Supplier update: Iplex
Iplex is under investigation in WA for leaky water pipes
Parent company Fletcher Building is establishing a fund to help plumbers and builders who installed products found to be defective
Thu Apr 27 2023
A preliminary investigation by the Department of Mines, Industry Regulation and Safety (DMIRS) found that "faulty piping" - made by Iplex - has been installed in around 1200 West Australian homes.
Within two years of the home builds being completed, hundreds of homeowners reported flooding issues, with some requiring all their plumbing to be ripped out and replaced. In a statement to the Australian Stock Exchange, Iplex said:
DMIRS has advised Iplex Australia that, while its tests are not yet complete, Iplex Australia should expect its results to lead to DMIRS finding that the leaks are due to a manufacturing defect.
A Western Australia group home builder has also advised it expects to deliver to Iplex Australia the results of its own tests once they are completed.
Iplex said its own investigation into the high number of leaks, while ongoing, had not identified any manufacturing defect.
While not admitting responsibility for the issue, Iplex has offered to assist the two major builders caught up in the pipe leaks - BGC and Delstrat - which account for 90% of the 15,000 homes built with Iplex piping during the five-year period being investigated.
The polybutylene plumbing piping at the centre of the investigation - branded Pro-fit - is no longer being sold, with Iplex noting the product did not experience similar issues in other states, despite being sold across Australia. In statement, Fletcher Building chief executive Ross Taylor said:
We acknowledge the frustration and inconvenience impacted homeowners and their families are facing. We are working hard with builders to arrive at an acceptable outcome for affected homeowners.
The company made an initial provision of AUD2 million for the affected homes, but that has now been expanded to AUD15 million.
Background
New Zealand-headquartered Fletcher Building revealed problems after receiving many complaints about the hot and cold water polybutylene pipe product. The company told the NZX (New Zealand Exchange):
The complaints relate to leaks in homes, primarily built by group home builders in Western Australia, which have required repair or replacement of the pipes and, in some cases, damage to the affected homes.
Reports to Iplex Australia show about 1200 of the 15,000 Western Australia homes with Pro-fit installed between 2017 and 2022 had leaks.
The date range is relevant because builders have told Iplex Australia they have not experienced unusual levels of leaks in homes built previously. Fletcher said:
The Pro-fit product was also sold in other states of Australia in that period. Reports to Iplex Australia are that the leak rate in those states is not materially unusual for a product of this type.
The Pro-fit product was sold only in Australia and the resin used in it during the period in question was not used by Iplex New Zealand or any other Fletcher Building company for any other product, the company said.
Grant Swanepoel, Jarden's equity research director in New Zealand, noted the pipes in Perth homes were installed in ceilings - unlike here (New Zealand) where they are in floors - so had the potential to cause far more damage to homes there than here.
The extent to which Iplex Australia will ultimately have accountability for this matter, the cost and timing of any payments can't be established right now, the company statement said.
Final costs incurred by the leaks will be affected by how much third parties are responsible, insurance payouts and the remediation required. The Iplex provision and costs relating to the Pro-fit pipe problem have been excluded from Fletcher's fiscal 2023 group earnings guidance.
Fletcher is listed on the New Zealand and Australian stock exchanges. The company runs a $3 billion-plus building products business in Australia under brands including Tradelink plumbing and bathroom supplies, Stramit roofing and structural steel, Iplex pipes, Oliveri sinkware and Fletcher insulation.
