than 500 objections to the proposal.

    The decision was appealed at VCAT, and while the proposal for a service station and attached McDonalds at the same location is still pending, the tribunal granted a permit to construct a building, put up signs and create access and parking for Bunnings.

    The council's planning and environment director Rebecca Stockfeld said it had blocked the planning application for a range of reasons which had not been addressed by the VCAT decision. Ms Stockfeld told Star Weekly:

    The proposal had detrimental amenity impacts, a poor design and interface with its surrounds, inadequate landscaping, removal of native vegetation, and poor layout for pedestrians within the car-parking and access areas.
    The VCAT decision to approve the development with little change to the design is disappointing.
    The approved Bunnings will have a generic design, similar to many others in large cities, rather than responding to the unique character of Kyneton and the Macedon Ranges.

    A spokesperson from one of the four respondents to the VCAT hearing, the Macedon Ranges Sustainability Group, said they could not comment at this stage as an appeal for the second proposal was still underway.

    At a council meeting in September 2021, mayor Jennifer Anderson said developers for both applications had not met the necessary standards for approval. Cr Anderson said last year:

    We are now declared an area of distinction and landscape, and we have a standard of planning policy and we must look at when we look at any application. It is mandated upon every authority to do so, and the officers have assessed this application against that and feel that it doesn't meet all those criteria.

    Ms Stockfeld said council would "continue to push for new developments to comply with the design standards incorporated within the Macedon Ranges Planning Scheme" into the future.

    Related

    A proposal for a Kyneton store in regional Victoria has been rejected.

    Kyneton development goes to tribunal - HNN Flash #67, October 2021

    A new development in the central Victorian town of Kyneton includes a Bunnings.

    Bunnings proposed for Kyneton -HNN Flash #57, August 2021
  • Sources: The Bendigo Advertiser and Star Weekly (Sunbury & Macedon Ranges)
  • bigbox

    Supplier update: Haymes Paint

    Rated "Best in Australia" five years in a row by Canstar

    The paint company has claimed Canstar Blue's "Most Satisfied Customers - House Paint" award for 2022

    The latest award from Canstar Blue is Haymes Paint's fifth in a row, rounding out half a decade of excellence for the largest Australian made and owned paint manufacturer.

    Haymes Paint topped six of its major competitors in the "House Paint" category including British Paints, Dulux, Accent, Wattyl, Berger and Taubmans.

    In addition, it is the only paint manufacturer to score the maximum five stars across the board for overall satisfaction, durability, ease of application, quality of finish, value for money and variety/range. Haymes Paint CEO, Rod Walton, said:

    Australians have spoken, and we could not be more proud to be their most trusted and respected paint manufacturer.
    To win this award for five years in a row is very humbling, and only made possible by the commitment of the entire Haymes Paint team to strive for excellence in all areas of our business.
    Every member of our team loves what they do and lives by our core values of passion, trust and respect and are driven by the motivation to continue deliver quality products to all our customers. It is pleasing to see that passion reflected so positively on our loyal customers and partners.

    Canstar Blue works alongside respected market research companies to ask everyday Australians about their experiences with purchased products and services. The "Most Satisfied Customers" award reflects the views of over 1,600 survey respondents from across the country.

    Canstar Blue group manager, Morgan Montova applauded the team at Haymes, and said:

    This is quite an incredible achievement for the Haymes Paint team. In such a competitive industry, it can certainly be difficult to maintain consistently high customer satisfaction ratings over a long period.

    Mr Walton said:

    To see our products rated so highly by the Australian public for half a decade now is incredibly rewarding. Whether it's our research and development team, our manufacturers in Ballarat, or our customer service specialists across our Haymes Paint Shops, everyone works together to create high-quality products that last.
    To know those products are not just being used - but also enjoyed - by our customers is all we can ask for.

    Haymes Paint has maintained its head office and manufacturing in Ballarat where it all began. This decision has been instrumental in providing employment and growth to the region, and has allowed the business to maintain its local identity.

    It currently has a network of over 58 Haymes Paint Shops and 34 PaintRight stores, and is proud to partner with more than 220 independent paint specialists and hardware stockists nationally.

    Related

    Paint On Australia campaign - HNN Flash #81, February 2022
    news

    New products

    Knauf releases SHEETROCK ONE

    Master Lock has launched its new range of maximum security Magnum padlocks with longer shackles to ensure greater flexibility of use

    Knauf said it is taking simplicity to the next level with the launch of SHEETROCK(r) ONE. It is designed for seamless use across walls and ceilings, and expands the SHEETROCK range of products.

    SHEETROCK ONE is a single 10mm lightweight plasterboard solution for residential wall and ceiling applications, replacing current 10mm SHEETROCK wall and ceiling standard plasterboards.

    With a single board, SHEETROCK ONE enables more efficient manufacture and delivery, and is easier to order and store. Able to span up to 600mm without sagging, SHEETROCK ONE also makes installation simple, to help installers work more quickly on and off-site. Tony Charnock, managing director, Knauf in Australia said:

    Feedback from customers was one of the driving forces behind this latest product launch, informing Knauf of the many benefits of a single 10mm plasterboard compared to the traditional separated offer.
    Simplifying the 10mm Knauf SHEETROCK range will reduce complexity on site, simplify orders and help make installation easier. One board for both walls and ceilings will also free up space and time for distribution and delivery, with our customers ultimately benefiting from improved continuity and reliability of plasterboard supply.

    SHEETROCK ONE is now available in NSW, ACT, Victoria, Tasmania, South Australia and Queensland, in a range of plasterboard sizes to suit residential 10mm wall and ceiling applications.

    The launch of SHEETROCK ONE comes after the successful acquisition of USG Boral by the Knauf Group. Now known as Knauf Gypsum, it is committed to helping customers meet the increase in demand for plasterboard products, building systems and materials.

    Related

    USG Boral rebrands as Knauf - HNN Flash #81, February 2022

    Master Lock Magnum

    The new Magnum range from Master Lock offers better security application options with the addition of a long shackle design (64mm shackle length), making it easier to safely secure more personal items (including with multiple chains and hasps).

    The range features boron carbide shackles that are 50% harder than hardened steel. The dual-armour construction with stainless steel laminated body provides maximum strength and security, as well as weather and corrosion resistance, even in prolonged extreme weather conditions. Each lock has a 4-pin cylinder for optimal pull and pry resistance.

    The new Master Lock Magnum Long Shackle padlock range is available in three variants: M1TLJ, M5DLJ and M5TLJ.

    They have been designed for both commercial and domestic uses, and can be purposed for a variety of functions including security on worksites, locking up fences, sheds and storage buildings, as well as safeguarding personal belongings.

    Related

    Master Lock celebrates its centenary - HNN Flash #31, February 2021
    products

    Supplier update: Fletcher Building

    New Zealand's Commerce Commission greenlights acquisition

    Fletcher Distribution has been cleared to acquire Tumu stores and a frame and truss plant

    The Commerce Commission in New Zealand has granted clearance for Fletcher Distribution, a wholly owned subsidiary of Fletcher Building, to acquire six building products stores, and a frame and truss manufacturing plant, from Tumu Merchants (Tumu).

    The six Tumu stores (which until recently operated under the ITM banner) are located in Gisborne, Napier, Hastings, Havelock North, Dannevirke and Masterton. The frame and truss manufacturing plant is located in Hastings.

    Fletcher Building operates the national network of Placemakers stores across New Zealand.

    In reaching its decision, the Commission considered the potential impact of the proposed acquisition on competition for the supply of building products to trade customers in the Wairarapa and Hawke's Bay regions, as well as national trade customers, predominantly group home builders. It also considered the potential competition impact on the manufacture and supply of frame and truss.

    Chair Anna Rawlings said the Commission was satisfied that the acquisition is unlikely to substantially lessen competition in any New Zealand market.

    We are satisfied that the merged entity will be constrained by competition from CARTERS and Mitre 10 in relation to the supply of building products to trade customers in the Wairarapa and Hawke's Bay, and Bunnings in the Wairarapa as well.
    Further, we are satisfied that the acquisition, and Tumu's recent exit from the ITM group, is unlikely to significantly impact ITM's ability to compete for national customers such as group home builders. ITM will still have a significant network of stores across New Zealand.
    The acquisition is also unlikely to increase Fletcher Distribution's incentive or ability to foreclose rival merchants' access to key building supplies.
    Finally, we are satisfied that competition in the manufacture and supply of frame and truss is unlikely to be significantly impacted, given the limited pre-merger competition between the parties and the presence of several other manufacturers and suppliers.

    In a statement, the Commission provided some explanation about how it assessed the merger application:

    We will give clearance to a proposed merger if we are satisfied that the merger is unlikely to have the effect of substantially lessening competition in a market. The test under section 47 focuses on whether existing competition is likely to be substantially lessened as a result of an acquisition in any relevant market related to that that acquisition.
    This is a different analysis to that being undertaken in the Residential Building Supplies Market Study, which is considering the factors that may affect competition for the supply or acquisition of key building supplies. The market study looks at whether competition for key building supplies is working effectively and, if not, why not and how competition could be improved.
    The conclusions we have reached in relation to our decision on clearance are specific to the facts of this acquisition and whether competition in the affected regions would be lessened substantially by it.
    Our work on the Residential Building Supplies Market Study is ongoing and will consider a range of matters in addition to competition at a merchant/distribution level...

    Related

    Fletcher Distribution proposal to acquire the six ITM stores - HNN Flash #87, March 2022
  • Sources: Commerce Commission and Scoop New Zealand
  • companies

    Europe update: Kingfisher

    Cost-of-living increases present opportunities for own brands

    Kingfisher believes own brands are becoming increasingly important in an environment of higher inflation. Price may be the reason shift, but own brands can offer much more than just cheaper products.

    In a recent edition of UK publication Retail Gazette, Kingfisher chief offer and sourcing officer Henri Solere writes that the cost-of-living crisis is "a moment for own brands to shine".

    Own brand products have a number of benefits for consumers, and against the current backdrop of rising living costs, affordability has leapt to top of the list, according to Mr Solere. He writes:

    At Kingfisher, our own exclusive brands - or OEBs as we call them - are 15-30% cheaper than branded products. Our OEBs have significantly grown in popularity in recent years, up 19% since 2019 and now account for 45% of Kingfisher Group sales.
    But while the affordability argument for buying own brand is clear, there remains a lingering perception that own brand can mean compromising elsewhere - whether that's on quality or on other considerations such as sustainability.
    That might have been true twenty years ago, but today's reality could not be more different.
    It is no longer about sourcing the same products for less, but instead about how we can add value as retailers who know their customers inside out, using that insight to design and develop products that truly suit their needs.
    With consumers thinking more about their finances, now is the time for retailers to step up and show what own brands can deliver.
    The truth is that most own brand products have gone through an exceptionally rigorous design, testing and development process.
    For Kingfisher, the development of any of our OEB product starts with our customers' home improvement challenge whether that's in DIY or trade - and we work back from there. We then find ways to develop and supply the product at scale, so great design is affordable and accessible to everyone.
    To give an example, through listening to our customers, we learnt that they need more space efficient, multi-functional areas in their homes, particularly in the kitchen. So, we created the Romesco smart space sink, which has the functionality for a work surface on top of the sink bowl for preparing food or drying dishes when it isn't in use.
    As retailers, we need to make sure we are not just thinking about now but pre-empting what our customers will need in the future.
    For example, our team undertake in-depth trend analysis to identify changes around how we live in and improve our homes, so we can design products that make customers' lives easier for the long term.
    The success of any of our OEB products is rooted in our ability to truly understand a customer's problem and create a product that fixes it, with our award-winning in-house design team dedicated to delivering just that.
    Having an own brand offer means that a retailer has complete control over the process of bringing products to market. Our depth of knowledge and expertise in home improvement means that we have the ability to create products that solve our customer's challenges, with the reassurance that they are buying from a business that they can trust.
    The 'no compromise' approach doesn't just apply to quality. We want to help customers live more sustainably, without a price premium.
    Our Erbauer 18V power tools are an excellent example of this. We know that most carbon emissions when manufacturing drills come from the battery and charger, so we've developed a product with a battery that can be used in multiple tools thanks to its modular design. In addition, the products' brushless motors mean they last longer between charges, use less energy and have a longer product life.
    Going forward, we're committed to making sustainable home products affordable and accessible to all.
    That's why, despite the cost-of-living crisis, we've increased our sustainable home product target to account for 60% of sales by 2025/26, 70% of which will come from our OEBs.
    As retailers, we need to tackle head-on the outdated myth that buying own brand means buying an inferior product.
    The innovation and expertise that goes into the development of own branded products is remarkable, and the cost-of-living crisis means it has never been important to show what they can do when it comes to affordability and innovation.
    It's time for retailers to rise to the challenge and prove what own brand is really capable of achieving for consumers.

    Related

    Kingfisher provides a trading update.

    Kingfisher said demand for DIY remains resilient - HNN Flash #96, May 2022

    Earlier this year, Kingfisher released its full year results.

    Kingfisher FY2021/22 - HNN Briefing No.5, March 2022
  • Source: Retail Gazette
  • bigbox

    Timber, steel prices climb to unexpected highs

    ABS Producer Price Index stats reveal how high costs have grown

    It's simply not normal to see something like 60% price index increases quarter-on-corresponding-quarter for building supplies. Yet that is what the Australian market is currently experiencing. While interest rate increases may be set to slow the actual housing market itself, it's difficult to imagine the house construction market being able to survive if the current rate of increases continues.

    The Australian Bureau of Statistics (ABS) has released its stats for the Producer Price Index, including for the category of inputs into the house construction industry. These are very useful stats for obtaining a better understanding of price rises for the building materials used in house construction.

    In this overview and analysis, HNN is providing an overview of the main categories in these stats for Sydney, Melbourne and Brisbane.

    It's often difficult to know exactly how to present these kinds of stats so that they are easy to understand, and unlikely to provide confusing indications. In this case we've chosen to present them in a year-by-year format. The years we are providing are the four quarters to the June quarter, which corresponds with Australia's financial year (FY), which is how we will refer to these periods.

    Generally, this format is most useful where you have seasonal elements. While there is seasonality in some of these stats, we've adopted it here is because the most recent period, FY2021/22, is quite unusual in most of these stats, and this format serves to highlight that.

    That said, one of the real difficulties with this format is that there is a visual discontinuity between the periods. It's helpful to track the stats from FY2021/22 (the dark red line) by seeing that it begins where FY2020/21 (the light blue line) ends. That's important because in many categories the climb in prices begins with June quarter 2021.

    The prices are provided by the ABS as index numbers, and we've taken the percentage change for quarter on corresponding quarter - so March quarter 2021 is compared with March quarter 2020.

    One other element to call out is that it's simply not possible to effectively use a single scale for the quantitative Y-axis as the data varies substantially, so it's a good idea to look beyond the slope of the graph lines, and to check the scale used for the index number and the percentage.

    Sydney

    In the overview of the basic components of construction, most categories show strong price increases for FY2021/22, with the exception of concrete products.

    The steepest rise is for steel products, with a 36.0% increase in prices for June quarter 2022. Timber also increased sharply, up by 18.6% in March quarter 2022, while ceramic products (which includes bricks) and other metal products increased by over 12%.

    For more complex products the rises were somewhat mixed, showing some sharp increases for FY2021/22, but a history of price volatility.

    This was true for both electrical equipment and plumbing. Gas and electric appliances did show price index rises above the norm for FY2021/22, and other materials escalated prices substantially.

    Melbourne

    While steel products for Melbourne reached the price index of close to 160, equalling Sydney, the rise was from a lower base, resulting in a quarter-on-quarter increase of 45.0%.

    With other metal products, however, the Melbourne price index was higher at around 150, with an increase of 25.0%. Timber rose especially steeply reaching a price index of 166 for June quarter 2022, with a quarter-on-quarter increase of 28.7%. Ceramic products also had a higher index than Sydney, and a percentage increase of over 15%.

    In more complex products, gas and electric appliances showed a steep increase in FY2020/21, which was maintained in FY2021/22. Plumbing, electrical equipment and other materials also rose to new highs in the price index.

    Brisbane

    The price index for steel products increased by 58.8% for March quarter 2022 as compared to March quarter 2021, with the price index itself closing out FY2021/22 at 175.

    The timber price index increased by 30.6% for the June quarter 2022, ending at 172. Ceramic products, however, dropped their price index for the first two quarters of FY2021/22, before equaling the price index for September quarter 2021.

    For more complex products, while both electrical equipment and gas and electric appliances found new highs in the price index, they have a background of considerable volatility in Brisbane.

    Plumbing and other materials, however, both found new highs in results broadly divergent from past stats.

    Timber

    While the ABS does not break down timber categories on the same basis, they do provide a weighted average across the capital cities.

    As these charts clearly indicate, timber products have shown highly unusual patterns of growth in price indices.

    Analysis

    While most hardware retailers and builders have grown somewhat accustomed to see steep price rises since mid-2020, these charts make it emphatically clear just how steep and unexpected the rises in the current market have become.

    The difficulty is that the current situation has increased in fragility. Current shortages are made up of the initial impact of COVID-19, followed by ongoing shutdowns in supplier sources such as China due to the Omicron variant of COVID-19, complicated by Russia's invasion of the Ukraine pushing up transportation costs still further.

    The concern is, of course, that these rises will simply continue until the industry reaches a point of market failure. This also places further doubts over whether the industry can confidently expect the backlog of building projects to be completed over the next 18 months. With interest rates set to gain another full percentage point (100 basis points) this year, it's possibly many prospective homeowners will just decide to give up for another couple of years.

    statistics

    Big box update: Store development

    Application for bigger Bunnings Lithgow store

    Bunnings in Hoppers Crossing (VIC) up for sale and Bunnings Timaru in New Zealand is expected to open in 2023

    A larger Bunnings store could be part of Lithgow's Pottery Plaza in NSW after a development application (DA) was lodged with Lithgow City Council. The proposed commercial premises would be located in Lot 26 DP 1244557 at 21 Willowbank Avenue, off Valley Drive, according to the Lithgow Mercury.

    Bunnings area manager Michele Ward said the new site would replace the existing Lithgow store which is currently located at 295 Main Street in Lithgow. She told the newspaper:

    The proposed store represents an investment of more than $13 million and would span more than 6000sqm, 1500sqm larger than the existing store.

    Ms Ward said the store would create 35 new jobs in the Lithgow community and feature an improved store layout, nursery, a timber trade drive through and car park dedicated for more than 100 cars.

    Bunnings has been part of the Lithgow community since 2010 and we look forward to providing local customers with a much wider range of home and lifestyle products. We will keep the community updated as our application progresses.

    The application and plans for the proposed site are available for public inspection at Lithgow Council's administration centre and on the council's website until August 5.

    Bunnings Hoppers Crossing

    The 55,000sqm Bunnings Hoppers Crossing store in Wyndham City (VIC) is being offered through an expression of interest campaign which closes on 11 August, reports The Property Tribune.

    The store is one of the largest in the Bunnings network, at 21,670sqm, and is complemented by an Amart Furniture outlet. Amart recently renewed its year, resulting in a weighted average lease expiry of seven years, and a total net income of over $4.72 million. Almost three-quarters of this is paid by Bunnings, owned by ASX-listed Wesfarmers.

    Billy Holderhead, a partner of Burgess Rawson, said investor appetite in this sector remains strong, with considerable interest from the top end of the market. He told The Property Tribune:

    Given the scale of the Bunnings store, the quality of its location, forecast growth in the trade catchment, size of the landholding and its robust lease structure, we've backed the property as the best Bunnings freehold ever offered on the open market.

    This Bunnings store is in a high-profile location in what is considered to be the fastest growing local government area in Australia over the past two decades.

    Business consultancy Deep End Services also said the property has the largest concentration of large format retail floor (LFR) space in Victoria. Harvey Norman, The Good Guys, JB Hi-Fi and Barbeques Galore are all located within 500 metres. Mr Holderhead said:

    With swathes of undeveloped residential land in Wyndham City there's still much more growth to come, and the Hoppers Crossing LFR precinct is strategically placed to benefit from this.

    The Bunnings store is being sold as part of a $350 million commercial property auctions and expressions of interest campaign beginning in August. This includes a Wattyl Paints store in Sunbury (VIC) which has signed a new seven-year lease to 2029, with options to 2034.

    Bunnings Timaru, New Zealand

    A Bunnings store located in Timaru, a port city in the southern Canterbury region of New Zealand, is expected to open next year. It is part of the Showgrounds Hill retail development site.

    Ben Camire, director of Bunnings New Zealand said work on the new store is progressing well. He told The Timaru Herald:

    The store's steel structure is now complete to make way for construction of the roof and store exterior, with concrete floor pours also underway. We anticipate the store opening in mid-2023...
  • Sources: Lithgow Mercury, The Property Tribune and The Timaru Herald
  • bigbox

    Supplier update: Knauf cyber attack

    Black Basta ransomware gang claims responsibility

    The building supplies company has been operating a reduced service since the breach in late June. However, it continues to work vigorously in reinstating operating procedures and is well on its way to achieving this, according to its corporate website.

    The Knauf Group has announced it has been the target of a cyber attack that has disrupted its business operations. To isolate the attack, Knauf's IT team shut down all operations across its business, some of which may still have temporary workarounds in place.

    The cyber attack took place on the night of June 29, and it is understood Knauf is still in the process of forensic investigation, incident response, and remediation.

    Emails seen by the Bleeping Computer website warned that email systems were shut down as part of the response to the attack but that mobile phones and Microsoft Teams were still working for communication.

    While Knauf's announcement does not explain the type of cyberattack it suffered, the extended duration, impact, and difficulty in restoring the IT systems point to a ransomware incident.

    Indeed, the ransomware gang known as Black Basta has taken responsibility for the attack via an announcement on its site, listing Knauf as a victim on July 16, 2022. It has published 20% of the files it allegedly exfiltrated during the cyber attack on Knauf, which over 350 visitors have accessed.

    Bleeping Computer said the documents uploaded appear to be examples of health insurance information, as well as user credentials, employee contact information, product documents and ID scans.

    The low percentage of files posted on the dark web hints that the ransomware negotiations could be ongoing.

    More details of the ransomware attack can be found here:

    Building materials giant Knauf hit by Black Basta ransomware gang

    Headquartered in Germany, the Knauf Group employs over 30,000 people around the world including Australia. It holds approximately 81% of the world's wallboard market.

    Related

    USG Boral Building Products Pty Ltd is now known as Knauf Gypsum Pty Ltd - HNN Flash #81, February 2022
  • Sources: Bleeping Computer News and Tech Monitor
  • companies

    New product

    JB Weld Essentials Pack

    It provides effective repair options for DIYers, tradies, caravanners, 4WD enthusiasts, motor cyclists, as well as agricultural and marine applications

    JB Weld's Essential Travel Pack contains five travel-sized products including putty, two-part epoxy and silicone. There are three putty sticks: one for repairing steel (SteelStik), one for water-related repairs (WaterWeld), and one for repairing plastics (PlasticWeld). The two-part epoxy is designed to repair metals, while the silicone comes with its own applicator.

    All come separately stored in compartments of a clear plastic box. The back of the box has information including instructions, a guide for working times through to setting times, plus the overall rating once fully cured.

    When using any of the putty sticks, assess how much you need then cut a piece off and remove its outer wrapping. Begin to work the putty together in your hands - it's ready to be used once it's fully mixed.

    Each of the putty sticks have different applications, and their contents can be moulded into any shape. The curing time for the putty varies, with the SteelStik and WaterWeld requiring one hour. The PlasticWeld takes three hours.

    After waiting for the required curing time, the putty can then be drilled, tapped, sanded, filed, or painted, depending on the putty type.

    At the completion of the repair, you simply return any unused putty back into the tube so it's ready for the next repair.

    The two tubes in the pack for the two-part epoxy cold weld system require a mix of 50/50, so it's simply a case of squeezing out what you need from both tubes and mixing them together well. This product provides a permanent bond on a range of surfaces and takes between four and six hours to completely cure.

    The fifth pack product is a tube of Ultimate Grey Silicone. Although its label specifies it as a "water pump and thermostat housing gasket maker & sealant", it's the type of silicone that could be used anywhere a gasket repair was required.

    JB Weld Essentials pack covers multiple situations and is stored in a neat carry case not much bigger than hand-size.

    JB Weld products are manufactured in the United States and considered to be the "World's Strongest Bond".

    For more information, visit the company's Australian distributor, HPP Lunds website below or call (07) 3722 1111.

    HPP Lunds, a leading independent wholesaler of automotive parts and accessories in Australia

    Related

    US-based JB Weld provides consistency of supply for Australian retailers.

    JB Weld Silicones - HNN Flash #102, July 2022

    FiberWeld is part of the JB Weld range.

    FiberWeld joins JB Weld's range of products - HNN Flash #103, July 2022
    products

    Big box update

    Bunnings consolidates its merchandising team

    Bunnings and Kmart Australia have paused the use of facial recognition technology while the Australian Information Commissioner investigates their personal information handling practices amid privacy concerns

    Recently appointed Bunnings merchandising director Jennifer Tucker has reduced her direct merchandise reports from three to two. This restructure means that dozens of categories will be grouped into two new portfolios: "building" and "home and lifestyle", according to The Australian.

    Adrian Pearce will lead the "home and lifestyle" portfolio and Cam Rist will lead the "building" portfolio. As a result, Tracey Lefebure will leave Bunnings after a career with Wesfarmers of 34 years.

    In a letter sent to Bunnings suppliers, obtained by The Australian, Ms Tucker told suppliers the change in the merchandising teams would help drive growth and "simplify the way we work". She wrote:

    This simplification of our structure will position us to accelerate our growth strategy in our commercial (tradies) business while also driving our core DIY business.

    Ms Tucker's rationalisation of teams that report to her replaces the structure set up by former Bunnings merchandise director Phil Bishop, who was recently appointed as CEO of discount retailer The Reject Shop. He was Bunnings' director of merchandise and marketing until early 2021.

    The Australian also reports Bunnings held a supplier forum in early July- its first in-person mass meeting with suppliers in more than two years - where issues around Bunnings' strategic agenda and the focus on merchandise strategies were fleshed out.

    For the suppliers who attended the forum, of which 450 were in person and 350 people online, Bunnings laid out merchandise growth opportunities around deepening and evolving its range for both consumer and commercial markets.

    Suppliers were told Bunnings was keen to expand its depth across existing product categories, with particular opportunities in room and furniture storage, garden and garden decor, and kitchen and bathroom. New growth opportunities were also revealed to be in in-home services, pet durables, recreation and the online Bunnings Marketplace.

    The suppliers were also told Bunnings believed that broader consumer growth would come from driving the core pillars across lowest prices, widest range and best experience. From a commercial range point of view, focused on tradies, it would be about better catering for each stage of the build and the needs of specialist trades.

    During the forum, Bunnings also discussed opportunities for its suppliers to partner with it on product innovation and new solutions to address the opportunities the hardware giant sees in the market.

    Related

    Bunnings plans trade revenue growth of $5bn - HNN Flash #97, June 2022

    Facial recognition tech on pause

    Bunnings and Kmart have stopped using facial recognition technology after CHOICE named large retailers that do not collect and use such biometric information, and have no plans to introduce it. Those retailers include Woolworths, Coles, Aldi, Target, Big W, Myer, David Jones, Dan Murphy's, BWS, Vintage Cellars, Liquorland, Rebel and Officeworks.

    Bunnings managing director Mike Schneider said facial recognition allowed the hardware retailer to identify when a banned person entered a store. He told the Australian Financial Review (AFR):

    When we have customers berate our team, pull weapons, spit, or throw punches, we ban them from our stores. But a ban isn't effective if it's hard to enforce.
    For absolute clarity, an individual's image is only retained by the system if they are already enrolled in the database of individuals who are banned or associated with crime in our stores.
    We don't use it for marketing or customer behaviour tracking, and we certainly don't use it to identify regular customers who enter our stores as CHOICE has suggested.

    In the Australian Associated Press, Mr Schneider said:

    If a particular Bunnings store has facial (recognition), and not all of our stores do, the camera will scan your face. It will map it back to the database, and if it doesn't recognise it, no data is held.

    If the camera does 'recognise' a face, their image goes back to Bunnings' loss-prevention team, which determines whether there is a genuine match and they should call the police. He said:

    That's what's been so frustrating for us in the way that this has been characterised by CHOICE. .It's not in any way designed to look at shopping patterns or anything else, it is purely there for the wellbeing of our team.

    It temporarily switched the technology off in stores ahead of a platform shift earlier this year, and has since informed the privacy watchdog it will not be reverting to it for the time being. Mr Schneider said:

    Given an investigation is underway, we won't be using it for the time being.

    CHOICE also polled 16,000 supporters in July that that indicated 80% of people want Bunnings and Kmart to stop using facial recognition in stores.

  • Sources: The Australian, Australian Financial Review, The Guardian Australia and Australian Associated Press
  • bigbox

    Supplier update: Brickworks

    Brickworks Manufacturing Trust

    The company has launched a joint venture property fund with industrial property and logistics giant Goodman Group

    Australia's biggest brick and masonry supplier, Brickworks has set up a joint venture real estate trust with Goodman that will buy 15 of the company's manufacturing plants across the country.

    The 15 properties earmarked for the manufacturing trust cover a combined 496ha and are predominantly in Queensland, Victoria and WA, according to the Australian Financial Review (AFR). All the facilities are tenanted by wholly owned Brickworks subsidiaries including Austral Bricks, Bristile Roofing, Austral Masonry and Austral Precast. Brickworks will retain 50.1% ownership of the new trust, with the remaining 49.9% interest sold to Goodman for $207 million.

    The sale of a 49.9% stake to Goodman was struck on initial yield of about 4.3%, and values the property portfolio at $416 million. Each of the 15 sites have long duration leases of five to 20 years with options to extend, giving the new trust approximately $17.75 million in annual income, with yearly increases of 2.5% for most properties.

    After accounting for tax, duty and transaction costs, Brickworks will take home net proceeds of around $193 million, which it will use to pay down debt. In The Australian, Brickworks managing director Lindsay Partridge said:

    The partial sale and lease back of these properties will deliver significant cash proceeds, allowing Brickworks to realise value for shareholders and capitalise on the strong growth in industrial land values over the past few years.

    He said the lease terms were structured to ensure minimal impact to the operational flexibility of the building products businesses.

    Brickworks retains about 5300ha of operational and development land across Australia and North America and will move on these holdings next. Mr Partridge said:

    Among our wholly-owned properties, we have four significant land holdings that may be suitable for sale into our property trust structures over the coming years. Based on independent market valuations, these sites have a combined current 'as is' value of $800 million and a 'rezoned' value of $1.3 billion.

    The sites include a 75ha parcel of land at Sydney's Oakdale East and 332ha of surplus land at Craigieburn, in Melbourne. Both are earmarked for sale into the industrial trust in the coming years.

    According to a report in The Age, the deal comes as the industrial property sector's decade-long growth appears to be losing steam. Online behemoth Amazon warned recently it has "too much warehouse space" and the cost of debt is rising.

    Colliers' managing director for industrial, Gavin Bishop, said industrial vacancy rates have fallen to new lows and currently average 1% nationally in the second quarter of 2022, down from 2.3% in the March quarter.

    Mr Bishop said the lack of leasing options has driven a further acceleration of rents across all markets in the three months to June, with the national weighted average prime rent increasing by 5.6%, representing a record high while year-on-year growth of 13.8% has been recorded. He told The Age:

    While macro headwinds have emerged, including higher inflation, interest rates and funding costs, the fundamentals of warehouse demand remain strong and will continue to drive growth in take-up and rents. Vacancy rates are forecast to remain close to their current levels as new supply is largely pre-committed.

    A report by JLL found that industrial land values had increased by as much as 210% since 2019 in some east coast markets. However, the real estate firm also said it believed industrial land values had now peaked because of rising interest rates and construction costs.

    The Brickworks Manufacturing Trust is the brick maker's second joint venture with Goodman Group alongside the long-running Industrial JV Trust which is developing new warehouse facilities for Coles, Woolworths, Australia Post and Telstra, and valued at about $3 billion.

    Given strong progress on these developments, Brickworks expects to deliver record property earnings this financial year (ending July 31) of more than $620 million, more than double the $253 million recorded in the 2021 financial year.

  • Sources: Weekend Australian, The Age and Australian Financial Review
  • companies

    How healthy is the construction industry?

    ABS stats show distinct industry patterns in every major state

    HNN looks at some key house construction and market stats from the ABS to see where the stresses are growing in the five largest states. While the forces working on each are similar, each state has its own way of resolving the different tensions.

    At this stage of the building supplies market, as both the boost of the pandemic wanes, and the shadow of increased interest rates on home loans grows, it's vital to get some sense of what is happening in terms of the housing market as it relates to new builds.

    As the house market plays an outsized role for building supplies in hardware retail, we're limiting the stats series to only houses. We've combined several sets of stats to provide an overview of how the sector is doing in the five largest states. (The smaller states and territories really need a different set of stats.) Those stats include: monthly numbers of building approvals, to provide a sense of planned builds; stats for building work done, including work yet to be done and building work not yet commenced; and stats on the number of house transfers and their median price values, to track the demand side of the market.

    New South Wales

    While New South Wales (NSW) was socially not as badly affected by the COVID-19 pandemic as Victoria (VIC), its housing market and construction industry were changed more radically.

    Chart 1 shows the stats for building approvals, with the top graph showing the basic number of approvals, and lower graph the percentage change for that top graph. These charts use 12 month periods ending in May, which are designated with the prefix "p". Thus p2021 refers to the period from June 2020 through to May 2021.

    That narrative for house building approvals through the pandemic begins with p2020 (the light brown line). In the months immediately before the pandemic started, from August 2018 through to March 2019, building approvals run somewhat below the number for the two previous periods, p2018 and p2019. The initial response to the pandemic from March 2020 is subdued. It is not until February 2021 (the green line) that approvals begin to climb above past periods, where they remained from March 2021 through to August 2021 - which is in p2022 (the blue line). After that, with the exception of March 2022, where approvals surged, they have mostly remained in line with past periods.

    Chart 2 shows house transfers and building work done.

    In the top chart, the blue lines indicate median price, and the red lines indicate the number of transfers.

    It's easy to spot the most immediate effect of the pandemic, which is the sharp spike upwards for established houses outside of Sydney (the pale red line, which references the scale on the left-hand side of the graph). This starts in the December quarter of 2020, and continues to a peak in the December quarter of 2021, before falling in the March quarter of 2022 below the level it held for the September quarter of 2020.

    Similarly, median prices - the blue lines, referencing the scale on the righthand side - for both Sydney houses and houses outside Sydney start to climb in the December 2020 quarter, and reach a peak in the December 2021 quarter. They remain stable for the March 2022 quarter for ex-Sydney houses (the pale blue line), but decline for Sydney houses.

    In the lower chart, the blue line indicates the value of work yet to be done, and references the scale on the RHS. Work yet to be done is derived by taking the total value of all projects not yet completed, then deleting the value of all the work that has already been done on those projects. It is essentially the "project load" on the construction industry for a particular quarter.

    The brown line indicates the number of dwellings not yet commenced, and references the scale on the left-hand side of the graph. This is a slightly complex stat, as it refers to houses that have received a building approval, but not yet started construction. However, the ABS measures approvals one month back from the quarter. So, looking at stats for the June quarter of 2021 (April, May and June), this would include approvals made in the months of March, April and May 2021.

    In terms of the value of work yet to be done, the blue line shows these dipped below previous quarters from the September quarter of 2019 through to the September quarter of 2020, then began a rapid climb in the June quarter of 2021, before peaking in the December quarter of 2021, and then declining in the March quarter of 2022.

    Dwelling units not yet commenced tends to play off of the previous stat. During the periods where work yet to be done declines, the not yet commenced numbers climb, indicating that projects may be delayed. We can, however, see that this relationship changes for the December quarter of 2021 and the March quarter of 2022, as both measures increase substantially. That indicates growing stress on the construction industry, as it fails to clear the work that has to be done, and there is an increasing stack of projects that remain to be started.

    Conclusions

    These chart bear out much of the standard analysis that builders and hardware retailers put forward for the construction industry in NSW. Even as building approvals pull back their levels from the mid-2021 highs, the construction industry is struggling to get projects started, let alone completed.

    The housing market itself is responding to increasing interest rates (and potentially other forces, such as inflation and increases in spending outlets) with a steep decline in the number of house transfers. However pricing, at least through to the end of March quarter 2022, remained relatively stable. Somewhat ironically, the ongoing limits to the capacity of the construction industry could contribute to a degree of stability in prices by effectively limiting supply, probably through to the end of Fy2022/23.

    Victoria

    Chart 3 shows the building approval numbers for private houses in VIC.

    Overall the trends hinted at in the NSW approvals are more clearly outlined for VIC in the top graph. Approvals spike sharply up in p2021 and p2022, from February through to August 2021. After that, they revert to something close to previous, pre-pandemic years.

    That said, this increase represents a substantial number of houses. Summing up approvals during that spike period, and subtracting the average number of approvals over p2017, p2018 and p2019 for same period, the result is close to 8500 extra approvals being made.

    The bottom graph, showing percentage change, demonstrates this pattern playing out, with approvals for p2022 well into negative territory as the market reverts.

    Chart 4 shows the stats for house transfers and building work done.

    The pattern for house transfers in VIC is quite different to that of NSW. While the median house price for Melbourne and ex-Melbourne follows a similar pattern to NSW - though not reach the same heights - the relationship between the number of transfers in Melbourne and ex-Melbourne is quite different.

    Transfers take a deep dip for the June and September quarters of 2020 in Melbourne, as the real estate market was almost closed during that time, due to lockdown restrictions. That results in a sharp spike back up in the December quarter 2020, followed by some volatility through to December quarter 2021.

    However, ex-Melbourne transfers (the pale red line) initially dip through to June quarter 2020, then begin a long, steady climb up to an initial peak for June quarter 2021. After that they remain relatively synchronised with the Melbourne transfers. Both then decline quite steeply through to March quarter 2022.

    The lower graph on Chart 4 for building work done shows a pattern also very different to that for NSW. Here the numbers of houses not yet commenced follows - in terms of growth - quite closely on the value of work yet to be done. That is, until March quarter 2022, when there is a sudden decline in the not commenced houses. It's a fall from 3133 in the December quarter to just 1534 in the March quarter - a drop of over 50%.

    Conclusions

    More than any other city in Australia, Melbourne faces barriers to building enough accommodation for its citizens. That is in part due to a state government policy of actually engendering a high degree of centralisation. However, one effect of the pandemic has been to overcome those obstacles, and to start to decentralise Melbourne (and therefore Victoria) in a de facto manner.

    The most outstanding feature of these stats, however, is the steep fall in work not yet commenced numbers. One possibility is that, given the restrictions on house building in VIC, due to a shortage of labour and ongoing supply chain issues - as well as the failure of some home builders - this decline represents projects that have been abandoned.

    That might be a temporary status, in that home builders are re-evaluating their options, or it could be a sign of a trend, as interest rates steadily increase and investors have second thoughts. Stats from subsequent quarters will verify what's happening.

    Queensland

    For Queensland (QLD), building approvals began to increase above average levels well before they did for VIC, beginning in October 2020, and continuing through to August 2021, as shown in Chart 5.

    As the top graph shows, the general contour of approvals does follow the seasonal variation of previous periods, though the peak exceeds 3200 in March 2021, where the previous peak was around 2600. The lower chart also shows that starting in October 2021, the growth trend went steadily negative, as approvals dropped back to nearly match those for p2018.

    While the pattern of approvals broadly followed that for NSW and VIC, Chart 6 for house transfers and building work done shows a unique pattern for QLD.

    The top graph for transfers shows that the number of transfers for houses in Brisbane (which includes the Gold Coast) closely matched those for ex-Brisbane up until June quarter 2020. From September quarter 2020 through to December quarter 2021 ex-Brisbane transfers are on a steep growth line, outpacing slower (but significant) growth in Brisbane transfers. Both, however, experience a sharp fall for March quarter 2022, with ex-Brisbane transfers falling more in percent terms.

    For median house prices (the two blue lines), however, Brisbane houses grew at a much higher rate than ex-Brisbane houses, closing in on $800,000 median, while ex-Brisbane median prices were around $550,000.

    The lower graph on Chart 6 shows a steady constant growth in work yet to be done from September quarter 2020, through to September quarter 2021. The number of dwellings approved but not yet commenced in construction (the light brown line) shows a degree of volatility, but with growth eventually averaging out to close that of work yet to be done.

    However, there is a sharp anomaly for September quarter 2021, which a steep decline from around 1500 in the previous quarter to below 1000. There's no apparent reason for this, but QLD has had similar drops in the past as well.

    Conclusion

    Perhaps the most interest statistical feature is the ongoing increase in house prices in the Brisbane area. Given that much of the growth is likely to come from interstate migrants to QLD, this might suggest QLD was the choice for many who didn't want to live in metropolitan Sydney or Melbourne, but also didn't want to move to the regions.

    It is also notable that despite the sharp decline in transfers, the median house prices both in Brisbane and ex-Brisbane continued to rise.

    South Australia

    South Australia (SA) has had its building approvals numbers boosted considerably during the pandemic period, as Chart 7 illustrates.

    One of the features of the top chart for building approvals that stands out is that, unlike the other states, SA almost escaped the "pinch" in approval numbers that occurs during January. Where approvals typically drop below 600 in that month, for January 2021 - at least - approvals remained relatively high, at over 800.

    However, the general pattern of boosting approvals was otherwise similar to other states. The boost began in November 2020 and, aside from a slump in October 2020, continued to December 2021. It has persisted somewhat since then, albeit at a lower rate.

    As the bottom graph on Chart 7 illustrates, at its peak in March 2021, the number of building approvals was up over 100% on the previous period. This means that even though the growth rate has fallen to below -20% in 2022, the actual number of approvals continues to be above the historical norm.

    In terms of the house transfers and building work done stats shown on Chart 8, SA again shows some unusual characteristics.

    While median house prices (the two blue lines) did both rise, the increase for ex-Adelaide prices (the lighter line) was far below that for houses in Adelaide itself. The Adelaide median price rose by 38%, and the ex-Adelaide median price rose by 25%.

    In terms of building work done, the lower graph on Chart 8, this shows that SA had kept up with the flow of construction projects until the March quarter of 2021 with less than 2200 on average pending. However, over the next two quarters these shot up to a high of close 3700.

    That was in response to an increase in the value of work to be done which increased from around $600 million in September quarter 2020, to around $1700 million in December quarter 2021.

    Conclusion

    Unlike QLD, SA had relatively little interstate migration during the pandemic period. Given that SA managed to get through this time with only relatively minor lock downs, this is an indication that the move to increased household formation is as much cultural as it is driven directly by the COVID-19 pandemic.

    Western Australia

    At the peak of the expansion of building approvals, during March of 2021, Western Australia (WA) saw a growth rate of nearly 200%, with approvals at nearly 2700. This is shown in the bottom graph of Chart 9.

    The surge in approvals began in October 2020, and continued through to August 2021. Even as it slowed down subsequent to that, approvals remained above the historical average.

    Chart 10 shows the house transfers and building work done stats for WA.

    The spike upwards in transfers for Perth began in September quarter 2020, and peaked in the next December quarter. While Perth house transfers have declined through to March quarter 2022, they've remained higher than the longer-term average.

    For the region outside Perth, house transfers began to increase at the same time, but grew steadily through to June quarter 2021, before beginning a gentle decline.

    In term of median house prices, from June quarter 2020 through to March quarter 2022, Perth median house prices increased by 16%, while ex-Perth median price increased by 30%.

    The lower graph of Chart 10 shows the expected surge in work yet to be done from December quarter 2020 onwards. Dwellings not yet commenced build to a peak of nearly 3200 in September quarter 2021, before falling sharply over the two subsequent quarters.

    Conclusion

    One force behind the continued increase in approvals, and growth in transfers for WA has been increased interstate migration, which has seen an influx of new residents from areas such as NSW and VIC. The isolation of the state meant it could reduce the initial impact of the COVID-19 pandemic, which helped to create a confident environment for real estate investors.

    Analysis

    One of the lessons from looking at the house market across Australia is how heterogenous it really is. While there are certain common forces at work, particularly in reaction to the pandemic, they tend to play out differently, according to the dictates of geography, past patterns of housing development, recent interstate migration levels, and local culture.

    NSW is a more decentralised state than any other in Australia, QLD has a unique, dispersed structure, and VIC is probably the most centralised, so for each of these regions the concept of ex-urban housing is quite different.

    In NSW increases in ex-urban housing picks up on an existing trend, while in VIC seeing ex-urban transfers come close to equalling urban transfers is a radical change. In QLD the surprise is the higher median prices of Brisbane houses. As we suggested above, that's likely people who do want to live in an urban environment opting to move to Brisbane over ex-urban NSW or VIC.

    One of the universal characteristics is the increase in the value of building work yet to be done. From June quarter 2020 to March quarter 2022 - two years - this increased by 75% for NSW, 100% for VIC, 148% for QLD, 163% for SA, and a whopping 232% for WA. The total additional value across those five states was $10.9 billion. That's over and above the pre-existing levels of work yet to be done.

    What's unique about this stat is that it is so universal throughout Australia. In past building surges, individual states would tend to surge while others remained slower, so that there could be a transfer of construction workers interstate. In this case all the major states show construction industries struggling to cope with the backlog of work.

    The most concerning datapoint out of all these statistics, however, is that for work not commenced in Victoria, which saw a dramatic fall from 3133 house projects to just 1534 in the course of just one quarter. There may be other extraneous reasons for that fall, but the fear would be that this represents abandoned projects.

    This could be the first sign that the backlog of construction work might not guarantee, as many commentators have suggested, another two years of busy construction work. This also goes to the point of what exactly is happening when construction companies fail in Australia. While this has been - a little simplistically - put down to material and labour costs exceeding those which went into project quotes back in 2021, there has to be more going on than that.

    The failures don't result from construction companies seeing their bank balances decline to zero. All those companies rely heavily on finance from banks or other sources, and their failures indicate a lack of confidence in their future earnings. That could indicate that banks and other financial institutions see a bleaker future for construction than is discussed publicly.

    statistics

    Big box update

    Bunnings store proposed close to South Australian cultural site

    There are plans for the site to be turned into a shopping hub after a developer from Victoria looks to buy the land

    Developer Troon Group has entered negotiations with the Indigenous Land and Sea Corporation (ILSC) to purchase the southern portion of the 707 Lot along Marion Road at Bedford Park in South Australia, reports the Eastern Courier Messenger.

    The site would encompass a Bunnings store, two fast food chains and hundreds of car parks.

    Bunnings regional operations manager Jessica Hitchin confirmed the company is considering the site. She told the Eastern Courier Messenger:

    We regularly review opportunities to improve our existing store network, but have no firm plans in place at this stage.

    The Troon Group also said no decision had been made on the development.

    However this has not stopped residents pushing back against the shopping hub proposal. Local resident Carolyn told the Eastern Courier Messenger that the site's cultural significance should be given first priority.

    Warriparinga is an important sacred site for the Kaurna people. The current proposal surrounds the Elders Village with businesses that operate until late at night, increasing noise and light pollution, and will not be the peaceful environment that was envisaged in the original plans.
    I am hoping the new [state] government can do better and quickly provide the means for a better quality of life for the Elders at Warriparinga.

    In June 2021, the-then Marshall Government announced a $10 million village next to the Warriparinga Wetlands that would create a purpose-built village for Aboriginal Elders living in Adelaide. At the announcement, former Premier and Aboriginal Affairs and Reconciliation Minister Steven Marshall said:

    ...Empowering Aboriginal South Australians by supporting them into home ownership, ensuring they have access to safe and secure housing and giving them a greater voice in determining their housing future is all crucial to helping them reach their housing aspirations.

    The 4.3ha vacant site next to the culturally significant Warriparinga Wetlands went on the market back in 2020.

    In documents supplied to The Messenger, the Kaurna Yerta Aboriginal Corporation (KYAC) have been working with the ILSC on a strategy for the land since 2013. An ILSC spokesman told The Adelaide Advertiser:

    ILSC purchased the land some years ago with an ultimate intent to benefit the Kaurna people of Adelaide.
    In 2019-20, the Kaurna Yerta Aboriginal Corporation, Kaurna's native title body, applied for authority under the Aboriginal Heritage Act 1988 to allow the sale and development of the Lot 707 and to specifically construct an Aboriginal Elders' Village on part of the land, and to provide an income stream for Kaurna people from the lease of buildings on the land.
    Most submissions received from Aboriginal people supported the sale and development of the land.
  • Sources: Eastern Courier Messenger and The Adelaide Advertiser
  • bigbox

    Supplier update: BGC Group

    Round two of sales process

    It is understood that overall BGC generates $100 million of earnings before interest, tax, depreciation and amortisation and $1 billion of revenue: report

    An Australian-based group could be acquiring building materials group BGC in its entirety so that it is not sold off in separate units, as speculated by DataRoom in The Australian. It has been reported that BGC's shareholders - the family of the late Len Buckeridge - prefer to sell out in full.

    DataRoom understands the potential buyer is not a private equity firm, and that CSR, Fletcher Building, Wagners, Boral and Wesfarmers are all thought to be out of the running.

    Sources also told DataRoom that US-based fundmanager Oaktree Capital Management may have gone through to the next round. Oaktree is best known for investing in WA driller DDH1, Nine Entertainment Co (publisher of The Australian Financial Review) and Blue Sky, in the local market. Howard Marks founded Oaktree in 1995 with a focus on investing in quality companies with high levels of debt.

    ASX-listed Adbri may only be keen to buy BGC's concrete plants and quarries, but would be unable to acquire its cement facilities due to objections from the Australian Competition and Consumer Commission.

    Adbri may be keen to buy only part of BGC's business - HNN Flash #93, May 2022

    Brickworks had shown earlier interest in buying the brick operations so could be considered a left-of-field possibility.

    As Australia's largest brick maker, Brickworks is believed to be exploring a BGC acquisition as a way of having a larger and stronger presence in the West Australian market, according to an earlier article in DataRoom. BGC holds around 5% of the country's overall brick market, based on data from IBISWorld. But it is a major competitor in WA to Brickworks, which has a market share of about 44% of the Australian brick market.

    DataRoom also speculates that a high-net-worth investor from Perth could be behind a different deal. Other possible shortlisted buyers include CRH and Cement Australia, which is controlled by Holcim and Heidelberg.

    DataRoom understands that BGC's West Australian cement grinding terminal, quarries, concrete and transport businesses account for at least half BGC's value.

    But the challenge has been what to do with the building arm. Many believe this division is tough to sell in a rising interest rate environment, particularly as such operations deter buyers due to their high-risk nature, very thin margins and volatile earnings. Earlier, it was expected to sell for about $1 billion.

    The estate of Mr Buckeridge, who passed away in 2014, was originally worth over $2 billion. The family have since sold off two hotels, the contract mining operation, property development land and apartment projects.

    Related

    BGC back on the market - HNN Flash #89, April 2022
  • Sources: The Australian and Australian Financial Review
  • companies

    New product

    FiberWeld joins JB Weld's range of products

    As the Australian distributor for all JB Weld products, HPP Lunds has access to more than 57 products that have a myriad of trade and consumer uses

    A number of weld products are part of the JB Weld range including PlasticWeld, ClearWeld, ColdWeld, KwickWeld, MinuteWeld, WoodWeld, SuperWeld, AutoWeld and now FiberWeld.

    After acquiring FiberWeld, JB Weld rebranded it under its own banner and the product then became an addition to the JB Weld range distributed by HPP Lunds in Australia.

    Four FiberWeld products are in the range: FiberWeld 1" Pipe Repair Cast, FiberWeld 2" Pipe Repair Cast, FiberWeld Permanent Repair Cast and FiberWeld Automotive Repair Cast.


    FiberWeld Permanent Repair Cast is a high-strength adhesive and fiberglass wrap, impregnated with a specially formulated resin. When activated by water, the product forms a strong, permanent bond that hardens like steel in 15 minutes with a bend strength of 1500 psi. All products in this range are the same formulation but packaged and tailored for different uses.

    FibreWeld 1" Pipe Repair Cast and FiberWeld 2" Pipe Repair Cast are the same formulation but made to repair pipes with either 1" or 2" diameters.

    FiberWeld Automotive Repair Cast is tailored to suit repairs to radiator and heater hoses, tail pipes and mufflers, oil and transmission lines, vacuum lines, exterior mirrors, roof racks, and RV and boat repairs.

    With FiberWeld, furniture, tool handles, yard equipment, pipes and hoses, plumbing, sporting and camping gear, motor vehicles and marine equipment can be fixed. It can also be used as a reinforcement. The product can be applied on metal, most plastics, wood, PVC, fibreglass, rubber and other surfaces.

    All JB Weld products come with a comprehensive set of instructions that cover safety, hardening times and uses. Depending on the product, JB Weld includes additional useful items such as protective gloves, or mixing tools. They are often supported with online videos to explain how to complete the repair.

    For hardware retailers, HPP Lunds offers a range of merchandisers including a full range wire rack display which can hold more than 50 products, and there are also counter displays.

    About JB Weld

    JB Weld products are specific to repairs of automotive parts, ceramic, concrete, metal, rubber, wood, brick, carpet, glass, plastic, plumbing as well as a host of general repair solutions.

    Some products such as the silicone gasket makers and adhesives are available in both smaller handyman sizes and larger cartridge sizes for trade use.

    JB Weld has an expansive range of adhesives, epoxies, putty sticks, gasket makers, super glues, silicones, thread lockers and sealants as well as repair kits and exhaust repair products.

    Its products are durable, high quality repair products and used by professional tradespeople on a daily basis.

    For more information, visit the HPP Lunds website below or call (07) 3722 1111.

    HPP Lunds, a leading independent wholesaler of automotive parts and accessories in Australia
    products

    Technology update

    Online marketplace for tradies

    Queensland tech company SafetyCulture is building a digital marketplace for tradespeople

    Former Amazon Web Services executive Andrew Boyd joined Townsville company SafetyCulture to create an online marketplace for tradies.

    He has involved TV personality Scott Cam in what he described as an UberEats-style marketplace for worker safety gear and power tools. He told The Australian:

    I'm going to be here to help build out this marketplace and working out how that integrates into the platform.

    SafetyCulture's new marketplace is part of iAuditor, its popular workplace inspection and checklist app. It collects data from 800 million workplace checks a year, a lot of which are conducted manually.

    iAuditor is used by Coles, Commonwealth Bank, Kmart, the United Nations, Coca-Cola, and British Airways. The app is used to pre-screen jobs and ensure safety compliance onsite. Mr Boyd explains:

    iAuditor is used by about 60,000 organisations around the world. Coles Group use it to work out how to inspect the level of merchandising in every cold chiller and to work out that stuff is stacked to the right level...
    Another example of one of our customers is a company that's cleaning windows off high buildings. They're often abseiling down the side of the building as they clean windows. And so in that scenario, the company would create a custom check based on what they need to do.

    The addition of the marketplace will lead to SafetyCulture capitalising on the sale of workplace products to its existing customers, who can order in a "one-click" setting from iAuditor.

    Customers will be able to register, monitor and allow for the purchase of new products through the app without having to go around the program.

    The marketplace would help workers on the ground communicate more effectively with managers in the office through a structured manner, according to Mr Boyd. He said employing maintenance schedules and educational training through the platform could also prove cost-effective.

    Mr Boyd said he would look to incorporate more services to the platform as it grew, with the integration delivery services.

    It's really about how do I get what I want when I want it and really as quickly as possible. Over time, with the insight that we can get from customer data and analytics, we can help get the stuff to them when they need it. I can imagine, though, short delivery time.
    Who knows what will happen with the likes of drone delivery and so on in the future.

    While inviting delivery options to the platform is on the agenda, Mr Boyd signalled SafetyCulture would utilise existing services rather than create its own. He said:

    I don't think (delivery) is an investment we can make in building out that infrastructure. I think that's already there. It's about the right partnerships, and then about making sure that we position the right products close to the board and really leverage third-party logistics provider.

    SafetyCulture is seeking to expand its marketplace into the US and Britain in 2023.

    Background

    Luke Anear is the founder and CEO of SafetyCulture which began as a safety documents business at an office in Garbutt (QLD) in 2004. He started the company after a career as an investigator for Workers Compensation.

    It was the first company in Australia to sell safe work method statements online in 2007.

    After developing its iAuditor safety checklist app in 2012, the company has become a significant technology player with global reach and a valuation of more than $2 billion. Mr Anear holds about 20% of the company's stock valued at around $400 million.

    In 2021, SafetyCulture said its iAuditor app had surpassed 100 million completed inspections.

  • Sources: The Australian, The Courier-Mail and Townsville Bulletin
  • companies

    UK update

    Kingfisher adds 3D and VR planning tools

    The home improvement group is partnering with 3D Cloud[tm] by Marxent to roll out new 3D visualisation, planning, and design technology

    Kingfisher's latest initiative includes 3D and virtual reality visualisation, planning and design tools across a number of its banner stores. They offer what tech partner Marxent said is "a superior hybrid planning experience" that flows seamlessly between in-store colleague-led design systems and ecommerce.

    Kingfisher's B&Q and Brico Depot Romania stores have already launched the 3D room planning system in the UK, Republic of Ireland and Romania. B&Q UK also has a line-up of intuitive, mobile-first 3D product configurators for fireplaces and the Kingfisher-exclusive Atomia and Alara product lines.

    Using the Kingfisher 3D planning and design tools, shoppers are able to explore, design, visualise and checkout in a single app. Simple enough for consumers and sophisticated enough for experienced kitchen designers, even novices can draw a custom room layout, drag and drop products directly into the space, and customise finishes. More complex design features are available for experienced designers.

    The result is a realistic picture of any kitchen, bathroom, or storage project in both 2D and 3D. Finished designs or proejcts can be exported to HD renders or 360 panoramas for an immersive virtual reality experience. For those shopping from home, items can be added from the finished 3D scene directly to their e-commerce basket.


    Customers can book an in-store planning appointment, sharing measurements, budget, style preferences, and designs and collaborate on final project details.

    The suite of tools also offers the retailer localised to specific banners, markets and product lines, as well as personalisation and customisation options. It comes with auto room scanning and offers a drag-and-drop photo feature, millimetre perfect precision and an add to basket option for easy online check out.

    JJ Van Oosten, Kingfisher's chief digital and technology officer, said:

    At Kingfisher, we're focused on offering the best experience for our customers, offering greater convenience, choice and speed as part of our Powered by Kingfisher strategy.
    We chose 3D Cloud by Marxent because they have the tech, team, and experience to implement 3D experiences at enterprise scale. The 3D room planner tool in stores combines leading-edge visualisation and configuration technology and provides customers with a seamless and personalised shopping experience.
    In partnering with Marxent, it has enabled us to focus on our mobile first approach, with tools to allow our customers to design from pictures and room scanning. 3D technology is just one of the initiatives we have launched to ensure Kingfisher is at the forefront of innovation in retail.

    Related

    JJ Van Oosten at Retail Connected - HNN Flash #44, May 2021

    Sources: Internet Retailing and 3D Cloud[tm] by Marxent

    bigbox

    ABS building work done stats to March quarter 2022

    Stress but short of a crisis

    While the construction industry has been portrayed as being very overstressed, in terms of residential housing projects it is evident it is staying at least in touch with rising demand. Building work done has increased in value, and there is some evidence of increased backlog, but nothing exceptional.

    One of the most useful set of stats that the Australian Bureau of Statistics (ABS) produces is that for building work done. While these are great stats, as they give a clear perspective on how the construction industry is performing (and thus an insight into the building supplies market), they are a little intricate to deal with.

    That is in part because it's a complex industry to model statistically, and because these stats form a part of the calculations for Australia's national accounts, including gross domestic product (GDP). That means there needs to be a high level of formality to them, as they follow well-established guidelines.

    From a hardware supply and construction industry perspective, the best way to understand them is to see that the stats fall into two groups. In the first group, the major concern is with the total value of the project. That's what is of most concern when looking at projects that are about to commence, that have newly commenced and that have been completed.

    The second group are those stats that are concerned with how much work has been achieved on a project during each quarter, and in all the quarters to date.

    Broadly, that first group of stats is about what is happening in the market, and the second set is about what is happening in the actual construction industry, as completes the work that has accumulated.

    Building work done

    To begin with the latter group, the stats for the actual building work done during a quarter are the most important numbers. Chart 1 shows the building work done in the private sector for houses, and for dwellings other than houses.

    These graphs make use of periods (indicated by a "p") of four quarters, ending with the March quarter, and are designated by the year of the March quarter. Thus p2020 consists of the June 2019, September 2019, December 2019 and March 2020 quarters.

    These charts take a slightly unusual approach, in that each line represents a quarter (e.g., the March quarter, which is January, February and March) as it progresses through the years

    One reason for using this technique is that it shows clearly one of the major changes which have occurred, which is the demise of seasonality. Looking at the top graph, for houses, it's clear that in the past the March quarter lagged the other three quarters in terms of the value of work done. For p2021 and p2022 - the core COVID-19 pandemic period - that trend diminishes, with the amount of work done in each quarter broadly equalising.

    However, in the bottom graph, for non-house dwellings, that trend does persist, along with a newly developed trend which shows a reduced value for work done during the December quarter as well.

    When it comes to the core pandemic period, these graphs are charting two conflicting forces in the market: shutdowns and interruptions caused by the pandemic, and shifts in demand. Looking at the top graph for houses, p2021 shows a sharp decline for the June and September quarters, but a sharp uplift for the March quarter.

    For p2022, there is sharp increase across all quarters, indicating a lessening of COVID-19 restrictions, accumulated demand from p2021, and increased demand for new house builds across Australia.

    In the bottom graph, for non-house construction, a very different set of trends is evident. It's interesting to note that something of a decline was already underway pre-pandemic in p2020, but this continued on sharply through p2021 and p2022.

    Market demand

    In Chart 2, the focus is on projects as they enter into construction and are then completed.

    The top graph shows the numbers of dwellings that are commenced and completed. The blue lines are for houses, and the grey lines are for non-houses (other residential).

    Perhaps what is most interesting about the house stats is how relatively stable the number of completions is. While there is a low point in completions for the March 2021 quarter, and a local high for the December 2021 quarter, completions track largely between 26,000 and 29,000, with median value for the series from the June 2017 quarter through to the March 2022 quarter of 27,591. In terms of commencements (the pale blue line), there is a sharp spike upwards from the December 2020 quarter through to December 2021 quarter.

    In terms of the non-house stats, commencements (the light grey line) have been at a relatively low level since the December 2018 quarter, until they spiked upwards during both the June and September quarters of 2021. Completions (the dark grey line) have, of course, followed these down, with a particularly steep drop in the most recent quarter, March 2022.

    The middle graph on Chart 2 shows the quarterly progress of the value of commencements above the value of completions. It basically tracks by how much the value of new projects is replacing the value of projects exiting construction.

    The graph shows a general "trough" in value replacement from the September 2018 quarter through to the June 2020 quarter. In the September 2020 quarter, the replacement value for houses picks up, and spikes up through to the June 2021 quarter. For non-house construction, the trough persists through to the March 2021 quarter, then lifts up to a lower high in the September 2021 quarter. Since their highs, both forms of housing have retained positive replacement, though at lower levels.

    Finally, the bottom graph of Chart 2 shows the "backlog" of building projects that have been approved, but not yet commenced. This is something of a slightly tricky stat, though it is well-designed. The ABS actually moves the window for treating building approvals for this category one month back. That means that buildings that have been approved but not yet commenced for, say, the June 2021 quarter, would be in relation to approvals granted in the months of March, April and May 2021 (where the June 2021 quarter would be April, May and June).

    Also, not all construction passes through this stat, making it a bit irregular. If a building was approved on 1 May 2021 and started construction on 20 June 2021 (for example) it would never show up in these stats, while a building that was approved on 1 June 2021 and started construction on 2 July 2021 would.

    That said, as a general measure, these stats do tend to show when there is an increase in delays for construction projects starting. As this graph shows, for houses (the blue line), there were generally minimum delays through to the March 2021 quarter, but this delay increased slightly (but significantly) through to the March 2022 quarter.

    The story for non-house construction is quite different. Since the local peak in the December 2017 quarter, there has been a steady and very significant reduction in the number of non-house dwellings that have been included in this category.

    Performance

    In Chart 3 we can see some indications of how construction is responding to the general forces in the market.

    The top graph shows the value of work under construction, with is the total value of each construction job that is still underway. For houses (the blue line) there is a near constant value through to the December 2020 quarter, followed by a very steep increase through to the September 2021 quarter, then an ongoing, shallower rise through to the March 2022 quarter.

    Non-house construction (the grey line) shows a steady decline starting in the June 2019 quarter, and continuing on to a low in the December 2020 quarter. Since then there has been a steady increase, but not back to the level of the June 2019 quarter as yet.

    The middle graph shows the value of the pipeline of work. This stat combines the value of projects yet to be commenced along with the value of the work still remaining to be done on existing projects. It's essentially a measure of the "load" on the construction industry.

    The most significant aspect of this graph is that it is surprisingly similar to the previous graph. What that means is that the work being done on construction projects is keeping pace with the introduction of new projects.

    Finally, the bottom graph of Chart 3 shows stats derived from the ABS stats that indicates how much of the available work - the total value of all projects under construction - is being completed on a quarterly basis. The two most significant features of these stats is the decline shown for the June, September and December quarters of 2021 for houses, and the very steep decline for non-house construction for the same period.

    Analysis

    Taken as a whole, these stats show two main characteristics: the first is that the construction industry has been stressed by increased demand and interruptions to its productive capacity; and the second is that, in general, the industry is actually coping very well with those stresses.

    That is evident in particular in the initial graph on Chart 1 for the value of building work done in p2022, and is echoed in the top graph for Chart 2 showing the number of completions.

    However, there are signs of ongoing stress, as commencements have risen at a higher rate than completions, and there is a steady increase in the value of work in the pipeline.

    If there are any inefficiencies evident, it is in the construction of non-house, multi-unit dwellings. Even with a fall-off in demand, there remains a significant and growing pipeline of work to be completed in that area.

    statistics

    Big box update

    Investigation by federal Privacy Commissioner

    The probe into Bunnings and Kmart follows a report from consumer advocacy group CHOICE about the retailers' use of facial recognition technology

    The Office of the Australian Information Commissioner (OAIC) announced it will launch an investigation into the personal information handling practices of Bunnings and Kmart in how they use the facial recognition technology in store, and whether it is consistent with Australian privacy law.

    The retailers say facial recognition is being used in some stores to protect shoppers and staff, combat anti-social behaviour and reduce theft.

    Bunnings chief operating officer Simon McDowell said it is aware of the OAIC investigations into the use of facial recognition technology in its stores and would co-operate with them. He told news.com.au:

    As we've previously explained, this technology is used solely to help keep team and customers safe and prevent unlawful activity in our stores and we have strict controls around its use.

    In a previous email exchange with Electronic Frontiers Australia (EFA) chair Justin Warren, published on the EFA's website, the Bunnings Privacy Team said the company is "comfortable" that its use of facial recognition is "undertaken in accordance with the requirements of the Privacy Act".

    Bunnings explained how facial recognition software attached to CCTV systems is used to enforce bans on customers. It said only the facial images of targets are stored by the system to make sure that, if a banned individual walks into a store, the CCTV cameras can immediately notify staff or security. It said:

    The facial recognition technology checks for matches against these uploaded images, and where there isn't a match then no action occurs. No data relating to anyone other than these uploaded images are stored in the system.

    The Australian Information Commissioner and Privacy Commissioner Angelene Falk said before she announced the investigation:

    It is important that all retail stores, when they are deciding whether to use technology to collect personal information, consider the impact on privacy, the community's expectations and the need to comply with privacy law.
    The Privacy Act generally requires retailers to only collect sensitive biometric information if it's reasonably necessary for their functions or activities, and where they have clear consent.
    While deterring theft and creating a safe environment are important goals, using high privacy impact technologies in stores carries significant privacy risks. Retailers need to be able to demonstrate that it is a proportionate response to collect the facial templates of all of their customers coming into their stores for this purpose.

    The OAIC is the independent national regulator for privacy, and said no further comment would be made while the probe continued.

    The Commissioner is authorised to investigate an act or practice which may be an interference with the privacy of an individual or a breach of the Australian Privacy Principles under the Privacy Act 1988.

    Background

    CHOICE submitted a formal complaint to the OAIC, detailing how Bunnings, Kmart and The Good Guys may have breached the Australian Privacy Act through their use of facial recognition.

    Specifically, it said the retailers have broken Australian Privacy Principles 1, 3, and 5 which relate to the companies' privacy policies, the reasonable collection of sensitive personal information, and obtaining consent from people whose faceprints were gathered. In the complaint, CHOICE senior campaigns and policy advisor, Amy Pereira said:

    CHOICE is concerned that the retailers' practices related to their use of facial recognition technology pose significant risks to individuals.
    The social and economic risks include invasion of privacy, misidentification, discrimination, profiling and exclusion, as well as vulnerability to cybercrime through data breaches and identity theft.

    Businesses are generally allowed to use CCTV to photograph customers on their premises, but CHOICE raised concerns that privacy law has not kept pace with advances in facial recognition technology.

    While an investigation is underway regarding Bunnings and Kmart, the OAIC said "preliminary inquiries" have commenced with The Good Guys after the retailer said it will "pause the trial of the upgraded security system with the optional facial recognition technology".

    Analysis

    Journalists and publishers make mistakes. Often those mistakes arise not out of a pure drive for success or recognition, but because they believe passionately in something.

    It's that passion which might have caused Choice to commit what HNN would regard as a real error in covering the issue of facial recognition in retail environments. What is at issue is not actually the article that Choice published, calling out a range of retailers, including big-box hardware retailer Bunnings, for potential mis-use of FR. Instead, it has to do with the way in which that article was promoted to the press.

    In brief, the promotional media release provided information and opinion that was not present in the original article. As that information and opinion was largely negative in nature, this method of dissemination left Bunnings with less recourse to answer and address the insinuations and allegations made.

    It's bewildering that if Choice, a publisher, had important statements to make and facts to declare, they would not put this in an article, and instead use a media release to convey the message.

    The article

    That original article made a number of very good points. More than anything it did the research to show that Australian consumers have been largely unaware they are subjected to FR when shopping. While retailers (including Bunnings) did disclose that information, it was not done in a clear and thorough way. Information could be obtained by browsing the websites of the various retailers. In Bunnings' case, there was also a physical sign present at the entrance of stores using the technology. However, these signs and small and not prominent, according to Choice.

    A particular focus of the article was the use by retailers of what is know as "faceprint" technology, which essentially converts a facial image into a unique identifying set of numbers, making future recognition simpler and more reliable.

    As part of the article, Choice quoted Mark Andrejevic, professor of media studies at Monash University and a member of the ARC Centre of Excellence for Automated Decision-Making and Society, who stated:

    I think the other set of concerns is we don't have a clear set of regulations or guidelines on the appropriate use of the technology. That leaves it pretty wide open. Stores may be using it for the purposes of security now, but down the road, they may also include terms of use that would say that they can use it for marketing purposes.

    Choice did suggest that retailers such as Bunnings might have been in breach of the Privacy Act. Choice quotes its consumer data advocate, Kate Bower, as saying:

    We also believe that these retail businesses are disproportionate in their over collection of this information, which means that they may be in breach of the Privacy Act. We intend to refer them to the Information Commissioner on that basis.

    That's all well and good. Choice is doing a public service here by alerting both the public and governmental agencies to a developing problem with FR technology in large stores. Great.

    Reading the article alone, the general impression most readers might have had was that the principal "sin" of Bunnings was that it definitely needed bigger signs in front of its affected stores. A deeper reading is that the industry would benefit from the establishment of clear standards, and some kind of audit process, to ensure that this information was not abused in the future.

    It's very difficult, however, to condemn a retailer operating in what Choice admits, through quotes from experts, is not a very well-defined legal area, for what comes down to not guessing what form future legislation and guidelines might take.

    The press release

    The Choice media release of 15 June 2022 differed in some ways from that article. For example, where the quotes from Ms Bower in the article were somewhat guarded, the media release quotes were less so. For instance, the media release quotes Ms Bower as stating:

    The use of facial recognition by Kmart, Bunnings and The Good Guys is a completely inappropriate and unnecessary use of the technology.

    This is a little confusing as Ms Bower states elsewhere that only Bunnings responded to queries about the technologies, so it's not clear where the background research to that statement originates.

    The quote continues:

    Using facial recognition technology in this way is similar to Kmart, Bunnings or The Good Guys collecting your fingerprints or DNA every time you shop. Businesses using invasive technologies to capture their customers' sensitive biometric information is unethical and is a sure way to erode consumer trust.

    If these are such important points, why were they not included in the original article? Perhaps that's because it is something of a stretch to link gathering DNA to facial recognition. It's certainly evocative, but is supported by analysis?

    The real final point where it seems to HNN that Choice may have stepped over a line is in this statement quoted from Ms Bower:

    The technology is capturing highly personal data from customers, including infants and children.

    Bunnings has very clearly stated since the publication of the article - or, rather, media release - that it has no interest at all in using FR on minors. Presumably Bunnings would have answered that question the same way prior to publication - if the company was asked. And, again, apparently the other retailers did not provide any information. So it's simply difficult to work out to what facts Ms Bower is actually referring. Does she have an inside source? Or is it guesswork?

    If this is so important, why isn't it in the actual article? Why would you omit the important fact that FR was being used on "infants" from the article?

    It's good to be passionate about good causes, and it can be frustrating when the pubic pays insufficient attention to them. That frustration is just part of being a journalist. You just have to believe that even if an issue doesn't get the attention it deserves, it still matters, it still counts. Because the alternative is far worse.

    Related

    Bunnings uses facial recognition technology - HNN Flash #98, June 2022
  • Sources: The Guardian, News.com.au, Australian Financial Review, AAP General News Wire, Australian Computer Society Information Age and Gizmodo
  • bigbox

    Construction update

    Alternative to timber

    The devastation of Australia's bushfires in 2019-2020 is helping drive demand for a non-combustible aluminium product for builders and homeowners

    The Knotwood aluminium product, which looks like natural timber, is made on the Gold Coast (QLD) using sustainable manufacturing methods. The company said it is low maintenance, longer lasting and easier to use than real wood.

    Knotwood uses aluminium sourced from Gladstone in central Queensland and then powder coats and wraps the product in a printed film, baking on the design that gives it the wood effect with as many as 41 different hues.

    The end product is recyclable alternative for architectural facades, garage doors, benches, gates, shutters and decking.

    Knotwood's Mark Curran said builders and architects are seeking out the aluminium wood for its aesthetic appeal, as an alternative amid the current worldwide timber shortage, and for its high fire safety rating.

    After the experiences with bushfire season, especially in Victoria, Queensland and NSW, [when rebuilding] architects are looking for an alternative to wood.
    We can achieve the highest fire rating, we are a non-combustible product and that ticks a lot of boxes for builders and architects.
    ...The low maintenance is what the householder, the end user, loves...On top of that it looks really good.

    The bushfires burned more than 24 million hectares across the nation, and caused 33 deaths directly and almost 450 more from smoke inhalation, according to a study by the CSIRO.

    In the wake of the destruction, Mr Curran said local governments across Australia had sought out the product for its safety rating. As a result, the business has grown 25% year-on-year over the past five years, he said.

    Knotwood complies with Australia's highest Bushfire Attack Level (BAL) rating, which is an Australian government standard that measures the potential for a home to be exposed to bush fire attack. The BAL rating dictates the materials and building design elements that need to be taken into account during construction. Mr Curran said:

    If you are going to try and melt aluminium, it would be ridiculous because nothing else would survive at that temperature. It is at the highest safety levels.

    The company has also expanded its 16,000sqm manufacturing facility where it employs 75 people.

    Knotwood will soon open a manufacturing plant in Manchester, England after exhibiting the product at Grand Designs Live 22 organised by the British Institute of Interior Design. It exports to New Zealand, the USA, Canada, the Caribbean and South Africa.

    Knotwood remains headquartered on the Gold Coast. Founded by the Galway family over a decade ago, it is now owned by Darren Galway and business partner Michael Saba, previously a co-founder of Swisse Wellness.

  • Source: News Leads
  • products

    New product

    JB Weld Silicones

    Silicone sealant shortages are addressed by JB Weld products as companies experience difficulties in the supply of silicone, especially businesses relying on Chinese suppliers

    Supply issues will continue for some time in the manufacture of silicones and epoxies due to increased demand and the availability of raw materials.

    However, US-based JB Weld does not have supply problems and the company's strong ties with its Australian distributor, HPP Lunds means the large range of JB Weld Silicones can remain on shelves now and into the future.

    JB Weld does all its own blending, packaging and logistics so it has been able to maintain an exceptional supply rate. Additionally, the company has its own R&D department that quality checks every product batch to ensure its high level of quality is consistent and maintained.

    JB Weld also recently competed a major expansion of its Texas manufacturing facility, an investment made to ensure it continues to meet the demand for products locally and internationally.

    With confirmed factory support from JB Weld, HPP Lunds has been able to realise excellent fill rates on orders. At the same time, it has substantially increased inventory levels with many more containers ordered to ensure best possible supply rates for its customers.

    Products

    JB Weld uses 100% silicone for its product range which is ideal for gaskets because it has very low shrinkage when cured, and the material remains compliant without being hard or brittle. It is also resistant to gas, diesel, oil and other automotive fluids, so it won't disintegrate over time.

    Each type of RTV (Room Temperature Vulcanized) silicone - denoted by the differing colours - has its own characteristics that make one more suitable than another, depending on the application.

    Ultimate Black RTV

    Ultimate Black RTV is commonly used in OEM applications and has a higher resistance to heat with maximum oil resistance, high flexibility and it is sensor safe. Some items suited to Ultimate Black include sumps, valve covers, timing gear covers and transmission pans. Ultimate Black RTV is available in 85g tubes or 280ml cartridges.

    Ultimate Grey RTV

    Ultimate Grey RTV is for high torque uses like intake manifolds where high torque loads are applied to the sealant. This sealant is more flexible when cured and remains oil resistant. It is temperature resistant to 260ºC and is sensor safe. Ultimate Grey RTV is available in 85g tubes or 280ml cartridge.

    Hi Temp Red RTV

    Hi Temp Red RTV is designed for use in mechanical assemblies where the existence of higher, continuous temperatures up to 288ºC or 343ºC intermittent might exist. Upon curing, which occurs when the product is exposed to the moisture in air, the silicone forms a tough, waterproof seal on most surfaces. It will not shrink or crack, resists weathering, is sensor safe and ideal for many automotive applications. Hi Temp Red RTV is available in 85g tubes or 280ml cartridges.

    Copper RTV

    Copper RTV is three times more oil resistant than conventional silicones and designed to resist the high operating temperatures of turbocharged or high-performance engines. It is also designed for use in mechanical assemblies where high torque or closely spaced bolt profiles can lead to higher loads and cause gasket and sealing failures for average silicones. It is available in 85g tubes.

    Blue RTV

    Blue RTV is a general-purpose silicone. This product is not designed for high temperatures with uses including sumps and water pumps as it is waterproof, flexible and does not shrink. It is also very useful for mechanical assembly bonding of uneven surfaces. It is available in 85g tubes.

    Black RTV

    Black RTV is a general-purpose product used for sealing a variety of metals, rubber and glass. It has high flexibility and is waterproof and is also very useful for mechanical assembly bonding of uneven surfaces. It is available in 85g tubes.

    White RTV

    White RTV is a general-purpose silicone for use in mechanical assembly applications and forms a tough, waterproof, mildew and mould resistant seal. It is available in 85g tubes.

    Clear RTV

    Clear RTV is good to use where you don't want the product to be easily seen such as sealing windscreens. It works on ceramics, cloth, carpet, glass, rubber and metals. It is available in 85g tubes.

    While JB Weld RTV silicone is ideal for permanent seals, it can also be used in applications where repeated removal is necessary such as valve covers. The trick is to apply the silicone and allow it to cure before installing the part. This makes a flexible seal that does not bond to the other surface; however, the right amount of silicone build-up must be used to make sure there is a proper seal in place.

    For more information, visit the HPP Lunds website below or call (07) 3722 1111.

    HPP Lunds, a leading independent wholesaler of automotive parts and accessories in Australia
    products

    UK update

    Wickes shoppable videos

    The home improvement retailer has partnered with digital services agency iSite to launch over 130 online shoppable videos

    Wickes has launched a shoppable video player which allows customers to add products directly to their basket, while learning how to complete a variety of DIY tasks.

    There are more than 130 videos available, including buying guides, step-by-step tutorials and design inspiration. Items featured in each video are listed in the sidebar, with the option to "add to basket" without opening a new tab or disrupting the video.

    The digital-first strategy was rolled out in partnership with digital services company iSite and features a range of over 1,300 products.

    The home improvement retailer said the shoppable content is part of its initiative to support mission and project-based shopping. Gary Kibble, Wickes chief marketing and digital officer, said:

    We know that customers shop by project or by mission, whether it's garden maintenance or painting a room. Through our digital channels we've been improving our customer shopping experience with extra tools and functionality to support mission-based purchasing.
    In creating shoppable video content where DIY products can be easily moved to a customer's basket, we're helping the nation feel houseproud by giving them the confidence in their product purchase and ensuring they have everything needed to complete their project.
    Being the first in this space is really exciting for us as it continues to underpin our digitally-led, service enabled business strategy.

    You can view one of the videos here:

    Wickes shoppable video: How to lay a deck

    The move comes as research by software company Brightpearl suggests that video is now becoming a more important role in consumer shopping journeys, with as many as 85% saying that video plays a role in what they buy and 71% being very drawn to interactive video, such as making purchases in videos.

    Wickes is also making efforts to improve its product availability and meet consumer demands.

    Recently, it announced a partnership with RangeMe, a global product sourcing platform which will help to support its customer buying team and enable them to access the most relevant products.

    The partnership will create visibility for more than 200,000 suppliers, allowing them to present their products directly to Wickes buyers, as part of a direct and unified journey. Andrew Cotterill, director of strategic procurement and responsible sourcing at Wickes said:

    Wickes is very excited to begin working with RangeMe to expand our access to new products and innovation and to streamline the procurement process.
  • Source: Internet Retailing
  • retailers

    USA update

    True Value CEO discusses supply chain issues

    The hardware retail group is also contributing to a White House supply chain task force

    In 2019, the Wall Street Journal reported that True Value was overhauling its distribution network to improve how it manages inventory as part of a USD150 million initiative.

    The company was revamping the network to deliver goods along a "hub-and-spoke" model to use inventory more efficiently so that seasonal items like outdoor furniture don't take up space where faster-moving products such as hand tools and plumbing supplies could be stored.

    Instead of stocking each warehouse with every product, True Value placed slower-moving goods in large central locations and pushing inventory that turns over more quickly out to satellite facilities closer to customers. Orders drawing from the hub are sent out to the spokes, where they are matched up on the loading dock with items pulled from those distribution centres.

    More recently, CEO Chris Kempa spoke to HBSDealer about what he sees as the current issues facing the distribution, post-pandemic. He said:

    We just continue on a monthly basis to assess where we're at. The good news is we are in a better place...
    The pandemic drove feet into our customers' stores, and they keep coming back. So the independent hardware retailers, and specifically our hardware stores, know how to manage in their markets. They know how to serve customers. They had a lot of them come back through their doors and they're keeping up.

    Mr Kempa also listed the challenges facing the business of moving products across land or sea including closed ports in China, container shortages, truck availability, driver shortages. On top of it all looms the threat of a strike at ports along the West Coast of the US.

    For True Value, rising to the challenge of supply-chain uncertainty begins with its people. Mr Kempa told HBSDealer:

    We have over the last couple years, built the best-in-class team that really manages the end-to-end supply chain. And so we have gained an advantage based on our team. We are doing everything we can to move and get goods. And from my perspective, our team has done an incredible job.

    That job includes building diverse options into the supply chain, finding dual sources, looking at new countries of origin and preparing for the unexpected. Mr Kempa said:

    Our perspective is easy. Please help me get goods so that I can take care of my customers.
    We're also helping leaders understand all the challenges we go through, to try to make this work better. Now, things are getting better. But better is not normal.

    Mr Kempa also described the labour shortage as the "biggest hangover from the pandemic". The situation demands looking inward at pay scales, benefits, work environments, and assessing all the things that lead to retention and recruitment of employees. He said:

    It makes you examine the basics of just good environments, good leadership and good engagement with your teams. And so we have put a lot of emphasis on that.

    White House task force on supply chain

    Earlier this year, True Value joined a White House task force on supply chain challenges. Mr Kempa was part of a roundtable discussion at the White House with Secretary of Transportation Pete Buttigieg and National Economic Council Director Brian Deese to discuss the launch of Freight Logistics Optimization Works (FLOW), a data-sharing pilot program created to ease supply chain congestion.

    FLOW aims to improve congestion and speed up the movement of goods by establishing a baseline supply chain data infrastructure to significantly improve goods movement coordination.

    True Value is contributing critical data about the supply chain to help give a clearer, real-time picture of the flow of goods and where infrastructure improvements should be focused.

    Related

    True Value is expanding the number of businesses it serves after moving away from its historic roots as a member-owned cooperative through the 2018 sale of a majority stake to private equity firm Acon Investments.

    True Value moves out of retail co-op model - HI News, May 2018
  • Sources: HBSDealer, Wall Street Journal and Hardware Connection
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