Supplier update

Ta Ann Tasmania teams up with Australian Sustainable Hardwoods (ASH)

Together, they will produce pre-finished engineered timber flooring and the collaboration will allow Ta Ann Tasmania to grow its workforce

Ta Ann Tasmania (TAT) general manager Robert Yong said the partnership with Australian Sustainable Hardwoods (ASH) is an example of the growing demand for products for the building industry. He told The Burnie Advocate:

TAT and ASH have been working together to develop engineered flooring with our Smithton plant supplying a high-quality substrate and ASH adding a Tasmanian Plantation oak laminate facing.
We have been working with ASH since August last year doing trials of our base substrate panel for their engineering flooring. ASH will laminate 4mm thick sliced hardwood veneer and cut into 200mm-wide tongue and groove flooring strips and then pre-coat into a range of architectural finishes.

ASH director Daniel Wright said that it would be the only pre-finished engineering flooring product on the Australian market that was not imported.

Previously, we produced part of it overseas, sending our feedstock to have it pressed to their plywood and then bringing it back to Australia for coating. But quality and coordination have become more difficult in recent years.
We have a third-party reviewed chain of custody certification under the Australian Forestry Standard and the Program for the Endorsement of Forest Certification schemes (PEFC) for all our products, as does TAT, so this gives us much better control to ensure wood used in production comes from certified sustainable sources.

Mr Wright said it aimed to have the flooring available on the Australian market by 2023.

Circular Head mayor Gerard Blizzard welcomed the announcement. He said:

An increase in locally-manufactured building materials is greatly needed to meet the Australian-wide demand to build more homes, as has been acknowledged in recent federal and state budget announcements. Here in Circular Head, we are keen to grow the population and look forward to increased local employment...
  • Source: The Burnie Advocate
  • Photo credit: Australian Sustainable Hardwoods Facebook
  • companies

    Supplier update

    Knauf Insulation plans glass recycling facility

    BM Webb Industrial Property has applied to Townsville City Council for the planning approvals to develop the facility at the BM Webb industrial estate

    Global building materials supplier Knauf Insulation is planning to operate a glass recycling facility in Townsville, QLD to produce crushed glass for use in insulation.

    A purpose-built facility is planned for 1.16ha of vacant land at 164 Webb Drive, Mount St John, QLD. The project involves a warehouse comprising 1950sqm of gross floor area and an ancillary office of 200sqm, fronting Webb Drive.

    The development requires a Material Change of Use from medium to heavy impact industry zoning, and the application is currently on public notification.

    According to the application, glass bottles will be sourced from the Containers for Change Scheme with the bottles crushed into a glass cullet product. The bottles will be trucked to the facility and stored in a bunker in the warehouse.

    Glass will be processed via crusher/breaker units to produce the cullet. Any ferrous or aluminium material will be removed via an overhead magnet and eddy current process. Paper labelling is to be separated by barrel dryer and dust will be collected via two cyclone units at the barrel dryer and a trommel. The glass cullet will be bagged into one-tonne bags and loaded into shipping containers for export.

    The proposed facility is designed to process of 10 tonnes of glass per hour.

  • Source: Townsville Bulletin
  • companies

    Makita results for H1 FY2023

    While there are declines, they come off a high COVID base

    Makita has proven its innovation credentials with the release of its 40V XGT line of tools. Facing the same declining post-COVID markets as most tool makers, its task is now to fit the company to the emerging future.

    Japan-based power tool manufacturer Makita Corporation held a presentation of results for the first half of its FY2023 (six months to 30 September 2022) on 8 November 2022. The company has recently released those materials.

    Makita reported revenue for the half of JPY391.32 billion ($4.17 billion) up from JPY364.23 billion in the previous corresponding period (pcp), which was the first half of FY2022. This was an increase of 7.4%. Of this, JPY61.82 billion was domestic revenue, constituting 15.8%, with the rest derived from overseas sources. Operating profit for the half was JPY21.92 billion, down by -58.0% on the pcp. Profit before income tax was JPY18.24 billion, representing a drop of -65.3%.

    The decline in operating profit was due to a range of factors. A decline in sales volume accounted for only 3.8% of this, according to Makita. Others were a 12.9% increase in costs, sales, general and administration (SG&A) costs up by 7.6% and a 7.3% hit on exchange rates, as the Japanese Yen remained highly valued.

    Revenue growth in Japan showed a mild boost during the half of 2.0% growth. Eastern Europe declined by -1.1%, while Western Europe fell heavily, with revenue down by 14.1%. North America was down by 1.3%. Oceania (including Australia) showed good growth of 11.2%.

    During the results presentation, Makita reported that its outdoor power equipment which had switched to cordless battery electric power had achieved a compounded annual growth rate (CAGR) of over 50% from FY2017 to FY2022. As part of that, the share of Lithium-ion battery products had grown from around 30% in FY2015 to over 70% in FY2022, displacing petroleum-fuelled and corded electric products.

    Makita was also very clear that it planned to "aggressively expand" its current line of 40V cordless tools. This has been a great success for the company, and it sees these products as a means to expand in existing markets, and to enter new markets as well.

    Analysis

    The Makita results, in context, reveal that the company is facing the same circumstances as most power tool manufacturers: a burst in sales during the COVID-19 pandemic years, followed by declining markets and higher costs.

    Strategically, Makita has always been interesting. The company's launch of its 40V XGT power tool range was masterful. While there has been plenty debate about whether this will become the core range for the company, displacing its 18V/20V range, what isn't debatable is that these tools have proved very popular with both existing customers and new customers. It's a line of tools that fits snugly in the middle between Stanley Black & Decker's FlexVolt 54V line, and Milwaukee Tool's split between powerful 20V tools and extra-heavy duty MX 72V line.

    That said, as HNN has pointed out in the past, Makita is the only major power tool company to not fully develop some version of the "connected tool". Techtronic Industries (TTI, owner of Milwaukee Tool), Stanley and Bosch have all developed some kind of extra Bluetooth linked capability in their tools - with TTI clearly leading the way. The most that has emerged from Makita is a Bluetooth linked dust extractor that turns on when the tools does.

    That may be about to change. In a typically quiet manner, Makita recently announced the opening of its imaginatively titled "Electronic Control Development Center" in Tokyo. Reading between the lines, this is Makita's effort to tap into the electronic engineering resources located in that major city, and it seems likely one of its tasks will be the development of some kind of connected tool.

    Not setting aside the considerable capacity of Japanese technology when it comes to electronics, there is a lingering question as to whether Makita may be almost too late to this game. We've already seen tools emerge from TTI which based their design in part on feedback received through connected tool links. Has Makita timed its entry to take advantage of a better-developed aspect of the industry, or is it too late to develop the needed skills to stay competitive in 2025?

    companies

    Supplier update: Big River Industries

    Epping Timber Joinery & Hardware and Prefab acquisition

    The company expects the acquisition to be earnings-per-share-accretive from year one, and it will be funded from Big River's existing debt facilities

    Manufacturer and distributor of timber and building products, Big River Industries (BRI) has entered an agreement to acquire the trading business and assets of Epping Timber Joinery & Hardware and its Prefab subsidiary.

    The acquisition price is up to $6 million, which includes a cash component and additional earn-out payments over a two-year period if certain profit growth targets are achieved.

    With locations in Epping and Beaufort, BRI said acquiring Epping Timber will enhance its presence in Victoria, and give it access to some of Melbourne's growing suburbs and regional Victoria, specifically Ballarat.

    Founded in 1965, Epping Timber started out as family business in a humble garage and became known as a manufacturer of cabinetry and joinery items for the building industry. In the late 1990s, owners Antonio and Caterina Chincarini purchased a truss plant which expanded the market for Epping Timber into prefabricated building products. It also became a retailer of building materials.

    With annual revenue exceeding $16 million, Epping Timber is also expected to complement BRI's existing Victorian sites at Geelong, Dandenong, Dandenong South and Campbellfield. The addition of Epping Timber's frame and truss capability will increase BRI's total manufacturing capacity.

    Big River CEO Jim Bindon said the acquisition "ensures the longevity of the Chincarini family legacy built over their 57 years in business".

    Big River looks forward to bringing our national product range, supplier relationships and capabilities to further enhance the customer offering, and we look forward to continuing the long-term partnership that customers, suppliers and the staff have enjoyed with Epping Timber.

    The acquisition will improve BRI's overall suite of product offerings into the residential construction markets. It will place BRI in a strong position to satisfy the growing timber demand for housing.

    At its full year presentation in August this year, Mr Bindon said acquisitions remain a major part of the company's strategy.

    ...[With] 23 [sites] in Australia and New Zealand compared to ... maybe 2,000 timberyard hardware shops, building materials outlets. So it's a very, very big market...Any excess funds we've got along with our additional bank facility is really earmarked for acquisitions as we continue to expand the network.

    Related

    Big River Group acquires United Building Products - HNN Flash #73, November 2021
  • Sources: The Market Herald, The Sentiment and Fair Disclosure Wire
  • companies

    Supplier update: VicForests

    Supreme Court of Victoria orders VicForests to halt logging

    The court order brings to a standstill most of Victoria's timber harvesting, given harvesting is being brought to a halt in coupes across the state's two largest harvesting zones: the Central Highlands and East Gippsland

    VicForests recently ordered its harvest and haulage contractors, who supply Maryvale and Gippsland's nine sawmills, to halt work in the wake of a Supreme Court ruling that forces it to resurvey most of its coupes and slashes the viability of harvesting others to protect greater glider possums.

    Until now contractors were able to cut down 60% of the trees across an entire coupe, but Justice Melinda Richards has ordered VicForests to cut just 40% of the available timber, after buffer and protection zones had been excluded.

    Justice Richards ruled the state-owned enterprise's pre-harvest surveys were inadequate and it was not doing enough to protect two possum species - greater and yellow-bellied gliders.

    The ruling forces VicForests to resurvey hundreds of coupes, which it confirmed would take months to complete and would leave harvest and haulage contractors without work and exacerbate a sawlog shortage that had already led to the closure of one mill.

    Justice Richards also ruled that VicForests had failed to meet its obligations to retain enough vegetation on coupes to protect gliders, under the precautionary principle of the Code of Practice for Timber Production.

    Sawmills

    Corryong sawmill owner Graham Walker said he had ordered 12,740 cubic metres of timber from VicForests for 2022-23 which was now stymied by the court ruling. He has been using Black Summer bushfire salvaged logs since January 2020 and now has only 3300 cubic metres remaining. Mr Walker told The Weekly Times:

    We'll be out of wood by the end of March ... sawmilling has been in our family for 87 years and we've never been faced with this situation. Corryong has had a sawmill since 1965 that's supplied constant work.

    Mr Walker's hopes of continuing rest on a successful court appeal by VicForests or a Coalition win in the Victorian election to open coupes not affected by the ruling. If neither occurs, he said:

    We will be forced to close up shop once all our logs are gone. We would be forced to accept the government's opt-out package which will pay workers a redundancy but nothing substantial for the business that's been in town for 58 years, or to the contractors and businesses that we have supported, our sawmill plant would only be worth scrap steel value.
    There is no opportunity to for us to cut softwood as our sawmill does not have the equipment to do that.

    Mr Walker has a five-year deal to June 30, 2024 to supply pallets to a major Australian company.

    Mr Walker said if his mill was unable to supply the contracted pallets it was likely to argue force majeure, that an extraordinary circumstance has resulted in the goods not being delivered.

    The Latrobe Valley's biggest employer, the Maryvale Paper Mill, has warned of worker stand-downs as its hardwood pulp log supplies dry up in the wake of the Supreme Court judgment.

    Opal, which employs 850 workers at its Maryvale mill, issued a statement that said: !...unfortunately, limited stand-downs may become necessary and we are currently consulting on this issue with our team members.

    No decisions will be made until the consultation is complete. These are temporary measures that we may need to put into place while we work through the potential implications of a court decision that was delivered only 10 days ago.
    Our priority is to continue to keep our team members fully updated on the situation as it develops further.
    As a large Latrobe Valley employer, secure, certified wood supply is crucial to Opal Australian Paper's Maryvale operations.

    Hardwood pulp log is used in manufacturing the plant's reflex paper and some brown paper packaging lines.

    VicForests warned it had been able to deliver only a week's worth of pulp logs to Maryvale and that supplies were set to dry up completely, after it was forced to halt harvesting in response to the Supreme Court ruling.

    Environmental concerns

    Barrister Jonathan Korman, who represented the environmental groups in court, said there was room for logging to continue under the new restrictions. He told ABC News:

    Contrary to what VicForests had claimed at trial ... her Honour found there were many contractors available to conduct these surveys, and that the cost is minor in relation to the income from the logging.

    A VicForests spokesperson said it is analysing the impact of the court decisions.

    In the meantime, VicForests will continue to pay stand-down payments to contractors who are impacted by these court actions. VicForests is also providing access to compensation for all mills who are not receiving contracted levels of supply.

    Related:

    Mectec timber mill closure - HNN Flash #107, August 2022
  • Sources: The Border Mail, The Weekly Times and ABC News
  • companies

    Supplier update: Reece Group

    International Quadratics and Dontek acquisition

    Both IQ and Dontek will continue to operate as standalone businesses and will retain existing names and brands

    International Quadratics (IQ) and Dontek are now part of the Reece Group, effective November 1, 2022.

    Geoffrey Bramley, Reece category lead for irrigation, pools, pumps and water treatment, said the acquisition allows Reece to enhance its presence in the Australian pool industry and become the trades' most valued partner in pools. He told Splash magazine:

    By joining the Reece family, both the Dontek and IQ brands will have the opportunity to scale and grow through the Reece network.
    We see great potential in the relationships IQ and Dontek have with their existing suppliers and are excited about the opportunities this new direction will bring for our collective businesses.

    With a combined history of more than 150 years, IQ (established in 1976) and Pierce Pool Supplies (began in 1898 as A H Pierce) have been names synonymous within the aquatics and leisure industries. Both companies merged in 2008 and for the first time, the commercial and domestic aquatic product and service became available under the one roof. The result is a single place to find a solution for most aquatic needs.

    Dontek Electronics started out in October 1989 specialising in solar controllers and in that time has become a very diverse manufacturer in this category for the swimming pool industry. It has grown to be the largest manufacturer of solar pool controllers in Australia and offers customised turn-key solutions.

  • Source: Splash magazine
  • companies

    Stanley Black & Decker seeks innovation

    Poor performance sees strategy shift

    After a disappointing 2022, SBD is focussing its efforts on tools, making innovative products, and expanding "electrification" into new job areas. It's also prepping for a coming recession.

    With construction continuing to perform at high levels, it would be natural to assume that power tool manufacturers such as US-based power tool company Stanley Black & Decker (SBD) would be doing very well.

    That assumption would be half-right. SBD was doing very well during 2021. After a sharp decline at the start of the COVID-19 pandemic in March 2020, its share price soared to close to USD220 in May 2021. Since then, however, a series of events have seen the company's share price collapse back to the earlier low, along with its financial indicators. That's been a result of some poor timing, market restrictions, and, it must be said, not the best management.

    Back in 2021, the company bet on an expanding market that would be held back by shortage of supplies from China. It boosted production and increased inventory substantially. However, the expected sales did not eventuate, leaving it stuck with large inventories going into 2022. SBD reported a 12% decline in sales volume for its Tools & Outdoor segment for Q3 2022.

    Power tools had a revenue decline of 2% for the quarter, while hand tools declined by 7%. Outdoor declined 12% in terms of organic growth. Commenting on these declines in the company's 2022 Q3 results presentation, interim chief financial officer Corbin Walburger said:

    Total revenue was impacted by moderated consumer demand like many other discretionary retail categories and lower orders as our retailers are also working down inventory.

    SBD's position has now deteriorated to the extent that financial analysts are concerned its cashflow is not adequate to fully service its debt burden. That doesn't mean the company is going to collapse, but it is close to hitting a negative cycle where too much debt leads to increased debt servicing costs, further increasing the burden created by that debt.

    Going through the financials of SBD will not be all that rewarding from the perspective of the hardware retail industry. To summarise the bad news, organic (non-acquisition) revenues are down around 2%, profit margin is declining, and inventory levels are very high.

    The real question is what SBD is going to do about these problems, and how those actions will affect the hardware retail industry. One result has been that the company has become more focussed on its tool business than previously. As the company's CEO, Don Allan remarked during the presentation of its Q3 results 27 October 2022:

    The divestitures of Electronic Security, Access Technologies and Oil & Gas businesses were successfully completed in the third quarter, which further focuses Stanley Black & Decker's portfolio on our leading Tools & Outdoor and Industrial businesses.

    Looked at from a structural perspective, the core difficulty that SBD has faced in power tools is that its strategy has relied on brand acquisition and development through the past decade. That strategy works best in markets that are technologically mature. In more dynamic markets, where innovation has an ongoing part to play, that strategy tends not to work as well.

    What SBD tends to do best is innovation that has a strong marketing aspect to it. Take, for example, FlexVolt, the system that switches battery cells from parallel to serial connection, so that one battery can produce either 54V or 18V current.

    While there are certainly some practical edge cases where that interchangeability is useful out in the field, they are hardly comprehensive. The FlexVolt 54V batteries are large, with the smallest around 0.9kg, which means its more than 50% the weight of the drill it matches to, the DeWalt DCD999N-XE 18V FlexVolt Advantage. As one DeWalt owner commented on a forum: "It's massive, it is far too big for a drill. But is fine with larger tools."

    Yet as a marketing/innovation move, it was very well managed. For one thing, most tradies will directly associate more volts with more power, when - of course - power is expressed in watts, which is the product of volts times amps. The practical consideration in tool design is that lower voltages need higher amps to achieve power, and high amps means big thick copper cabling to carry the load.

    In the case of Hilti's Nuron range, for example, the size of the cabling that supports high-power 22V tools is very noticeable. For Hilti, working mainly with larger customers with expansive fleets of tools, using one battery system across all the tools, thus reducing logistics complexities, the added costs and design difficulties are worth it.

    What FlexVolt did was to make adopting a twin-battery system - with all the extra investment needed for batteries and chargers - more acceptable to trade customers. It has been successful enough that it has sparked a response from SBD's main competitors. Techtronic Industries (TTI) has introduced even higher voltages in its Milwaukee Tool MX range, and Makita seems to be re-platforming from the dominant 18V range to 36V - which it uses the North American nomenclature of "40V" to refer to. (The difference between 18V and 20V, as well as 36V and 40V, is that the lower number uses the expected output voltage, and the higher number uses the maximum output of a fully-charged battery.)

    The question that is beginning to loom in the industry is whether the extra expense of making the FlexVolt system will continue to be worth it. DeWalt made twin-voltage platforms acceptable, but it could be that both TTI's and Makita's approaches prove more profitable in the long-term. Nominating its most successful innovations, Mr Allan came up with this list:

    We have a strong track record as the industry leader in breakthrough, world's first innovations in our businesses. From FlexVolt to Atomic and Xtreme to Powerstack, we will build upon this strength to deliver an even higher quality of core and breakthrough innovations with shorter development cycles and new technologies.

    It's possible to question just exactly how innovative both Atomic and Extreme really have been, but Powerstack - the first pouch-based battery for power tools - certainly has been something new. However, other manufacturers have indicated that SBD may have entered that market a little early, as production of the pouch-based batteries is difficult, making range expansion difficult to manage.

    That said, the company is now expanding Powerstack, as Mr Allan informed the analysts at the results presentation:

    We are expanding DeWalt Powerstack with the launch of a new 5-amp hour battery. This is the most powerful, longest-lasting 20-volt MAX battery in its class and is compatible with our 300-tool strong DEWALT 20-volt system. Powerstack is the first pouch cell technology battery of its kind designed to deliver unparalleled power density to best serve our most demanding professional customers, and is expected to deliver over USD100 million of revenue in its first 12 months since launch. Today, the 5-amp hour product is already in the European market and has received great reviews by our customers.

    Mr Allan also indicated areas where FlexVolt is expanding, as well.

    We're also continuing to advance our high-power DeWalt FlexVolt line. By the end of this year, the portfolio will reach 60 products across power tools and outdoor power equipment, generating approximately USD500 million of annual revenue and continuing to grow, approaching nearly 70 products by the end of 2023. The DeWalt FlexVolt 15 Amp-hour battery was introduced last year as a world's first innovation. DeWalt FlexVolt converts users who are using corded, small-gas engine or pneumatic tools due to a high power need, and they convert them over to battery power.

    In fact, SBD seems to be starting to follow the market plan of TTI, which has been to expand electric tools into new areas. As Mr Allan also remarked at the recent results announcement:

    Electrification is a key growth driver across our Tools & Outdoor and Engineered Fastening businesses. We plan to make incremental investments to accelerate our efforts, capitalise on share gain opportunities and fortify our market leadership position as the technology continues to shift and adoption accelerates.
    Market leadership includes more user activation at the front end of our businesses. As we introduce our new products and innovation, we will bring more digital tools and capabilities as well as additional commercial resources to engage directly with our customers, enhance interactions with our end users and drive market share gains.

    To that end, SBD is finding ways to employ its FlexVolt tech in more industrial settings, Mr Allan explained:

    Our FlexVolt technology is also advancing innovation and sustainability across our industrial business, where customers desire to replace existing hydraulic tools with cordless solutions to increase portability and efficiency. To that end, the Stanley infrastructure team recently launched the first cordless automatic rail maintenance tool, the RD60 rail drill, which is powered by DeWalt FlexVolt.

    At the Robert W Baird Global Industrial Conference held on 9 November 2022, Mr Allan detailed market share concerns in response to a question by an analyst:

    I think when you look at the different categories of power tools, hand tools and outdoor, in hand tools and outdoor, I think we've continued to gain share over the last year, 1.5 years or more. Power tools for DEWALT was challenging, and so we went through a period of time where we probably lost a point or so of share, and that's just the reality of being constrained on the supply side.
    The good news is I feel like what we're doing now is we are going to be able to, at a minimum, maintain share going forward, but more importantly, we're going to be able to gain share because of how we've addressed the supply constraint issues, but also because we're going to invest more in the innovation side.

    Mr Allan also pointed to what he sees as a coming recession, at least for the US market:

    For us, we kind of - we've been in a recession. So we've had a consumer recession that we've been dealing with. There's probably some type of professional construction worker recession coming as housing slows due to rising interest rates and maybe unemployment rising. We'll see what happens over the coming months and quarters.

    Mr Allan also clarified where he could see cost savings coming in the future on the productions side:

    The best example I can give folks is we have 11 different DeWalt drills. They can be 20-volt, 60-volt, FlexVolt. They have all kinds of different varieties, too. Then you have Atomic. You have Xtreme. You have all kinds of variations to it. And they've been designed and innovated in a way that made them unique, for some reason that at the time made a lot of sense.
    But what didn't happen was looking at all 11 of them and saying, "What is the common components we can use across all 11 of them?" So the crazy example I can give you is we have some drills that have 7 screws in them that keep them together. We have some drills that have 8 screws that keep them together. We have some drills that keep 4 screws that hold them together, and then the types of screws are all different.
    Those are things that you just need to look at and say, 'Well, okay, there's common things we want to do across this particular product family. Let's leverage the spend. Let's leverage the design.' And then what it does is it helps you not only drive benefit with your external vendor base, because you're leveraging the spend, but what – it allows you to innovate faster because you're not starting from scratch every single time around.
    You're starting with a platform and you say, 'Okay, 60% of the product is standardised. The remaining 40% is going to be tailored for something unique that the end user wants that they think is differentiated.' That's a combination of what we need to do internally and with our external vendor base.

    Analysis

    In some ways the outlook from SBD could be regarded as one of the first truly post-pandemic forecasts we've seen. There is a persistent concern in both North America and Australia that the construction industry could see a decline - if not a slump - once the building contracts won during Australia's Fy2021/22 are completed.

    One background reason for this, beyond COVID-19, is that globalisation has been more of a general economic boon than many realised, and has suffered a number of additional setbacks, including the Russian war in Ukraine, China's apparently similar external ambitions and, of course, Brexit.

    That said, however, there is a genuine note of hopefulness in the immediate reaction of SBD CEO Mr Allan - the push for real innovation as the best possible solution. It's really a major shift for the company. While we tend to think of companies like TTI and SBD as locked in continual competition, the truth is that if both are now staking their future on innovation, that may work to move the entire construction industry further down that path. We might even, just, see the emergence of important community innovations, such as how a connected construction site might actually work.

    companies

    Supplier update

    CSR benefits from building supplies demand but warns on prices

    James Hardie Industries cut its annual profit guidance on expectations that macroeconomic conditions and challenging housing markets will impact volumes

    CSR chief executive Julie Coates said demand for housing construction remained strong, with the pipeline for detached housing 50% higher than historic averages and extending well into 2023 - despite rising interest rates negatively affecting the housing market.

    HomeBuilder grants of up to $25,000 per project - offered by the former Morrison government at the start of the pandemic - created a boom in the housing construction and renovation market. This led to a supply chain crunch, sending the price of building materials soaring, with some projects yet to begin.

    CSR is set to benefit for longer because many of its products - including Gyprock plasterboard, PGH bricks, Monier roofing, Hebel lightweight building blocks and Bradford insulation - are generally only needed in the final stages of construction and renovation projects.

    In the Weekend Australian, Ms Coates said the Hebel lightweight blocks and Gyprock plasterboard were in particularly high demand. Builders looking for faster overall construction times amid labour shortages and supply chain pressures are increasingly using Hebel blocks.

    Cost, supply chain and labour pressures are supporting adoption of CSR systems like Hebel lightweight aerated autoclaved concrete as faster build times and reduced labour requirements are becoming increasingly valuable to builders.

    Ms Coates said the upgraded Hebel manufacturing facility at Somersby on the NSW Central Coast had substantial capacity to cater for that growing demand and could double its output. The Bradford insulation business had also been a strong performer as it ditched lower-priced items to concentrate on higher-margin products.

    CSR's revenue rose 14% to $1.29 billion in the six months to September 30. Meanwhile net profit before significant items - including a $6 million software upgrade - rose 27% to $110 million.

    Bottomline net profit after tax was down 34% to $104 million for the first half because of one-offs. CSR was able to lift prices for its products to combat raw materials inflation, and said it has also been disciplined on costs.

    The company's building products arm generated a 15% rise in earnings before interest and tax to $139 million for the six months ended September 30. Revenues in building products were up 11%, with most of it coming from price increases on its products. Gyprock plasterboard had lifted prices again in September and October.

    Ms Coates foreshadowed that price rises at the PGH bricks business would likely be higher than any of the other products because the brick-making plant uses much higher levels of gas as an energy source, where prices are escalating.

    In the Australian Financial Review chief financial officer David Fallu said there would "double-digit" increases in brick prices to "maintain margins in that space".

    James Hardie

    James Hardie said it has begun to see a "significant change" to the Australian housing market outlook in the past two months, with labour shortages and unfavourable weather conditions contributing to a slowdown despite backlogs.

    The company said its customers had asked to lower inventory levels amid a "period of market uncertainty". In The Australian, chief executive Aaron Erter, said:

    We see a weakened housing market for the remainder of our fiscal year, softening volumes in all three regions we participate in. To ensure we deliver on our results, our teams will be laser-focused on expense control through (cost cutting), price real­isation, and efficient resource allocation.

    As a result, he has been forced to downgrade full-year profits by about 10%. James Hardie said it now anticipates adjusted net income for the 12 months through May of between USD650 million and USD710 million, down from a previous forecast of USD730 million to USD780 million.

    It was the second downgrade in the past few months, with James Hardie having cut its full-year forecasts in mid-August.

    The profit downgrade overshadowed the first-half results where net profit after tax was up 22% to USD330.5 million, with sales up 14% to USD1.998 billion, for the six months through September, up 22% on the same period in the previous year.

    Mr Erter also said there had been a shift in the way homes were constructed. James Hardie products were being used earlier in the construction process, as builders awaited deliveries of other materials in short supply, he said.

    This switched order of construction would reduce the backlog of work for James Hardie.

    Related

    James Hardie annual profit jumps 75% and CSR reported an 85% rise in annual net profit - HNN Flash #94, May 2022
  • Sources: Australian Financial Review, Weekend Australian and Dow Jones Institutional News
  • companies

    Supplier update: Timber

    Competition concerns over FCNSW's proposed acquisition

    The ACCC announced in August that it was making inquiries about its proposal to buy Hume Forests

    The Forestry Corporation of NSW (FCNSW) is looking to buy Hume Forests Limited which is owned by major US forestry fund managers Global Forest Partners (GFP). However the Australian Competition and Consumer Commission (ACCC) has put a hold on the move, saying it has "preliminary competition concerns".

    Hume Forests comprises a maturing softwood plantation estate located between the Tumut-Tumbarumba and Bathurst-Oberon regions of NSW. The plantations include about 19,000ha of freehold land with a total productive area of 14,000ha and are planted with the radiata pine which has strong demand in the building industry.

    GFP, which has about USD3.3 billion in assets, acquired Hume Forests in 2004 for one of its timber funds.

    The ACCC said the proposed buy would be likely lessen competition in the supply of softwood logs in each of the Tumut/Tumbarumba and Bathurst/Oberon regions, and said the softwood log market was already highly concentrated and the sale could lead to higher prices for the timber. (Its invitation for public comments on its concerns recently closed on November 3.)

    FCNSW, a state-owned statutory corporation, owns and operates more than 230,000ha of softwood timber plantations and just under 35,000ha of hardwood timber plantations in NSW. It is the largest producer of softwood logs in NSW with plantations across Bathurst, Bombala, Grafton, Moss Vale, Tallaganda, Tumut and Walcha. It owns more than 70% of all softwood plantations in the state, according to the Oberon Review.

    Analysts told The Australian the state government's motivation for buying the plantations is likely to be that it lost its own plantations across 50,000ha during the bush fires almost two years ago.

    The Australian Financial Review has also reported that investors are re-thinking forestry as an asset class following recent changes to Australia's carbon legislation, which has created additional potential revenue streams.

    The demand for timber from a booming housing construction sector, and supply chain issues in offshore markets, has investors looking for hedges against rising inflation.

  • Sources: Oberon Review, The Australian and Australian Financial Review
  • companies

    Rural supplies update

    Delta Agribusiness seeking buyer for majority stake: report

    The business is being pitched as Australia's third largest rural supplies player, following Nutrien Ag's acquisition of Ruralco in 2019

    It is understood that interested parties for Delta Agribusiness (Delta Ag) were told that its founders and management wanted to retain as much as a 30% stake in the company, according to Street Talk in The Australian Financial Review. Delta Ag managing director Gerard Hines is said to be heavily involved in the future planning.

    The parties were told Delta Ag wanted indicative offers before Christmas, and would run a full course of due diligence early in the new year for serious contenders. UBS is handling the auction for the business.

    Private equity firms have been mapping out where the business has gone with Odyssey Private Equity's backing - after it took a 24% stake in 2019 - and where it can go in the future. They believe establishing a toehold in Queensland is a logical place to start, which would turn Delta Ag into a national player, and are considering strategies such as following Elders into livestock agency and finance.

    Delta Ag is also fresh off a bumper year. Its parent entity recorded $750 million sales revenue (up from $356.6 million) in the 12 months to June 30 while EBITDA (earnings before interest, taxes, depreciation, and amortisation) doubled to hit $61.2 million, according to accounts filed with ASIC.

    Delta Ag's directors have put the growth down to favourable seasonal conditions and its expansion into Western Australia.

    The company purchased Agquire Rural Holdings (ARH) and the business assets of David Grays Aglink (DGA) during FY22, and six Cox Rural agribusiness branches in South Australia on the first day of FY23.

    Cox Rural

    Delta Ag announced that Cox Rural agreed to merge its business with Delta Ag, effective July 1, 2022.

    Both Cox Rural and Delta Ag are privately owned and independent businesses, and the merger has added significantly to Delta Ag's geographical footprint into SA. At the time of the announcement, Mr Cox said:

    It has always been very important to the Cox Rural Group to remain strongly independent, and we did not want to change that, so the decision was made to find a suitable partner to merge with, a company with a very well aligned culture and care for its team of people and customers alike, and with the resources and functionality to strengthen our business.
    Delta was the obvious choice and ticked all the boxes. This merger will provide increased efficiencies, enhanced buying power, and provide the resources and one team approach required to grow and innovate. It does this without compromising our independence and autonomy, not only a benefit to Cox Rural and its team, but most importantly its ... customers.
    Delta Agribusiness is a company I see as the ideal fit to take our business to its next stage of growth. Additionally, the Delta Ag shareholder model allows our Cox Rural team to invest in the merged business, as some had done in Cox Rural, however, the opportunities were limited due to our company structure. This is a great opportunity for our ... team to be able to become a shareholder and share in the success of the overall business. The increased scale of the combined businesses provides further career opportunities for our terrific team, and we believe will only build on the positive outcomes that we strive to deliver to our clients.

    Commenting on the merger, Mr Hines said:

    It's important to understand that Lachy has not sold out of his businesses, quite the contrary in fact. Lachy has, via this transaction, reinvested a large proportion of the transaction consideration into the expanded business and maintains his senior management and leadership position to ensure continuity across the business. This means Lachy retains a high level of 'skin in the game' and maintains an unfettered desire to ensure Cox Rural continues its proud tradition in the SA communities that it services.
    ...Lachy and his senior team will continue to operate the business as is, with retained autonomy and management initiative. The combined commercial and agronomic experience will greatly strengthen the overall value proposition to clients, as both businesses will bring new ideas and synergies to the table for the benefit of our clients. The combined group will have 66 agronomist/farm consultants, and an enhanced commitment to research and development trial work.

    Cox Rural has outlets in Naracoorte, Keith, Tintinara, Coonalpyn, Clare and Jamestown in SA.

    About Delta Agribusiness

    Originating in Southern NSW in 2006, Delta Ag has grown strongly over the past 16 years to become a major supplier of farm inputs, agronomy and advisory services, technology solutions, as well as grain marketing, livestock and property, and seasonal finance solutions.

    Pre-merger, Delta operates out of 53 company owned locations and has 40 independent wholesale customers across WA, through its business there, David Grays Aglink.

    Delta Ag is privately owned by 110 shareholders, most of whom work in the business, and it employs around 350 people.

    Related

    Delta Agribusinses is seeking a new investor - HNN Flash #110, September 2022
  • Sources: The Australian Financial Review and Delta Agribusiness
  • Image credit: Delta Ag Facebook
  • companies

    Supplier update

    CSR is preparing a bid for Jeld-Wen Australasia: report

    The doors and windows manufacturer is being put up for sale through investment bank Macquarie Capital

    Offers for Jeld-Wen's Australian and New Zealand operations are due soon, and it is understood building materials company CSR is a serious bidder for the business, according to DataRoom in The Australian.

    It is believed Macquarie has sounded out a range of buyers, and some that have shown interest early on are overseas-based trade groups, with at least one Australian private equity firm. Jeld-Wen Australasia has an asking price of about $1 billion.

    Sydney-based Crescent Capital has bought building materials companies in the past. Crescent Capital purchased glass manufacturer Viridian for about $155 million from CSR in 2018, but the question is whether Jeld-Wen will be too large an acquisition for Crescent.

    CSR's chief executive Julie Coates will be presenting the company's half year results in a week.

    The business is being sold at the peak of the market, with interest rates on the rise and building demand set for a slow down, so CSR will be wary of overpaying for Jeld-Wen. But playing to its advantage may be that funding costs have skyrocketed for private equity firms, so an acquisition may no longer stack up for them.

    Advisers at Macquarie are expected to make much of Jeld-Wen's property portfolio in Australia, which could be worth hundreds of millions of dollars. It presents an ideal opportunity for a sale and leaseback deal involving a real estate investor.

    Jeld-Wen's Australasian operation generates between $90 million and $100 million of earnings before interest, tax, depreciation and amortisation, and about 10% of the company's global revenue.

    With notable brands such as Corinthian, Stegbar and Breezway, it operates more than 120 manufacturing facilities in 19 countries, producing and distributing interior and exterior doors, wood, vinyl and aluminium windows. It also makes wall systems, shower enclosures, closet systems and other components used in construction.

    Related

    Jeld-Wen is conducting a review of its Australasian operations - HNN Flash #110, September 2022
  • Source: The Australian
  • companies

    Supplier update: Timber

    Timber processors impacted by VicForests decision

    The state government in Victoria will also spend $120 million in a deal with Hancock Victorian Plantations to establish 14,000 hectares of softwood plantations in Gippsland

    The Victorian state government recently announced a halving of the native timber sold by VicForests by 2024 under the Victorian Forestry Plan. This could mean that timber processors at Longwarry, Noojee and Powelltown may lose more wood supply.

    The catalyst for cutbacks was the government's release of the Threatened Species and Communities Risk Assessment, which outlines further new protection areas that will affect forest areas set aside for timber harvesting. This is on top of the extra 100,000 hectares of protection areas put in place in 2019, much of which has since burnt, according to the Warragul & Drouin Gazette.

    With the latest cutbacks, the area available for timber harvesting is now less than two per cent of Victoria's public forests.

    Currently, VicForests is supplying 253,000 cubic metres of D+ saw logs per annum until 2023-24. Under the plan, this will reduce to 185,000m3 in 2024-25 and to 140,000m3 from 2025-26 until 2029-30, when all harvesting will cease.

    The amount of Vic Ash timber that will be harvested over this period is 85,000m3, while the annual harvest of mixed species will go from 100,000m3 in 2024-25 to 55,000m3 from 2025 until 2030.

    Australian Sustainable Hardwoods in Heyfield is a major user of Vic Ash timber, while Radial Timber sources timber from VicForests until its own plantations are mature. Many of these, however, will not be mature by 2030, leaving Radial short of timber.

    Along with the risk assessment cutbacks, the government delayed the release of VicForests' next Timber Release Plan until after the November 26 state election.

    It also announced a new tranche of its "sawmill opt-out scheme" for processors who may want compensation to leave the industry. The government is offering up to $250,000 as a redundancy payment for plant and equipment, and up to $150,000 for the safe retirement and repurposing of mill sites.

    Victorian Forest Products Association (VFPA) chief executive Deb Kerr said the state government's actions were undermining any industry confidence that it would be able to guarantee supply timber until 2030, as promised. She told the Warragul & Drouin Gazette:

    On the face of it, it appears to be forcing mills to leave the industry they love - all right before the November election. The government's exit package has come at a time when many mills have been operating with very little timber supplies for months, with some mills mothballing operations due to lack of supply.

    She said the government had confirmed it was reducing saw log supply by 24% and further reducing the effective harvest area by expanding protection zones for threatened species.

    Victoria's sustainable native forest industry operates on just 0.04 per cent of the forest each year and for most of 2022 has been held to ransom through the courts by litigious green groups. Mills and their workers are stressed about their future and have little confidence in the government's promise to guarantee supply until 2030.

    Related:

    Mectec timber mill in East Gippsland (VIC) closes - HNN Flash #107, August 2022

    Plantation expansion

    A new softwood timber plantation covering about 14,000 hectares will be established in Gippsland, also as part of the Victorian Forestry Plan.

    Agriculture Minister Gayle Tierney said the plantation would be established by Hancock Victoria Plantations (HVP). HVP, which already has extensive plantations in Gippsland, will match the Andrews Labor Government's investment almost dollar-for-dollar to buy, lease and manage the more than 14,000ha of softwood plantations.

    Ms Tierney said 16 million trees would be planted and the government would match the company's investment almost dollar-for-dollar.

    Plantings of the softwoods will begin in 2023, subject to final approvals, and continue over 10 years. Softwood plantations normally take 30 years to grow to provide quality sawlogs. All going well, these plantations would mature between the early 2050s and 2060s.

    Ms Tierney said the plantation would protect timber supply for the construction industry, had the potential bring international processors to the region and would ensure a long-term sustainable future for Victoria's forestry industry. Currently, Gippsland is almost 100% dominated by hardwood processors.

    The minister's announcement did not stipulate where the plantation would be located but it will be across various Gippsland locations to reduce water impacts on existing plantations and other land uses including agriculture.

    It will contribute to the state's emission reduction targets by removing 7.8 million tonnes of carbon dioxide over the next 25 years.

    Ms Tierney said five of every six trees currently harvested in Victoria were from plantations and over time the new investment would make that six out of six.

    However, the Forests and Wood Products Association said in an interim report that Australia's manufacturing and construction sectors will face a critical timber shortage and a doubling of the ever-increasing reliance on imported timber by 2050 unless an additional one billion production trees are planted.

    The VFPA backed the state government's announcement and said 16 million trees would help close the current supply shortfall. In a statement, Ms Kerr said:

    Victoria imports on average 36% of its softwood demand and desperately needs to secure future timber and fibre supplies. This support to establish 16 million new trees is welcomed to close the current shortfall in sovereign timber supplies.
    Originally promised as the transition for the Gippsland hardwood industry, with plantings only expected to commence from 2023, it will still leave a future gap in harvestable timber and fibre from 2024.

    Ms Kerr also said HVP's participation would enhance Gippsland's standing as a plantation region of major importance while providing immediate jobs in new plantings, tree and land cultivation, and management.

    It also opens opportunities in the farm forestry space, for local landholders to participate.

    A consultant's report for the federally funded Gippsland forestry Hub found that Gippsland has more than one million hectares of land suitable for forest plantations. Most of these areas' suitability are classed as "high" to "very high". The report said:

    Although land costs are high, there is great potential to work with current landowners (including institutional agribusiness investors to integrate plantations on their land.

    However, the report warned the Andrews Government's policy to end native timber harvesting - despite growing demand for the timber - would continue to reduce local processing capacity. It said:

    Loss of scale threatens the ability of manufacturers to compete in an open economy.
  • Sources: Warragul & Drouin Gazette and Australian Associated Press
  • companies

    Supplier update

    Adbri is looking for a new leader

    The building materials manufacturer has sacked its chief executive Nick Miller, amid ongoing cost and weather pressures

    Adbri has replaced the company's CEO with interim chief Mark Irwin, not long after it revealed net profit fell 15% to $48.1 million for the six months to June on the previous corresponding period. In a trading update, Adbri said:

    The board has determined that it is an appropriate time for a change in leadership and the board thanked Mr Miller for his service, particularly during the challenges of COVID-19.

    Adbri deputy chair Vanessa Guthrie said changing market dynamics meant the company had to drive efficiencies and lower its costs to boost margins. The company said in a statement:

    The demand environment has remained robust. However, extreme rainfall events and ongoing inflationary headwinds, particularly energy and diesel costs, have continued to impact margins.

    While Adbri had implemented out-of-cycle price increases, they have not addressed ongoing cost inflation, the company said, and it was looking at further cost cuts. But it remains committed to rebuilding its $199 million Kwinana cement facility in Western Australia and more lime assets, which cost money.

    The group has launched "a critical review" of expenses to deliver further savings by focusing on operational efficiency tweaks. It will also review supplier and customer contracts for repricing opportunities and fast-track its sale of surplus land to raise cash.

    After removing its CEO , Adbri revealed an earnings downgrade as it continues to battle cost inflation, wet weather and high energy costs.

    It issued a new forecast for annual underlying net profit after tax of between $75 million and $85 million for the full year ending December 31, down from $113 million in 2021.

    The Adbri board is led by majority shareholder Raymond Barro. He said of Mr Irwin's appointment:

    Mark's immediate priorities upon joining will be driving our commercial performance in all end markets to improve margins and offset cost pressures, while accelerating our cost reduction and operational efficiency initiatives.
    He will also focus on our capital deployment to ensure efficiency and effectiveness in the current environment, in order to deliver the best returns for shareholders.

    Adbri shares have now lost half of their value so far this year, delivering the company a market capitalisation of $936 million.

  • Sources: The Australian and Adelaide Advertiser
  • companies

    Supplier update

    Speculation around Boral buying Wagners

    New Boral CEO could turn his attention acquiring rival Wagners, according to industry observers

    Vik Bansal's official start as CEO of Boral was brought forward from December to October as chairman Ryan Stokes steps up a push to initiate a turnaround at the company.

    As Australia's largest building materials supplier, Boral is now more than 68% owned by Kerry Stokes's Seven Group and has a $3.2 billion market value.

    Wagners has seen its value fall sharply in recent months and is currently worth about $152 million. When it listed in 2017 by the Wagner family, its market value was $437.3 million, reports The Australian.

    Toowoomba-based Wagners describes itself as a leading producer of construction materials and services for Australian and international markets. It made a $7.6 million net profit for the year to June as higher costs hurt profit margins. Its major projects such as Cross River Rail came to an end just as the business was hit by rising fuel costs and labour shortages.

    The construction industry is experiencing tougher conditions with companies being hit not only by rising costs, but also a slowing economy and a falling housing market. Across the industry, building materials providers cannot increase prices fast enough to cover costs, and many have fixed price contracts in place for the next 12 to 18 months.

    Industry sources have told The Australian that in this environment, consolidation makes sense, and Wagners would be a manageable acquisition.

    Any deal would no doubt happen down the track after Mr Bansal carried out an overall assessment of the company. But the industry sources believe he is likely to make significant changes to the group.

    More ambitious plans could include a merger with AdBri. Boral has tried this before, with a bid in 2003 valuing AdBri at $840 million, but that was blocked by the Australian Competition and Consumer Commission. Since then, the market has been shaken loose due to cement imports by several players.

    Whether a merger between the $1.3 billion AdBri and Boral could happen would rest on the willingness of AdBri's 43% shareholder, Barro Group. The head of the Melbourne-based family-owned company, Raymond Barro, has not shown any interest in selling AdBri.

    One suggested scenario is where Boral and AdBri merge, and what the competition watchdog forces the groups to sell could be given back to Barro Group as partial payment.

    In Queensland, Wagners supplies cement to Boral, with eight years to run on the contract. Many saw the agreement with Wagners at the time as an odd move, given that it also had a cement manufacturing joint venture with AdBri known as Sunstate Cement.

    In 2021, Boral was ordered to pay Wagners $4.8 million in a contractual dispute over cement prices. Boral buys about 40% of Wagners' cement.

    Related

    Court ruling favours Boral in cement price battle.

    Legal decision will cost Wagners in cement deal with Boral - HNN Flash #14, June 2020

    Boral is set to have new chief executive by December 2022.

    Changing of the guard at Boral - HNN Flash #97, June 20222
    companies

    Supplier update

    Makita launches Outdoor Adventure

    Outdoor Adventure products, powered by 18V LXT batteries, take users from the jobsite to the outdoors in one system

    Makita has moved cordless into different spaces with the announcement of Outdoor Adventure, a new range of cordless products for camping, hiking and fishing.

    They feature a distinctive camo-green colour inspired by outdoor environments and operate within the existing Makita LXT(r) System. This gives users seamless compatibility and one system of cordless products. Brent Withey, vice president - brand marketing, Makita USA, said:

    ...There is a greater appreciation of the outdoors as people are spending more time outside. At the same time, there are no battery-powered systems in the outdoor products category with the advanced technology and proven performance of LXT. With Outdoor Adventure, users now have battery-powered products they can count on when they hit the open road...

    Outdoor Adventure products are powered by Makita 18V LXT batteries and feature the same technology that power Makita tools on commercial job sites. The range launches with 16 battery-powered products including a chain saw, inflator and wet-dry vacuum as well as cordless lighting, fans, audio equipment, and a coffee maker. The system will continue to expand with a range of new function-specific products on the way.

    The following are the new Outdoor Adventure products announced for October 2022:

    Work lights and flashlights

    When the sun goes down, campers and hikers need portable and powerful lighting. Outdoor Adventure work lights and flashlights bring reliable, long-lasting lighting to camp sites, workspaces, or wherever the road leads.

    Speaker and radio

    Outdoor Adventure offers two powerful and portable solutions that bring the audio to camp sites, tailgate parties, and more. Both feature the convenience of Bluetooth.

    Fans and cordless power source

    Bring cooling air to a tent or trailer with two Outdoor Adventure cordless fans. A Makita battery can be used to charge devices with the portable power source.

    Inflator

    There's no compressed air in the back country. For off-roaders, overlanders, and campers alike, Outdoor Adventure has a portable solution for unexpected tire maintenance and inflation demands.

    Chainsaw, vacuum and blower

    Whether it's trail-clearing and cutting firewood, or just cleaning up an RV, tent or pop-up trailer, Outdoor Adventure is the solution. This system includes a powerful chain saw for portable cutting, and two efficient tools for fast clean-ups.

    Beverage utility and cooler

    Coffee and cold beverages are mandatory for any road trip. Outdoor Adventure has solutions that keep them flowing, hot or cold, including a battery-powered coffee maker.

    Coming soon: A battery-powered hot water kettle and cooler/warmer.

  • Sources: PR Newswire/Makita USA
  • companies

    Supplier update: Garden nursery

    Allan's Nursery in Tasmania is on the market

    Owner Bill Allan and his late wife Noelene sold billions of plants, flowers and herbs

    Located in Launceston (TAS), nursery wholesaler Allan's Nursery can sell 14,000,000 seedlings in just one year. Bill Allan told commercialrealestate.com.au:

    At any one time, we've got upwards of 10,000,000 plants in the place. And it turns around five times a year.

    The wholesale nursery has been in business for six decades. But after the passing of his wife and son last year, 84-year-old Mr Allan has decided to sell the business and retire to enjoy fishing and lawn bowls. He said:

    It's a pleasure to be here, but I've got old legs. I'm worn out.

    Listing agent Roger Dick of Goldman Property, who is selling the property alongside Ian Singline of Shepherd and Heap, said:

    He's been a pioneer in the nursery industry. He and his wife worked all their life. He's been very innovative and well regarded in the industry as a leader. He was the first to put in underground heating.

    In addition to winning accolades such as Nurseryman of Australia award in 1987, Mr Allan also bred a unique flower, a pansy called Storm Cloud. He explains:

    It's the most unusual pansy. Its petals have a white strip through them, which is uncharacteristic. They have to be hand pollinated with a little brush and kept away from other pansies, so they don't cross-pollinate.

    He also bred two types of tomato plants: Mama Mia and Allans Early Red. The latter has been in production since 1967 and is available throughout the country.

    The Allans' nursery empire once included three retail centres, but these were sold off over the years, with only the wholesale site at Youngtown left in the family. It grows and sells an enormous range of ornamentals, herbs, flowers, trees and vegetable seedlings. Bunnings is one of its main customers, buying roughly 1700 different products.

    The nursery currently employs nine full-time staff, including two managers. Mr Allan said:

    I'd like [the new owners] to carry on with the staff. Some of the staff I've got have been here since they left school. They are all brilliant.

    He has offered to stay in touch with the new owners to assist with the handover. While Mr Allan would like to see the business continue, the property could also appeal to developers, zoned for future residential subdivision.

    On-site, glasshouses and polyhouse structures cover about 8000sqm. Hydronic heating, shading and ventilation boost production in the cooler months. There is also a workshop, machinery shed, potting shed, soil mix bays and an administration building. Machinery and equipment include two delivery trucks, a front-end loader, a forklift, and tractor.

    As the agent, Mr Dick would not speculate on a price range. He said:

    We're offering it to the market by expressions of interest.

    In an earlier interview with The Examiner, Mr Allan said he didn't plan on completely giving up growing plants. Instead, he would opt to use an empty block next door to him to continue breeding certain flowers, while also growing "a few things" for charity.

  • Sources: Commercialrealestate.com.au and The Examiner
  • companies

    Construction update

    Toowoomba is getting its second passive house

    The tiny house market is getting bigger and owners of farmland in Victoria have embraced them as a new revenue stream

    Passive houses are growing in popularity in Australia as homebuyers look for energy efficiency, and a low environmental impact. The number of certified passive homes increased from 25 in 2019 to 52 in 2022.

    A new two-bedroom, one bathroom house, being built on a 380sqm parcel of land at Harlaxton in Toowoomba's northern suburbs, is set to become the southern Queensland city's second passive house.

    For a building to be certified as a passive house, it needs to meet several criteria including airtightness and for temperatures to remain around 25 degrees Celsius.

    Features of the passive house being built in Toowoomba include double-glazed windows filled with argon gas and thermal breaks, to stop heat from coming into the building. It will also have thicker, heavier duty insulation wrapped over the house and a heat-recovery machine fitted with medical-grade filters, to keep temperatures stable.

    And it will only need a small 5-kilowatt ducted air conditioning system, powered by solar panels, to deal with southern Queensland's seasonal extremes.

    Owners Michael Krause and Meegan Symonds said they first looked at the concept of a passive house because they wanted to have a low impact on the environment. Ms Symonds told the ABC the designed house seemed comfortable, and the use of filtered air met the health needs of her husband, who had asthma.

    The couple had been concerned about extra costs, but Ms Symonds said quotes for the project ended up only about 10% more expensive than a traditional build. She said the project has since managed to stay within their $510,000 budget for the house.

    The Australian Passive House Association said the couple were part of the growing number of homeowners, builders and designers interested in the concept. CEO Alexia Lidas said demand was outpacing the number of skilled professionals who could build the homes. She told the ABC:

    We're growing 20% year on year.

    She said along with the concept's environmental credentials, people were also interested in passive homes because of the verification process.

    Nathan Peters, director of Titanium Homes, built Toowoomba's first passive house and is helping Mr Krause and Ms Symonds with their build. He said he'd seen an increase in enquiries as well.

    I've got another two three-bedroom ones I'm quoting at the moment, I quoted one last month out near Dalby, so there's definitely a bit of interest.

    Mr Peters said a passive house build required a lot more attention to detail and better planning.

    There's a lot of thought that goes into it to try to get all the wraps really done well and get the house totally airtight. The trades need to be thinking a lot more about their workmanship and making sure they take a lot more care.

    Mr Peters said he thought the passive house concept was the way of the future, as energy efficiency and climate change became bigger considerations for buyers.

    Mr Krause also expects to see more passive houses in Australia, given the concept works well in both warm and cold climates. He said:

    I think it will be a lot more common because people will realise once they come in just how comfortable they are versus the traditional home where you've got those extremes.
    You'll find a lot more people will be looking at building, especially once they realise that the costs aren't prohibitive.

    Tiny houses

    Tiny Away, which supplies turnkey-ready tiny homes to rural property owners and allows them to share in any revenue, opened its doors in June 2020. By the end of 2020 it saw a 660% increase in bookings across its 120 properties in Australia and New Zealand compared with the first pre-COVID quarter of the year, according to The Weekly Times.

    Co-founder Jeff Yeo said for the first half of this year, Tiny Away had year-on-year revenue growth of almost 218%. Tiny houses in Victoria had booking increases of 40 to 75%.

    The growing market has initiated an increase in demand from rural landholders keen to host a tiny house as a way of generating extra income. Mr Yeo told The Weekly Times:

    Many farmers across Australia are still feeling the financial legacy and impact of bushfires, drought and COVID, and tiny house hosting offers them a way to generate income.

    The idea of a tiny house stay has risen in popularity, especially in Australia and New Zealand where low-impact tourism and sustainability are sought. Mr Yeo said:

    Tiny Away not only appeals to stressed-out city dwellers looking for an escape but also to travellers keen to reduce their environmental footprint.

    Tiny Away plans to open an extra 300 houses over the next year. He said:

    The first step has been to canvass regions that lend themselves to a Tiny Away stay - close to a major city but far enough away to give our guests a true 'escape to nature' - and then begin to recruit host landowners through a rigorous site assessment process.

    Creating reliable, local partnerships was the key to their success. Mr Yeo said:

    The social enterprise model within which we work with landowners means that these hosts become their own micro hoteliers, hosting tiny houses on their privately owned land, maintaining the houses, and hosting guests - all while sharing a cut of the earned revenue.
    What sets us apart is our network of local landowners who make a Tiny Away stay so unique. All our properties offer something different. Some are semi-secluded and close to activities, and others are in the middle of nowhere.

    Tiny Away builds and supplies houses to landowners, but there has also been strong demand from farmers going direct to local tiny home builders for the same reasons.

    Universal Tiny Houses co-founder Tim Hutchins said demand for short stay, farm accommodation and Airbnb-type houses had increased to a point where they were having to knock back orders. He told The Weekly Times:

    The majority of our demand is coming from the farming and rural sector seeking that extra cash income for short-stay accommodation. If you can get your five nights a week at $165 to $200 a night, and if it's done well, it can be a very lucrative earner.

    Tiny Homes and Tiny Homes Australia's Henry Hangan said it was the busiest it had been yet and would build 50% more houses than last year.

    About 50% of the builds are going to be lived in and 50% are for Airbnb or holiday homes.
    I've been getting a lot more interest recently from the farming sector. We expect demand to continue rising. There are massive issues with rentals and houses post COVID.
    A lot of younger people are looking at tiny homes to get their foot in the door with something they actually own, not paying off someone else's house by renting.

    Prices vary between builders but can start from $35,000 and extend beyond $220,000 for fully optioned models.

  • Sources: Australian Broadcasting Corporation and The Weekly Times
  • companies

    Construction update

    Prefab methods for Melbourne townhouses

    In a trial using prefabrication, Mirvac has reduced construction times and the amount of labour required

    Property group Mirvac has managed to cut build times by almost 25% and reduce labour hours by 11% in a pilot program using prefabrication for townhouses being built in the Melbourne suburb of Doncaster East. Labour costs typically account for 50% of the cost of a dwelling.

    At its 911-home Tullamore housing estate, the developer compared the construction of two rows of four townhouses - one built using prefabrication and the other by traditional methods - and nearly halved the on-site waste generated by each new dwelling.

    It will now extend prefabrication across its residential construction portfolio, according to the Australian Financial Review (AFR).

    The pilot site is located on the former 47-hectare Eastern Golf Club, where Mirvac craned premade sections of double-layer "cassette" floor into place and did the same with wall panels already comprising facade panels, window frames and glass that needed only rendering and painting on site. Mirvac's residential head, Stuart Penklis, told the AFR:

    Prefab and off-site manufacture is a way in which we can mitigate [time, material and labour] risks while actually improving safety and helping to achieve our aspiration to send zero waste to landfill by 2030.

    For a high-cost country such as Australia, developing more efficient construction methods is a crucial issue. Companies including Lendlease, Hickory Group and Aveo have been working on this for many years. But the 2018 collapse of prefabrication-specialist builder Strongbuild showed it can be a risky business.

    Prefab suppliers to builders can carry large risks in the form of products they hold, and banks can be wary about the early release of funds for products that might not be built to specification.

    Mirvac started putting prefabricated bathroom pods in its apartments years ago and it has taken five years to refine the process and products to the level where they have now become a standard feature, Mr Penklis said.

    The Tullamore test involved just four dwellings, but the 16-home first stage of Mirvac's Georges Cove project in Sydney's Moorebank is expanding the process to 16 homes. At Georges Cove, Mirvac has cut the time from the start of construction to lock-up - the point at which the roof is on, and the structure is watertight - from 25 weeks to just 12 weeks.

    For its next venture, the 300-home Riverlands project on the site of a former golf club in Milperra (NSW), the company aims to combine prefabricated walls, floors and bathrooms to maximise the work done in the controlled environment of a factory and reduce on-site construction.

    Achieving scale was crucial, particularly as prefab meant a prior outlay of money for materials, Mr Penklis said.

    But actually, that is countered by the fact that your construction programs are shorter. As we increase our scale and volumes, we'll start to see the benefits from a cost perspective. But at the moment, it's probably been line-ball.

    Related

    3D-printed houses are in Australia - HNN Flash #100, July 2022
  • Source: Australian Financial Review
  • companies

    Supplier update: Building materials

    New James Hardie CEO starts immediately

    Australian Sustainable Hardwoods is expanding its plantation timber manufacturing operations after receiving a Victorian government grant

    As the new chief executive at James Hardie, Aaron Erter will be based at the company's Chicago offices in the US. In a statement, Mr Erter said he had "long admired" James Hardie and jumped at the chance to join the firm.

    I have been fortunate to work for some world-class organisations in my career, and I am confident that my experience and expertise align with what James Hardie needs in a leader.

    James Hardie recently implemented pushed another raft of price rises through its business, which is expected to affect customers in the Asia-Pacific region in September.

    Mr Erter said the company was in a "solid financial position".

    ...The relentless pursuit of providing solutions to the trade and offering materials that help beautify and protect homes will continue to grow under my leadership. These are qualities that have built the business into the leader it is today and will be our guiding principles as we move forward.

    Mr Erter was most recently CEO of PLZ Corp, a North American group of companies involved in specialty aerosol and liquid product manufacturing. PLZ is owned by Pritzker Private Capital and management.

    Mr. Erter joined PLZ from the Sherwin Williams Company, where he was president of its Performance Coatings Group. Prior to this, he held various senior roles at Valspar which was acquired by Sherwin Williams in 2017, and Stanley Black & Decker, where he was instrumental in expanding the company's distribution channels.

    Mr Erter was appointed after a comprehensive search conducted by Heidrick & Struggles, following the sacking of previous CEO Jack Truong after James Hardie described the work environment under him as "too hostile".

    In The Australian Financial Review (AFR), it was reported that the first several weeks was spent working out what qualities the new boss needed, with discussions held with employees and with the board.

    The board felt its strategy (much of which was set under Mr Truong) was the appropriate one, so it was not a job for a CEO who would turn the company on its head.

    Instead they decided four key criteria: a leader who had experience running global operations; someone who could bring teams together across a large organisation; a leader who could take consumer data and insights and turn it into products that would generate demand; and a leader with strong emotional intelligence.

    James Hardie's incoming chairwoman, Anne Lloyd believes the type of manager needed to lead an industrial business has changed - the drill sergeant-type CEO or coach doesn't work any more. She told the AFR:

    Hardies is a tough place to work, everybody demands a lot of one another. I love that. But it's how you do the demanding that has changed.
    It was clear that we needed a leader that had a strong EQ, someone who could identify and develop talent, and who could couple empowerment with accountability.

    At the announcement of Mr Eter's appointment, Ms Lloyd said:

    Aaron brings experience leading global teams and the ability to execute strategies that combine innovation, marketing to the homeowner and penetrating new and existing markets and segments.
    Aaron has proven capability and extensive experience in understanding the consumers' needs, commercialising the right innovative products to meet those needs, and driving growth through the right consumer marketing.

    Mr Erter will take over from interim CEO Harold Wiens.

    Related

    Mr Erter's appointment comes eight months after James Hardie sacked its previous CEO Jack Truong.

    James Hardie terminates CEO - HNN Flash #77, January 2022

    James Hardie said that it had missed earnings expectations and cut guidance in its first-quarter results.

    Inflation bites into first quarter performance at James Hardie - HNN Flash #107, August 2022

    Plantation timber

    A $1.2 million Victorian Forestry Plan innovation grant will allow Australian Sustainable Hardwoods (ASH) to expand its plantation timber manufacturing.

    Minister for Agriculture Gayle Tierney visited the Heyfield mill to announce the innovation funding and inspect the mill's newest addition - a retail outlet also funded by the Andrews Labor Government.

    The new funding will help build a new $2.4 million specialised MASSLAM (Glue Laminated Timber) manufacturing facility to support the mill's transition to alternative fibre sources.

    ASH is the only large-scale manufacturer of MASSLAM in Australia and this investment will help them expand their current operations to manufacture products made out from plantation shining gum.

    The grant will support the build of the specialised MASSLAM manufacturing facility which will create 12 new full-time jobs and help retain the mill's existing 172 roles.

    The investment will also help future proof ASH's manufacturing business. The facility will be able to manufacture more products from plantation timber in the future such as mass flooring systems, engineered floorboards, kitchen benchtops and components for staircases, windows, doors and furniture.

    The mill previously received $1.6 million through the Victorian Timber Innovation Fund to install a new manufacturing line to produce engineered flooring made from plantation shining gum and Australian made pine plywood and to expand both its online and retail outlet.

    The retail space has recently been completed and customers can purchase staircase and furniture components directly from ASH. The engineered floorboard line is anticipated to be up and running by the end of the year, and ASH will become the only company in the country to manufacture this kind of high-value plantation product.

    The Victorian Timber Innovation Fund is a key part of the Victorian Forestry Plan supporting timber businesses to diversify and plan for their future. ASH managing director Vince Hurley said:

    Plantation shining gum is a key pillar in the future of MASSLAM production. This investment will mean that ASH can continue to produce Australian made large-scale section columns and beams.
  • Sources: The Australian, Australian Financial Review and Victorian Government
  • companies

    Supplier update: BGC and Jeld-Wen

    BGC Group suspends sale again

    US-headquartered doors and windows manufacturer Jeld-Wen is conducting a review of its Australasian operation in preparation for a potential sale

    Building supplies and housing group BGC is citing labour shortages and rising costs and its impact on residential construction in Western Australia for stopping the sale process. Supply chain disruptions and increasing interest rates are also being blamed.

    According to the Street Talk in The Australian Financial Review, BGC's home building division has been hit by a severe market slowdown. Instead of taking six months to build a house, it's taking two years, and the unit's high fixed cost base means tough times for BGC.

    DataRoom in The Australian understands that BGC's owners, the Buckeridge family, still want to sell the company in one line, but will wait for the right conditions to do so.

    The announcement to stop the sale process comes four months after the BGC board put the group on the market for a second time in four years with the aim of distributing the proceeds among the late Len Buckeridge's heirs.

    However, with the shortage of skilled trades in WA slowing down the home construction business, and likely hurting its value, BGC directors said, "now is not the time to be selling the group".

    While BGC said it had received "very strong interest from a range of parties", it had postponed the sale after considering "current market conditions".

    The board will revisit its decision in six to 12 months when the labour squeeze is expected to have eased. It said:

    BGC is committed to a sale, and it remains BGC's preference to sell the group as a whole once these short-term challenges subside.

    WA-based BGC's home building brands include HomeStart, Aussie Living Homes and Commodore Homes. In a statement, BGC chief executive Danny Cooper said:

    We are not immune to the supply chain and labour challenges that are affecting all Australian builders. This means that now is not the right time to be selling the Group.

    He added that builders were competing for the same skills such as bricklaying at the same point in the building cycle. In The West Australian, Mr Cooper said:

    All WA builders are going through the same stage of building at the same time, given the timing of the start of the stimulus.
    Moving from a market with 10,000 detached homes being built in WA to 25,000 plus with no mobility between borders, just doesn't compute, and we're all competing for the same groups of labour.
    It just introduces challenges to the sale process, because any buyer looking at the business can see those challenges and risks in housing. It's unfortunate because the rest of the group is performing well.

    Overall, it is understood that BGC had been generating $100 million of earnings before interest, tax, depreciation and amortisation and $1 billion of revenue. Earlier, it was expected to sell for about $1 billion, but recently some speculated a price of between $500 million and $700 million was more realistic.

    Related

    BGC is back on the market - HNN Flash #89, April 2022

    Jeld-Wen

    Jeld-Wen's Australasian operation generates between $90 million and $100 million of earnings before interest, tax, depreciation and amortisation, according to DataRoom in The Australian.

    Although Jeld-Wen holds the leading position in Australasia in its sector, the unit up for strategic review generates just 10% of its global revenues.

    Sources told DataRoom that divesting the Australasian operation presents an opportunity for further investment that the global group has not pursued. A sale process for the business is expected to get underway before the end of the year.

    The company said in a statement the review was consistent with its goal of simplifying its operations.

    Prospective buyers include private equity firms, buyout funds and listed building materials providers such as CSR, Fletcher Building and GWA, while Dulux owner, Nippon Paint could also be interested.

    Jeld-Wen currently employs about 5000 people in Australasia and comprises 41 manufacturing locations across Australia, Malaysia and Indonesia. It produces and distributes interior and exterior doors, and wood, vinyl and aluminium windows.

    It also makes wall systems, shower enclosures, closet systems and other components used in construction, along with the repair and remodelling of homes and buildings. Among its brands are Corinthian, Stegbar and Breezway.

  • Sources: The West Australian, Street Talk/Australian Financial Review and Data Room/The Australian
  • companies

    Seven-star energy ratings for new homes

    New code to make houses greener

    Garden design guru Jamie Durie has joined forces with Victorian builder Chatham Homes to champion greener building

    From October 2023, new residential builds must meet a 7-star energy efficiency rating - as opposed to the current minimum of 5.5 - which could mean adding solar panels to roofs, increasing insulation or converting gas hot water systems to a heat pump system.

    The minimum 7-star energy rating requirement for newly built homes are part of the agreed changes to the National Construction Code that experts say will cut home energy bills.

    While the 7-star standard focuses on the building shell, a separate change will also recognise the inclusion of energy-efficient appliances.

    There is no checklist of features to create a seven-star home and the requirements can vary based on whether it is in a cool climate, and needs heating, or a hot climate, and needs cooling.

    Instead, a new home's design is run through computer software that assigns it a rating from 0, a tent, to 10, a home so comfortable in all seasons that the occupants might not need to use heating or cooling. A 7-star home needs about 25 to 30% less energy consumption for heating and cooling than a 6-star home.

    The new code was expected to reduce emissions by 1.64 million tonnes and would assist in Australia reaching its goal of net zero by 2050.

    Under the changes, new homes would also need to be built to a "silver standard" of accessibility. This means, in addition to at least one step-free entry into the home, increasing the width of internal walkways to fit a wheelchair or walking frame, and a toilet on the entry level.

    Master Builders Queensland CEO Paul Bidwell has been critical of the time frame. He believes it would place additional strain on an industry already struggling with a 30% increase in supply costs, and a pipeline of work beginning to slow. He said:

    It's breathtakingly stressful. [Builders] are going to have to change the way they do their business.
    October 2023 is not that far away and right now they're dealing with all sorts of other pressures. They just don't need that now.

    The Property Council of Australia welcomed the decision to lift the energy efficiency standards, saying the changes to the construction code represented the first significant adjustment in a decade. Council chief executive Ken Morrison said:

    It is great, that after years of work and advocacy on this matter, ministers have made the commitment to improve the efficiency of all new homes built in Australia.
    Lifting the energy rating from 6 to 7 stars has the potential to slash the average household energy bill by up to $576 a year, so for homeowners and renters alike, a 7- star home means big savings, as well as higher levels of comfort.

    Sustainable building expert Dr Trivess Moore, of RMIT (Royal Melbourne Institute of Technology), said the case for energy-efficient homes had existed for years but the property industry was reluctant to change.

    The fact that standards haven't changed since 2012 is pretty poor, when you consider there are other jurisdictions around the world that require new houses to be net-zero. You don't even need to reinvent the wheel - we know what to be doing; it's just people have been choosing not to, and consumers don't understand.

    Dr Moore said there would be a brief adjustment period for the construction industry - which could involve higher costs, additional training and education - but developers would adjust.

    We have the skills and knowledge, the technology, design and materials, and examples of doing this at a much higher standard. The argument put forward by those in the industry, who don't want to see change, is consumers will choose a more efficient, effective, sustainable house if they value it. The problem is sustainable housing [can be] quite complex in terms of how to deliver it ... It's not as simple as solar panels.

    Chatham Homes

    Award-winning landscape designer and environmental advocate, Jamie Durie has been announced as Chatham Homes brand ambassador in a partnership focused on encouraging more sustainable, healthy and climate resilient homes.

    Chatham Homes managing director Bradley Hall said Mr Durie's passion for sustainable design and living made him the perfect partner for Chatham.

    Jamie Durie is an Australian design icon with more than 24 years of experience crafting spaces that not only improve the lives of those who live in them, but also the environment. This is also what drives Chatham Homes.

    Mr Durie has more than 40 international design awards to his name and was awarded a Medal of the Order of Australia in 2013 in recognition of his commitment to and work in the environmental sector spanning 29 years. He said:

    I was hugging trees long before climate change and sustainability were on the global radar. And I know there's never been a more important time to address a more sustainable way to live and build our homes.

    The horticulturalist and author of 12 best-selling design books said he was thrilled to partner with his first home builder, and one that was creating healthier, more energy and cost-efficient homes at prices Australian families could afford.

    The team at Chatham is doing an incredible job using the latest environmental technology and best quality practices to not only tread more lightly on the environment but to demystify the art of green building.
    Together, we will challenge the industry and raise awareness for sustainable practices in home building for consumers. It's our shared goal that more Australian builders follow these green initiatives to build a better future for Australia.

    Mr Hall said encouraging the home construction industry to do better to confront the challenges of living in a changing climate was also high on the partnership agenda. He hoped the partnership with Mr Durie would also raise awareness about the potential harms that existed within many homes.

    Many people are unaware just how harmful issues like poor indoor air quality, the use of gas appliances and the presence of volatile organic compounds (VOCs) from paints, conventional flooring, carpets and cabinetry can be.

    He said most new homes were not being built for maximum resilience against the impacts of climate change, with just 1.5% of new builds achieving a 7.5+ star energy efficiency rating under the Nationwide House Energy Rating Scheme (NatHERS).

    Chatham Homes' Blackwood display home at Ballarat's Lucas estate has an 8.2 star energy rating, while its Arlington display home in the Attwell estate at Deanside, in Melbourne's west, has a 7.2 star rating.

  • Sources: AAP Australian National News Wire, ABC North QLD, The Age and Sydney Morning Herald
  • companies

    Supplier update: Building materials

    Boral CEO sees detached housing market slowing in 2023

    Adbri misses profit estimates; Wagners' full year result disappoints the market; and BGC Group sale update

    Outgoing Boral CEO Zlatko Todorcevski believes the worst of the housing market downturn will happen next year. In The Australian, he said:

    On a housing downturn, I think we're all expecting that to happen based on feedback we're getting from our detached housing builder customers.
    Detached housing is likely to trail off in the second half of 2023. If you overlay what's happening with interest rates and the really sharp increase we're seeing in detached housing prices over the last 18 months, I think it is a sign it will probably start to soften.

    Business collapses in the building industry have also emphasised the risk of insolvencies, as soaring prices for labour and materials continue. Mr Todorcevski noted that Boral had built in a buffer against collapses. He said:

    I think it's important to be prudent at the moment when you are seeing some builders go into administration or not being able to perform.
    We monitor all the customers - whether they're detached housing builders or larger infrastructure builders - pretty closely. And I feel good about the position we are in today relative to some of the risks, but it's just an ongoing watch for us. Frankly, we don't take that for granted.

    Price increases

    Boral's latest round of price increases in August across the group's product portfolio of cement, aggregate, concrete, gravel, asphalt and sand are the largest since 2017, and came on top of previous out-of-cycle price rises implemented in January and February. Mr Todorcevski believes the price increases are "reflective of the inflationary environment we're facing." He told The Australian:

    There was a lot of discretion and a lot of authority within Boral given to relatively junior sales­people who were well intentioned and were trying to support their customers. We can't afford that.
    The worst thing we can do now is say we're going to increase prices and get wobbly knees when we see customers walk. We're all holding hands singing Kumbaya at the moment because it's unprecedented times in the industry. And what we're focused on is holding prices and getting the realisations we need.

    Energy costs and higher fuel costs totalled an extra $58 million in 2021-22. Mr Todorcevski said diesel prices had risen 90% in the past year.

    He said interest rate rises and the knock-on effect to the housing market were causing some potential buyers to rethink whether an apartment was a better option than a detached house.

    Annual results

    The building materials supplier reported a 50% jump in annual net profit reflecting profits from asset sales but said that underlying earnings were weaker, weighed by sharp increases in energy prices and transport costs.

    The company said it made a net profit of $960.6 million for the 12 months through June. That compared to a profit of $639.9 million in the same period a year earlier and included a significant gain of $811 million mainly due to the sale of its North America businesses.

    Earnings before interest and tax - excluding property - totalled $107 million, down 32% on year but in line with revised earnings guidance announced in May.

    The company forecast FY2023 revenue would be higher year-on-year, aided by strong price growth, and said it expects the benefit of price increases and performance improvement initiatives to more than offset the impact of inflation even as energy costs remain elevated.

    Related: Former Cleanaway and current InfraBuild boss Vik Bansal will take over as Boral CEO by December.

    Boral is set to have new chief executive by December 2022 - HNN Flash #97, June 2022

    Adbri

    Adbri could not lift prices fast enough in the six months to June 30 to offset inflationary pressures including higher materials, power, transport and fuel costs.

    This led to a sharp 17% decline in its share price that wiped out almost $300 million from its market value.

    Surging fuel and energy prices also negatively affected its latest profit results.

    The company said a cost reduction program, which delivered $7.5 million in gross savings and was on track to realise $10 million in savings for the full year, had limited impact because of inflation and geopolitical events.

    A third round of out-of-cycle price increases for 2022 would be passed onto customers from September as it looked to improve margins. Adbri chief executive Nick Miller Miller told The Australian:

    There is always going to be lag from when a price rise takes effect and when you start to see the benefit of it due to long-term contracts. In turn we will benefit from those longer-term contracts when market costs soften.

    He said demand for the company's products remained strong with all divisions up in the first half except for lime, which sold lower volumes as a result of a contract change.

    The result is good in the context of extreme external shocks we face, which were at a level and rate not seen in many years.
    In NSW and Queensland we've seen extreme wet weather events that caused significant disruptions and higher costs to deliver to our customers.

    The company's net profit for the first six months of calendar 2022 slipped by 15% to $48 million. Underlying EBITDA margins fell to 16.6 from 17.7%.

    Revenue rose 8% to $812.4 million primarily on strong construction and mining sector demand and improved pricing across most products.

    Mt Miller said the overall business was in a better position than in the past to withstand a period of falling house prices and a more subdued housing market.

    The company has repositioned so a larger share of profits comes from the mining and infrastructure sectors. The company predicts lime demand to be robust from alumina, nickel and gold producers.

    Adbri is one of Australia's largest cement, concrete, sand and gravel suppliers.

    Wagners

    The Toowoomba-based concrete and materials company posted a net profit of $7.6 million for the year to June 30, down 23.4% on the previous year.

    Revenue rose 5.05% to $336.85 million. The company said revenue in its precast concrete segment was affected by timing between major contracts, with its Cross River Rail project finishing in the first half of the 2022 financial year before the $140 million Sydney Metro precast tunnel segment begins in October.

    Wagners said its outlook for the year ahead assumes continued levels of demand for construction materials and services as experienced over the 2022 financial year. However, increased shipping, fuel and raw materials costs, labour and supply chain shortages are expected to affect the business.

    Wagners' CFT (composite fibre technology) and EFC (Earth Friendly Concrete(r)) segments remain the future pillars of growth as management strives to enter new markets and invest in automation.

    Further capital will be used to invest in R&D to identify new markets and products.

    Wagners expects strong cement volumes throughout FY2023 due to the high level of activity in the southeast Queensland construction sector. As a result, management will continue to expand its concrete plant network.

    BGC Group

    Maas Group Holdings has emerged as a buyer for WA-headquartered building materials and housing company, BGC Group.

    Sources told DataRoom in The Australian that second-round offers have been submitted for the business and it is understood that adviser Macquarie Capital will now consider the offers with the owners - family members of the late Len Buckeridge.

    DataRoom understands that a very limited number of parties made proposals to buy the company as a whole.

    An Australian private equity firm is understood to have bid for the business. Maas Group initially looked at the business, but sources close to the company say it is not in the second round, despite talk in the market that the group had submitted a proposal for the entire group.

    Founded in 2002, Maas Group is an Australian construction materials, equipment and services provider with diversified exposures across property, civil, infrastructure and mining sectors. It has a market value of $1.27 billion and is based in Dubbo (NSW).

    It is understood that the Buckeridge family has been keen to divest the business as one entity to prevent tax costs. However, the challenge for buyers is the loss making construction arm that builds 3500 homes annually and comes with seven-year guarantees on the dwellings.

    DataRoom understands that the Buckeridge family may be willing to come to an arrangement where they either retain the building arm or it is returned to them after a sale.

    Related

    Second round offers for BGC Group - HNN Flash #103, July 2022
  • Sources: The Australian, Australian Financial Review, Market Watch, The Courier Mail and Motley Fool
  • companies

    Supplier update

    Techtronic Industries joins Melbourne Airport Business Park

    Melbourne Airport is owned by Australia Pacific Airports, a private company made up of institutional investors including the Future Fund, IFM Investors and AMP

    Power tools giant Techtronic Industries (TTI) has signed up for a 74,200sqm distribution centre within Melbourne Airport Business Park. The $130 million TTI automated facility will be the largest warehouse built to date at the 410-hectare logistics estate, which is the biggest in the southern hemisphere.

    It is the second Australian distribution centre for TTI after committing to a 73,920sqm Sydney warehouse last year.

    In 2021, TTI leased a distribution centre that is part of the 118ha The Yards business park, at Sydney's Orchard Hills, near the Western Sydney International Airport, which is under construction.

    TTI'S expansion into two large state-of-the-art distribution centres highlights the investment being made by major retailers around the world in their supply chains, amid growth in e-commerce and increasing consumer demands for same-day delivery, according to the Australian Financial Review (AFR). In the AFR, Melbourne Airport's head of commercial property and retail, Andrew Gardiner, said:

    Our location will bring a lot of value to Techtronic's distribution business, enabling easy access to their various markets.

    TTI partnered with industrial property and supply chain specialist TMX to design, procure and deliver the purpose-built Melbourne Airport facility, due to be completed by the third quarter of 2024. Angus Perry, development manager at TMX told the AFR:

    The nature of Techtronic's business is that it requires an efficient, large-scale distribution network to deliver within the fast time frames expected by its Australian customer base.

    Other occupiers at Melbourne Airport Business Park include Reece which pre-committed to an 11,670sqm complex on 4.7ha two years ago.

    Related

    Techtronic Industries' Sydney-based DC.

    Techtronic Industries' new Sydney DC - HNN Flash #42, April 2021

    TTI/Milwaukee 2022H1 results show steady growth, revised product lines.

    TTI/Milwaukee 2022H1 results - HNN Flash #106, August 2022
  • Sources: The Australian Financial Review and Real Estate Source
  • companies

    Supplier update: Timber

    Mectec timber mill in East Gippsland (VIC) closes

    OneFortyOne's Kaituna sawmill in New Zealand and woodchip supplier Marusumi Whangarei will export wood chips to Japan

    Mectec sawmill in regional Victoria will need to close after not receiving enough logs to keep the business operating but hopes it may be able to reopen if normal supplies return. The timber mill has operated in Newmerella, a small township five kilometres west of Orbost for 80 years.

    Mectec is one of 12 mills across Victoria to have lost access to state forests after Supreme Court judge Melinda Richards placed injunctions on timber harvesting in December 2021 to protect a possible threat to greater gliders (possums).

    The court orders have prevented the state government-backed VicForests from harvesting timber in the Central Highlands, Tambo or Gippsland, locking up as much as 90% of Victoria's ash harvest zones. As a result, supplies of hardwood timber in Victoria have been hit as a result of the court injunctions.

    More recently, The Australian Financial Review (AFR) reported that Judge Richards had partially wound back court orders. The decision allows VicForests to harvest a small area of 50 hectares across three sites in Victoria's Central Highlands - around 2% of VicForests' annual harvest area.

    Mectec manager Clinton Mekken told The Weekly Times his supply of messmate, stringybark, shining, silvertop and grey gum had dried up. He said:

    This season I've received 550 cubic metres over the past two months. Normally I'd be getting 1000 cubic metres a month...

    Mr Mekken said the mill's customers would struggle, given 60% of Mectec's green timber went to other timber businesses that kiln dried and processed it into decking and shiplap cladding for the housing industry.

    Timber industry leaders say Environment Minister Lily D'Ambrosio could end the legal lockup of native forests by spending $100 gazetting or officially including Greater Glider possum protections into the Code of Practice for Timber Production.

    Victorian Forest Products Association chief executive Deborah Kerr said the failure of the Minister to act, meant it had been left to the Supreme Court to decide what protections should be put in place.

    But Minister D'Ambrosio's office said, "protection of Greater Gliders is complex and any changes require proper assessment", as part of a review of the code that has been going on since 2019.

    The industry warns a "catastrophic" shortage of timber will hit major projects and home builds. Master Builders Victoria has released analysis that showed steel product prices have risen by 54.2% and timber, boards and joinery by 37.8% in the past three years.

    Victorian Forest Products Association chief executive Deborah Kerr told the AFR:

    All options to supply timber have been exhausted and around half the mills currently have either no wood or less than two weeks supply, with some considering standing down employees. It will impact public infrastructure, houses, floors, windows, decks and furniture."

    The industry also warns that supplies are set to get worse, with Western Australia the first state to ban native forest logging from 2024, with Victoria also reducing supply until a complete ban in 2030.

    OneFortyOne exports

    OneFortyOne's Kaituna Sawmill in New Zealand and Marusumi Whangarei Co have signed an agreement to export woodchip to Japan with the first vessel expected to depart from Port Marlborough (Picton) before the end of the year.

    Port Marlborough has been a critical partner in providing logistical support for the trial, including 4,000m2 (0.4 ha) in the port's Shakespeare Bay log yard currently used for the operation.

    Tracy Goss, general manager at Kaituna Sawmill said this trial has been three years in the making.

    It is part of our growth strategy and an exciting opportunity for us to diversify our wood residues market.
    The woodchip is a by-product generated during timber production. In the South Island, woodchip is primarily used for making MDF (medium-density fibreboard) and utilised in biofuel and wood energy markets which we support our partners with. This new export initiative complements our existing market in New Zealand, and we now have access to a growth market in Japan.

    Marusumi Whangarei Co has been exporting both softwood and hardwood chip from Marsden point since 1995, predominantly to its parent company Marusumi Paper Co. Ltd, and other end users in Japan and China.

    The first load is expected to depart Picton in November by sea and will be sent to Japan for use in paper production.

  • Sources: The Weekly Times, Australian Financial Review and OneFortyOne
  • companies

    Supplier update: James Hardie

    Inflation bites into first quarter performance

    The company also announced that former Bunnings executive Peter Davis is part of a chairperson succession plan

    Significant price rises for its plasterboard and wall-cladding products have not been able to fully make up for sharp increases in freight, energy and pulp costs at Australian building materials supplier James Hardie Industries.

    Energy costs in the June-quarter in the Asia Pacific division - which includes Australia, New Zealand and the Philippines - rose 53%, pulp costs jumped 26%, and freight costs climbed 20%. A second round of price increases will come affect Australian customers in September, reports the Australian Financial Review (AFR).

    Asia Pacific earnings before interest and tax rose 2% to AUD51.3 million, but volumes fell 3%, largely because wet weather disrupted construction schedules. Price rises and product mix improvements totalling 12% meant overall sales still increased 9%.

    Interim chief executive Harold Wiens said there had been "unprecedented levels of inflation" and the economic environment was more uncertain in all its major markets of North America, Europe and Australasia.

    We have to adapt and adjust to changing and uncertain market conditions.

    The company is adapting to more uncertain economic environment by implementing a hiring freeze for non-critical positions.

    Mr Wiens said profit margins in all three regions declined in the three months ended June 30, though net sales rose 19% to USD1 billion and net profit jumped 34% to USD163.1 million. Adjusted profit climbed 15% to USD154.3 million.

    James Hardie cut its full-year profit forecasts for the 12 months ending March 31 to between USD730 million (AUD1.04 billion) to USD780 million, from a previous USD740 million to USD820 million. It cited inflationary pressures, softness in Europe and growing uncertainty in housing markets.

    However, James Hardie said it is still winning market share in its major markets, as home renovators and builders are attracted to its range of modern plasterboard and exterior cladding products. The new full-year profit forecast still represents growth of 22% over the year ended March 31.

    Board refresh, CEO search

    The company recently announced that Anne Lloyd would become chairwoman later in 2022, replacing outgoing chairperson Michael Hammes who will retire after the November 2022 Board meeting and Annual General Meeting.

    It also said that Peter (PJ) Davis, a former chief operating officer of Bunnings, would become an Australian-based director in Queensland. Mr Davis retired from Bunnings in 2018 after a 25-year career. His last position was managing director of Bunnings in the UK and Ireland. In a statement, James Hardie said:

    PJ previously served as chief operating officer (COO) of Bunnings Australia & New Zealand. During his 15-year tenure as COO, the division was one of the most profitable of the Wesfarmers Group. With over 40 years' experience in various retail and trade formats and home improvement industries, PJ commenced his career on the sales floor and held senior roles in operations, marketing, advertising, and merchandising before moving into general management and leading the development of the highly successful Bunnings Warehouse concept.
    PJ completed the Advanced Management Program at Harvard Business School in Boston, USA and is the Founding Director of ANRA (Australian National Retailers Association) and Foundation Member of the Australian Institute of Company Directors.

    Ms Lloyd, an American who from 2005 to 2017 was chief financial officer of US-based Martin Marietta Minerals, a supplier of gravel, concrete and asphalt, commented on Mr. Davis' appointment:

    We are pleased to have PJ join our Board. His deep understanding of the retail and trade segments will be an asset to our Board, and we are pleased to once again have an Australian on our Board, as we now have Board representation from all three key geographic regions.

    The Board anticipates it will add two additional Board members in the next six months as it continues the refresh process.

    James Hardie has also been without a permanent chief executive since early January when former boss Jack Truong was forced to step down following an investigation into claims of bullying. At the time, dozens of top executives threatened to quit over his management style. Mr Truong has rejected those claims.

    Ms Lloyd said the group is in the final stages of selecting a new chief executive officer and expects to announce the new chief executive within the next month.

    Analysts told the AFR they expect two internal candidates will have a strong chance in the process. They include Sean Gadd, who was elevated to president of the North Americas business in January after Mr Truong's sudden exit. The other internal candidate is Jason Miele, the chief financial officer of James Hardie.

    Related

    James Hardie terminates CEO - HNN Flash #77, January 2022
  • Sources: Australian Financial Review, Reuters and Dow Jones & Company
  • companies

    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.

  • This article can be read as a HNN Briefing PDF. To read the PDF, please download by clicking the image/link below.
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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.

  • This article can be read as a HNN Briefing PDF. To read the PDF, please download by clicking the image/link below.
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    companies

    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

    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

    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

    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

    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

    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

    Supplier update

    Sustainable concrete gains market traction

    Australia's largest cement group, Adbri, has outlined plans to gradually cut emissions in two of its biggest businesses

    Boral is meeting the increasing demand for lower-carbon concrete by property developers and construction companies looking for slightly "greener" options.

    The company's ENVISIA is a lower-carbon concrete with special properties including what it calls ZEP technology which enables lower levels of cement to be used without losing strength.

    Ashleigh O'Brien, executive general manager of sales and marketing at Boral, said more customers are looking to use lower-carbon products. She told the Australian Financial Review (AFR):

    We're getting a lot of builders wanting to use this concrete. Absolutely there is a growing increase in more sustainable products.

    Sales of the product are up 80% compared with the same time last year. It is being used for commercial projects, apartments, warehouses and residential housing, mainly as a material for a glossy finish floor. Developers including Meriton, Mirvac, Multiplex, Lendlease and Hesperia have all used the product. Ms O'Brien said:

    This is a step-change for us. Our customers need it to be high performing.

    Some of the signature projects it has been used in include the refurbishment of the Sydney Opera House and Melbourne's Stokehouse restaurant on the foreshore of St Kilda.

    The ENVISIA product was actually developed about 10 years ago. But its time has now come as manufacturers try to make some of early steps in the supply chain process to become "greener".

    Ms O'Brien says the ZEP ingredient, so named because the people at Boral working on the process were listening to some Led Zeppelin songs at the time, allows for higher levels of cement replacement in the product.

    The ENVISIA range has about half the carbon emissions compared with the production of standard concrete.

    Related

    Boral invests in sustainable concrete - HI News 6.03, September 2020

    Adbri

    ASX-listed cement company Adbri has set a target of cutting emissions by 20% across its cement business by 2030, and reducing emissions by 10% in its lime operations. Adbri is a large supplier of lime to the mining industry, where it is mainly used in mineral processing.

    Adbri chief executive Nick Miller said Adbri was ahead of many global rivals because it did not use any coal in its kilns for making clinker, which is central to the production of cement. He told the AFR;

    The majority of the world's clinker is still produced using coal-fired kilns.

    He said cement and lime production are "hard-to-abate" sectors because of the nature of cement production. At its simplest, it involves the heating up of limestone and other minerals.

    It is a chemical process.

    Rebecca Irwin, Adbri's chief sustainability and people officer, said the cement industry globally makes up about 7% of the world's carbon emissions.

    Adbri aims to obtain all of its electricity supply from renewable sources by 2030 and has said if firming capacity were needed from non-renewable energy, it intends to offset the associated emissions.

    The company's goals for 2030 are in line with the framework set out by the Global Cement and Concrete Association, an industry body set up in 2018, of which many big cement companies around the world are members.

    Adbri, previously known as Adelaide Brighton, had spent about $50 million on projects to reduce carbon emissions across the company in the past decade. It aims to be at net zero emissions across the group by 2050.

    Mr Miller said for the cement industry to make much bigger cuts in carbon emissions beyond 2030, new technology will be needed to supersede its existing chemical processes.

    It's going to rely on a technology breakthrough.

    Mr Miller said Adbri is also pushing hard for importers to be held to the same rules as domestic players.

    We're very keen to see a level playing field.

    Mr Miller said cement, concrete and lime are crucial materials in a modern global economy and will play a critical role in the broader transition to a low carbon environment across many industries. It is vital for wind turbine foundations, hydrogen plants and water treatment plants.

    Adbri's biggest plant is at Birkenhead, near Port Adelaide. The company also imports about 2.6 million tonnes of cement products annually.

  • Source: Australian Financial Review
  • companies

    Metcash results FY2021/22

    Sales slow, but remain at high level

    With overall growth of 11% and organic growth of over 10%, Metcash's Hardware segment has come through the slower growth of 2022 with a degree of success. However, questions remain over its longer term strategies in hardware: will it continue to foster independent retailers in hardware, and how will it counter Bunnings' growing focus on trade sales?

  • This article can be read as a HNN Briefing PDF. To read the PDF, please download by clicking the image/link below.
  • Download hnn-brief-010

    Metcash, the parent company of the Independent Hardware Group (IHG) and Total Tool Holdings (TTH), has released results for its FY2021/22, which ended on 30 April 2022.

    It's worth noting that there are a number of complexities to the report of these results. This includes the need to account for charge-through revenues, which result from Metcash services that are transaction-only, as well as FY2021/22 including 53 trading weeks. Metcash's advice has been to pro-rate the extra week, which means that results are reduced by around 1.9% when comparing to previous, 52-week years. According to a footnote in Metcash's presentation:

    The 53rd week comprised 4 business trading days over the week ended Sunday 1 May 2022 (Anzac Day was on 25 April 2022). One-week of sales has been estimated on an annualised basis by pillar to display an FY22 sales number comparative to prior (52 week) periods.

    Metcash has also, in the process of "normalising" results to 52 weeks for its Food business, removed sales from the comparative FY2020/21 year for 7-Eleven and Drakes. According to another footnote:

    The previous East Coast supply agreement with 7-Eleven concluded on 17 August 2020 and Metcash ceased to supply Drakes in South Australia from September 2019. A normalised sales growth has been calculated by adjusting sales in the relative comparative period to exclude sales to both 7-Eleven and Drakes, in addition to excluding the 53rd week from FY22.

    HNN has not excluded sales from 7-Eleven and Drakes in our analysis.

    It is also worth noting that, as far as we can tell from Metcash's report, while the revenue numbers have been pro-rated to 52 weeks, the earnings before interest and taxation (EBIT) numbers have not. The use of non-normalised numbers was explicitly mentioned in Metcash's FY2016/17 results, so we assume the continuation of that practice. In our numbers we have pro-rated EBIT.

    Metcash overview

    The overview for the three main business areas at Metcash, Food, Hardware and Liquor, is provided in Table 1: Metcash Results FY2021/22 ending 30 April 2022.

    Overall, Metcash's year was not outstanding, particularly when its gains are viewed in the context of 5.1% inflation. Hardware did perform well, but that was in large part due to further investments in TTH and other acquisitions.

    It may be that Metcash might have been better served making similar investments in its other business segments, rather than funding the share buyback scheme initiated by the company's previous CEO, Jeff Adams. At the FY2020/21 results several analysts suggested the market remained fragile, especially as regards the Food segment. It would seem they were more right than wrong.

    Mr Adams, who decided in late 2021 not to continue as CEO at Metcash so as to spend more time with family, has been replaced by Doug Jones. Mr Jones is a chartered accountant, and is a graduate of the tough school of supermarket operations in South Africa, where he spent 14 years at Massmart.

    Metcash overall had revenues of $17,405.7 million with charge throughs, $15,164.8 million without, for a 52-week normalised revenue of $14,878.7 million. (All subsequent mentions of revenue will refer to non-charge through, 52-week normalised numbers; EBIT will also refer to 52-week normalised results.) This was an increase of $563.4 million or 3.9% over the previous corresponding period (pcp), which was FY2020/21.

    Metcash's Food business did not fare especially well, with revenue of $8,221.2 million down by -1.1% on the pcp. Liquor had revenue of $4,662.7 million up by $288.4 million or 6.6% on the pcp.

    Metcash's EBIT of $463.4 million was $62.0 million or 15.4% up on the pcp. However, its statutory profit for the year was $245.4 million, which would be $240.8 million as a 52-week year, an increase of $1.8 million or 0.8% on the pcp.

    EBIT for the Food segment was $196.5 million, up by 2.1% on the pcp, while EBIT for Liquor was $95.6 million, up 7.7% on the pcp.

    Hardware

    Looking at the topline numbers for the Hardware segment, revenue was $1,994.7 million, up $370.0 million or 22.8% on the pcp. EBIT for Hardware was $187.7 million, up $51.7 million or 38% on the pcp.

    To make an attempt to break out the "organic" (non-acquisition) growth from the "non-organic" growth, Metcash states that:

    An additional 20 joint venture and company-owned stores were acquired during the year which added ~$95m of sales.

    That would mean organic revenues were around $1,900 million, which represents organic growth of 16.9% overall.

    Hardware in four parts

    To fully understand how Metcash's Hardware segment has developed, it's necessary to see it as four separate components: There is the charge-through business; TTH; the franchise component with independently-owned stores under the Mitre 10, Home Timber & Hardware Group (HTH), Thrifty-Link and True Value banners; and a separate group of corporate-controlled stores bannered as Mitre 10 and HTH.

    There is a total of 513 Mitre 10 and HTH stores, and Metcash has 102 fully-owned and joint-venture stores, or 19.9%. It makes sense to treat the controlled stores as their own entity. Some analysts have suggested - as a rough estimate - that the full EBIT earned by the company-controlled stores is almost as much as the EBIT Metcash earns from all the fully independent stores - though HNN cannot confirm this. While treating these separately would be a more accurate representation of Metcash's Hardware segment, the corporate-controlled stores are instead treated as a "regular" part of IHG.

    Equally, there is only limited insight into the charge-through business, in terms of how much EBIT it generates, and other details. About all we can do is to take out the revenue from the overall numbers. The one comment that Mr Jones did make about this business in his prepared remarks was:

    There's been strong growth in charge through sales, as retailers recognise the value in accessing a broader range, and suppliers continue to take advantage of Metcash as an effective route-to-market partner. Just remember, these sales are not a shift from one channel to the other, they're sales that we otherwise wouldn't have got.

    So charge-throughs are significant, and part of Metcash's ongoing strategy, but we have little insight into aspects of how they work, including the EBIT derived from them.

    That leaves HNN with the sole option of analysing only the entire IHG business and TTH. That's a pity, because it means we have only limited insight into what seems an interesting strategy.

    Independent Hardware Group

    While tracking down the IHG numbers is a little complex, it should be noted that there is at least greater clarity to these figures as compared to when Metcash combined Hardware with its automotive operations.

    Revenues

    Metcash states that:

    [S]ales in IHG increased 12.5% (+32.6% 2yr basis) to $2.8bn reflecting the impact of inflation and volume growth in Trade.

    Evidently, the $2,800 million number includes charge-throughs and represents a 53-week trading year. Rectifying those elements, the sales revenue would be roughly $1,681 million.

    Metcash does not seem to have provided IHG revenue without charge-throughs for its reporting on the previous year, FY2020/21. We can, however, reverse into those numbers. If the $2,800 million represents a 12.5% increase over FY2020/21 total revenues, then total revenues for FY2020/21 would be around $2,489 million. There is an indication that charge-throughs for hardware in FY2020/21 were $975 million, which would give us IHG revenue of $1,514 million, for that year.

    This means that IHG's growth would be roughly 11.0%. That accords fairly well with the other statements Metcash has made about IHG growth. Metcash states that:

    The IHG banner group continued to perform strongly with retail LfL sales increasing 10.5%, with Trade sales up 12.7% and DIY sales up 6.7% (+21.8% on a 2yr basis, with Trade +11.6% and DIY +39.1%).

    In the slide presentation accompanying the results, slide 14 notes:

    22 new or expanded sites across the network, adding 39,000m2 of floor space (10 IHG stores/23,000m2 and 12 TT stores/16,000m2).

    It's likely the extra 0.5% over the like-for-like (comp) figure is a result of the new sites added to IHG.

    It is worth noting that in terms of the background growth in the hardware retail industry, the comparative figures for the Metcash FY2021/22 were overall growth in Australia of 2.2%, indicating that IHG has outperformed the background market.

    Metcash states that:

    DIY demand continued to be elevated, but volumes declined slightly against the exceptional prior year comparative.

    This led to a shift in the proportion of DIY/Trade sales, from 40/60 in the pcp to 36/64 in the reporting year. In response to an analyst's question as to which DIY categories were seeing a decline, IHG CEO Annette Welsh responded:

    [DIY] is really coming off the very heightened level that we saw through lockdowns and the need for consumers to invest in their homes as they were spending more time there. I would say some of our decline is probably in that area of garden and paint, which were the two heightened and really peak elements [during lockdowns].

    EBIT

    Regarding EBIT for IHG, Metcash states:

    IHG's EBIT increased $15.8 million or 14.1% to $127.8 million reflecting the strong sales performance, and the contribution from company-owned and joint venture stores acquired during the year.

    This would mean EBIT for a 52-week equivalent trading year would be $125.4 million, or a 12.0% increase on the pcp.

    Total Tool Holdings

    Metcash has continued to expand TTH.

    Revenues

    Metcash states that TTH sales were up by 160.4% to reach $367 million, which would be $360 million in a 52-week trading year, and would represent an increase of 155% on the pcp.

    (Just to reconcile these figures, if we have total hardware revenue adjusted for a 52-week trading year of $1,994.7 million and IHG revenue of an estimated $1,681 million, that would, however, indicate TTH revenue of under $314 million. It seems to be the case, then, that Metcash has in its revenue number for the Hardware segment accounted for holding only 85% of TTH.)

    Much of that increase is due to expansion, of course. Metcash acquired an additional 15 TTH joint-venture stores, which contributed an additional $67 million to Hardware sales revenues.

    Metcash stated in a footnote that:

    Total Tools sales include exclusive brand sales, franchisee fees, joint venture and company-owned store sales and other services.

    The entire TTH network had sales of $972 million for the year, or $954 million for a 52-week trading year, an increase of 9.9%. The network was expanded by a further 11 stores, to reach 100 in total. Metcash reports that comp sales were up 5.0%.

    EBIT

    Metcash states that TTH has increased EBIT by $39.5 million to $63.5 million. That would be $62.3 million for a 52-week trading year, an increase of 160%.

    Hardware strategy

    IHG

    The attitude that Metcash expresses towards the hardware market is that it has been constrained by elements other than demand:

    Residential construction and renovations activity was adversely impacted by tight supply conditions, tight labour supply and unseasonal wet weather, leading to a further strengthening of the pipeline of future activity.

    Categories that struggled due to supply shortages included timber, LVL, plaster and insulation.

    While there were certainly constraints that contributed to lower background market growth, it is also a fact that the market did continue to grow, despite record-breaking growth in the previous financial year.

    It is also worth noting that the language used includes the suggestion that work not completed in the reported year is merely delayed for subsequent years. That has become a common assumption across the hardware and construction industry. However, it seems just as likely that, facing higher interest rates, increasing inflation and sustained resistance to wage increases, much of that work, if delayed beyond calendar 2022, could end up being cancelled or put off until subsequent years by clients.

    The company has confirmed it is moving rapidly to a two-brand strategy, sidelining both the Thrifty-Link and True Value brands. It reports that 20 Thrifty-Link stores were converted to HTH in FY2021/22, with a further 30 conversions planned for FY2022/23. The company states that it had 154 HTH stores at the close of the reporting year, down from 157 in the pcp. However, it had 359 Mitre 10 stores at the close of year, up from 340 in the pcp. The combined Thrifty-Link and True Value store fleet is set at 123, down from 145 in the pcp. Overall store numbers went from 642 to 636. Metcash's stated goal is to build a network of 400 Mitre 10 stores and 200 HTH stores.

    The company is also planning to expand in categories such as kitchen, laundry and bathroom. Part of that plan includes a further build-out of its "Design 10" showrooms, developed as a project by Ms Welsh. These help showcase building elements, creating a design space for tradies and builders to better collaborate with their customers. There are currently five of these centres, in Hobart, Geelong, Melbourne, Coffs Harbour and Orange, as well as a website.

    In his prepared remarks at the results conference, Mr Jones stated:

    This [strategy] includes continuing to win new DIY shoppers. And doing this through highly effective recruitment and store reinvestment programs. We've got a clear focus on a relevant range and competitive prices, as well as on emerging categories like bathroom, kitchen and laundry.

    That said, Metcash is also clearly committed to its trade business, as Mr Jones explained:

    As we look to consolidate our leading position in the building trades, we'll focus in on our extensive footprints of trade-focused trade centres, as well as the whole of house strategy, which is underpinned, as I've said, by the now 10 frame and truss plants, as well as continued steady investment in leading trade technologies.

    The company is also continuing its Sapphire program, with 300 stores planned for completion by 2025, and 161 currently up and running. Sapphire for trade centres is targeting 50 completions, with 37 currently in operation.

    No explicit mention was made of Metcash's plans to further expand its joint-venture and wholly-owned IHG stores, but it seems likely that it will maintain at the very least its current 20% share of stores, so if the network expands to 600, Metcash would obtain a further 20.

    Total Tool Holdings

    Metcash probably would not agree with this blunt statement, but it seems fairly clear that the overriding strategy for TTH is to get big as fast as possible, and hope that Bunnings' Tool Kit Depot (TKD) doesn't catch up. It does seem likely that one factor which triggered the partial sale of TTH to Metcash was concerns over competition from TKD.

    Metcash and TTH are certainly executing to this plan, or one that is similar. TTH had 81 stores in its network when acquired in July 2020. It now has 100 stores, and the company says it is on track to complete 120 stores by 2025. As importantly, the stores are being upgraded, with 83 completed to date, and a further 11 planned by 2024.

    Veteran analyst Brian Raymond of JP Morgan poised a question about the pace of acquisition of TTH stores by Metcash at the results announcement:

    My first one is just on the Total Tools conversion, 15 last year, 12 the year before. That is slowing to eight next year. I just wanted to understand the drivers of that slowdown, but also the productivity of the stores you converted this year relative to last. Is the incremental store a bit smaller in terms of sales per store, or have you converted the obvious ones first, and is it now just the tail of the network?

    Ms Welsh responded:

    Yes, you'd be pretty much right in your assessment there. When we first invested in the joint ventures it was with the larger joint ventures and those that were probably the most significant in terms of their size. That will be the 12, 15 in terms of last year. Similarly, and as we run through the network we will pick up the investments of the joint ventures that seem appropriate, but they are on the slightly smaller scale as we continue that investment.

    Metcash's chief financial officer, Alastair Bell, chimed in with an additional, enthusiastic comment:

    And I'll just add one, one thing about the JV stores. We've acquired these a lot quicker than they originally envisaged. You'll recall my comments about the Total Tools put option valuation increasing. And this is an area [which has] held the performance our business in good stead. And the year ahead, well, we'll look to execute eight, and thereafter take the opportunity to continue to own more of those stores.

    Another strategic possibility that Metcash is exploring is combining Total Tool stores with Mitre 10 stores. Trial sites at Merimbula, Wonthaggi, Matraville and Richmond are already up and running. However, it's noticeable that while the slide describing this move states that these have been "successful" and there are opportunities for expansion, in his remarks, Mr Jones was considerably more cautious:

    It's early to draw conclusions on performance, but we like what we see so far, and we think there are more opportunities for the format.

    Another highlight of the strategy is the development of the Marxman private label brand of power tool accessories. The trademark "Marxman The Mark of a Professional" was first applied for in January 2021. It consists of the expected accessories, such as drill bits and circular saw blades.

    Analysis

    It's worthwhile noting that there was one response by Mr Jones which indicated the Metcash board has made a good choice in appointing him as CEO. In replay to an analyst's question about pricing, and price comparisons between IGA and the two major supermarkets, he had this to say:

    I think the first point that we want to make is that the proposition in the independent network is founded on more than just price competitiveness, which, as you point out and we have spoken about, has improved significantly. We also offer in the network the ability for retailers to arrange a wider range of national and local products that give customers a choice as to how they manage their own budgets. And so we don't rely simply on price competitiveness for our overall customer value proposition.

    You only get to that understanding by having a lot of experience with retail, over years, and seeing how growth and development can take place. While it seems a very simple statement, it is also a very revealing one. It is really important, it seems to HNN, for two reasons. One is that it captures a particularly important strategic essence of what networks of independent retailers can do. Price is part of it, service is part of it, but smaller scale operations incur lower costs for specialisation than larger scale operations, on a comparative stocking basis.

    The second reason is that this is precisely the transition that certainly the Food segment, and most likely the Hardware segment as well, need to undertake. Pricing is, in the vernacular, table stakes in retail now. What will differentiate retailers is a form of responsiveness to specific demand.

    That said, though, there remains some questions over what path Metcash's Hardware segment will take to the future. The initial vision that Metcash seems to have had with Mark Laidlaw as CEO of Mitre 10, which was to acquire HTH, then use those scale advantages to gain a network of around 900 stores, simply hasn't worked out.

    Instead it looks like is the industry is undergoing the development of a kind of "spectrum" of stores. On one end there is the fully corporate, wholly-owned and operated Bunnings big-box stores. At the other end are fully independent store buying groups, such as Hardware & Building Traders (HBT), which is entirely consent-based. Metcash's IHG is trying to find a space, it would seem, somewhere in the middle of that.

    The real question is going to be exactly where does IHG end up on that spectrum? It would seem that TTH is headed for something like a 50+% ownership by Metcash, while IHG is currently around 20%. How much independence will really be left in IHG if Metcash moves to 30+% ownership of that network? Will HBT end up being the only way to go the "full surfboard" with independence in the future?

    As importantly, Bunnings has declared its intent to expand its trade business, and HNN has suggested that works out to gaining something like $1 billion a year from the overall market. In particular, TTH is going to compete directly with TKD, which will have advantages such as co-locating with Bunnings Warehouse stores, and the massive reach of Bunnings in the supply market.

    It's not clear from the current strategy being presented that Metcash has planned to counter these difficulties.

  • This article can be read as a HNN Briefing PDF. To read the PDF, please download by clicking the image/link below.
  • Download hnn-brief-010

    companies

    Construction update

    3D printers set to disrupt the building sector in Australia

    The arrival of commercial 3D house-printing technology is capable of slashing build times and costs

    Melbourne firm Fortex has struck a deal with international 3D house-printing company COBOD to exclusively distribute its products in Australia including its BOD2 3D construction printing technology and equipment.

    Fortex chief executive David Lederer said COBOD 3D construction printers deliver faster, greener, more durable homes and commercial buildings, with greater design freedom than conventional building methods.

    That means improved outcomes for building companies and consumers.

    Its printer's modular design is developed to fit most projects and uses technology to control the extrusion of concrete, in accordance with the programmed build design. The fully automated process happens mostly onsite. Mr Lederer said:

    This world-leading technology is the disrupter conventional building needs. It is not only the future of construction, it is the now.

    Fortex technical director Jake Hartman said the process is like a 3D desktop printer but on a much larger scale and can construct a home in a more efficient time period. He told 9News:

    We are able to produce concrete onsite, pump it onsite and deliver the wall system to a house onsite.

    The concrete-based printer can use locally based resources to build house. Mr Lederer said the system is best suited to a flat surface to build on but can construct up to 12-metre homes. He explains:

    It is a modular-based system from small homes to 12 metres wide and three storeys and 50 metres deep before you have to move the printer, so basically infinite in-depth.

    The company boasts its technology will carve months off traditional time frames, streamline labour and alleviate supply issues at a time when skills and material shortages are plaguing the conventional housing construction industry.

    Fortex said it could build a 210sqm single-storey home in just 40 hours with two days of setting up the printer prior to construction. Mr Lederer told 9News:

    That compared to a conventional building eight to 12 weeks for the wall system, that is excluding the delays that all builders are having in terms of supply, now it could blow out to 14 weeks for the wall system.

    The company said the technology would not put tradies out of business as workers are still required to operate the printing system. Their skills would be re-distributed.

    Glaziers, plumbers, electricians and fitters are also still required, but their jobs will be easier. For example, the computer can calculate exactly where the best place to put an electrical socket is, so the electrician won't have to spend as long assessing the structure.

    While single and multiple storey domestic projects will be the prime application for the technology, concrete and mortar 3D prints outside of home construction are also possible with wind turbine towers already having been printed.

    The first BOD2 3D construction printer will arrive in Australia in Q4 with COBOD equipment available for immediate order.

    Background

    The deal between Fortex and COBOD follows the first ever 3D-printed house in the southern hemisphere built in a Melbourne manufacturing warehouse.

    The house was built by Australian 3D printing building and construction company Luyten in December 2021, using highly robust and eco-friendly 3D printable concrete.

    The structure, called the Heptapod, costs less than 70% of traditional building methods. The structure's elements were printed in two days and assembled on day three. Luyten co-founder and CEO Ahmed Mahil told 9News:

    ...It is a fine example of the type of structure that can be built using our innovative 3D printing technology and will provide people with the ability to see and touch a 3D-printed home in person before they order one.

    Luyten's 3D printer is able to adjust its settings to suit the velocity, quantity and type of material being fed into it. Mr Mahil told Cosmos Weekly in another interview that it is the first and only such machine made in Australia - a mobile robotic transformer that is capable of printing a three-bedroom or two-bathroom house in a week.

    Some of the 3D homes on order will be used for affordable housing options in regional areas of the country, as well as schools and accommodation. Luyten said it has begun taking orders from regional areas seeking affordable housing, school and accommodation solutions.

    Dubbo Council in central western NSW recently announced it is now considering whether the technology is viable enough for houses to be constructed quickly and in a more environmentally friendly manner.

    Dubbo Regional councillor Matt Wright is confident it could revolutionise the Australian property market. He told ABC Western Plains:

    ...I'm planting the seed in readiness for what we hope might be something we can see in our city in the next year or two.

    The councillor put forward a notice of motion proposing council sets aside up to four residential blocks from the newest stage of the local Keswick residential land release for a 3D printing trial. He said the speed of building a 3D-printed house was one of many benefits.

    ...Cost efficiency is another plus, we're talking about machines that can precisely calculate the amount of materials that are required so wastage can be zero in some cases.
    That's massive cost savings. I know some people are concerned that this would put some people out of jobs but you still need plumbers, electricians, plasterers to work on these houses depending on the finish you'd like.

    Dubbo Council CEO Murray Wood will report back on its feasibility in September.

    About COBOD

    Denmark-based COBOD has spearheaded the development of 3D house-printing, having sold about 50 systems featuring multifunctional construction robots around the world since 2019.

    They have been used to 3D print Europe's first building in 2017. COBOD subsequently 3D printed the first 2- and 3-story buildings in Europe, specifically in Belgium and Germany using its technology. Also, the first villa in Dubai and the first 3D-printed house and school in Africa were built with COBOD's 3D construction printers, as well as the first wind turbine bases.

    COBOD counts leading companies such as General Electric, Swiss global building materials company Holcim, and German scaffolding group PERI among its shareholders. Simon Klint Bergh, regional general manager for COBOD Asia Pacific, said:

    ...This arrangement [with Fortex in Australia] together with our new distribution partners Siam Cement in Thailand and KA Bina in Malaysia and our new regional office in Malaysia, will mean that we penetrate the growing market in Asia Pacific even further.

    With a promise to build homes more efficiently and with less harm to the environment, COBOD sees an opportunity to leverage current worker and material shortages in Australia.

    Related

    Creality mass production 3D printer - HNN Flash #25, November 2020
  • Sources: Australian Associated Press, Herald Sun, 9News, MediaNet and ABC Western Plains
  • companies

    Supplier update: Building materials

    Sharp increase in power and gas bills

    Boral will sell tech company Found Concrete, an online marketplace for builders and DIY renovators

    Two of Australia's biggest building materials manufacturers, Brickworks and Boral, are cutting back operations, hiking prices and considering moving production offshore in an effort to manage a spike in power and gas bills, according to a report in Reuters.

    Power prices have surged in Australia amid a shortage of coal-fired generation due to planned and unplanned outages, which has driven up demand for gas-fired generation at the same time as gas demand for heating jumped during a cold snap. The price jump has been exacerbated by record high global coal and gas prices, as a result of sanctions placed on Russia.

    This led the Australian Energy Market Operator to suspend the country's main wholesale market on 15 June 2022 in an attempt to stabilise the supply of electricity.

    It has left Australia's manufacturing sector, a major power and gas consumer, exposed to soaring costs, especially those whose cheaper, long-term energy contracts are expiring.

    For example, Brickworks has gas contracts with Santos Ltd averaging AUD10 per gigajoule, locked in for two years, compared to the current government-mandated price cap of A$40. Lindsay Partridge, managing director of Brickworks, told Reuters:

    If we had to pay, when our contract rolled over, (the current spot price), we would no doubt be shutting plants down and moving production offshore.

    As Australia's largest brickmaking company, Brickworks operates about 30 brickmaking and masonry plants.

    Brickworks pays just USD3 per gigajoule for gas in the United States, where it owns Pennsylvania-based brickmaker Glen-Gery Corp. Mr Partridge said:

    If we rolled over and you had to pay AUD40, and I could buy gas in the US for USD3, then it's a pretty easy equation to work out.

    The United States generates just one-sixth of Brickworks' earnings from building materials, but the company could save money by shipping product back to Australia, he said.

    Boral told Reuters it has cut back on operations due to "the speed and magnitude of the change in energy prices". Outgoing chief executive officer Zlatko Todorcevski wrote in an email to Reuters:

    We have been forced to temporarily curtail some areas of our operations and unfortunately have been left with no other option than to pass increases onto customers directly.

    The company did not specify the size or products affected by the cuts but Mr Todorcevski added:

    We have also had to accelerate plans to review our overheads as we offset these inflationary challenges.

    Boral welcomed a move by the Australian energy market operator to cap wholesale power prices and take control over power supplies, but Mr Todorcevski said those temporary measures "do not provide long-term confidence for large manufacturers".

    Domestic gas

    The latest crisis has highlighted the need for more gas supply in the domestic market.

    Manufacturers have long clamoured for gas export controls or a reservation of gas for the domestic market. Gas prices have more than tripled in price since 2014, when Australia started exporting liquefied natural gas (LNG) from the east coast. (Australia is the world's biggest exporter of LNG).

    In Western Australia, where 15% of gas is reserved for local consumption, domestic prices are a fraction of the capped east coast price.

    Successive governments have previously opposed a gas reservation on the east coast, under pressure from gas producers which say the structure would deter further investment.

    Government package

    The Australian Financial Review (AFR) reports that a crisis meeting of state and federal energy ministers will consider a financial aid package for business and manufacturers to help ease the cost of soaring energy bills sending some businesses broke.

    Victorian Energy Minister Lily D'Ambrosio call for a support package comes after a local manufacturer, Advance Bricks in the Victorian town of Stawell which employs 23 people, said it was shutting its doors after more than 82 years in business because it could no longer afford to pay its power bill.

    Managing director John Collins said the business went from paying $6 to $8 a gigajoule of gas to more than $37 a gigajoule after the collapse of commercial gas supplier Weston Energy forced it onto a plan with "retailer of last resort" Energy Australia.

    Boral tech business

    Boral is divesting an app-based tech company that enables builders and DIY renovators to order concrete deliveries from seven different suppliers, according to the AFR.

    Found Concrete, established in 2019, operates in Melbourne, Sydney, Geelong, the Hunter region in NSW, and has just started up in south-east Queensland.

    Chief executive Adam McArthur said about 1000 customers had used the service, which matches their orders with supply of smaller batches of concrete made by seven different suppliers, including Boral.

    He said it was mainly used by smaller professional builders and DIY renovators for projects such as concrete slabs for new home construction, driveways or swimming pool surrounds.

    Boral set up the Found Concrete digital marketplace business when it partnered with Fusion Labs to develop the platform technology. Fusion Labs is now part of Deloitte. Boral owns 100% of Found Concrete.

    Mr McArthur said almost 30% of orders were made outside business hours as various parts of a construction process fall into place. Once concrete is in a truck it needs to be delivered and poured within an hour or two. He told the AFR:

    Concrete is a last-minute order.

    Trades people and building company operators traditionally made phone calls to order concrete but now were increasingly using the digital marketplace set up by Found Concrete.

    Smaller operators that were often left behind in the early morning rush to order concrete, were able to lock in a delivery with certainty. Mr McArthur said Found Concrete wanted to go national and have a presence in all major markets around Australia.

    Placing Found Concrete up for sale is not expected to be large in dollar terms for Boral, but it is part of a "back-to-basics approach" by chairman Ryan Stokes.

  • Sources: Reuters, Australian Financial Review and Global Cement
  • companies

    Supplier update: Sherwin-Williams

    AI-powered paint tool

    Speaking in Color is a voice-controlled tool from Sherwin-Williams that uses natural language systems to interpret descriptions of the ideal colour

    A newly created AI-powered paint tool from Sherwin-Williams can help create custom colours with a human voice.

    The US-based paint company recently launched Speaking in Color that allows users to tell it about certain places, objects, or shades to make the specific colour they want. For example, users can start with a broad description like "New York City summer sunset" and then fine tune from there once it responds with photos and other options with more in-depth preferences like "darker red", "make it moodier" or "add a sliver of sun" until it's done.

    Developed with agency Wunderman Thompson, it's a React web app that uses natural language to find a preferred colour using both third-party and proprietary code. The tool's custom algorithm allows users to tweak colours in a way that translates statements like "make it dimmer", "add warmth" or "more like the 1980s" into mathematical adjustments.

    See the video of Speaking in Color here:

    Speaking in Color by Sherwin Williams

    The tool is currently exclusive to architects and the company's high-performance coil coating paint business, with the goal of creating one of the largest colour libraries in the world. So it's not quite ready for DIY consumers to paint their kitchen yet.

    Christian Zimprich, marketing manager for Sherwin-Williams Coil Coatings, explains that Speaking in Color is a major evolution of the brand's past work in helping architects play with and develop new colours, like with 2019's Color Mixology and Thinking in Color, which used hands and brain waves, respectively. He told Fast Company magazine:

    Investing in new tools and technology to make something that's never been done before requires time, trust, and the ability to be agile. The final result isn't always easy to see - you have to be in it for the long haul and have faith. For us, the biggest challenge was keeping everyone on board throughout the prototype and testing phases to get to the end product.

    Wunderman Thompson group creative director Brett Knutson said that even though Sherwin-Williams is often thought of as a paint company, it's a leader in coil coatings - a high-performance paint applied in the manufacturing process to primarily steel or aluminium for a range of industries, including high-end architectural and construction use - which goes far beyond the typical association with interior house paint. Mr Knutson said:

    While product innovation is critical, being a leader means that innovation goes beyond the product itself to help customers realise their vision along the entire journey. Speaking In Color lives up to this mission, and can be a guiding tool for both customer initiatives and business planning. It's the perfect combination of Sherwin-Williams Coil Coatings investment in colour, technology and data.
  • Source: Fast Company
  • companies

    Supplier update

    TTI Australia chooses One Network Enterprises

    Global digital company Vtex is helping Stanley Black & Decker transform its e-commerce offering

    Techtronic Industries (TTI) Australia - owner of brands including Milwaukee, AEG, Ryobi and Homelite - has chosen to work with One Network Enterprises (ONE) to improve demand and supply planning.

    One Network Enterprises (ONE) is a global provider of a secure, and scalable multi-party network in the cloud.

    By leveraging ONE's NEO Platform, TTI will integrate its physical network of partners across Asia, Australia, and New Zealand, to supply a single data model across multiple workflows and applications. This should enable real-time collaboration.

    ONE's Digital Supply Chain Network[tm] will help ensure that efficient planning and matching of demand with supply is achieved. Increased visibility and execution in the same platform should drive process improvements. More importantly it should also improve on-time deliveries, customer service levels, and reduce the cost of goods sold throughout the supply chain. Grant Edhouse, CFO and COO of TTI Australia and New Zealand, said:

    We have selected the ONE platform based on the depth of its capabilities and ability to connect us to a multi-enterprise supply chain business network. We are confident that the solution can handle the complexities of our supply chain, starting with end-to-end visibility and collaboration.
    With this foundation in place and the support of ONE's experienced team, we look to achieve seamless end-to-end demand- supply planning and execution, across our entire Asia Pacific network. This will greatly improve our responsiveness to our customers and effectiveness in collaborating with our suppliers.

    Greg Brady, founder and chairman of One Network Enterprises, said:

    TTI's supply chain is characterised by long lead times, making demand-supply match accuracy that much more critical. The network-based approach provided by ONE will enable TTI to remove days and weeks of information lag by digitizing the entire ecosystem of trading partners.
    Collaboration through enhanced visibility and execution is how organisations like TTI will increase competitiveness, particularly during times of significant supply constraint.

    About ONE

    The company has been operating in the Asia Pacific region since 2013 and offers a solution that gives supply chain managers and executives end-to-end visibility and control with one data model and "one truth", from raw material to last-mile delivery. It is powered by NEO, One Network's machine learning and intelligent agent technology.

    For more information, visit the website:

    One Network Enterprises

    Stanley Black & Decker

    As one of the world's largest tool companies, Stanley Black & Decker (SBD) is embracing digital transformation to help provide a better experience to its customers, channel partners and sales representatives. It achieves this by giving them a more efficient ordering and distribution process while delivering functionalities such as order tracking, credit limits and faster reordering.

    SBD is partnering with Vtex for its expertise in e-commerce, flexibility and operations in the time zones where it wants to roll out its online stores, so that any problems could be addressed immediately.

    Vtex is a global enterprise digital commerce platform with 18 operating locations around the world - including its new Southeast Asian base in Singapore. It believes it is ideally suited to build SBD's omnichannel e-commerce platform.

    Founded in 2000 in Brazil, Vtex is named as one of the fastest-growing digital commerce platforms in the world by global market intelligence firm IDC. Listed on the New York Stock Exchange, it has helped build more than 3,200 online stores in 38 countries, enabling brands such as Sony, Motorola, Coca-Cola, Carrefour and Walmart to expand their global footprint by delivering native and advanced B2B, B2C and marketplace commerce solutions.

    In 2018, SBD embarked on a digitalisation journey for its traditional - and complex - business-to-business (B2B) channel, launching an online service for some of its bigger distributors: medium-sized and large hardware stores in Brazil, India and South Korea.

    One of the initial challenges facing the company was mapping the processes and people that would need to manage a successful digital transformation. That meant understanding the needs of the sales representatives and customers who would be using the platform and communicating the roll-out to the key departments that would play a day-to-day role in its operations once it was live - including IT, finance and customer services.

    Vtex assisted SBD with e-commerce solutions that enabled the company to centralise its digital experience globally. Although it was a complex process, Vtex supported the company with the front- and back-end integrations, helping it to identify and implement new features and functionalities that would be both practical and appealing to all users.

    Leveraging the Vtex Commerce Platform - a "headless" solution where the front-end and the back-end functionalities are independent - the company's digital offering is the same worldwide, yet has the flexibility to personalise services and meet the requirements of specific markets. These include payment gateways to suit individual markets, personalised order management systems and the ability to offer services in different languages.

    This is especially essential for a B2B platform, as every client order may be unique. The Vtex Commerce Platform streamlined the entire quoting and ordering process, and also provides sales representatives with their own customised dashboard, enabling them to manage orders and gain customer insights - all within one system.

    Prior to the implementation of the Vtex Commerce Platform, SBD's sales representatives placed, reviewed and changed orders manually, spending valuable time on paperwork. Now they can submit bulk orders and process them on behalf of their customers - in one single step.

    Some 50% of SBD's orders are now placed through the bulk-order feature, which allows sales representatives to dedicate more time to supporting their clients and expanding their roles to become their customers' strategic partners.

    companies

    Supplier update

    Changing of the guard at Boral

    A number of buyers for West Australia's BGC Group are expected to make their indicative bids including Queensland-based Wagners: report

    Building materials company Boral is set to have new chief executive by December 2022 following two recent profit downgrades.

    Incoming Boral CEO Vik Bansal comes to Boral via Cleanaway and for the past year, he has been running steel group InfraBuild which is part of the global GFG Alliance owned by British billionaire Sanjeev Gupta.

    Mr Bansal takes over from Zlatko Todorcevski, who has been chief executive of Boral since July 2020, in a change triggered by Boral chairman Ryan Stokes. (Boral is 70% owned by billionaire Kerry Stokes and his family through Seven Group Holdings (SGH) after a takeover completed in 2021.)

    According to the Australian Financial Review (AFR), Mr Bansal said he misses the pressure and accountability of leading a large publicly listed company. Mr Stokes also told the AFR:

    The environment's changing very quickly. In the last 12 months we dealt with COVID, extreme weather and now this dynamic of rapidly increasing input pricing. That requires businesses to be far more nimble and dynamic, and that takes really strong operational leadership, and that's something we're confident he can bring.

    In the AFR, Mr Stokes said the plan for Boral is very clear - it needs to shore up its market position in Australia such that it can appropriately price its products to get a return on capital that can ensure its sustainability. Boral is now a domestically focused business in Australia after selling out of North America in a string of $4 billion-plus asset sales.

    Mr Stokes does not see energy costs suddenly coming down in Australia, and believes the broader economy needs to be ready for that reality - as well as the impact it will ultimately have on prices. He said:

    It's a challenge to the economy as to how we adjust to that, but I don't think it's a short-term factor. This is going to be a medium-term dynamic as to how we have to cope with increased energy costs, both gas and electricity.
    At the end of the day, the era of cost-led profit growth is over. The issue we're all going to have collectively is to ensure that we're making a return on capital above a benchmark level to allow reinvestment. Because if we're not that, sectors aren't going to be viable long term.
    We're confident we can do that [at Boral]. But that means prices go up.

    :Background

    The AFR reports that Mr Bansal was highly regarded by investors for the turnaround he engineered at Australian waste management company Cleanaway - until serious questions about his leadership style effectively ended his time in charge of the group.

    Mr Bansal was chief executive of waste group Cleanaway for six years before he resigned in January 2021 in a "mutually agreed" decision with the board, following a string of allegations about a "culture of bullying and harassment" under his leadership.

    Mr Stokes acknowledges the cultural fit, but said the appointment should not be seen as a sudden change in direction at Boral. He remains undaunted by the circumstances of Mr Bansal's departure from Cleanaway. At the same time SGH has done its homework. As Mr Stokes told the AFR:

    I am a strong believer that leaders evolve, change and grow. That's a fundamental premise and I think Vik is someone who can really grow through his journey. But what he accomplished at Cleanaway ... is a very significant transformation of a really complex industrials business into a leading waste and recycling business.
    I'd say that his core leadership style is really focused on getting the most out of people and business assets and really results orientated.
    Ultimately, we did quite a lot of research into his background experience and we had a lot of very prominent people advocate his capability as a leader, which gave us confidence.

    Mr Bansal has also said he has learnt from that experience, but did not step back from how he built a high-performance culture at Cleanaway.

    You learn, and then you become a better leader...You can't turn around a company without a positive culture.

    Mr Stokes said Boral needed a new style of leader by the end of the year for the company's next phase as it looked to improve its operational performance.

    We're not satisfied with the profit results. I don't think anyone is.

    Mr Stokes said Mr Bansal's track record in lifting investment returns and profits at Cleanaway and InfraBuild was impressive.

    Future

    Mr Stokes told The Australian that he plans to use Mr Bansal's experience in decarbonisation with Greensteel at Infrabuild and in recycling at both Infrabuild and Cleanaway to drive Boral's green credentials. He said:

    Zlatko put a very clear focus on a net zero plan. Boral has the leading low carbon concrete in the market. That is something we will do more to promote.

    He also sees Boral playing in the recycling space with construction materials. Mr Bansal's work at Cleanaway enabled the business to dramatically reposition itself through recycling. Mr Bansal told The Australian:

    Recycling and reuse of the product is critical and construction material is perfect for that.
    Boral creates the hole and what does the waste management company do? Fill that hole with material. And in between is the reuse. So there is a real opportunity here to do something.

    Related

    Floods on the east coast and soaring energy and fuel costs triggered the latest $45 million downgrade in May.

    Boral prepares for another round of cost-cutting - HNN Flash #95, May 2022

    Mr Stokes said Boral, under new leadership, would be looking hard at the prices it was charging customers.

    Boral has introduced "out of cycle" national price increases - HNN Flash #82, February 2022

    BGC Group sale

    Denis Wagner, non-executive chairman and one of the co-founders of construction materials and services company Wagners, is understood to be considering a bid for BGC Group, according to the AFR's Street Talk column.

    It is believed that Wagners could make a bid through its ASX-listed Wagners Holding Company. However Street Talk speculates it would be a big step for the small cap company with a recent market capitalisation worth $242 million. It could also be seen as a surprising move, particularly given that BGC's shareholders want to sell out completely, and have instructed their bankers to find a single buyer for the entire business.

    Other main contenders are believed to be large scale businesses such as AdBri, CSR, Boral and CRH. Adbri has already declared its interest to shareholders, and listed CSR, which at $2.2 billion market capitalisation is bigger than Adbri. Topping the list of potential overseas buyers is Irish building materials supplier CRH.

    The main prize is seen as BGC Group's cement business, which has 47% market share in WA. But over its 60-year existence, the company's built other businesses ranging from bulk haulage services in Perth's metro area to asphalt production.

    Related

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

    Supplier update: Timber

    NSW state government subsidy

    The $10 million Hardwood Timber Haulage Subsidy Program has been designed to ease costs for local mills amidst soaring fuel prices

    The NSW state government recently announced a $10 million subsidy to help the flood-ravaged timber industry in northern NSW stay afloat.

    The Hardwood Timber Haulage Subsidy Program aims to address soaring timber transporting costs in wake of natural disasters such as floods. The subsidy, $30 per tonne of timber, is designed to ease the cost of transporting timber - a task that has become more difficult this year due to fast-increasing petrol prices and the wet.

    Timber producers throughout Northern NSW have been severely impacted by recent bushfires, destructive floods and months of persistent wet weather to source supplies from outside the region. The subsidy program should help enable them to efficiently transport materials from outside their existing supply areas to their processing facilities. It is available in 18 NSW Local Government Areas (LGAs) declared disaster zones.

    Andrew Hurford, chairman of Hurford Hardwood, said his mill in northern NSW had been hauling timber from as far as central Queensland. He told ABC News:

    Our company has been bringing some timber down from another operation we have up in the Burnett region in Queensland. That's a long haul, 700 kilometres. It's not really economically viable for us, but we have to do that to keep our staff working.

    Mr Hurford said the industry was feeling the pinch of rising cost of living pressures.

    We're all running on the smell of an oily rag. We're just minimising our costs, just keeping our staff going ... you can only do that for so long.

    The industry has also been dealing with increasing demand for timber to be used to repair and reconstruct homes lost in this year's floods. Donna Layton, general manager of the Notaras Sawmill in South Grafton, said her mill was struggling to meet demand. She told ABC News:

    We're probably 60, 70% down on what we would normally supply. It just hasn't stopped. The rain hasn't stopped - we're just scratching.

    Ms Layton said the announcement will allow the sawmill to remain operational. She told the Clarence Valley Independent:

    It's all about maintaining jobs. If we close, all of the people we employ will lose their jobs, or if we have to reduce our operating hours they might have to go elsewhere, so the whole idea is to help the mills and help local people stay employed.

    J Notaras and Sons Sawmill has been manufacturing hardwood products for over 70 years and employs a large number of Clarence Valley residents. Ms Layton said:

    ...While the sawmill is not as productive as it usually is, we're still sawing timber and we're keeping everyone employed. This [announcement] is a wonderful supplement to what we can do, and it will make life a lot easier for most of the mills.
    We really want to keep operating and now we can confidently source timber from elsewhere. This has given us freedom to go further afield which is really wonderful.

    Mr Hurford said he hoped the subsidy would be enough to hold on until spring, a time of year when forests usually dried out.

    We're coming into winter now and the ground is wet. We just need to try to get through the next few months to spring, when the weather warms up and the cycle generally dries out.

    The NSW Agriculture Minister Dugald Saunders said much of the machinery used to harvest timber cannot be operated in the wet. He told ABC News:

    Access roads to forests in NSW may take many months to repair, resulting in low or no harvesting activity and a critical lack of supply of hardwood resources that timber processing facilities would normally rely on.

    Minister Saunders said the subsidy program is aimed at providing more certainty around timber supply.

    Mills like [J Notaras and Sons Sawmill] rely on a regular timber supply. The idea of the subsidy is it gets timber from wherever it is harvested to the mill, and we are supporting those in the industry who have been doing it tough...

    State Member for Clarence, National Chris Gulaptis, said timber will play a vital role in the region's rebuilding.

    In the Northern Rivers, people have to rebuild and they've got to find a resource that's reliable, good to work with and affordable.

    The Hardwood Timber Haulage Subsidy Program is co-funded by the NSW and Australian Governments under the Disaster Recovery Funding Arrangements.

  • Sources: ABC News (Coffs Coast) and Clarence Valley Independent
  • companies

    Supplier update: Building materials

    Timberlink expansion plans for Tarpeena sawmill

    Boral is preparing for another round of cost-cutting following two profit downgrades

    Timberlink has announced a $5.4 million project to open an onsite Light Organic Solvent Preservative (LOSP) timber treatment plant in January 2023 as part of its Tarpeena facilities in South Australia.

    According to the development plan submitted to PlanSA, the mill is reliant on off-site timber treatment. In Mount Gambier News, the plans read:

    Timberlink does not currently treat timber on the Tarpeena site and therefore trucks collect the timber to be taken off-site for treatment, with some treated timber returning to the Tarpeena site.
    The proposed timber treatment facility will replace the off-site treatment with a facility constructed in the north-eastern corner of the site.

    The plans indicate that the treatment plant would initially run on an one shift per day roster, but hoped to "operate 24 hours a day when increased demand is required". The plans read:

    The LOSP timber treatment plant is expected to process 25,000m³ of timber per year and is timber that is currently sawn onsite.

    According to the plans, LOSP treatments are "less hazardous than other forms of timber treatment" with an air quality assessment carried out by independent assessor Jacobs. The assessment concluded the expected works were safe with "majority of the hydrocarbons emitted - determined to be benign".

    Low odour LOSP was first developed at Timberlink Bell Bay, Tasmania in 2015 which the company said is "up to 30 times less odour than traditional LOSP formulations". A spokesperson told Mount Gambier News:

    Timberlink has been working closely with the South Australian EPA to ensure the highest standards are achieved for this state-of-the-art treatment facility.

    The LOSP expansion is happening alongside a $63 million project already underway in Tarpeena. In February, works began on Australia's first combined CLT and GLT manufacturing plant at the site, which is expected to be completed in September 2023. A spokesperson said:

    The co-location of a NeXTimber Cross Laminated Timber (CLT) and Glue Laminated Timber (GLT) Plant on the same site makes this facility unique in Australia.

    The LOSP treatment plant is expected to process 25,000m³ of timber per year. All of it will be sawn in the co-located mill.

    CLT is manufactured into panels and can act as a replacement for concrete, and GLT is produced as beams that can replace steel. At the time of the announcement, Timberlink chief executive Ian Tyson said the products were "tremendously environmentally friendly". He told ABC South East SA:

    It's got all the carbon storing benefits, it's got the renewability of timber. It's a whole new market and a whole new opportunity for timber in a transformed, value-added form to be utilised in construction. The demand is there, the opportunity is there.

    Related

    Timberlink is upgrading its sawmill facilities in Tarpeena, SA - HNN Flash #2, July 2019

    Boral

    Floods on the east coast and soaring energy and fuel costs have triggered the second profit downgrade in as many months for building materials group Boral.

    Chief executive Zlatko Todorcevski said full-year profits would be negatively impacted by $45 million, as disruptions from flooding and persistent heavy rainfall brought a $30 million hit, with rising inflation as coal, electricity and fuel prices jumped, making up the other $15 million.

    Mr Todorcevski said a round of product price rises implemented in January and February did not offset the effect of the floods and inflationary forces. In the Australian Financial Review (AFR), he said:

    Ongoing rainfall in many parts of the east coast, particularly in NSW and Queensland, has continued to significantly impact our sales volumes, while also resulting in additional costs.

    Boral already told the market in March that full-year underlying earnings from continuing operations, excluding property, would be $145 million-$155 million provided there was no more heavy rain and other imposts. This is down slightly from $157 million in the previous financial year.

    Mr Todorcevski said energy price increases, particularly across coal and electricity, were impacting production and logistics costs.

    We are responding to this challenging operating environment by implementing additional measures to mitigate the impact of transport and fuel inflation alongside the already-announced out-of-cycle price increases, and accelerating our focus on costs.

    Boral is now a domestically focused business in Australia after selling out of North America in a string of $4 billion-plus in asset sales. It is 70% owned by billionaire Kerry Stokes and his family through the Seven Group. Ryan Stokes, son of Kerry Stokes, is Boral's chairman.

    The company has been working on plans to "rightsize" the structure, in line with being an Australia-only business that involve slashing hundreds of jobs before June 30, according to the AFR. But the two downgrades have added extra pressure.

    Related

    Boral provided a recent trading update.

    Boral trading update - HNN Flash #87, March 2022

    Boral's bottom line has been hit with extreme wet weather and surging energy prices.

    Boral is raising prices for its building materials products - HNN Flash #82, February 2022
  • Sources: Mount Gambier News, ABC South East SA, Australian Financial Review and The Australian
  • companies

    Supplier update: Building materials

    Weathertex hits the market: report

    Brickworks could be exploring BGC buy and New Zealand timber and panelling group Herman Pacific may be up for a future sale

    It has been reported by the Australian Financial Review (AFR) that weatherboard manufacturer Weathertex is looking at a potential sale.

    The company is expected to appoint Miles Advisory to run a strategic review of the business, according to the Street Talk column in the AFR. The review is set to consider sale options, including talks with private equity (PE) and potential buyers from the industry.

    Weathertex is understood to make about $50 million a year in revenue and about $10 million in earnings, which is consistent with accounts filed for its holding company CABP Group.

    Weathertex was established in Raymond Terrace, in the NSW Hunter region, in 1939 and has employed more than 100 people for the past 50 years. Its products include cladding weatherboards and architectural panels, sold in Bunnings and other hardware stores. They are marketed as eco-friendly and made of real wood.

    The business is expected to attract interest from Australia's PE firms, including those that have had success in building materials companies in the past, and other hardware suppliers.

    Brickworks and BGC

    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 DataRoom in The Australian.

    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.

    The Australian Competition & Consumer Commission would most likely oppose an acquisition by Brickworks of BGC. However, the thinking is that Brickworks could get around that opposition by offloading some of its own assets in the WA market.

    BGC is up for sale through investment bank Macquarie Capital and PwC. Analysts have told DataRoom that BGC's brick business accounts for less than half of its value, with about half of its value in its WA cement grinding terminal, quarries, concrete and transport businesses. Also included in the sales is BGC's building construction arm.

    Few buyers exist for the brick business, although given its scale it is seen as a rare and valuable opportunity for a major player like Brickworks which operates under the Austral brand.

    Perth-based BGC operates its brick unit under the Midland Brick and Brikmakers brands and caters exclusively to the WA market. It operates four manufacturing sites and three retail sales centres in Perth.

    Midland Brick accounts for about one-third of the WA's clay brick production, with an annual production capacity of about 110 million bricks. An acquisition would capitalise on the buoyant construction conditions in Perth.

    Related:

    In 2021, Brickworks restarted a mothballed brick kiln in New South Wales.

    Brickworks' Australian business gains significant earnings - HNN Flash #39, April 2021

    Earlier this year, Brickworks was seeing potential early signs of softening construction activity in Australia.

    Brickworks believes construction may be starting to weaken - HNN Flash #87, March 2022

    Hermpac

    New Zealand-based Herman Pacific (Hermpac) could be an acquisition target for Australian building materials companies and private equity groups, according to Street Talk in the AFR.

    It is understood Hermpac's family owners are considering their strategic options, and Ascentro Capital Partners has been introducing the business to potential buyers.

    Sources told Street Talk that Hermpac had been pitched with about NZD30 million (AUD27 million) a year in earnings, fuelling expectations of a potential AUD250 million valuation.

    Hermpac is a NZ made timber company, sourcing and selling timber for flooring, decking, weatherboard, cladding, panelling and more. It was founded in 1974 and is majority owned by members of the Carter family, and management.

    It is understood to be attracting interest from PE firms and building products companies with operations on either side of the Tasman.

    PE sources have told Street Talk that the potential sticking point with NZ-based investments is the exit strategy. While companies can make good money buying and running businesses, selling assets has become harder given the "tricky IPO market and a clampdown in foreign investment".

  • Sources: Australian Financial Review and The Australian
  • companies

    Supplier update

    James Hardie annual profit jumps 75%

    CSR has reported an 85% rise in annual net profit, and offered an upbeat outlook as it supports a strong pipeline of detached housing projects

    James Hardie chief financial officer Jason Miele said about 65% of the company's business is centred on the repair and remodel category, which was showing robust growth, according to The Australian Financial Review (AFR).

    Mr Miele said its Asia-Pacific operations, including a substantial business in Australia, were reporting large backlogs for renovators using the company's products, which include cladding and plasterboard. And the prospect of higher interest rates in Australia was not curbing demand in the June quarter. He said of the Australian subsidiary:

    The business is operating very strongly.

    The AFR also reports the company will push through a fresh round of price rises in its big North American business in June to tackle soaring inflation. James Hardie's North America president, Sean Gadd, said prices had risen 5% in January in the standard annual price increase round, but a special out-of-cycle increase was needed on June 20. There would be another increase next January in the standard annual review. He said rising rates were not a handbrake and renovators were going hard in the US. Tradespeople were at the frontline. He said:

    They will tell you they're not getting cancellations.

    Mr Miele said there had been "hyperinflation" in energy costs in its European business, with sharp rises in gas prices resulting from the Ukraine war a big drag because gas is a crucial input in the manufacturing process of plasterboard.

    Margins would soften slightly in the June quarter because of climbing freight and pulp costs, but will expand again for the rest of the financial year as the June price increase of 4% flows through.

    James Hardie reported a 24% increase in net sales to USD3.6 billion (AUD5.1 billion) for the full year ended March 31, which helped deliver a 75% lift in profit to USD459.1 million following "above market growth and returns" in the fourth quarter.

    The building materials group now expects fiscal year 2023 adjusted net income to be in the range of USD740 million and USD 820 million, a 19-32% increase.

    The company remains without a permanent chief executive since the announcement in early 2022 that Jack Truong had been forced to step down following an investigation into claims of "intimidating behaviour" over allegations he created a "hostile" work environment. Mr Truong has denied these claims, saying he was "blindsided" by the move by the board.

    James Hardie shifted to a strategy of heavily investing in marketing direct to the homeowner under Mr Truong's stewardship, saying female decision-makers were a major driver of demand for stylish building products.

    In February, it signed US television renovation show duo Chip and Joanna Gaines to help in marketing its products. They host the Fixer Upper TV show, have their own network of renovation shows, the Magnolia Network and share 24 million Instagram followers.

    Related

    James Hardie chief executive Jack Truong has been abruptly sacked - HNN Flash #77, January 2022

    CSR

    CSR said its Building Products division is well positioned to grow in the next 12 months as tradie shortages and supply chain disruptions mean an already strong pipeline of work in the detached housing market is stretching out to be "stronger for longer".

    Chief executive Julie Coates said demand in the apartment building market was also starting to gain momentum after an extended slowdown, while non-residential construction was improving. But labour shortages and supply chain congestion are causing house building and renovations projects to take up to 50% longer than usual, according to the AFR.

    CSR's building products include Gyprock plasterboard, PGH bricks, Monier roofing, Hebel lightweight building blocks and Bradford insulation. Ms Coates said Bradford and PGH bricks were strong performers in a market where housing construction timelines have extended to beyond 12 months in many cases.

    She foreshadowed further price rises of products to offset rising input costs after putting through out-of-cycle price rises in late 2021 to offset rising input costs and inflation. However Ms Coates did not specify the quantity. She said:

    Where we need to, we will continue to pass on price increases into the market.

    The company announced its core building products division had produced a 24% rise in earnings before interest and tax for the year to AUD228 million. Net profit after tax was up 85% to $271 million after some one-offs from carried forward tax losses of AUD86 million bolstered the bottom line.

    Ms Coates said margins in the building products division had lifted to 14.1% from 12%. The federal government's Homebuilder program had been an important catalyst in lifting demand. Applicants who sign a contract under that scheme have to commence building work within 18 months.

    The company is expanding capacity at its PGH bricks operations at Oxley in Queensland, adding an extra 10 million bricks a year. Ms Coates said her strategy of centralising logistics functions was paying off, particularly at a time when there were shortages of truck drivers in the industry. Deliveries were more efficient and better able to adapt to supply chain congestion.

  • Sources: Australian Financial Review, The Australian and Wall Street Journal
  • companies

    Supplier update: Adbri

    BGC still of interest as an acquisition for Adbri

    Perth-based BGC is up for sale through investment bank Macquarie Capital and PwC

    A number of market analysts believe ASX-listed building materials supplier Adbri may be keen to buy BGC's concrete plants and quarries, according to a report by DataRoom in The Australian. However it would be unable to acquire its cement facilities due to objections from the Australian Competition and Consumer Commission.

    Adbri chief executive Nick Miller recently told investors at the Macquarie Australia Conference that parts of BGC remained of interest to the company.

    Adbri is Australia's largest lime producer and concrete masonry products supplier and holds the number two position in the cement and clinker market to the construction sector. It is the fourth largest concrete and aggregates producer in Australia, according to The Australian.

    BGC's No. 1 market positions in Western Australian cement, bricks and building homes are the focus of an eight-point sales pitch by its bankers at Macquarie Capital (MacCap), according to the Australian Financial Review (AFR).

    In a detailed document sent to potential buyers, MacCap's bankers said BGC had 47% of WA's cement market and was the only player with a vertically integrated quarry, cement and concrete value chain.

    In bricks, the bankers said BGC's Midland Brick had 80% of the market and 83% of WA pavers, and it built 16% of new homes, which made it No. 1 in WA and one of the largest home builders in Australia.

    MacCap said BGC was making about $1 billion revenue and $100 million in earnings before interest, tax, depreciation and amortisation, with group earnings skewed towards BGC's cementitious (quarries, cement, concrete, asphalt) and bricks and masonry arms.

    BGC is seen as a complex, eclectic business where operations are interrelated. While some suitors would shy away from those operations, others say that such businesses of scale in the west are rarely on the market and would be seen as a valuable opportunity for certain buyers.

    Sources have told DataRoom that Knauf would be the obvious buyer of the plasterboard operations after buying Boral's plasterboard business on Australia's east coast.

    In addition to global buyout firms, other parties exploring a BGC acquisition are believed to be Boral, while some believe that Holcim, Cement Australia and HeidelbergCement will likely form a consortium to bid for the assets. (Holcim and Heidelberg are Cement Australia's shareholders.)

    Interested parties said they were told there would be an indicative bid round in June, with shortlisted groups to get further diligence materials soon after, according to the AFR.

    BGC's shareholders are understood to be keen to sell in full, which may mean buyers interested in different parts of the group form consortiums to get a transaction over the line.

    There is speculation that BGC could fetch more than $1 billion based on early expectations.

    Related

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

    Supplier update: Alpine Truss

    Celebrating 20th anniversary

    The company was established in 2002 and now employs 130 people and is one of the biggest employers in Wangaratta (VIC)

    When Alpine Truss launched in March 2002, it did so with only a handful of staff. The company, which is celebrating its 20th year in business, now employs 130 people and is one of the biggest employers in Wangaratta.

    Prior to establishing Alpine Truss, director Chris Vafiadis and managing director George Prothero were employees at one of the largest frame and truss manufacturers in Australia. The pair were with the company for approximately 25 years. At the time, with Mr Vafiadis worked from Melbourne and Mr Prothero was in Benalla as the Victorian state manager. Mr Prothero told the Wangaratta Chronicle:

    We were extremely lucky that when we decided to start Alpine Truss we were able to source the site we have now in Tone Road. Originally on five acres, we have since purchased the two acre adjoining property to enable the business to grow and a further 18 acres, which we have built a warehouse on for storage of raw materials.

    The Wangaratta office, located at the manufacturing facility, services regional clients while supporting major project builders in Melbourne and southern New South Wales. It also has a sales and technical office based in Epping to provide assistance to their metropolitan-based clients. Mr Prothero said:

    When we decided to ... start our own business, which my wife Belinda was an integral part of its growth and success, we were also lucky enough that some of my key design and production staff from the Benalla operation took a major gamble and joined Alpine Truss.

    He said he is extremely grateful for all the support that customers had placed in the company over the years, especially in the beginning.

    We're very grateful for the local businesses, including North East Fasteners, Wang Bearings, STY and Merriwa Industries, that backed us 20 years ago.

    The timber shortage has put a planned expansion on the backburner temporarily but Mr Prothero said that it will continue to enhance its facilities and upgrade equipment.

    Our biggest issue is timber supply, but more so lack of staff and the rental crisis is not helping us in being able to employ people who need to relocate.

    The company is a licensed Mitek manufacturer of pre-fabricated timber roof trusses, wall frames and Posi-strut flooring systems. Being manufactured to size eliminates wastage and the need to trim on site, as well as save labour on site. Alpine Truss also supplies particle board flooring, which can be delivered at the same time as the floor systems.

    Mr Prothero said its products are designed in accordance with the relevant Australian Standards and manufactured from renewable sources of structural graded pine. All products can incorporate H2F termite resistant pine that comes with a 25 year guarantee.

  • Source: Wangaratta Chronicle
  • companies

    Supplier update: Allegion

    Allegion to buy SBD's Access Technologies unit

    With this acquisition, Allegion expects to significantly expand its range of access, egress and access control solutions

    For USD900 million, Stanley Black & Decker (SBD) is selling its automatic door division to Allegion with plans to stay focused on its tools, outdoor and industrial segments that have experienced sales surges since the onset of the COVID-19 pandemic.

    In a statement, SBD CEO Jim Loree said the company will use the proceeds to pay off debt and repurchase shares of its stock from investors.

    The Access Technologies business was the original platform for Stanley to enter the commercial security industry in the late 1990s. Sales and profits from that move were so strong after the 9/11 tragedy that Stanley was able to buy its longtime rival, Black & Decker, which had tried to take over Stanley several times.

    The sale means SBD will now exit security. The company recently sold its Stanley Security segment to Securitas for USD3.2 billion, but held on to Access Technologies. Security products included advanced locks, video surveillance systems and entry systems to screen people for weapons.

    Stanley Black & Decker selling its security unit to Sweden's Securitas AB - HNN Flash #76, December 2021

    Allegion said the acquisition bolsters its "seamless access strategy with a complementary category market leader". Its expertise in mobile applications and software will increase Access Technologies' connected capabilities, and allow Allegion to further capitalise on the industry shift toward smart security solutions.

    The acquisition is expected to close in the third quarter of 2022, subject to regulatory approval and customary closing conditions. Following this, Allegion expects to operate the Access Technologies business as part of the Allegion Americas segment.

    Access Technologies claims credit to the first patent for a "hands-free" door in 1931. Grocery stores were the earliest adopters of the "Magic Door" with commercial builders and high-rise apartments quick to follow as the company added automated revolving doors and other products.

    Today, Stanley Access Technologies remains one of the biggest vendors for automated doors, along with ASSA ABLOY which has a door security division.

    Related

    Allegion buys GWA-owned brands - HI News 4.04 (June 2018), page 22
  • Sources: Stamford Advocate and PR Newswire
  • companies

    Supplier update: Timber

    Government grant to develop hybrid wood

    The South Australian state government is giving SA Pine $1.36 million to process timber

    The federal government's Trade, Tourism and Investment Minister and Wannon MP Dan Tehan announced a $1.3 million trade and market access grant to help the forest and wood products industry develop hybrid engineering wood products.

    The grant should help the industry add more value to lower quality forestry resources onshore in Australia, creating more jobs in regional communities and helping to diversify timber exports.

    It should also provide an opportunity for the industry to increase export incomes. The hybrid wood products would be sold to three alternative markets including Vietnam, Indonesia and Malaysia. In the Warrnambool Standard, Mr Tehan said the project would provide a significant boost for the timber industry across the Green Triangle region in Victoria and continue to secure jobs in Wannon and benefit the Port of Portland.

    In addition, Mr Tehan said the hybrid timber could be used to meet the growing demand of construction timber in the south-west.

    The manufacturing process would be the first of its kind in the region, he said. The project was an example of the federal government supporting trade diversification. Mr Tehan said:

    This project offers great promise to establish new export markets thanks to the adoption of innovative technology.

    Forestry and Fisheries assistant minister Jonno Duniam said the project would benefit the industry supply chain, from timber growers to wood processors and exporters.

    SA Pine

    Minister for Primary Industries and Regional Development, David Basham said the $1.36 million state government grant will help SA Pine expand its capacity to process an extra 25,000 tonnes of pine logs, which is enough to build approximately 950 houses.

    The $1.36 million grant to the business comes from "the government's $2 million Additional Structural Timber program". Some timber has already been shipped off Kangaroo Island on the SeaLink ferry to a mill in Jamestown. Mr Bassham told The Islander:

    SA Pine is a successful South Australian sawmill operating out of Kuitpo and Monarto and the largest customer of ForestrySA timber sourced locally from the Mount Lofty Ranges.
    The SA Pine Kuitpo mill is well positioned to benefit from the joint Commonwealth-State funded transport assistance scheme to move bushfire salvage timber off Kangaroo Island to processing.

    The minister's office told The Islander that state treasury confirmed prior to the election caretaker period that this initiative could be funded from within existing departmental resources.

    Meanwhile, logistics company T-Ports on behalf of forestry owners is proposing to transship pine logs, as well as blue gum woodchips, off Kangaroo Island using its transhipment vessel near the Kingscote jetty.

    The extra timber has been made possible by SA Pine successfully negotiating a long-term timber supply agreement with ForestrySA, as well as a plan to source logs from Kangaroo Island.

    Pine was about 20% of the forestry trees on King Island, 90% of which was burned in the bush fires. Harvesting company Harvestco said there is still some undamaged pine standing, while some burned pine logs were stockpiled under water in McGills dam.

  • Sources: The Warrnambool Standard and The Islander
  • companies

    Supplier update

    WD-40 raises prices in Australia

    Dremel tells Gen Zers and millennials, "When It Comes to DIY, 'You Got This'" in its latest campaign

    In an earnings update to US investors, hardware supplier WD-40 revealed that significant inflationary pressures are impacting its global operations, including Australia. Profit margins are down to 50%, from a traditional level of about 55%, as costs increase.

    As a result, there are price rises across its range of products in the Australian market.

    The largest cost increases for WD-40 are coming from the price of specialty chemicals and the aerosol cans its products are stored in. This had forced the US company to lift prices for its range of WD-40 products in Australia by as much as 8%. WD-40 chief operating officer Steve Brass said:

    In Australia, sales were USD5 million (AUD6.7 million) in the second quarter, down 5% compared to last year due primarily to decreased sales of home-care and cleaning products, which were down 10% compared to last year.

    The Asia-Pacific region makes up 16% of the WD-40 global business. WD-40's sharp sales retreat in the second quarter is in contrast to the rush by consumers to tackle home improvement projects in 2020 during the early months of the pandemic.

    At the time, sales momentum in Australia eclipsed that of WD-40 in its US home market. The boom in sales then generated double-digit sales growth for WD-40 in the Australian market, with its Solvol soaps and No Vac carpet sanitiser also generating strong sales.

    The company believes its local subsidiary is holding up well despite the recent decline in second-quarter sales.

    Related

    WD-40 generates increasing profits from its Australian business - HNN Flash #55, July 2021

    Dremel

    Nearly 40% of millennials and Gen Zers say they lack the confidence to take on solo DIY projects, according to a US-based consumer trends study by Gartner. So Dremel is telling these generations, "You Got This", in new brand campaign that aims to inspire and help them find the courage to take on creative projects big or small. Dremel global president, Sonesh Shah said:

    Through the "You Got This" campaign, we are giving this new class of DIYers the inspiration to unlock their creativity. Gen Z specifically is one of the most artistic generations yet, as the value of creativity among this group ranks 40 points higher (according to MRI-Simmons Custom Audience Data) than the general population.
    With our high-quality versatile products, expertise and after sale support, we are here to coach them as they work through creative and DIY projects around the home.

    In other aspects of their lives, these "new DIYers" don't require much hand holding. Millennials and Gen Zers have been self-educating for years - mastering skills such as the art of the smoky eye (make-up) or coding their own websites. According to research conducted by MRI-Simmons who surveyed millennials and Gen Zers that describe themselves as altruistic/purpose-driven and creative minded, said they're also willing to extend that passion to their home. Research findings include:

  • 75% are always looking for new ways to improve their home
  • 72% enjoy DIY projects
  • 69% like to make things themselves
  • 56% of Gen Z or millennials say everything in their home should be beautiful, so it looks good in pictures for social media
  • With Dremel's latest campaign, the brand brings three ad spots titled, Tub, Mirror and New Place. They showcase a range of creative and functional DIY and home improvement tasks, from polishing an op shop find to removing a nail in order to hang a vintage mirror, encouraging people to pick up a Dremel tool and let their inner DIYer shine.

  • Sources: News Corp Australia and Dremel
  • companies

    Supplier update: timber

    OneFortyOne completes Jubilee sawmill upgrade

    The Australian Forest Products Association launches a campaign as part of a plan to get one billion new trees planted across the nation by 2030

    OneFortyOne Jubilee Sawmill's second continuous drying kiln (CDK) is now online and operational, completing a $16 million capital investment at its Mount Gambier (SA) site. Jubilee Sawmill general manager Paul Hartung said the kilns are working well and have increased site capacity while improving the quality of the timber dried. He said:

    The CDKs are powered by our own sawdust and wood waste offcuts, and their efficient design is using less energy to process more timber compared to our old batch kilns.
    With the old batch kiln we put 150m3 of timber in at a time, drying it at up to 160 degrees to achieve a moisture level down to 12%. These high temperatures can stress the timber.
    With the CDK, we load the timber to move through the drying process. With the efficiencies of shared energy and temperature control, the new kilns have a maximum temperature of 130 degrees which is a lot less aggressive on the timber as it dries.

    Two of four older batch kilns will be reconditioned and remain on site to provide added flexibility and backup for when the CDKs are offline for maintenance.

    The upgrade project is part of a greater Jubilee-wide modernisation program, which has included with state-of-the-art sawing equipment upgrades, through to the addition of robotic pack wrap and strapping machine.

    Related

    OneFortyOne commits to invest over $11 million in its Jubilee Highway sawmill - HNN Flash #77, January 2022

    AFPA campaign

    As the main industry body charged with representing the interests of the sustainable timber and forestry sectors, Australian Forest Products Association (AFPA) believes Australia is on the cusp of a serious nationwide shortage of locally grown timber and wood-based products. Its goal is to influence government policy and public support to significantly increase the growth of sustainable plantations before the decade ends. AFPA communications director Joe Prevedello, said:

    At the current rate of timber production versus usage, Australia is on a path to have massive wood shortages in the future if no action is taken. And the fact is, we desperately need locally grown timber and wood - not just for the construction industries or our collective economy, but to build new homes, reduce our reliance on plastic products, and also contribute to fighting climate change given that harvested timber sequesters a massive amount of carbon.

    Tim Kirby, founder at advertising agency Galore explains:

    The AFPA came to us with a great story that needed telling. There is a clear current problem, but it's one that brings a multitude of enormous benefits for Australia if we can help to solve it. So, we set about working out the best way to tell that story.

    Written and directed by Nick Snelling, the emotive spots for the "Australia, we need a tree change" campaign open with a young girl engrossed in colouring in her school homework project. When her curious father interrupts to ask what she's doing, she spells out the case to him in simple language as to why Australia should aim to plant one billion new trees. Mr Snelling said:

    We felt it was vital that we bring the high stakes of an Australian wood shortage home - not just for tradies, who will feel its ramifications first, but for parents. We all know kids possess a simple wisdom and purity of thought that often escapes us as adults. Kids tend to only see the common sense or potential for good in things. So that felt like the perfect way to approach this film.

    You can view it here:

    Australia, we need a tree change campaign - AFPA

    Mr Prevedello said:

    AFPA are delighted with the whole concept of 'Australia, we need a tree change'. We have the kind of ambitious but achievable goal that we believe a lot of Aussies will rally behind, and who better lay out our argument than a super-smart little girl, whose generation will ultimately inherit the vital decisions we all make today.

    In addition to out of home (outdoor) ads, the new AFPA spots will run across commercial television and online platforms throughout April 2022.

  • Sources: OneFortyOne and Campaign Brief
  • companies

    Supplier update: BGC

    BGC prepares to be sold - again

    Chief executive Daniel Cooper believes the company will now attract global interest

    Building products and housing group BGC is back on the market for the second time in four years after a period of restructuring, according to a report in The West Australian.

    The market has changed significantly since 2018 since it first attempted a sale. The company was taken off the market the following year because of a slowdown in the number of housing starts in WA that meant it would be selling at a low point. CEO Daniel Cooper told The West Australian:

    The construction market in WA was at an all-time low and housing starts were at their lowest level for 20 years (in 2019).
    It's a very different story now in that it is a strong market and if we look ahead, the forecast for construction and materials supply into WA and across Australia is very strong for the next many years.
    For us, the market timing is right but also our internal completion of transformation work has been done.

    Mr Cooper said BGC was "in great shape" after the restructure and divesting a string of non-core businesses, which involved the sale of BGC Contracting and the release of a large amount of property and assets such as The Westin and Aloft hotels.

    Much of the work in strengthening and consolidating the core business was also complete, Mr Cooper said, referring to the purchase of Midland Brick a year ago.

    The sale of the group is expected to take six to 12 months and while no price target has been named, Mr Cooper said he was expecting global interest from a range of buyers.

    I think there will be some strategic materials buyers and others will be more financial buyers. Our leadership team are excited about the opportunity a new shareholder will bring and we think any new shareholder will be looking to add value, add synergy and expand and grow the business.
    For the staff at BGC it's a bit of clarity, it's a bit of certainty, but it's also exciting.

    Consortiums are forming to buy BGC, according to DataRoom in The Australian. It understands that a break-up of the company is off the table, with only shares in the business on offer, so the owners can avoid paying tax. Few buyers are interested in the business as a whole (mainly because of its complexity), so efforts are being made to put together buyer groups.

    DataRoom has learned that overseas building materials companies are interested in parts, with Knauf the obvious buyer of the plasterboard operations, while Hanson may also be interested. Knauf earlier acquired Boral's plasterboard business on Australia's east coast.

    Analysts told DataRoom that BGC's cement grinding plants would be the most attractive to suitors. Sources also said private equity firms will only participate if they can find a break-up solution for the business.

    Mr Cooper said the unwinding of the business would be a decision for the new owner but "my view is there's a lot of value in the business as it stands at the moment".

    Favourable market conditions helped the timing of the sale and have left BGC with a large pipeline of work. Activity is particularly robust for its building materials businesses, which have "relatively full order books", said Mr Cooper.

    Mr Cooper said the BGC business is No.1 in home building in Western Australia and the fourth-largest home builder in Australia. The group is forecasting a robust four to five years for the WA housing market.

    However, its construction businesses have not been spared from supply chain challenges which have seen builders across the country face surging construction costs amid shortages of labour and key building materials such as timber. Mr Cooper said:

    I think like all builders we've got our challenges. Certainly, as borders have reopened there's opportunity for us to improve and we're working on that.

    BGC started out as a property development and building company focused on residential home construction in Perth when it was founded by Len Buckeridge over six decades ago.

    The company has been simplified but still operates 16 businesses which span the production of building materials including bricks and cement, quarries, and residential building under brand names such as HomeStart, Aussie Living Homes and Commodore Homes.

    The proceeds of a sale will go to Mr Buckeridge's beneficiaries.

    Related

    BGC could be back on the market: report - HNN Flash #85, March 2022
  • Sources: The West Australian, Australian Financial Review and The Australian
  • companies

    Supplier update: Green Hip workwear

    Women's workwear brand

    Liv Thwaites said she has created a range that allows women to work in comfort and style

    The initial idea for Green Hip workwear came about in 1997 when Liv Thwaites started an apprenticeship in horticulture. It wasn't until 2007 that she registered Green Hip as a business, and after a few years of product development it officially launched in 2010 with just four products.

    Ms Thwaites learnt about garment construction while working for a landscape architecture firm in Bangkok, having moved to Thailand for her husband's job. She told the Geelong Advertiser::

    ...I was in the land of tailors and I knew exactly what I needed...I was able to learn about the construction of garments, the process of designing them, garment specifications and fabric.

    Along with selling the brand online and in stockists including Total Tools, Hip Pocket, Totally Workwear, and RSEA, Green Hip is supplied to Melbourne Water and Department of Environment, Land, Water and Planning employees across the state.

    Green Hip has also been featured on TV renovation show The Block, with contestants Kirsty and Jesse and Kerrie and Spence making appearances at the Green Hip shop and at the recent Melbourne International Flower & Garden Show.

    The TV show is always a highlight for the business, especially since COVID has stopped it from going ahead the past two years. Ms Thwaites said:

    It's a place where we get to speak to our customers and get to know what they want.

    Ms Thwaites said women had been expected to wear men's clothing for decades when it would have been unacceptable for men to have to wear women's clothing. She explains:

    It also affects the safety perspective. If you're not working in comfort, with your sleeves too long or pants falling down, your mind isn't completely on the job.
    We believe women should have the appropriate clothing and we cover all stages of life, including maternity, and represent women of all ages and sizes. What we were finding is that larger women were having to be pushed into menswear, which is not OK.

    Ms Thwaites feels proud every time she sees the clothing on different body shapes. Green Hip offers sizes from 6-24. The range currently includes four styles of pants, overalls, shorts, various shirts, T-shirts and hats, in four different colours, plus hi-vis. She said:

    You can go onto a work site and not feel girly or different, and they fit perfectly in all the right places.

    The 100% female-owned and operated brand is continuing to evolve, with a long wish list of future product ideas. A new inventory system has been put in place, so that more time and effort can be put into growing the business that is based in Geelong (VIC).

    Ms Thwaites hopes to increase the number of stockists nationally and is in discussions with larger chains.

    At the same time, she is on the lookout for a new warehouse space where there can be a showroom, office space and warehouse all in one.

    Related: Toowoomba based Co Gear workwear range supports women's real-life decisions.

    Women's workwear designed for inclusion - HNN Flash #28, January 2021

    Related: Bisley Workwear designed for lady tradies.

    Bisley Workwear knows lady tradies - HNN Flash #12, February 2020
  • Source: Geelong Advertiser
  • companies

    Market update: Tradies

    Jobsite deliveries by drones

    Google Wing drones are now delivering supplies to tradies on worksites in Logan, Queensland

    Google Wing's head of government relations, Jesse Suskin recently told Australian Aviation that while builders don't often forget their power tools, they can call upon Wing's devices to fetch things such as painter's tape. He said:

    We have a hardware store we deliver from. As long as the product weighs what it does and fits in the box, we can deliver it.

    Wing launched commercially in Canberra (ACT) and Logan (QLD) in 2019 and currently allows for the delivery of packages that weigh less than 1.5 kilograms from a variety of stores that sell household and perishable goods, including coffees and sandwiches.

    The business now conducts more deliveries in Australia than in any other country. Mr Suskin said:

    There's a worksite in Queensland where they're building a series of homes. We're not delivering to the homes, we're delivering to the people who are building the homes.
    We're delivering their tools and hardware when they run out of something or their food during lunch. We didn't originally think we'd be moving hammers and screws with drones!
    We had a customer reach out who runs a landscaping business, and they constantly ran out of the Whipper Snapper line. So we stock that now.

    Wing began in 2012 as one of the first projects at the tech giant's secretive research lab, Google X, alongside its augmented reality eyeglasses and self-driving cars. It launched its first trials in 2018 before starting more commercial flights the following year in both Canberra and Logan.

    Once a customer submits an order via the app, the drone flies to pick up the package at the designated delivery centre before climbing to a cruise height of 45 metres and flying to the destination. Once there, it hovers and lowers the package to the ground, automatically unclipping the parcel without assistance from the customer.

    In October 2021, Wing drones began picking up packages from the roof of a Logan shopping mall to deliver to customers in the area.

    The development was a major milestone because previously, retailers had to co-locate in the tech giant's distribution centres rather than being able to work from their own stores.

    Related

    Drone potential in hardware deliveries - HNN Flash #26, December 2020
    companies

    Supplier update: Carter Holt Harvey

    Building supplies spin-off

    The company is reportedly being prepared for an initial public offering (IPO) on the Australian and New Zealand sharemarkets by its New Zealand based owner

    New Zealand billionaire Graeme Hart's Rank Group is exploring the possibility of floating its building supplies unit Carter Holt Harvey and Carters distribution business, according to the Street Talk column in the Australian Financial Review (AFR).

    The business would be spun off and trade under the name Building Supplies Group with revenue of about AUD1.55 billion per year and earnings before interest and tax of about AUD150 million.

    Although it is early days in terms of the mooted IPO, sources told AFR's Street Talk that Rank would look to raise more than AUD500 million in the IPO for a valuation of over AUD1 billion.

    It would be pitched to potential investors as the leading New Zealand trade-focused building supplies distributor, integrated with the country's largest wood products manufacturer, with a track record of earnings growth and cash flow generation.

    Carters has a national footprint of stores and frame and truss plants, and about 38% of its sales are products internally made by Building Supplies Group. The wood products side of the business, Carter Holt Harvey is dubbed the market leader in structural timber, laminated veneer lumber and plywood.

    Together, they make about 75% of sales in the residential building market and the other 25% to commercial/other building customers in New Zealand.

    The sharemarket listings are being spruiked at a time when the New Zealand construction industry is running hot, with building approvals for new homes at a record 48,899 last year, while supply chain disruption and capacity constraints push up prices for building materials. Castle Point Funds Management co-founder Stephen Bennie told the Waikato Times:

    The building cycle in New Zealand has been very strong. Clearly Carters is enjoying a bumper year. It's been a sweet spot. That's often a time when people look at IPOs.
    Carters is on the right side of things at the minute in terms of having supply. That's obviously a good place to be right now, when other supply chains are basically dysfunctional. It's had an extra kicker from being able to supply customers and enjoy the price increases.

    Rank Group paid NZD3.31 billion for Carter Holt in 2006 and has since sold the company's forestry and farm land and its pulp and paper unit, leaving a smaller business focused on wood products and building supplies.

    The distribution of building supplies is under the spotlight in New Zealand amid rising prices and product supply constraints. Last year the Government asked the Commerce Commission to look at whether Kiwis are being ripped off by the cost of building materials.

    The cost of building materials has been a longtime concern in New Zealand, even before the latest bout of inflation. The Productivity Commission estimated people in New Zealand pay 20 to 30% more for building materials than those in Australia.

    In November 2021, the Commerce Commission confirmed it was undertaking a market study of factors that may affect competition for the supply or acquisition of key products defined as foundations, flooring, roof, structural and non-structural walls and insulation.

    A draft report is due in July and a final report by December.

  • Sources: Australian Financial Review, Waikato Times and New Zealand Media and Entertainment
  • companies

    Big box update: Wesfarmers

    Retail businesses sign onto clean energy

    Bunnings, Kmart, Target and Officeworks have signed an agreement with CleanCo to provide 100% renewable electricity across their 147 sites in Queensland

    Government-owned energy generator and retailer CleanCo has struck a deal with Wesfarmers to provide renewable energy to a number of its major retail subsidiaries, Bunnings, Kmart, Target and Officeworks.

    This will result in participating stores using a combined ~140,000 MWh of renewable energy each year by mid-2025, following a staggered onboarding of sites starting July 2022. This is equivalent to the energy consumption of approximately 23,000 Australian households each year and will result in the removal of carbon emissions from the environment equivalent to taking about 48,000 cars off the road. It represents 30% of Scope 2 emissions from Bunnings and about 18% of Scope 2 emissions for each of the other businesses.

    Queensland Energy Minister Mick de Brenni made the announcement and said the deal represents a major step forward for renewable energy made and delivered in Queensland. He said:

    Every time Queenslanders visit these iconic retailers, whether to Bunnings for mowers, Officeworks for school supplies or Kmart or Target for clothes for the kids, they are now supporting Queensland renewables jobs...
    This agreement with the Wesfarmers' companies represents a win-win for Queensland with CleanCo providing renewable energy at a competitive price, on the back of jobs growth in regional Queensland.
    The Queensland Government has a target to reach 50% renewable energy generation by 2030 and we congratulate Wesfarmers for joining us on this journey.

    Bunnings Group managing director Michael Schneider said partnering with CleanCo is an exciting step in their sustainability journey, as Bunnings continue to make progress towards our commitment to source 100% renewable electricity by 2025.

    This builds on the work we have already done to increase our renewable power use by installing solar PV systems at 88 sites across Australia, generating the equivalent capacity to power over 4,600 households.
    While we've made positive headway, we recognise we have a lot more to do in this space, and we look forward to pursuing more initiatives to reduce our footprint.

    CleanCo has been steadily building its customer base since its establishment just three years ago and interim CEO Darryl Rowell said Wesfarmers is a great partnership to strike with its businesses committed to 100 per cent renewables by 2025.

    Kmart, Target and Officeworks are contracted to take our energy and large-scale generation certificates (LGCs) to the end of 2030, while Bunnings is currently signed up to 2027.
    We will be providing this energy and LGCs in part from Neoen's Western Downs Green Power Hub solar farm, from which we have a power purchase agreement to take 320MW, and in part from the Macintyre Wind Farm when it comes online in late 2023.
    Deals such as these allow us to support business and industry to reduce their carbon footprint with affordable, reliable green energy. We are proud to be supporting Wesfarmers to meet its renewable energy targets for its selected businesses across Queensland.

    REenergise Campaign director Lindsay Soutar, from Greenpeace Australia Pacific, also welcomed the announcement, and told The National Tribune:

    Queenslanders will soon be buying their homewares, power tools and office supplies from shops powered by the wind and sun ... Kmart, Bunnings, Target and Officeworks combined are Australia's 33rd largest electricity user, using vast amounts of power every day. Making the switch to clean power in Queensland will make a big dent in Australia's emissions and bring online enough clean, reliable renewable energy to power 23,000 homes, and create good, future-facing Queensland jobs.
    Smart businesses know that wind and solar are cheap, reliable and ready to power even our largest companies ... For a company like Wesfarmers, one of Australia's biggest and most profitable businesses, making the renewable switch is the obvious choice, and this power purchase is a significant step towards making it a reality.
    This is a big win for the community. Greenpeace supporters have been pressuring Australia's big retailers to shift to cleaner power, alongside a strong green push from shoppers. With Australian communities struggling with climate disasters, like the recent catastrophic floods in Queensland and Northern NSW, there's increasing pressure on big companies to speed up the energy transition. Ending reliance on fossil fuels like coal and switching to renewable energy is critical for tackling climate change, and these companies are showing how it can be done.

    Related

    Bunnings works towards 100% renewables - HNN Flash #22, November 2020
  • Sources: Minister for Energy, Renewables and Hydrogen and Minister for Public Works and Procurement, Wesfarmers and National Tribune
  • companies

    Supplier update

    Reece considering another US acquisition: report

    A custom rural machinery company based in Port Lincoln (SA) has been placed into administration after 25 years of operation

    Plumbing group, Reece is believed to be in the United States seeking a new business that could add to its American operations that currently generates $3.5 billion a year, according to the Australian Financial Review (AFR).

    Sources told the AFR that Reece is exploring the water distribution products market, and considering a private equity owned player that could be worth as much as AUD1 billion.

    Reece entered the US market in 2018 when it acquired plumbing showrooms business MORSCO in a $1.9 billion deal that doubled the size of the company. At the time, Reece told investors it had run out of opportunities in Australia. It was already the No.1 player in an industry where it had a large chunk of the bathroom and plumbing supplies market. So it headed to the US, where growth rates in the plumbing market were said to be twice as high as Australia's.

    Supply chain issues hampered its performance during the COVID-19 pandemic, while its most recent earnings results showed improving EBIT margins to nearly 5%. Macquarie analysts said the recent result beat expectations, thanks to the US business' performance.

    Earlier this year, Reece told shareholders it was focused on the fundamentals of its existing business, but flagged potential growth opportunities across markets and formats.

    Related

    Reece expands into US after 10 year study - HI News page 17, June 2018

    Moose Industries

    Founded in 1997, Moose Industries has been placed into voluntary administration. Initial investigations by administrators Oracle Insolvency Services has found hundreds of thousands of dollars owing to various creditors, according to Stock Journal.

    Servicing the agricultural sector across Australia, Moose Industries uses 3D design technology to custom manufacture machines and components to suit individual farming needs. These include delvers, land rollers, tree seeders, hydraulic coulters, grain doors and PTO trailers.

    Moose Industries has also worked with the aquaculture industry in Port Lincoln and previously designed tree seeders for Landcare and Greening Australia.

    The business has faced tough conditions as a manufacturer in the current economic climate.

    As part of the assessments by Oracle Insolvency Services, the administrators plan to keep Moose Industries operating for several weeks in an effort to complete as many customer orders as viably possible.

    Oracle Insolvency Services' founding partner Nick Cooper said the goal was to explore every opportunity for the business to "trade out of its difficulties". He told Stock Journal:

    If that is not possible we have a strong focus on maximising the return to creditors. These farmers are waiting for important pieces of machinery vital for the continuing operation of their business and we are in the process of contacting them.

    Oracle Insolvency Services has determined that without a significant change in circumstances, Moose Industries will likely face liquidation.

    It is now looking into opportunities for a potential sale of the business assets after receiving some initial interest.

  • Sources: Australian Financial Review and Stock Journal
  • companies

    Supplier update: Building materials

    Brickworks believes construction may be starting to weaken

    Boral's bottom line has been hit with extreme wet weather and surging energy prices

    Diversified building materials maker Brickworks is seeing potential early signs of softening construction activity in Australia, which could affect demand at its local building products division.

    The ASX-listed company said that underlying demand remained strong across Australia due to a large backlog of detached house construction work that built up amid recent strong demand, a shortage of skilled labour and COVID-related disruptions.

    Yet declines in building approvals and moderating house-price growth suggest the potential for a subsequent period of softening construction activity, the company said.

    The average price for Australian homes grew by a record 22% in 2021 but edged just 0.6% higher in February, logging its slowest monthly increase since September 2020, according to data from property analytics firm CoreLogic. Brickworks said:

    It is clear that government stimulus has brought forward a large volume of work that has the potential to leave a void once the existing pipeline is exhausted.

    Brickworks also said it expects inflationary pressures and supply-chain issues to persist for the foreseeable future. After presenting the company's first-half result, managing director Lindsay Partridge believes there could be a "fallout" in the building industry as surging prices of raw materials cut further into profits.

    Mr Partridge told The Australian the company had so far been able to pass on rising costs to customers in the local market. But he has warned that supply chain constraint and the recent floods on the east coast are slowing down construction in the housing market, resulting in building timelines stretching out as prices continue to increase. He said:

    There's a lot of work in the pipeline at the moment because builders can't get the builds done for a variety of reasons.

    Some builders were already constructing houses at a loss, due to the combination of delays and rising costs, he added.

    I think we might see a bit of fallout in the industry going forward. Many of the homes that builders would be working on, they'll be building at a loss...
    Some of them, if not on fixed price contracts, have been able to get higher prices. But eventually you'd have to be concerned that, particularly if interest rates are rising, you're going to see housing will become unaffordable.

    Recent heavy rain that inundated large parts of the country's eastern seaboard severely limited construction activity in key markets such as Sydney, hitting demand for materials early in its fiscal second half, the company said.

    Brick sales volumes were down about 50% in the first two weeks of March, while manufacturing operations were also hit by major disruptions across nearly all east-coast plants in February and March.

    Brickworks half-year result showed it is on track to record over $1 billion on annual group revenue for the first time, as revenue for the half topped $500 million. The building materials maker saw its profit surge 729% to $581 million. However not all of it was organic growth from its building materials division.

    The record profit number for the six months through January was boosted by the deemed disposal of (investment company) Washington H Soul Pattinson shares following its merger with Milton Corporation. Stripping this and other one-off times out, Brickworks' underlying profit still jumped 269% to $330 million, as its property division assets experienced a boost in valuation.

    Underlying group earnings before interest, tax and depreciation from continuing operations rose 200% to $488 million, while revenue was 24% higher at $535 million.

    For the Australian building products division, pre-tax earnings jumped 66% to $27 million over the six months, while its North American division saw a 70% plunge in pre-tax earnings as a jump in sales revenue, driven by the acquisition of Illinois Brick Co., was more than offset by rising labour costs and supply chain challenges.

    Mr Partridge cautioned the impact from the recent floods and the uncertain global near-term outlook. He said:

    Within Building Products Australia, the start of the second half has been impacted by severe we weather and flooding along the east coast...
    However underlying demand remains strong, and we are hopeful that all states will experience an elevated period of activity for the remainder of the second half.

    The company said the war in Ukraine has created additional uncertainty, affecting energy prices and availability, adding upward pressure on inflation and interest rates, and weakening consumer confidence.

    In the shorter term, Brickworks said easing pandemic restrictions and staff absenteeism should translate to strong sales for the remainder of its 2022 fiscal year, which runs through July.

    Boral

    In a recent market update, Boral said the "exceptional weather" that has affected NSW and parts of south east Queensland has significantly disrupted its operations.

    The company also flagged sharp increases in fuel and coal prices as weighing on earnings despite recent moves to lift prices to offset rising costs. In The Australian, CEO Zlatko Todorcevski said:

    The impact on sales volumes of the extreme rainfall across NSW and Queensland in late February and early March have adversely impacted Boral's earnings by (about) $23 million.

    The company now expects underlying earnings from continuing operations, excluding property, in the financial year to be between $145 million and $155 million, assuming no further weather event.

    Mr Todorcevski said the rains had prevented the company from delivering products to customers and caused significant production disruptions to operations. Boral is also facing higher fuel prices. He said:

    Unusually extreme and rapid increases in the price of coal and diesel have recently occurred.

    He said those energy costs would not be offset in January and February by price increases in Boral's products.

    The company said the "elevated fuel prices (were) also exacerbating supply chain con­straints" as previously flagged and were likely to flow into the second half.

    Related

    Boral reported a 23% slide in earnings at its first-half result, with the company moving to implement "out of cycle" price increases.

    Boral is passing on price increases to its customers - HNN Flash #82, February 2022

    Fletcher Building

    The Commerce Commission in New Zealand has received a clearance application in relation to a proposed acquisition by Fletcher Distribution Limited (FDL) to acquire the six ITM stores, and a frame and truss manufacturing plant from Tumu Merchants Limited (Tumu).

    FDL and Tumu ITM both supply building materials and related goods and services to trade and retail customers.

    FDL is a wholly owned subsidiary of Fletcher Building Limited. It owns the PlaceMakers network of hardware stores, which sell building products and related goods and services throughout New Zealand. FDL also operates frame and truss manufacturing plants across New Zealand. Relevant to the proposed acquisition, PlaceMakers has stores in the Hawke's Bay, Wairarapa and Manawatu-Whanganui regions and operates a frame and truss manufacturing plant in Taupo.

    Tumu majority owns and operates the six ITMs, and the frame truss plant, through the following subsidiaries that will be acquired by FDL: Tumu Gisborne Limited, Tumu Napier Limited, Tumu Hastings Limited, Tumu Havelock North Limited, Tumu Dannevirke Limited, Tumu Masterton Limited and Tumu Frame & Truss Limited.

    The ITM stores that are part of the proposed acquisition are situated in Gisborne, Napier, Hastings, Havelock North, Dannevirke and Masterton and the manufacturing plant is located in Hastings.

  • Sources: Wall Street Journal, The Australian and Scoop NZ
  • companies

    Supplier update: Building materials

    BGC could be back on the market: report

    Major rivals including Boral, Brickworks and Adbri have expressed interest in parts of the business

    Family-owned construction and building products group BGC could be on the market soon, according to a report in The West Australian. Its building materials and housing portfolio is owned by the Buckeridge family. BGC chairman Neil Hamilton told the newspaper:

    We're pushing forward and it's my expectation that we will be in a position to make a decision within two months.

    Mr Hamilton said subject to the board's decision, BGC would likely be offered as a combined business, an acknowledging there is keen interest in the operations.

    Potential buyers have speculated that BGC could be sold to a private equity firm and then unwound, possibly creating opportunities for the likes of Brickworks and Adbri to pick up an individual business.

    Boral could also be interested in buying some assets from BGC when comes back on the market. Boral chief executive Zlatko Todorcevski said it would "definitely" have a look at BGC's concrete, cement and quarry assets in WA as it looks to expand its proportionally small presence in the state, which accounts for just 5% of group revenue. He recently told The West Australian:

    We like the potential in WA and so we are looking at how we build that out to have a greater footprint, particularly in that Perth and Peel region. They're areas we are actively looking at. WA is on the hit-list for us, so it's getting a lot of focus.

    Improved trading conditions over the last two years as a result of the pandemic and increased infrastructure spending is expected to have boosted BGC's financial performance. The West Australian states that the last publicly available financial results show BGC turned over more than $910 million for the 2019-2020 year.

    BGC is the largest producer of bricks in WA through its ownership of Midland Brick and has significant market share in cement and quarries, in the state. Mr Hamilton said, "The housing business is an interesting one, it's a big business but it has got some challenges at the moment," he said, citing the labour and materials shortages which have prevented BGC's builders from taking full advantage of the residential construction recovery.

    BGC's business spans building materials manufacturing including bricks and cement, quarries and one of the country's biggest residential builders under brand names such as HomeStart, Aussie Living Homes and Commodore Homes.

    The West Australian revealed late last year that the BGC board was preparing to revisit a sale of the group in early 2022. The Buckeridge family initially put it on the market four years ago, only to later postpone the divestment of the core home construction and building products arms to await a recovery in the local residential market.

    Related

    BGC building materials draws interest - HNN Flash #11, December 2019 BGC offers property assets for sale - HNN Flash #14, June 2020 Speculation that BGC could be Wesfarmers' next target - HNN Flash #70, November 2021
  • Source: The West Australian
  • companies

    Supplier update: Work boots

    Steel Blue Boots new brand campaign

    Blundstone has released the #243 "crew boot" for builders, construction workers, tradies, or anyone who works in a warehouse

    Australian safety footwear manufacturer, Steel Blue, has launched a creative campaign celebrating the tradespeople wearing the brand. It also positions its boots as a "premium" product.

    Using the tagline, "A Mark of True Skill", the campaign makes a direct link between the exceptional craftsmanship that goes into every pair of Steel Blue boots and the skill and expertise of those who wear them.

    The TV commercial opens on a male and female tradesperson walking out into a public space looking determined and ready to build something. We see them working and showcasing multiple crafts with both skill and laser focus. A crowd builds, admiring and marvelling at their work. The anticipation from the audience to see what they are making grows. As they finish, we hear the voice over declare, "True skill, it's easy to see, if you know where to look". The camera pans in, but instead of us being shown the mysterious structure, we see a pair of Steel Blue boots.

    Filmed in Western Australia, the commercial features a variety of trades, and is currently airing during Network 10's Australian Survivor and Seven's SAS Australia as well as existing commitments with Fox Sports, Optus EPL and ESPN NBA. Steel Blue chief marketing officer, Jocelyn Da Silva, said:

    The launch of our new brand campaign comes after a lengthy strategic and creative review process, partnering with Wunderman Thompson. It began from a desire to stand out further from our competitors and differentiate ourselves in an increasingly crowded market. We also wanted a creative platform that would grow with us in the future.
    We've built our business on the difference great footwear makes and a belief that workers are worth the effort. Throughout this process, it became evident that the brand and those wearing our boots can have an aspirational role to play. Wearing Steel Blue boots can be a sign that you have made it.

    In addition to the TVC, the latest brand rollout will include an updated logo and design guide, short videos of skilled tradespeople in action to be used for digital, social assets, in-store POS, website, content, and direct marketing.


    Blundstone

    The launch of Blundstone's #243 boot is an option for businesses looking to kit out their crew in durable, comfortable, and safe work boots.

    Victorian construction company Evolv Homes was among the first to kit out their crew in this tyle, with an overwhelmingly positive reception from the guys, Gav and Dave, on site. They said:

    The new wheat boots fit like a glove, built for the site all day everyday.
    The new wheat boots make long days on-site on the feet a whole lot easier. Comfortable, durable and sturdy.

    Made in Blundstone's signature water-resistant wheat nubuck upper, the #243 is a 135mm high safety boot with a padded collar and tongue, and Blundstone's exclusive SPS Max comfort system, making it an ideal boot for those on their feet all day. Adrian Blandford, global work & safety range manager at Blundstone said:

    Our new #243 is a boot that every member of the crew, from the master to the apprentice, will love. This wheat coloured, water-resistant, low-cut style is packed full of all our mod-cons, with the added bonus of a lightweight TPU outsole...

    Features include:

  • Wheat nubuck upper in a new low-cut design
  • Water-resistant upper, zip sided for convenience
  • Coolmax-breathable, moisture wicking lining
  • TPU outsole resistant to 140 degrees Celsius. The outsole is also slip, oil, acid and organic fat resistant.
  • SPS Max-XRD(r) Technology in the heel and forepart strike zones for increased impact protection
  • Removable Comfort Arch footbed with XRD(r) Extreme Impact Protection
  • Electrical hazard resistant
  • Steel toe cap, tested to resist a 200-joule impact
  • Blundstone boots are backed by a 30-day comfort and six-month manufacturing guarantee.

  • Sources: B&T and Blundstone
  • companies

    TTI results FY2021

    Milwaukee/Ryobi manufacturer sees performance uplift

    Techtronic Industries saw its profit surge to USD1.1 billion, as it releases a series of highly innovative products into the market. This includes a joystick-controlled zero-turn mower.

  • The following is a summary of this article. To read the full version, please download the full version by clicking the image/link below.
  • Download hnn-brief-003

    On 3 March 2022 Techtronic Industries Group (TTI) released its results for its FY2021, which consists of the 12 months to 31 December 2021. The results show comprehensive and company-wide growth for the global manufacturer of power and hand tools, which is listed on the Hong Kong stock exchange. Sales for the reported period came in at USD13,203 million, up by 34.6% on sales for the previous corresponding period (pcp), which was FY2020. Net profit also rose steeply up 36.5% on the pcp, to come in at USD1099 million. Earnings per share (EPS) was USD0.6004, up 37.1%.

    The company's performance metrics were equally impressive. Earnings before interest and taxation (EBIT) outgrew both sales and profits, lifting 37.2% over the pcp to hit USD1192 million. Gross margin also increased by 0.54%, to reach 38.8%.

    TTI's long term investment in floorcare appliances, specifically vacuum cleaners, also showed signs of paying off, with the segment's sales up 14.8% to USD1242 million, and operating profit listed as up 18.7% to USD29.2 million.

    In terms of regions, Europe outperformed with a 41.1% lift in sales, while North America was up 33.7%, and rest of world (including Australia) rose by 31.8%.

    While the results for TTI were good, especially in an industry sector where competitors, such as Stanley Black & Decker (SBD), have seen substantially less growth, what was even more important was TTI's clarification - almost declaration - of the high growth potential it sees its strategic moves delivering over the next two to three years.

    In the past, TTI CEO Joe Galli has suggested the company's end goal was to reach USD20 billion in sales by 2025. Looking at the results for 2021, Mr Galli has found himself in the position of having to alter that suggested forecast - by cutting off one year, and estimating TTI could reach that sales target in 2024 instead.

    Part of that enthusiasm is likely the result of emerging from what has been, due to external circumstances, a difficult five years for the company. While Mr Galli, has been quietly reticent to make any public reference to US politics, having a global, Hong Kong-based company with extensive Pearl River Delta manufacturing resources during the four years of the Trump administration could not have been easy. This was, of course, then capped off with the COVID-19 pandemic.

    What has set TTI apart from manufacturing companies both within its sector and more broadly, is that it adjusted to these challenges by making strategic, structural innovations. Where others adopted more temporary measures to, for example, reduce expenditures, TTI invested heavily in areas that would generate future growth.

    In particular Mr Galli pointed to TTI's ongoing efforts to hire more engineers to assist with product development:

    We now have for 2022, 977 degreed engineers, many [electrical engineers], many software development engineers. So two years ago, when we started to talk to Home Depot about developing a relationship together, a serious relationship together, in outdoor, we had 361 engineers. Last year, we hired 442 engineers. Remember our largest competitors is boasting about firing people and workforce reduction. Initially we had another 174 that'll get us to 977. We'd hire more if we can, but we're very selective about this.
    But this is a statement. You know, our model of high gross margin, which self-funds investment in software development, engineering, in other forms of technical skills that we need, like acoustic engineering, this is where we feel like we're building an unassailable leadership position long term. A leadership position, we believe, much like what Apple's been able to do and what Tesla is doing in the EV market.

    Segment growth

    The difficulty with explaining the segment growth of TTI is that there is so much there, and so many multiplying potentials, it's not possible to fully document it within the scope of a results announcement. HNN did not get very far in our analysis before we realised we will need to produce a follow-up article examining, in particular, what is happening at Ryobi in more detail.

    To some extent this was a difficulty shared by Mr Galli himself. While HNN would confidently suggest that Mr Galli has never been accused of underselling anything in his entire life, the sheer breadth of development at TTI brought him close to doing so during this presentation. In fact, Mr Galli chose wisely, and highlighted those aspects of TTI that would most connect with the company's valued investors.

    The three dimensional matrix that describes TTI's approach consists of brand/market fit, market segment development and battery platforms. It is not going too far to say that by combining those three elements, TTI could be set to redefine a major part of the cordless tool market.

    In order to cope with this wide field of information, HNN will take its lead from Mr Galli's own approach during his presentation, and concentrate largely on individual products, then develop the underlying potential from that.

    In terms of overall segments, Mr Galli was very clear that he sees DIY as being a strong growth area, contrary to what some industry analysts have suggested:

    Another maddening bit of misinformation that's in the public domain, is we have competitors that are saying, "Now that COVID seems to be slowing down, the DIY market is flattening out. So the potential is all with the Pro [tradie]".
    This couldn't be further from the truth. The DIY market, we think, is a massive opportunity. We've established 20 verticals of DIY. Twenty. I'll show a few in a minute, that we think are untapped. We believe that the opportunity to create what we call the newly minted do it yourselfer is something that our competitors don't understand.
    There are college grads, launching their careers, you know, the people who buy houses, condos, they're buying properties now, and they need [tools], they don't have any tools to start. I've never seen the rate of newly minted households that we've seen today in terms of ownership. And you know, that's just one of many, many examples here.

    In fact, though, what is really interesting is that TTI seems to be redefining the DIY market, and in the process also redefining parts of the Pro market as well.

    Ryobi zero-turn ride-on mowers with iDrive

    Set to be released during the northern hemisphere's spring season, this is both a development of two previous generations of ride-on mowers, and a revolutionary product for its category. This zero-turn mower has two standout technologies to offer: the move from mechanical lap-bars to control the mower via a joystick system named Intelligent Drive (iDrive), and a new battery system.

    The increasing popularity of the zero-turn mower is a result of both its convenience for manoeuvring in tight spaces and the resultant time-saving, with industry estimates putting time saved at over 35%. The lap-bar system of control of zero-turn mowers was invented back in 1963 by John Reiger, though the term "zero-turn" only came into common usage in the mid-1970s. The system was further developed through a series of patents registered in 1997. Essentially, zero-turn works by differential control of the rear drive wheels. A zero width turn is achieved by running one wheel in forward drive and the other wheel in reverse drive - as you would with, say, the tracks on a bulldozer.

    There are some zero-turn mowers which are controlled by steering wheels, which control direction both by moving the front wheels, and by redistributing drive power to the rear wheels through a complex mechanical system. These mowers have some advantages when mowing steep areas.

    Ryobi's iDrive is the first significant development in this area for at least 25 years. Previous systems were all mechanically based, while iDrive is electronically based - a system shift sometimes referred to as "drive-by-wire". The position of the joystick is sensed and used to determine the differential delivery of power to the rear drive wheels. This allows one-handed, minimal force control of the mower.

    The battery system on these mowers uses a new Lithium-ion (Li-ion) 80-volt, 10 amp-hour battery. These batteries are "briefcase" style in design, and each weigh around 8.2kg.

    In his presentation Mr Galli focused on the flagship of the range, the Z54Li. That mower has a 54-inch (137cm) cut width, and comes with three of the 80-volt batteries. However, it also can be simultaneously powered by up to four of Ryobi's standard 40-volt, 12 amp-hour batteries. While it would be difficult to swap out the 80-volt batteries during use, as the mower is the charger for those batteries, the 40-volt batteries can be easily swapped out. That's a particular benefit as the "range-anxiety" scenario that most EV mowers face is completing the cut on a large paddock, and then running out of power at, of course, the furthest point from the equipment shed. It would be feasible (but not recommended) to run the mower with a single 40-volt battery (the electrical system is 80-volt but the 40-volt batteries are not run in series, instead being electronically converted to 80-volt, so you only need one), which is a big advantage over pushing the mower back to the shed instead.

    In addition to the flagship Z54Li, the Li-ion zero-turn ride-on mower range includes two other units. The Z42Li features a 42-inch (107cm) cut width, and the Z30Li has a 30-inch (76cm) cut width. The Z42Li seems to be very similar to the Z54Li, with both supporting the same number of batteries, along with independent suspension for the driver's seat.

    The Z30Li seems more of a stripped down version, with support for only two 80-volt batteries and two 40-volt batteries, but it has also been carefully tailored to its intended market. The 76cm width is designed to fit through normal yard gates, even with its bagging attachment, which hitches on behind rather than to the side.

    There is evidence of real depth of thought in developing these mowers. In his comments to analysts, Mr Galli pointed out the mowers were developed to avoid the windrowing effect:

    There's a classic problem called "windrow", and this is interesting to me. So farmers for years would have tractors. When they would harvest their wheat, their wheat yields, they would have a tractor that was designed to push the wheat to the side of the tractor and create something called windrow, which is a technical term for clumps of wheat that go alongside the tractor so that you can go back and harvest the wheat ... So the problem is the design of a farmer's tractor is not the right design for [ride-on mowers]...as you get this this windrow issue. So you're cutting the grass and all of a sudden there are clumps of grass alongside of you while you're trying to cut the grass. You are not harvesting the grass. You want the grass to go away, in the bag or into mulch. So our design, because of the blades and the other things our guys have developed here, we've eliminated windrow.

    There is a lot going on with this announcement. First of all, Ryobi has launched a brand new, high capacity battery platform, and TTI has built a factory in the US to make those batteries. Where else are those batteries likely to show up? One immediate suggestion is for generator replacement to provide household power during blackouts, as well as for outdoor activities. In fact, these batteries open up a whole new range of potential products.

    Next, who is the target market for these products? Evidently, hobby farmers, people with large outdoor areas, but how much will the product penetrate the market for professional landscapers? These might not be designed specifically for professional use, but the systems are so advanced it's likely they will find a market there.

    Along with the mowers, Mr Galli pointed to a range of other cordless OPE products from Ryobi, including a tiller, a new string trimmer, a powerful, quieter handheld leaf blower and a backpack-based blower as well.

    Ryobi "workshop" tools

    Though only referred to in passing by Mr Galli, there are three recently released tools that also bring up the question of what is Pro and what is DIY. The one that has attracted the most attention is Ryobi's release of a track saw. Track saws make use of aluminium "tracks" which are clamped to wood (such as plywood sheets) and help to guide a specialised saw to cut straight lines. The Ryobi 18-volt ONE+ Hp Brushless 6-1/2" Track Saw features a 140cm track and a true "plunge" saw with depth control and depth scale. While not quite up to the power of some Pro saws, it also sells for USD329 as a bare tool (no battery), making it highly price competitive.

    This was released along with a Ryobi cordless table saw, and a new cordless 10-inch mitre saw. All three of these products really encroach into the area of Pro tools, largely because they are relatively low-cost cordless. There is a very different usage scenario, for example, for a corded and cordless table saw.

    Ryobi "hobby" tools

    HNN has previously covered the development of these tools, which consists of tools such as rotary, Dremel-like tools, complete with a stand, a powered wood chisel, a cordless magnifying light. Mr Galli explained what he sees as the strategic significance of these tools:

    A new category for us. So we think hobby crafting - during the virus, one thing that's happened is people rediscovered hobbies, people who never would consider hobbies started to do it. And, unlike what our competitors think - that the virus ends and people are going to go back to some kind of normal day - we think that people are so excited about hobby and craft. And the feedback we're getting confirms that. So we rolled out a new leadership line. We intend to be global leaders in this space.

    Analysis

    Again, HNN believes that this announcement needs to be unpacked at more length later, and will be a developing story throughout 2022.

    To use a power tool based analogy, what we could say about Mr Galli and TTI is that he is actually the first "brushless" CEO the industry has seen. We say that to reflect that the major competitors in the industry - SBD (DeWalt), Makita, Bosch, Hikoki (Metabo), and Chervon (Flex, Worx, EGO, Stihl) are really still stuck in the analogue, "brushed" version of the industry. That is best reflected in the slightly (understandably) bewildered reference that Mr Galli makes to a performance comparison made by SBD at an analysts' conference:

    There's been some misinformation and misleading information that's been introduced into the public domain that we want to clear up a little bit here today. So our largest competitor, Stanley, actually announced last week at the Barclays conference - and I read the quote from one of their executives. Stanley said, "Our professional power tool business has had a 13% average annual CAGR [compounded annual growth rate] over five years well in excess of GNP [gross national product]".
    Why would you compare with GNP? "It's clearly outpacing the market performance, gaining significant share". So I feel like up 27% would be outpacing the market and gaining significant share. We wouldn't even look at GNP because we're developing cordless solutions to achieve sustainability and to change, transform the way people use our products.

    Frankly, GNP only makes sense for companies that see themselves as standard manufacturers of stable products - such as handsaws or bolt-cutters. For technology and innovation focused companies GNP reflects little more than current market conditions.

    What makes this particular result, and the strategies that are emerging at TTI so significant is that we are seeing for the first time a true delta emerge between TTI and other companies, to the direct benefit of the overall market. That delta is based on years of good strategic investment and planning, but all those forces could come into focus over the next two to three years.

    It is likely one reason why in this announcement Mr Galli tended to focus more directly on competitive statements such as the above is that when genuinely new innovations hit the market, there is often a kind of stuttering response to them, based on comparing what is new to the older standards. To build on Mr Galli's references to Steve Jobs at Apple, analysts and manufacturers initially tried to compare the iPhone to the Blackberry back in 2008. By the time they woke up to the real differences, Nokia was gone, Blackberry was a husk of its former self, and Microsoft's phone efforts were in a long, slow spiral down.

    There has been just a slight sense of that happening with the Z54Li mower, with some reviewers stating that "users hate change". But do they? Isn't it really the case that what is happening is not so much change, as the alteration of an entire frame of reference? Once you had used an iPhone, it was very difficult to go back to pecking at the tiny angled keyboard of a Blackberry. Once you've driven a mower with a joystick, what will it feel like switching back to lap-bars?

    More importantly, it's an easy matter to see how the joystick product can develop and evolve. A semi-auto, self-driving setting? Four-wheel drive to handle hills? There are lot of possibilities. But how would you build a better lap-bar? It's a good innovation, for its time, but because it is not digital, it is essentially a dead end.

    What is really going to be fascinating is to see how (and if) TTI rises to the next set of challenges, facing into the coming six or seven years, which will involve more forms of task automation, making use of techniques in 3D printing and CNC processes to (finally) bring a boost to productivity in construction and associated fields. All of that innovation, and really big improvements it could bring, will be digitally-based. And TTI is, currently, by far the best-place company to benefit from these developments.

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    companies

    Supplier update: Adbri

    Top executive signals price increase

    Strong construction pipelines across both commercial and residential are expected to bolster the company's bottom line in 2022

    Nick Miller, chief executive of Adbri, said a round of "out-of-cycle" prices rises for most of its products used in the construction sector is likely - probably in late March - as it looks to offset rising inflation, reports The Australian Financial Review (AFR).

    As a major supplier of cement, concrete, sand and gravel, the company makes 42% of its revenue from residential construction.

    Mr Miller said the size of the price increases is still being determined, but it will be above the official rate of inflation because of rising cost inputs in the Adbri business. He gave the AFR an example of the company having to endure a 30% increase in the price of pallets which is causing problems in the group's masonry and paving products arm amid an industry-wide shortage of pallets.

    However, Mr Miller said the company's vertically integrated model, and the fact that it is a domestic manufacturer, has stood it in good stead through supply chain pressures and cost rises. He said Adbri was now well-positioned to take advantage of a major pipeline of work across commercial and residential construction, including an increase in multi-residential builds.

    Performance

    Adbri reported a revenue increase of 8% or AUD1569.2 million compared to AUD1454.2 million in the previous year with increased sales volumes experienced for all products other than lime. The company's net profit jumped 25% to AUD116.7 million in the year ended December 31.

    Cement volumes increased by 11% for 2021 despite variable demand due to temporary government lockdowns that closed the construction sector in Victoria, New South Wales, South Australia and Northern Territory.

    Demand across the southeast Queensland construction sector saw a 115% improvement in Sunstate Cement's contribution to earnings. Independent Cement & Lime Pty's earnings rose by 13% and Mawson Group's earnings increased by 23%.

    Concrete and aggregate volumes increased by nine and 22% respectively, and overall, masonry sales revenue increased by 2% to AUD149 million as compared to the prior year.

    Adbri experienced a $16.2 million in one-off COVID-19 costs stemming from shipping delays, higher pallet costs and other disruptions. Mr Miller told The Australian:

    It was a really robust financial result which we're particularly pleased with given the challenges associated with COVID disruption throughout the year.
    Importantly it does reflect our geographical footprint across Australia - our balance of exposure to the mining sector coupled with infrastructure, housing and commercial construction.

    Adbri said it achieved a 2% reduction in emissions last year compared with 2020, and would be increasing the use of alternative fuels as it sought to hit net zero by 2050.

    Outlook

    Mr Miller remains bullish on the company's profit outlook, and he expects the residential housing construction market to remain strong, with a large amount of pent-up demand because of a backlog of projects as people struggle to find a builder for new homes and renovations. He said:

    Our sense is that it is actually going to be stronger for longer.

    Adbri had a "good line of sight" on demand across its business until at least mid-2022 because of its order book, he added.

    The company wins 47% of the overall tenders it had been pursuing in the infrastructure sector in concrete and the aggregates segment, where it supplies sand, gravel and crushed stone. Mr Miller said:

    We've been very specific and very targeted on tenders.

    Adbri utilises its national network and tries to win projects where it has plants nearby. Mr Miller said there is a pipeline of projects over the next two years across Australia, with about AUD196 billion in infrastructure projects expected to come to the market by the end of 2023.

    Related

    Adbri was known as Adelaide Brighton until a name change in 2020 - HNN Flash #13, June 2020
  • Sources: The Australian Financial Review, Weekend Australian and Cemnet.com
  • companies

    Supplier update: RWC plumbing

    Reliance Worldwide reports dip in profit

    RWC grew its product portfolio with the acquisition of EZ-FLO International, makers of EZ-FLO[tm] and Eastman[tm] products, in 2021

    Plumbing supplies group Reliance Worldwide Corp. (RWC) experienced a 3% dip in net profit in the first half of the financial year despite price rises and continuing demand for its products.

    The Melbourne-based, global company said it generated a USD63.7 million net profit, down from USD65.9 million in the same six-month period in the prior year.

    The decrease in profit came despite a 12% lift in net sales to USD521.8 million, with a 15% lift in the Americas and 11% growth in the Asia-Pacific. In The Australian, CEO Heath Sharp said:

    We continued to experience robust market conditions and demand for our products. The trend of increased spending on home remodelling activity, coupled with strong new residential construction markets, has underpinned record levels of demand.
    We were able to consolidate our volumes following a period of exceptional growth in 2021. Importantly, we were able to meet our customers' service and delivery expectations despite the increased incidence of COVID and supply chain challenges.

    Reliance, pushed up its average prices by more than seven per cent. Mr Sharp said:

    We have acted decisively to address input cost pressures now being experienced, principally through passing on higher prices, cost control and operational savings.

    EZ-FLO acquisition

    The company is still bedding the down its acquisition of US business EZ-FLO that was announced in November 2021.

    EZ-FLO makes plumbing supplies and specialty plumbing products and was established in 1980. It purchased the Eastman brand in 2000 which is known for its appliance connectors, supply lines, stop valves and gas connectors. The Eastman brand helps to position RWC as a leader in appliance connectors, including plumbed appliances, gas, hot water and dryer venting. At the time, EZ-FLO president Paul Wilson said:

    The EZ-FLO Eastman legacy is one of growth through entrepreneurship, quality, relentless customer service, and brands our customers trust.
    In joining RWC, we're aligning with a likeminded partner to further accelerate growth and expand our capabilities to benefit our customers and the trade as a whole throughout North America and Latin America.

    RWC's family of brands includes SharkBite[tm] push-to-connect plumbing solutions, HoldRite[tm] engineered plumbing and mechanical solutions, Cash Acme[tm] control valves and John Guest[tm] fittings and fluid dispense products.

    Related:

    Reliance Plumbing buys US business - HNN Flash #69, November 2021
  • Sources: The Australian, Reliance Worldwide Corporation and PR Newswire
  • companies

    Supplier update: Showerama Products

    Showerama has appointed voluntary administrators

    The company also issued an insolvency "combined notice of appointment and first meeting of creditors of company under administration"

    Insolvency firm, DW Advisory is seeking buyers for Queensland-based bathroom fixtures maker Showerama Products after moving in as administrators, reports The Courier-Mail.

    Queensland Building and Construction Commission records show Showerama was allowed to carry out work worth up to $12 million each year under a category two licence.

    The company's core business has been the manufacture and distribution of bathroom cabinets and mirrors, bathroom vanities and cultured marble tops. It also manufactured and installed shower screens, sliding wardrobe doors, shelving and splashbacks.

    DW Advisory administrator Cameron Gray has advertised the business for sale with expressions of interest open until March 9.

    Founded in 1969, the company has annual turnover of $11 million with manufacturing and distribution facilities around the country. A company representative told the City Beat column in The Courier-Mail that Showerama was still operating and "it was business as usual."

    A virtual meeting of creditors has been scheduled for 28 February 2022 with an agenda or purpose to do the following:

  • whether to appoint a committee of inspection; and
  • if so, who are to be the committee's members.
  • At the meeting, creditors may also, by resolution:

  • remove the administrator(s) from office; and
  • appoint someone else as administrator(s) of the company.
  • More information can be found at: Public Notice for Showerama Products - ASIC

  • Sources: Courier-Mail and Australian Securities and Investment Commission
  • companies

    Supplier update: BlueScope Steel

    ResponsibleSteel standard certification

    BSI has been approved by ResponsibleSteel to carry out audits against the ResponsibleSteel standard

    BlueScope Steel Works Australia is the first organisation to be certified by business improvement and standards company, BSI against the ResponsibleSteel[tm] standard.

    ResponsibleSteel[tm] is the industry's first global multi-stakeholder standard and certification programme. Certification to the standard demonstrates compliance based on 12 principles. From raw materials to end users, it addresses social and environmental impacts, ranging from climate change and greenhouse gas emissions, occupational health and safety and water management to human and labour rights.

    By achieving certification to the standard businesses in the construction, steel, infrastructure, and sustainability industries can demonstrate their responsible steel credentials to customers and stakeholders. Firms can gain market benefits such as improved responsible sourcing and reduction in greenhouse gas emissions; and demonstrate their contribution towards the Sustainable Development Goals (SDGs), such as Goal 12 Responsible Production and Consumption and Goal 13 Climate Action. John Nowlan, chief executive, Australian Steel Products, said:

    ResponsibleSteel site certification provides our customers with the confidence that BlueScope's Port Kembla Steelworks meets the highest ESG performance standards, assessed against the 12 principles of the standard.

    Chris Meehan, chief operating officer - Australia at BSI said:

    Driving change in the way we address our economic, social and environmental challenges is high on everyone's agenda, from achieving net zero to pollution reduction, climate change and the responsible sourcing and production of steel. We are delighted to be an approved auditor for the ResponsibleSteel standard and certification programme and look forward to working with clients and organisations to help them achieve sustainability and resilience.
    I would like to congratulate BlueScope on their achievement in being the first site in Australia to attain ResponsibleSteel certification from BSI. BlueScope is leading the way in accelerating the transition towards more sustainable steel.

    Related

    BlueScope Steel building hub in South Australia - HNN Flash #72, November 2021
    companies

    Supplier update: Boral

    Boral is passing on price increases to its customers

    The company said the increases will offset rising energy costs, supply chain constraints and labour shortages

    Building products supplier, Boral has introduced "out of cycle" national price increases. In a statement, Boral CEO Zlatko Todorcevski said:

    To recover the impact of higher energy costs and other cost increases on our business, we've implemented out-of-cycle national price increases. These, together with further transformation benefits and less expected disruption to construction activity, should deliver stronger earnings in the 2H [June] FY2022.

    In The Australian Financial Review (AFR), Mr Todorcevski said the price rises would be staggered across Boral's building products range.

    It will be a different increase in different markets.

    Mr Todorcevski said it was difficult forcing higher costs on its customers, but the move reflected a broader inflationary environment. He told The Australian:

    The feedback is it's never easy to have a price increase conversation with customers but they're noticing it quite strongly in a lot of other building materials. Frankly, the increases we're putting through are not as large as what we've seen in timber or what we understand is happening with steel. They're more moderate and focus on offsetting what we're seeing in energy.

    Rising energy costs - the price of coal had jumped - are making it more expensive for Boral to operate plants such as its Berrima cement works in the Southern Highlands region of NSW. Boral's diesel fuel bill had also soared as oil prices jumped.

    It estimated a net impact of $6 million from extra energy costs in the December half, with hedging contracts helping to limit the increase to some extent. Mr Todorcevski said:

    Inflation is predominantly short and sharp around the energy space.

    The hit from higher energy costs and construction site shutdowns in Sydney and Melbourne in the first few months of the December half weighed down on profits by $33 million. Long periods of wet weather on the eastern seaboard also negatively affected the Australian building operations. Boral's first-half earnings before interest and tax slid by 23% to $78 million.

    Boral said its revenue fell 12% to $2.38 billion in the six months ended December 31 compared to the year-earlier period. However, its net profit surged sixfold to $1.02 billion, because of a pre-tax one-off gain of $931 million from asset sales in North America.

    The company noted supply chain constraints after COVID-19 lockdowns for items such as heavy vehicles, along with labour shortages that affected the first half, are expected to continue to June 30. Mr Todorcevski said:

    The supply chain has extended so it's taking a lot longer to get the vehicles in the country, which means we've got to pre-order to a large degree. The other one is just availability of labour. We have particularly noticed that in drivers and quarry managers. So we're not only looking at accelerating some of our recruitment and retention progress, but how we reduce the impact on our fleet.

    Mr Todorcevski expects the detached housing market to soften later in calendar 2022 as construction under the federal government's HomeBuilder scheme starts to roll off. But the high-rise apartment market is showing signs of life with approval numbers rising. It also has a pipeline of big infrastructure projects. The company said in a statement:

    New major projects remain slow to move into execution, despite the sizeable infrastructure pipeline. We have successfully secured a number of major project opportunities in the half, which will predominantly benefit from 2023, and are tendering on numerous other opportunities.

    Boral is 70% owned by billionaire Kerry Stokes and his family through Seven Group Holdings after a takeover bid last year.

  • Sources: The Australian, Australian Financial Review and Sydney Morning Herald
  • companies

    Supplier update

    Solvol soap bar is discontinued after 105 years

    South Australian based Gerard Lighting Group - renamed as GLG - has reached an agreement to sell its Pierlite business to Signify (Philips Lighting)

    Classic Australian soap bar, Solvol will no longer be produced or sold in Australia. It was used by tradies, mechanics, farmers and households for more than a century, since 1915. In 2000, the product was bought by US-based WD-40 Company.

    WD-40 Company general manager Nick Roberts said production of the bar had long been carried out by specialist soap manufacturers in Sydney, but due to its "highly unique" formula, they had found the production of Solvol to be very harsh on their equipment and could no longer make it.

    Due to production circumstances outside of our control, the much-loved Solvol soap bar will no longer be manufactured and sold in Australia.
    After 105 wonderful years, we're hugely disappointed and saddened by this news and we know many of our customers are too.

    Although the Solvol bar has been discontinued, the liquid version remains, and will continue to be produced and sold.

    GLG - Pierlite

    Private equity owned Gerard Lighting Group (GLG) is selling its Pierlite business to Netherlands-headquartered Signify, formerly known as Philips Lighting. The value of the transaction is believed to be worth about $100 million, reports The Australian.

    The sale comes after GLG sold two of its other divisions, Sylvania and Austube, to Schreder, a Belgian family-owned company that has 2,600 employees and operates in 35 countries around the world. Sylvania delivers lighting solutions to infrastructure projects including roadways, tunnels and sporting facilities and Austube is a custom light manufacturer.

    Pierlite designs, manufactures and distributes indoor architectural, industrial and commercial lighting systems. It is the largest remaining part of the GLG business and generates approximately $150 million in revenue a year and is understood to be profitable, according to The Australian Financial Review

    Gerard Lighting chairman Ben Sebel said Signify's scale and worldwide footprint would rapidly accelerate Pierlite's growth and enable the business to better service the Australia and New Zealand market.

    The sale process is expected to be completed in the first half of the year, subject to customary closing conditions.

    Background

    Gerard Lighting was founded by Alfred Gerard in 1920s when it was then known as electrical accessories business Clipsal.

    As part of its history, GLG became Australia's biggest lighting company. The company was listed on the ASX for a short stint before CPE Capital (then known as CHAMP) bought it in 2012, via a $186 million takeover. But it struggled in a competitive market with shrinking margins, in particular due to the rise of low-cost Chinese manufacturers.

    GLG built significant debt in the years between 2012 and 2017, before it became majority owned by Investec and Bain Capital Credit in June 2017. Part of the terms of the acquisition was to invest capital into the business to reduce its debt.

    The two private equity firms embarked on a comprehensive turnaround program, and steered the company through several large transformations, focused on enhancing internal operations, the technology infrastructure, innovation, and shifting the distribution model to a customer-led approach.

    The transformation has been successful because Investec and Bain Capital are understood to have recouped their investment. GLG has also prospered from the booming housing market.

  • Sources: Southern Highland News, Queensland Country Life, The Australian, Consultancy.com.au and Australian Financial Review
  • companies

    Supplier update: Hyne Timber

    Hyne Timber has a new majority owner

    UK-based sawmilling group James Jones & Sons has acquired just under 60% of the shares in Mayflower Enterprises Pty Ltd, the Australian holding company of Hyne Timber and XLam

    When announcing the deal, Hyne Timber said the new partnership brings together a combined 320 years of family-owned sawmilling heritage to pursue growth opportunities.

    James Jones & Sons Ltd (JJSL) is the UK's largest, family-owned timber processor with annual sales in excess of GBP330 million. Founded by James Jones in 1838, its history includes supplying timber for Captain Scott's Antarctic exploration vessel Discovery. Tom Bruce-Jones is the fifth-generation family chairman and David Leslie is its joint managing director. Mr Bruce-Jones told Timber Trades Journal Online:

    We first commenced discussions with the Hyne family members in late 2020, and it quickly became apparent that the two companies were very similar culturally and shared complementary values regarding service and quality and looking after their employees.

    Jon Kleinschmidt, CEO of Hyne Group, said there was no overlap in the operations of the two companies because of the locations, with the Hyne Group focused on Australasia and JJSL on Europe. He told Timber Trades Journal Online:

    We can now concentrate on identifying and developing growth opportunities in our region and beyond, through organic growth and acquisition, and through a cross fertilisation of ideas.

    Mr Kleinschmidt also confirmed there were no plans for any changes to the Hyne Timber and XLam brands. He told the Fraser Coast Chronicle:

    It is business as usual for the Hyne Group operations with no changes to the company's team members, customers, suppliers and our ongoing commitment to supporting the communities in which we operate.

    Fifth generation Hyne family member James Hyne said it was another significant milestone in Hyne Timber's 140 years as a business. He told the Fraser Coast Chronicle:

    With this exciting partnership, we are bringing together two multi-generational family-owned and operated companies with a shared commitment to world-class product quality, service, safety, innovation and sustainability...
    The JJSL Chair, Tom Bruce-Jones, is also now the Chair of our Hyne Group board, who we welcome with his extensive experience in our industry at a global level.

    Mr Bruce-Jones said the partnership provided a strong platform for further consolidation and growth in Australia and New Zealand.

    We choose our partners very carefully and in the Hyne Group we have found a culture of integrity and excellence that mirrors our own.
    In an increasingly corporate and private equity dominated industry, we believe that family culture and values not only provide differentiation but are a key competitive advantage. Together, we believe there are enormous opportunities to use our combined know-how, experience and financial strength to grow the business by delivering even better products and services.

    The transaction has secured Foreign Investment Review Board approval and all other regulatory approvals.

    Hyne Timber, dates back to 1882, and operates two modern sawmills in Tuan (QLD) and Tumbarumba (NSW) producing around 800,000m3 of sawn timber. The mills source approximately 1.6 million tonnes of pine logs from plantations located in Queensland, NSW and Victoria.

    XLam is a cross-laminated timber (CLT) manufacturer acquired by Hyne Timber in New Zealand, in 2015. The company commissioned Australia's first ever CLT manufacturing plant in 2018.

    Expansion and growth

    The deal with JJSL follows a period of major investment by Hyne Timber. This includes a $14.5 million expansion of the Hyne Timber factory in October 2021 through the construction of a continuous drying kiln (CDK). At the time of its official ribbon cutting event, Mr Kleinschmidt said

    The CDK not only delivers efficiency for the Tuan Mill in addressing the timber drying bottleneck, but it will also improve the consistency of drying quality and overall quality of our timber in addition to delivering energy efficiency.

    This project was funded through the Queensland Government's Jobs and Regional Growth Fund.

    Just before the launch of the CDK, Hyne Timber took on three-year lease with an option on a 12,608sqm office/warehouse in the Osprey Estate on the Port of Brisbane. At the time, Hyne Timber's general manager of customers Peter Hyne said the warehouse was a significant upgrade to their distribution network. He told the Courier-Mail:

    It offers us increased capacity and is designed to offer our customers even greater service as we increase production at our Tuan Mill to meet the future demands of the market. The new distribution centre is our largest nationally and services 90% of all deliveries to the southeast Queensland region.

    Hyne Timber national logistics manager Adrian Garnett also said the move saw the company close its Kunda Park facility on the Sunshine Coast (QLD).

    Hyne wanted a bigger footprint in the northern region and consolidate across their network. Hyne Timber were drawn to the highly functional layout, drive-around capability and direct access to heavy vehicle road routes, providing a streamlined production and distribution process that greatly improved their operational efficiencies.
    Underpinned by a booming construction sector, the expansion and relocation exercise was driven by proximity to critical infrastructure, tenant specific requirements and improved central locality to their southeast Queensland customers.

    In May 2021, the company in conjunction with Hutchinson Builders, was awarded the contract for the construction of the new $12.1 million fire and emergency station at Maryborough (QLD).

    Hyne Timber also opened a $23 million dollar timber laminate factory at Maryborough (QLD).in August 2020.

  • Sources: Timber Trades Journal Online, The Press and Journal (UK) and The Courier-Mail
  • companies

    Supplier update: Knauf Group

    USG Boral rebrands as Knauf

    Following its acquisition by the Knauf Group, USG Boral has become a wholly owned subsidiary of the group

    USG Boral Building Products Pty Limited is now known as Knauf Gypsum Pty Ltd, or simply "Knauf" in Australia.

    Boral had a plasterboard joint venture across Asia, Australia and New Zealand with USG, but Knauf bought out USG in a deal in 2019 worth USD7 billion.

    In October 2020, Boral announced the AUD1.43 billion sale of its 50% stake in the USG Boral plasterboard business to Knauf. Soon after, Knauf agreed to sell its Australian plasterboard plants to Belgium-based Etex after they were placed on the market through Bank of America. (Etex is a family-owned global manufacturer of lightweight building products that operates in 42 countries.)

    The plasterboard factories that were sold were those Knauf had before it purchased the USG assets in Australia and Asia, and located at Altona in Melbourne, Matraville in Sydney and Bundaberg in Queensland. It also has a metal profile production facility in Beenleigh, in Brisbane.

    All plants and assets belonging to Knauf Plasterboard, including the Bundaberg facility, have been purchased by the Etex Group. The name of the Australian business has been officially changed to Etex Australia.

    Knauf Gypsum

    With transition to the new brand name underway, Knauf managing director Tony Charnock reassures existing customers, suppliers and partners with regards to changes to the name. He said:

    Now we are part of the Knauf Group, one of the world's leading innovators and manufacturers of modern building materials, we look forward to continuing the established relationships we have with our- customers.
    The synergies between the two brands ensure the transition to the new name will be seamless and our customers will receive the same high-quality experience they have come to expect, with access to locally manufactured products that meet Australian standards.
    We have manufacturing facilities in Sydney, Melbourne and Brisbane, and will continue to supply plasterboard, compounds, cornice and associated products and systems to the Australian building industry through a national distribution network of 40 company-owned trade and retail outlets.
    I wish to reassure all of our existing and future customers that, as part of the Knauf Group, we remain one of the best suppliers for the Australian construction industry.

    Related: Knauf sells its Australian plasterboard plants.

    Knauf sells Australian plasterboard factories - HNN Flash #27, December 2020
    companies

    Supplier update: Haymes Paint

    Paint On Australia campaign

    The latest marketing campaign stars comedian Nazeem Hussain and launched on Connected TV, broadcaster Video on Demand and YouTube

    Melbourne-based advertising agency Balance has enrolled comedian Nazeem Hussain to be the face of Haymes Paint's "Paint On Australia" campaign. It makes use of Nazeem's trademark personality to encourage Aussies to celebrate and embrace what it means to be uniquely Australian. Haymes Paint director Matt Haymes said:

    We're over the moon. Here at Haymes Paint we've got our own way of doing things - and we don't do inauthentic. Nazeem totally fits our culture, as well as the mindset of our customers, so we're very excited.

    Agency strategist and copywriter Rankin McKay said the campaign is all about "channeling the modern and dynamic version of Australian identity. That reflects reality yet rests on the strengths of over 85 years of Haymes Paint history. This is your version of Australia and Haymes Paint is one of the enablers of that. That's what 'Paint on Australia' really means".

    Haymes Paint head of marketing Andrew Senyard said:

    The process started with a critical brief, working closely with Balance on a fundamental review of our brand and strategy. We were looking for the strategic 'glue' that would keep our values and personality playing clearly and consistently across our multitude of customer segments and product categories. This campaign is the result of that journey.

    Starting on radio, digital and social media, the campaign will also translate directly into retail promotions for Haymes Paint Shops, PaintRight stores and other Haymes Paint stockists around the country. Balance Creative Partner, David Gullotti, said:

    Haymes has seen its market share grow strongly in a market dominated by internationally owned competitors. We wanted to break away from the paint ad cliches and put our message across in true Haymes Paint style.
    Serious about paint, but not taking ourselves too seriously - and yet there's a real story there too. After all, how many people know that Haymes Paint has been awarded Canstar Blue's award for Most Satisfied Customers in the paint category the last four years in a row, or are the only major paint brand that's actually Aussie made and owned?

    Haymes is the last big locally owned paint manufacturer since Japanese giant Nippon Paint bought DuluxGroup for $3.8 billion in mid-2019.

    You can view a video of the campaign here:

    Paint On Australia campaign from Haymes Paint
  • Sources: Ad News and B&T
  • companies

    Supplier update: Zenexus

    Zenexus moving into new premises

    In August 2021, the company committed to a new $25m distribution centre west of Brisbane (QLD) in a growing business park

    Storage products supplier Zenexus has taken on a seven-year lease at a property in the 41.3-hectare Rubix Connect industrial estate owned by Frasers Property Industrial, according to a report in the Australian Financial Review. It will occupy a 15,000sqm combined head office and state distribution centre located in the Melbourne suburb of Dandenong South.

    The facility comprises 13,724sqm in warehousing space and 1280sqm of office space. The facility, expected to be operational in October, will source certified carbon-neutral electricity and will target a Five-Star Green Star Design & As Built v1.3 rating by the Green Building Council of Australia. Commercial real estate agency TMX Global secured the deal for Zenexus.

    The wide range of Zenexus products can be found in the aisles of Bunnings stores.

    The company also has a five-year lease on a 9870sqm purpose-built facility that was being built on a 4.2ha site within Goodman Group's Redbank Motorway Estate in Queensland, according to The Courier-Mail.

    Back in August 2021, Zenexus Group general manager Joe Guthrie said the distribution centre will drive greater efficiencies to the company's operations and will support its continued growth and strategic business plan. He told The Courier-Mail:

    Our sector has seen an increased demand in home improvements from the impacts of lockdown and with this new facility we will be able to meet this demand by creating maximum efficiencies in our supply chain network to enable smoother and faster distribution.

    TMX's Matthew Frazer-Ryan who struck the deal, said the Redbank Motorway Estate continues to attract large scale national and multinational occupiers due to its location near transport routes.

    Related: In 2020, power tools and gardening equipment supplier Ozito became the first tenant in the Rubix Connect estate.

    Ozito leases new warehouse - HNN eNews #139, September 2020
  • Sources: Australian Financial Review and The Courier-Mail
  • companies

    Supplier update: DuluxGroup

    Cromology completes sale to DuluxGroup

    The sale follows the announcement in October last year that Cromology's former owners Wendel Group had entered into an exclusive agreement with DuluxGroup to the sale

    Backed by the resources, scale and financial strength of its owner Nippon Paint, DuluxGroup plans to invest in Cromology's future growth and sees excellent opportunities to expand. DuluxGroup International chief operating officer Richard Stuckes said it has acquired Cromology with a firm eye on growth.

    We're about acquiring market leading businesses who already have a strong track record, retaining them and investing in them. Cromology is world class. It has a highly capable management team who have deep European market knowledge and experience, leading premium brands that are household names, excellent manufacturing facilities, broad distribution across key geographies, strong R&D credentials and - above all - plenty of more opportunities for growth.
    For us, this is about acquiring a sizeable European platform as the base for ongoing growth. We see opportunities in adjacent geographic and related product markets, including through DuluxGroup's broader product range and technology as well as its retail DIY channel expertise.

    As part of DuluxgGroup, Cromology will be empowered to grow autonomously while benefiting from access to the Nippon Paint Group's global scale, technologies, capabilities and extensive capital resources. Specifically:

  • Cromology will become DuluxGroup's Western European hub for decorative paints and coatings and ETICs (External Thermal Insulation Composite Systems) as well as DuluxGroup''s platform for its expansion to adjacent markets
  • Cromology's brands will remain and product offerings further developed
  • Cromology will become a valuable part of Nippon Paint Group's 3,000 strong global R&D community enabling it to benefit from shared technical expertise and insights while retaining R&D autonomy
  • Cromology's manufacturing and supply chain footprint will be maintained and expanded over time
  • Cromology CEO Loic Derrien said:

    ...Being part of the fourth largest paint company in the world will bring tremendous opportunities to all of us. We will leverage DuluxGroup-Nippon Paint Group's technologies and know-how to the benefit of our customers while offering new opportunity for growth to our suppliers. Cromology associates will be exposed to new professional and personal development opportunities.

    DuluxGroup has a growing presence in Europe and is responsible for Nippon Paint Group's ambitious growth plans in decorative paints in Europe and other western markets. (It has no association or connection with the owner of the DULUX brand in other parts of the world including Europe.)

    About Cromology

    Cromology distributes its products in eight countries including Belgium, France, Italy, Luxembourg, Morocco, Portugal, Spain and Switzerland. It has more than 3,000 employees, five research laboratories, nine production sites and seven logistics platforms.

    Throughout its 270 years of history, Cromology has developed a reputation for its expertise in decorative paints. Cromology's commercial brands have a major capacity for innovation (20% of its revenue was generated with products released in the last three years). It aims to expand its presence in the decorative painting industry in Europe, while doing the most to minimise its environmental footprint.

    Cromology was formerly owned by listed European investment firm, Wendel.

    Related: Nippon Paint plans to acquire French construction and decorative paint maker Cromology through its Australian subsidiary, DuluxGroup.

    Nippon Paint to buy France-based Cromology - HNN Flash #69, October 2021
  • Sources: Cromology and Dow Jones & Company
  • companies

    Supplier update: James Hardie

    Chief executive Jack Truong has been abruptly sacked

    The board of the ASX-listed building materials giant fired the CEO over his "intimidating, threatening" and disrespectful behaviour towards colleagues.

    The abrupt dismissal of James Hardie CEO Jack Truong seems to be shift in the way public companies sack their CEOs over their behaviour.

    In a statement to the ASX, the company announced the immediate exit of Mr Truong, after an "extensive and material" breach of its code of conduct.

    Executive chairman Michael Hammes said terminating Mr Truong was a difficult decision but came after extensive due diligence from a third-party consultant and staff threatened a mass exit.

    James Hardie said the board had received reports from employees in recent months about Mr Truong's work-related interactions. The company hired a third party to help investigate the claims and said it offered coaching to Mr Truong, but he did not alter his behaviour and refused to accept the need to change.

    When executives threatened to leave, the board decided to remove him. Mr Hammes said:

    It was clear that sincere change did not occur. Jack's behaviour remained inconsistent with the James Hardie code of conduct. It was not discriminatory, but Jack's behaviour was cited by the management survey as intimidating, threatening and not respectful of the individual.

    Mr Hammes said James Hardie interviewed the 30 to 50 people who daily worked with Mr Truong, and about 80% of those people reported inappropriate behaviour.

    He is a very tough, very demanding kind of executive. That is fine, That is the culture of Hardie.
    But he started, over the last few months, treating people over the last few months with a lack of respect in intimidation, fear, humiliation, publicly and privately. And it wasn't a one meeting problem. Why? I can't answer that question but it was there, multiple times.
    This was not a chemistry problem between Jack and his senior team. It was something much more fundamental. Our code of conduct is to treat people with respect to all cases, period full stop, and that wasn't happening.

    On an investor call, Mr Hammes ruled out resetting James Hardie's culture, known for being "aggressive" and "upfront".

    That culture won't change and shouldn't change. It needs to be managed with understanding and respect for people and that's what we'll take.

    Mr Truong's departure comes as he oversaw a strategic transformation during his three years at the helm, which Mr Hammes praised while revealing a profit upgrade. Mr Hammes said:

    The transformation that has occurred over the past three years is truly remarkable. The company now has a clear, correct and very well-defined strategy that is aligned with what the board and management identified as necessary in 2017. This strategy is now deeply embedded throughout the organisation, from the line employee at our plants all the way to the executive leadership team.

    However Mr Hammes said the work environment under Mr Truong had become "too hostile".

    James Hardie has appointed non-executive director Harold Wiens, who persuaded staff who intended to resign to stay at the company, as the interim chief executive. Mr Hammes said a permanent chief executive might be appointed within six months.

    In response, Mr Truong has hired lawyers and is considering potential legal action against his former employer.

    A public relations firm hired by Mr Truong confirmed to the Australian Financial Review (AFR) that he was considering his "next steps" and had retained legal counsel..

    When the buildings supplies manufacturer fired Mr Truong, it scrapped his on-foot incentives, including unvested long-term bonuses. The executive walked out the door with just his statutory entitlements.

    James Hardie appointed Mr Truong in May 2017 as president of international operations before promoting him to CEO in 2019 when he was tasked with transforming the global building materials company, according to the AFR.

    Under Mr Truong's leadership, James Hardie recorded a rise in annual revenue of USD400 million, with shares climbing more than 363% since 2019.

    Before joining James Hardie, Mr Truong was the chief executive of home appliance maker Electrolux North America and an executive at industrial and consumer products company 3M.

    The company is now expecting full year net profit to be between USD605 and USD625 million, up from previous guidance of USD580 million to USD600 million. The increase would be driven by higher earnings across strong residential and market growth in the US.

    For James Hardie, there seems to be a question over the strategy unveiled by Mr Truong in mid-2021 which commits to a 3M-inherited lean manufacturing model and direct marketing push to homeowners looking to renovate.

    The company has profited from soaring demand for home renovations. The trend had been exacerbated by the COVID-19 pandemic, which required people to work from home and largely curtailed travel. Discretionary spending on renovations climbed despite shortages in building materials and difficulty in booking tradespeople.

    The firm benefited from television and social media campaigns that targeted homeowners directly, letting them know what options were available for an overhaul of an exterior and an upgrade inside.

    Related: James Hardie "pull" strategy delivers for Q2 results.

    Renovators boost James Hardie's latest results - HNN Flash #71, November 2021

    Workplace culture

    Management experts say companies and employees are losing tolerance for workplace bullies. In The Age, Natalie James, a former Fair Work Ombudsman who now leads Deloitte's Workplace Integrity Team, said the "MeToo" movement highlighting sexual harassment and misconduct in recent years had sparked a broader rethink of what was acceptable in the workplace.

    The heightened public debate about sexual misconduct has also extended into other conduct, particularly bullying because often the two come together.

    (Ms James was speaking in general terms and not specifically on any company or executive.)

    Ms James said many employees previously tolerated intimidating and humiliating behaviour from their managers because it was "just the way things are around here".

    Now people, particularly younger people, are saying: that's not OK by me and I have choices, and I'm not going to work in a place where this is how things are done. There has been that moment where people have reflected on conduct that was perhaps normalised or considered banal in the past and now it is being recognised as harmful.

    Social media also gave employees a direct way to speak out about mistreatment, Ms James said, with potentially dire consequences for a firm's reputation.

    It's around, first and foremost, reputation and it's also around talent retention in this age when people want to see purpose and value in their work.

    Mark Schmitt, who runs the workplace mental health consultancy Thrive In Work, said bullying remained "rife" in corporate Australia, but agreed it was becoming less accepted as companies realised workers would underperform and eventually leave if they failed to provide "psychological safety". He told The Age:

    Our expectations of how we are treated are changing, and it's obviously changing for the better.

    Mr Schmitt said it would take workplace safety regulators to start prosecuting more of these cases for employers to treat the issue with the seriousness it deserved. He said:

    When we think about workplace health and safety, we need to think about mental health and safety [too]. It will take one case from ... the regulator, and then boards will become very understanding of the risk they face.

    Tony Boyd writes in the AFR's Chanticleer column:

    Australian boards have a long tradition of obfuscation when it comes to telling the market about the departure of CEOs who get the boot for overly aggressive and disrespectful behaviour.
    The most common approach has been to say the CEO left for "personal reasons" and leave it at that. This leaves the market confused and allows all sorts of wild theories to fill the vacuum.
    Often, boards have bowed down to the demands of a disgraced CEO and kept secret the details of what really happened. This allows generous payouts or certainly payouts that are better than the terms allowed under a "termination for cause".
    Accountability is a critical aspect of corporate governance and should not be the subject of negotiation.
  • Sources: Daily Telegraph, Australian Financial Review, The Age and The Australian
  • companies

    Supplier update: timber

    OneFortyOne invests in Jubilee sawmill

    In late 2021, Timberlink announced it is spending $63 million on its Bell Bay operations

    OneFortyOne has committed to invest over $11 million in its Jubilee Highway sawmill over the next two years. Paul Hartung, general manager of Jubilee sawmill, said:

    OneFortyOne has invested close to $40 million since purchasing the mill in 2018, on state-of-the-art technology projects such as sorter bins, a Lucidyne scanning system, reducing boiler emissions and upgrading to continuous drying kilns.
    This most recent commitment will extend to an equipment and technology upgrade for Drymill A, replacing and modernising equipment as it reaches end of life.

    Mr Hartung said the new equipment will be manufactured in New South Wales under a licensing agreement, a first for Australia.

    OneFortyOne is committed to ensuring we remain one of the most progressive and efficient mills in Australasia. By investing in new technology, we are continuing towards our objective of valuing every strand of wood fibre that we process.

    The company estimates that through this upgrade Jubilee sawmill will reduce its emissions by approximately 268 tonnes of CO2 equivalent annually. These savings will be generated by reduced electricity consumption.

    The project is scheduled to begin in 2022 and will take two years to complete.

    Jubilee Highway is a large sawmill situated in Mount Gambier (SA) and processes softwood sawlogs into structural framing timber products used in residential and commercial construction of wall frames and roof trusses. The sawmill also produces some non-structural timber products including packaging and decking. Its products are sold to wholesalers, frame and truss manufacturers and retailers.

    Timberlink

    Beginning in 2022, Timberlink will implement a two-stage upgrade to its timber manufacturing facility in Bell Bay (TAS). It will include an expansion of the site's existing sawmill, and other infrastructure improvements as well as:

  • Offline log debarking and sorting
  • Residue and energy optimisation
  • Additional continuous kiln for drying of timber
  • Planer infeed systems
  • The project is expected to increase the timber manufactured at the site by more than 50%, providing material for an estimated 7000 new houses.

    According to Timberlink chief executive Ian Tyson, the upgrades were brought forward two years to support additional supply into the Australian market.

    The Advocate reports the sawmill upgrades have come about as timber supplies around the nation remain tight. The shortage has been further constrained by a housing boom around Australia, with many builders unable to source sufficient structural timber to complete houses. With that in mind, Mr Tyson said the increase in structural timber from the company's two Australia-based sawmills would help - but not solve - the timber deficit.

    When asked how Timberlink would feed the significant increase in output at site, a company spokesperson said agreements were in place with its pine plantations as part of a staged expansion.

    To date around $120 million has been invested into the Bell Bay sawmill, which Timberlink first purchased back in 2013 from the receivers of the then-defunct Gunns Limited. This latest round of upgrades is scheduled to be completed in 2025. In a media statement, Mr Tyson said:

    At the completion of this project, the combined output of Timberlink's Bell Bay Tasmania and Tarpeena South Australia manufacturing facilities will position Timberlink to increase supply of manufacture of structural timber for use in the construction of homes in Australia.

    The improvements will enhance the volume of renewable plantation pine logs that can be processed as well as the yield per log, resulting in a future workplace with improved precision, safety, and job security thanks to high-tech machinery.

    The anticipated investment comes on top of extensive modifications undertaken two years ago and the announcement earlier this year of the establishment of Tasmania's first Wood Plastic Composites manufacturing facility at the Bell Bay location.

    The plans for Bell Bay mirror the major investment the company made into its Tarpeena sawmill in South Australia, as part of a push by the company into new structural timber materials.

    Related: Timberlink began work on upgrading its Tarpeena (SA) sawmill in 2019.

    Timberlink sawmill upgrade includes a new electrical substation - HNN Flash #02, July 2019
  • Sources: Lesprom Network, OneFortyOne, Australian Manufacturing and The Advocate
  • companies

    Supplier update: Bisley Workwear

    US company Protective Industrial Products buys Bisley Workwear

    This company is expanding is footprint in Australia after acquiring Perth-based Paramount Safety Products in mid 2021

    New York-headquartered personal protective equipment company Protective Industrial Products (PIP) has acquired Australia's Bisley Workwear. This follows its acquisition of Paramount Safety Products which was announced in July this year.

    PIP said it had signed an agreement to acquire DJG Corporation, Bisley's parent company. The deal is expected to close towards the end of December and financial terms were not disclosed. Joe Milot, PIP's president and CEO, said in a statement:

    The Bisley brand will add new portfolios of innovative workwear and safety garments to the head-to-toe PIP product offering in different regions, including North America. This addition reinforces our key objective of serving customers globally by continually providing them with more opportunities for growth.

    Bisley Workwear is another example of PIP's acquisition strategy that is built upon strengthening its portfolio of products so that global distributor partners choose PIP first for all of their safety needs. PIP has over 20 locations around the world and is a portfolio company of Odyssey Investment Partners.

    Bisley has been shaping the Australian workwear clothing industry for nearly 60 years, and driven by "old fashioned ideals like quality, exceptional service and value for money", according to its website. The company has been recognised for its innovative workwear designs and its ethical and sustainable sourcing affiliations. The company's in-house design team has worked with leading fabric and material specialists to produce stylish and comfortable workwear, safetywear and technical protective wear. This includes garments for men and women that are used in oil and gas, construction, manufacturing, logistics, agriculture and maintenance and repair operations. David Gazal, CEO of Bisley Workwear, said in a statement:

    We are thrilled to join the PIP Global family. Joe and I have a very similar business path and values while sharing the same mission: Using our scale to engage with key distributors while giving them more of a reason to buy all brands under the PIP Global umbrella.

    About PIP

    In late 2020, private equity investment firm Odyssey Investment Partners purchased PIP from Audax Private Equity for an undisclosed amount. Founded in 1984, PIP offers a broad suite of recognisable PPE products and brands across numerous industries, including hand & arm protection, protective clothing, head protection, eye & hearing protection, and other safety protection. Headquartered in Latham, New York, PIP supplies its products through distributors, retailers, and e-commerce platforms. At the time of the acquisition, Henry Bendit, a principal at Odyssey, said:

    We look forward to pursuing a multi-pronged growth strategy for PIP, including both organic initiatives and strategic acquisitions. Given its scale and proven success with integrating prior acquisitions, PIP is uniquely positioned to capitalise on the fragmented global PPE market to grow within its current core offerings, while expanding further into adjacent PPE categories, both in the US and internationally.

    PIP supplies innovative PPE to wholesalers and distributors in the industrial, construction and mining industries. Its brands include G-Tek, Bouton, Ironcat, Assurance, Kut-Gard, CleanTeam, QRP, Ambi-Dex, Dynamic, Maximum Safety, Novax, JSP, and Boss. The company's West Chester division offers safety products to retail customers under the Safety Works, Boss, Brahma, Mud, West County Gardener and Hearos brands, as well as licensed brands.

    Related: Paramount Safety Products is now part of Protective Industrial Products.

    Paramount Safety Products has a new owner - HNN Flash #53, July 2021

    Related: Bisley Workwear is designed for lady tradies.

    Bisley Workwear asks women want they want in workwear - HNN Flash #12, February 2020
  • Sources: EHS Daily Advisor, Industrial Distribution and Industrial Supply Magazine
  • companies

    Supplier update

    Stanley Black & Decker selling its security unit to Sweden's Securitas AB

    Stanley Security will give the Swedish company a bigger global footprint as it aims to double sales from higher margin security solutions and electronic security by 2023

    The sale of Stanley Black & Decker's (SBD) security business to Securitas includes its Commercial Electronic and Health Care Security business lines, which have projected 2021 revenues of about USD1.7 billion. Automatic-door services provider Stanley Access Technologies is not part of the sale.

    SBD said net proceeds from the sale are expected to partly fund approximately USD4 billion in share repurchases. SBD's CEO James Loree said in a statement:

    The sale of Security is consistent with our commitment to generating substantial shareholder value and allows us to sharpen our strategic focus on growing our core businesses while also returning capital to investors through a significant share buyback. This transaction is a result of our active approach to portfolio management, and the attractive valuation we received reflects the investments we made in transforming our Security business over the last several years.

    SBD officials expect to close the sale in the first half of 2022, but timing is "contingent upon receiving regulatory approvals and other customary closing conditions."

    Based in Indianapolis in the US, Stanley Security has a 30-year history of protecting its clients world-wide through tech-enabled security services, ranging from alarm monitoring to systems integration, as well as a specialised healthcare offering. Today, Stanley Security is highly recognised as an electronic security provider with approximately 7800 global employees.

    Securitas, which is headquartered in Stockholm, represents one of the world's largest security services companies. Employing approximately 355,000 people, it delivers guards, electronic security, fire-and-safety and risk management services to more than 150,000 customers.

  • Sources: New Haven Register and PR Newswire
  • companies

    Hipages grows platform to New Zealand

    It acquired Builderscrack in a deal worth $11.8m

    The company also acquired a 25% stake in property management platform Bricks + Agent as part of plans to expand its offering

    Online tradie marketplace hipages has acquired New Zealand web-based trades platform Builderscrack. The 100% acquisition of MyQuote Limited, trading as Builderscrack, is for $11.8 million in (80%) cash and equity (20%).

    It gives the ASX-listed hipages group access to a new $26 billion total addressable market, in addition to Builderscrack's 4000 active tradies and 200,000 registered homeowners.

    Founded in 2007 by Jeremy Wyn-Harris, Mark Dickson and Keith Robert, Builderscrack is a website that connects tradies across New Zealand with consumers, allowing homeowners to post jobs, find trades professionals and leave reviews. It grew to post more than 95,000 jobs on its platform in the past 12 months, generating more than $67 million in revenue.

    Since it was established, it has facilitated more than $237 million of value from over 480,000 jobs posted.

    Hipages group chief executive and co-founder, Roby Sharon-Zipser told SmartCompany the deal was "a big milestone" for both platforms and an opportunity to share pricing models and growth strategies. He said:

    Builderscrack has done an outstanding job over the last 15 years and we see a huge opportunity to take what we've learned and what they've learned and bring it together to make an even better business.

    Hipages' take rate, which is the proportion of value the platform earns from the total value of jobs facilitated on the platform, is 2.1%. In comparison, Builderscrack's take rate is much higher at 3.9%.

    Mr Sharon-Zipser said Builderscrack uses more sophisticated pricing techniques allowing it to capture the intent of its users and generate a higher rate. He said:

    They know whether a user is more inclined to proceed with the job or not and then ultimately, they work on a commission model, so that's why their take rates are higher.

    Builderscrack's co-founder and general manager Jeremy Wyn-Harris will continue managing the platform in New Zealand with its 14-strong team. Mr Sharon-Zipser told New Zealand's The Daily Post:

    Jeremy and the Builderscrack team have built a great business around a strong technology platform and an incredibly loyal tradie base.
    We will supercharge their growth by leveraging the strategic and operational experience we gained from scaling our business in Australia, as well as helping them to grow their brand to capture the huge market opportunity in New Zealand.

    Mr Sharon-Zipser said the two businesses will remain separate and he has no plans to change the name Builderscrack because "it's just so appropriate to the New Zealand market".

    The acquisition follows its recent investment in a property management technology platform Bricks + Agent and the field service software solution Tradiecore.

    Tradiecore allows tradies to save customers' details, generate quotes and invoices, send them directly through the app and add individual notes.

    Bricks + Agent uses a cloud-based platform that allows tenants to post maintenance requests online, which can then be allocated to tradies, who can also be paid through the system. It has 360,000 users, a pipeline of almost 500,000 properties under management and 21,000 tradies on its platform, reports the Australian Financial Review (AFR).

    Hipages bought its quarter stake in Bricks + Agent for $6.25 million, an investment that would give hipages exposure to Bricks + Agent's user and tradie base.

    At the time, Mr Sharon-Zipser said Bricks + Agent was a great cultural match for Hipages and fitted perfectly with its strategy to expand into adjacent markets. He told the AFR:

    The $21 billion property management market is a huge opportunity for us.
  • Sources: Smartcompany, Australian Financial Review and The Daily Post
  • Related: Hipages has been growing revenue from tradie subscriptions.

    Hipages' subscriptions deliver growth - HNN Flash #43, April 2020

    Related: In the UK, Kingfisher purchased a majority stake in an online home services platform.

    Kingfisher acquires online DIY marketplace - HNN Flash #25, November 2020
    companies

    Supplier update

    Boral sells US fly ash business to focus on Australia

    Industrial workwear and construction/infrastructure supplier, Jaybro may be put up for sale by CPE Capital

    Building materials company Boral has sold its fly ash unit to Eco Material Technologies for USD755 million (AUD1 billion), as it focuses on its Australian construction materials business.

    Chief executive Zlatko Todorcevski said the group's ongoing divestment program has now "unlocked substantial value", according to a report in The Australian. He said:

    Together with the sale of the North American Building Products business and our stake in Meridian Brick ... we will have divested the North American businesses for more than $4 billion. This is a significant milestone that supports our strategy to refocus on our construction materials business in Australia.

    Boral has owned and operated fly ash businesses in the US for 40 years. The company has faced pressure to sell its assets in the US after Seven Group grew its stake to more than 69% in the company.

    Fly ash relies on coal-fired power stations for production, a factor that makes it unappealing for environmentally friendly equity investors, and Boral has considered sourcing other greener alternative products that make cement.

    The net proceeds from the sale will add to surplus capital, with the board to determine the most appropriate way to return surplus capital to shareholders at the relevant time, the company said.

    The deal is expected to be completed in the 2022 financial year, allowing for the regulatory approval process. It is also subject to customary conditions precedent and completion adjustments.

    Jaybro

    As a supplier of products used in the construction and maintenance of infrastructure projects in Australia and New Zealand, Jaybro also sells hardware and tools, civil supplies, printed mesh and safety signs, road and traffic signs, fencing and barriers, emergency response equipment, personal protective equipment and other products.

    It has been reported in Data Room in The Australian that buyout fund CPE Capital is putting it up for sale after acquiring it in 2017. At the time, Jaybro was generating about $20 million of annual earnings before interest tax, depreciation and the price paid was reported at the time to be about $170 million. The business was started by Stephen Joyce in 1996.

    CPE Capital is led by John Haddock and has invested $3.8 billion since 1987. Other companies in its portfolio include the Rocla concrete solutions business that was recently purchased from Fletcher Building, online cycling retailer Pushys, the Banksmeadow Recycling facility in Sydney, automotive business The Dutton Group and engineering solutions provider Marand.

  • Source: The Australian
  • companies

    Supplier update: TTI

    TTI in court for alleged resale price maintenance over power tools: ACCC

    Hong Kong based Techtronic Industries Group (TTI) is best known for its power tool sub-brands, Milwaukee Tool and Ryobi

    The Australian Competition and Consumer Commission (ACCC) has instituted Federal Court proceedings against Techtronic Industries Australia Pty Limited (TTI), alleging it engaged in resale price maintenance in relation to the wholesale supply of Milwaukee brand power tools, hand tools and accessories, in breach of the Competition and Consumer Act.

    Resale price maintenance (also known as RPM) occurs when a supplier engages in conduct which prevents, or attempts to prevent, resellers of their goods or services from advertising or selling the goods or services below a specified minimum price.

    The ACCC alleges that, between 2015 and 2021, TTI engaged in RPM conduct, including by entering into 96 agreements with independent dealers (retailers) and buying groups which restricted the sale of Milwaukee products below a specified minimum price.

    The ACCC also alleges that TTI enforced these agreements by issuing reminders, warnings and breach notices to dealers that advertised or sold Milwaukee products below the specified minimum price.

    In addition, it is alleged that TTI withheld supply from two of the dealers to enforce the restrictions on price discounting below the specified minimum price. In a statement, ACCC Deputy Chair Mick Keogh said:

    Requiring retailers to charge at or above a minimum price for products in the way that we allege Techtronic has done, stifles retailers' ability to compete on price, which ultimately hurts consumers. This is particularly so in industries where retailers would otherwise strongly compete on price, such as by offering price match guarantees to consumers.
    We alleged that Techtronic's actions meant Milwaukee power tool dealers could not sell the products at a discount below the specified minimum price, depriving consumers of the chance to benefit from lower prices driven by competition.

    The ACCC is seeking penalties, declarations, injunctions, a compliance program order, an order for corrective advertising and costs.

    According to the ACCC, RPM occurs where a supplier:

  • makes it known they will not supply unless a reseller agrees to advertise or sell at a price not less than a specified minimum price;
  • induces or attempts to induce the reseller not to advertise or sell below a specified minimum price;
  • enters into agreements or offers to enter into agreements for the supply of goods on terms that the reseller does not to advertise or sell below a specified minimum price;
  • withholds supply of goods or services because a reseller, or a purchaser from the reseller, has not agreed not to advertise or sell below a specified minimum price; or has advertised or sold (or is likely to sell) at a price below a specified minimum price;
  • uses, in relation to goods or services supplied or that may be supplied, a statement as to price which is likely to be understood by the purchaser as a minimum resale price.
  • RPM is strictly prohibited by the Competition and Consumer Act and is not subject to a substantially lessening competition test. More information about resale price maintenance can be found at the following link:

    Imposing minimum resale prices - ACCC

    Companies can lodge a notification of RPM conduct or apply for authorisation of proposed RPM conduct, which will be permitted if the likely public benefit from the resale price maintenance conduct outweighs the likely detriment from the conduct.

    In June 2020, the ACCC rejected a proposal by Stanley Black & Decker to set a minimum advertised price for DeWalt brand power tools and accessories, following a resale price maintenance notification it had lodged with the ACCC.

    DeWalt seeks to control dealer ads - HNN Flash #12, February 2021

    In September 2021, Nero Bathrooms admitted to likely resale price maintenance by withholding supply of its tapware products from a small independent retailer who declined to raise its advertised prices.

    Bathroomware brand admits to likely resale price maintenance - HNN Flash #62, September 2021
    companies

    Supplier update: Big River Group

    Acquisition of United Building Products

    With this acquisition, Big River Group continues to expand its national network into major population centres around Australia

    In early October, Big River Industries (Big River) announced that it had entered into an agreement to acquire the trading business and assets of United Building Products (United) located in Albion Park (NSW). The acquisition is now complete.

    With annual revenue exceeding $20 million, United complements the company's existing site at Kiama (NSW), which services the South Coast and Southern Highlands areas. United has a strong presence in the Shellharbour and greater Wollongong markets in NSW. In its statement to the ASX, Big River said:

    The purchase consideration of $9 million at completion, comprises $7 million of cash and $2 million in BRI (Big River) shares (to be issued at the 10-day weighted average trading price prior to the completion date). There is the potential for the vendors to receive an additional earn out payment of up to $1.5 million, payable over a two-year period, if certain profit growth targets are achieved. The acquisition is expected to be earnings per share accretive from year one and will be funded out of the Company's available debt facilities.

    Big River CEO Jim Bindon, said in a statement:

    Whilst the founders, Nick and Steve Grozdanov no longer have operational roles in the business, I am pleased they will become meaningful shareholders in BRI and maintain their connection to the business they developed for over 30 years...
    There is a quality team already running United Building Products who will remain and continue to manage the business with Mark Hogan as Branch Manager. I look forward to their contribution right across the Big River business in the future.

    About United Building Products

    United's original building supply business opened at Fairy Meadow (NSW) in 1989 with two staff and $20,000 in stock. It grew to become a major supplier of doors, timber mouldings, locks and bathroom products to both trade and DIY customers.

    In 2004, it opened in its current location in Albion Park (NSW). During its first year of operation, the store won the NSW Hardware Industry Store of the Year award and the Illawarra Business Chamber's 2004 Retail Business of the Year award.

    In 2005, it opened a second outlet in Corrimal (NSW) - that is no longer part of the business. United is a joint venture of Mitre 10 and United Building Products.

    United complements Big River's building products sites, supplying mainly into the residential and commercial construction markets and offering an enhanced service and product range for existing Big River clients.

    About Big River Group

    Big River has been operating for over 110 years, manufacturing and distributing timber and steel formwork products, timber flooring, building products, structural plywood and related timber products. It also distributes a broad range of other building products, including MaxiWall and MaxiFloor, primarily to the commercial, residential and infrastructure construction markets.

    It owns and manages 23 sales and distribution outlets in Sydney, Gold Coast, Brisbane (2), Sunshine Coast, Townsville, Illawarra, Melbourne, Canberra, Geelong, Adelaide, Perth and New Zealand. The company also owns and operates manufacturing facilities in Grafton, Geelong, Perth and Auckland, New Zealand.

    Earlier this year, Big River expanded its plywood and architectural panels offering with the acquisition of Timberwood Panels.

    Timberwood is a manufacturer and distributor of a range of panel products including veneers, veneered and coloured boards, plywood, particleboard and MDF. It has operated in the market for 13 years and has three sites in Victoria and the ACT.

    It also agreed to acquire Revolution Wood Panels in Brendale (QLD) for $8 million in August which is now finalised. Under the terms, $6 million will be paid in cash and $1 million will be paid in BRI common stock. Also, $1 million will be paid in additional earnout payments, payable over two years subject to certain profitability targets being met.

    Revolution distributes a diverse range of plywood and specialised timber panel products and has been established for over 15 years.

    During its full year results presentation, Big River reported revenue of $281 million, up 13% on the previous year. Mr Bindon said of its acquisition strategy:

    Growing scale, obviously, a critical part of our overall strategy. We've already spoken about both Timberwood and Revolution. So we continue to expand our network there. And it is particularly pleasing that all of those businesses are in the highest margin category and the most specialised where there's distinct product differentiation, which is not the case in all market segments we're involved with...

    In response to a question from Sean Kiriwan, vice-president - Australian Equities, Ma Moelis Australia Securities about future acquisitions, Mr Bindon said:

    ...[T]he last couple of acquisitions have been in this panel space, but that's not say that there's not still really good growth opportunity in building products and formwork material. We think there is, and we think that diversity is what's held us in such a good state in the last few years.
    So we want to continue to make sure that we've got strong position in all three of those product categories. And hence, we're looking at acquisitions in all of those categories, Sean, and then also in all geographies, all four of our operating regions. So I think that's an important part of the acquisition strategy.
    ...[W]e're certainly continuing to look at more acquisitions, and we still see ... in terms of industry consolidation, aging business owners, they have a succession plan that absolutely holds true. And it might be only being enhanced with lots of people thinking about their future in this COVID environment, particularly aging business owners. So I think there are great opportunities to continue with that ... I think has worked well for us so far, and certainly, we can extend it much further than what we've already achieved.
  • Sources: Australian Stock Exchange, Illawarra Mercury and Fair Disclosure Wire
  • companies

    Supplier update

    Timberline Bathroom Products expansion

    There is speculation that Coates (Hire) may be put up for sale by owner, Seven Group

    Bathroom vanity manufacturer, Timberline Bathroom Products based in Armidale (NSW) has received $1.44 million in state government support to expand its operations. The company was established in 2006.

    Northern Tablelands MP Adam Marshall announced the grant from the government's Regional Job Creation Fund. Mr Marshall said the grant would aid Scott Group Management, owner of Timberline Bathroom Products (and Uniplan Group) to build a new facility and buy the equipment needed to fulfil more national retail supply contracts. He said:

    ...Timberline's reputation for quality is growing at a rapid rate with national contracts. Scott Group will use these funds to build a bigger manufacturing facility with additional offices to accommodate its growth.
    It will relocate machinery and make an initial investment in automation equipment and control systems for a future new manufacturing line, to help it meet increased demand for bathroom vanities.
    The output which will result from this upgrade, through automated machinery and robotic handling systems, is eye watering as production ramps-up from 180 to about 350 bathroom vanity units per day.

    The Scott Group forecasts it will increase its manufacturing capacity by 75% over three years, helping it secure new supply agreements with retailers. Mr Marshall said:

    Timberline Bathroom Products is a real success story and Armidale should look forward to the benefits its success delivers the local economy, both in the form of employment opportunities and investment in the local community.

    Deputy Premier and Minister for Regional NSW Paul Toole said the $130 million Regional Job Creation Fund aimed to create more than 6,500 new direct jobs in regional NSW by providing incentives to expand and keep operations in regional areas.

    Innovation is the backbone of our economy and helping companies like the Scott Group expand its operations stimulates local and regional economies, boosts livelihoods and increases local employment opportunities.
    Setting businesses up for success helps the local community grow and new jobs mean more people earning a wage and spending their pay packets in local stores, cafes, and restaurants and on local goods and services.

    The Regional Job Creation Fund supports eligible businesses with grants to purchase new equipment, expand facilities, acquire technology, create new production lines or establish businesses in regional NSW. Round one of the Regional Job Creation Fund has now closed. A second round will open in early 2022.

    Coates

    The West Australian-based hire company owned by Seven Group has been performing well on the back of the mining and construction boom. Now there are suggestions that Seven may be contemplating whether to capitalise on its success by divesting it, according to Data Room in The Australian.

    Seven bought full control of Coates back in 2017, paying private equity firm The Carlyle Group AUD517 million for the 53% it did not own. The Australian reports:

    While there is no current confirmation it is on the block, what analysts believe is telling is a move by Coates to tap the US private placement market for USD900 million in recent weeks.
    Coates has about AUD1.5 billion worth of loans outstanding to Seven, which offers debt at a cheaper rate than it normally would pay as a standalone business.
    Analysts believe the bond market raising indicates something is afoot with Coates - which has been valued at AUD2.2 billion - with Seven probably creating a more palatable debt structure for a buyer or ahead of a move to vend it into Boral.
    With an AUD8billion market value and about AUD4.5 billion of net debt, Seven is one of the most leveraged industrial companies on the ASX 100. Paying off loans remains a priority...

    In June 2021, Coates Hire relaunched as Coates. The company said the re-brand represents its evolution into a leading end-to-end solutions and specialist services provider. Coates operates across a range of markets including engineering, mining and resources, infrastructure, manufacturing, construction, agriculture, and major events.

    Related: In a research note, Macquarie identified that Seven's Coates subsidiary could have opportunity through Bunnings' rental shops.

    Seven's Coates subsidiary may have a AUD150 million opportunity - HNN Flash #54, July 2021
  • Sources: Adam Marshall MP and The Australian
  • companies

    Supplier update

    BlueScope Steel building hub in South Australia

    The company has also acquired a US-based scrap steel recycler and has appointed a chief executive of climate change

    A new $30 million manufacturing and logistics facility for BlueScope Steel is being constructed at the Adelaide Airport Business District, reports the Adelaide Advertiser. The site includes 17,000sqm of warehouse and office space on a 50,000sqm site. It will become the central hub for the BlueScope Building Components division in South Australia, which includes the Lysaght and Fielders brands.

    Roofing, cladding and flooring products, as well as patios, sheds and other steel products will be manufactured at the site. It will replace BlueScope's existing factories at other South Australian locations in Keswick Terminal and Gillman. The company has signed a 12-year lease and will relocate about 200 staff to the new facility when it's completed at the end of next year. BlueScope Building Components state manager Brad Bairstow told the Adelaide Advertiser:

    We believe the central location gives us a competitive edge because most of our competitors are located out in the northern corridor. The Adelaide Airport precinct suited us really well, and we were able to maintain that central location with really good access to transport routes and a good size site. It's 30% bigger than our current sites combined.
    A lot of businesses have spent time consolidating their manufacturing, and servicing other states out of hub states like Victoria and NSW, but this is a show of our commitment to SA. We're committed to the state, and we're committed to manufacturing in Australia.

    Mr Bairstow said the company would also invest about $20 million in state-of-the-art manufacturing technology and equipment.

    It's about doing things differently - safer, more accurate, more efficient - to be able to service the market better and to keep our people safe.

    Located on James Melrose Road, south of the airport terminal, the manufacturing centre will be built by Sagle Constructions, while Leyton Funds will retain long-term ownership of the property.

    BlueScope's investment comes amid a boom in the construction sector, with demand for building materials surging in response to the HomeBuilder stimulus and strong commercial activity. Mr Bairstow believes the heightened level of demand was likely to continue well into next year. He said:

    Residential, commercial and home improvement, which is sheds and patios, are all performing really well all over the state. I think there's a good 12 to 18 months, or two years, left in the pipeline of current work. The supply chain is a bit restricted, which is dragging it out. It's probably good for the industry otherwise you're left in that boom-bust environment.

    Sustainability

    In a move towards sustainability, Bluescope has an executive in charge of climate change whose job is to develop and maintain the company's climate strategy, including driving innovation and delivery of emissions reduction across the group, setting and monitoring progress towards emissions targets and engaging with staff and external stakeholders. In addition to her climate change role, Gretta Stephens is also chief executive of the steel maker's New Zealand business.

    In late 2020, BlueScope managing director and CEO Mark Vassella tapped Ms Stephens to take on the additional role of executive in charge of climate change. Auckland-based Ms Stephens said "yes" immediately. She told the Australian Financial Review (AFR):

    [The role] combines a number of things I am passionate about, that will combine to ensure the long-term sustainability of industry via technical development.

    Bluescope released its first climate action report in September. The company has set itself a zero net emissions target by 2050, although the goal is "highly dependent" on external factors, such as "the availability of affordable and reliable renewable energy and hydrogen, availability of quality raw materials and appropriate public policy settings."

    The company will allocate up to $150 million over the next five years to help it meet its 2030 target of reducing emissions intensity in the production of both steel and non-steel products.

    Steel making accounts for about 7-8% of the world's carbon emissions, according to the Australian Financial Review. It is an industry that is under pressure to move faster to try to reduce carbon emissions.

    BlueScope's biggest challenge - like its competitors - is that the majority of its steel is made in blast furnaces, where the chemical reductant is coal. Ms Stephens expects the technologies required to reduce the requirement for coal will be available sometime between 2035 and 2045. She concedes it's a big range.

    BlueScope has signed up with mining behemoth Rio Tinto to explore the direct reduction of iron ore using hydrogen produced from renewable electricity. The direct reduced iron from this process would be melted in an electrical furnace, powered with renewable electricity, to produce iron suitable for steel making.

    Australia's biggest steelmaker also announced it would pay USD240 million for MetalX, a scrap steel recycling business in the United States. MetalX is already one of the big suppliers of feedstock for the company's most profitable business, the North Star steel mill.

    Mr Vassella said the acquisition of MetalX, which runs two scrap steel facilities in Indiana and Ohio, would ensure security of supply and add to the competitiveness of the North Star facility, currently in the final stages of a AUD1 billion expansion.

    The acquisition will also go some way to improving BlueScope's "green" credentials.

  • Sources: The Adelaide Advertiser and Australian Financial Review
  • companies

    Supplier update

    Renovators boost James Hardie's latest results

    The company said marketing its range of products directly to consumers has paid off, contributing to record second-quarter net sales

    James Hardie chief executive Jack Truong said renovators are increasingly the main driver of the company's strong financial performance, according to a report in the Australian Financial Review (AFR). He expects that as economies open up, renovators will continue to invest in upgrades of their biggest asset after a shift in mindset during the pandemic which has led them to view their homes as their "castle".

    Dr Truong said by marketing directly to households through advertising on homemaker television shows and magazines, James Hardie was becoming more of a consumer brand. He said:

    That creates a pull-through. Our approach is more about the pull and creating demand with the homeowners.

    The Australian reports that this elevated demand had shown itself in key metrics for the group. In the six months ended September 30. it recorded 109% growth in its key brand metrics, an 81% lift in company website traffic and 61% increase in leads within its target markets.

    Dr Truong said new exterior panelling in different colours was proving popular and achieving the right look was the main priority for households, with price a secondary consideration.

    That is what the household makes their decisions on.

    For the six months to September 30, net sales rose 28% to USD1.75 billion and net profit more than doubled to USD271.5 million. Net profit rose 182% to USD271.5 million in the six months, and global earnings before interest and tax (EBIT) lifted by 34% to USD386.2 million.

    Dr Truong said a strong performance in the September quarter marked the fourth three-month period in a row where all its main regions of North America, Europe and the Asia-Pacific produced double-digit sales and EBIT growth. He said:

    We continue to make excellent progress on our stated global strategy. Our strong execution on this strategy is reflected in second-quarter global price/mix growth of 9%.
    Our growth momentum in accelerating high-value products penetration, which underpins price/mix, is the result of enabling our customers to make more money by selling more James Hardie products and marketing directly to the homeowners to create demand of our high-value products through our customers.

    James Hardie plans to invest in new facilities including a greenfield manufacturing site in Victoria to help its Australian operations meet demand. The company closed a small plant on the Sunshine Coast in Queensland last year. Overseas, there is the expansion of an existing plant in Alabama (USA) and a fibre gypsum plant in Spain.

    Expecting continued market growth, particularly in the US, James Hardie raised its guidance for the 2022 financial year. It has lifted its profit forecasts for the full year to between USD580 million to USD600 million, from a previous band of USD550 million to USD590 million.

    Fine Texture Cladding

    James Hardie recently launched its Hardie[tm] Fine Texture Cladding, a fibre cement wall panel embedded with a fine texture to create a contemporary aesthetic for houses.

    The pre-textured fibre cement panels connect with shiplap joints, bringing subtle shadow lines, geometric precision and a gentle vertical rhythm to the façade. The ready-to-paint, pre-sealed surface has a textured finish of fine render which diffuses light and gives a matte finish.

    For minimal joints and maximum coverage, Hardie Fine Texture Cladding comes in 120mm wide sheets in common wall heights of up to 3600mm. It is the ideal cladding choice for non-combustible construction with the added performance benefits of fibre cement such as long-term durability and low maintenance.

    Neil Hipwell, builder and founding director of FutureFlip, said Hardie Fine Texture Cladding speeds up the building process with the render texture embedded in the fibre cement panel, minimising the number of trades required on site at any one time. (Mr Hipwell is a James Hardie ambassador.)

    For builders, lightweight building material such as Hardie Fine Texture Cladding is an ideal choice for ground floor renovations and additions as well as optimising a home's usable floor space. For homeowners, it is durable, low maintenance and built for tough Australian conditions.

    Hardie Fine Texture Cladding also offers architects and designers creative freedom to explore the possibilities of lightweight construction and considered joint detailing. Panels are supported by a range of corner and junction accessories, also produced by James Hardie. These combined systems streamline the installation process and deliver a consistent, quality finish whilst upholding the integrity of the design.

    Related: James Hardie ambassador provides tips for social media.

    Social media and builders: Customer insights for hardware retailers - HNN Flash #28, January 2021
  • Sources: Australian Financial Review, The Australian and James Hardie
  • companies

    Supplier update

    BGC could be Wesfarmers' next target: report

    DuluxGroup confirms it has entered into a binding agreement to acquire Slovenian paint company, JUB

    There has been market speculation that Wesfarmers was looking to acquire West Australian building materials company, BGC (Buckeridge Group of Companies).

    Now there is discussion that Wesfarmers may be finalising a deal to purchase BGC, according to Data Room in The Australian. It believes it may be an ideal time to sell with a strong residential construction market in Western Australia as a result of the mining boom.

    BGC could make sense for Wesfarmers because it may create opportunities to attract more trade customers to its Bunnings hardware stores.

    Parts of the BGC business have already been offloaded, including its contracting arm, which was purchased by NRW for $310 million including debt.

    The business is now involved with producing construction and building materials and offering residential and commercial construction services, industrial maintenance and fabrication services, and property ownership and management. It owns quarries and a cement grinding plant.

    It is thought that the group's divisions are all interrelated and are largely reliant on each other for profitability.

    Related: BGC may be up for sale

    BGC Group potential sale - HI News, December 2018

    Related: BGC's building materials division could be of interest for an acquirer after its contracting business has been sold off

    BGC building materials draws interest - HNN #11, December 2019

    Related: BGC offers property assets for sale

    BGC offers property assets for sale - HNN Flash #14, June 2020

    DuluxGroup-Jub

    DuluxGroup's deal to buy Slovenia-based paint company JUB has been valued at EUR194.5 million. The company plans to turn JUB into a hub for Central and Eastern Europe, maintaining its existing brands, and make it part of Nippon Paint's R&D community. (DuluxGroup has been owned by Nippon Paint since 2019.) JUB said in a statement:

    Under the auspices of DuluxGroup, JUB will enjoy autonomy and independent growth, while at the same time leveraging the advantages of access to a global market, technologies, capabilities and abundant capital resources of Nippon Paint Group.

    Patrick Houlihan, chairman and CEO of DuluxGroup, said that with the support of the world's fourth largest paint producer, JUB would continue to build its leading position in the regional market, strengthening its innovation, portfolio and geographical reach. It could also play an important role in the group's expansion to Western Europe.

    In a separate release for investors, Nippon Paint said JUB commanded market leading positions in several paint segments in Slovenia, Croatia, Serbia and Bosnia-Herzegovina, and the acquisition will allow it to better use its distribution network.

    Nippon Paint said "the European paint market is the world's second-largest following the China market and has prospects for continuing steady growth".

    JUB is a manufacturer of decorative paints, ETICS (External Thermal Insulation Composite System) and other paint-related products. It is one of the market leaders in interior paints in Slovenia, Croatia, and Bosnia and Herzegovina and in façade paints in Slovenia, Serbia, and Bosnia-Herzegovina.

    It posted group sales of EUR111 million in 2020 and a profit of EUR4 million.

    Related: Nippon Paint plans to acquire French paint maker Cromology.

    Supplier update: Nippon Paint to buy France-based Cromology - HNN Flash #69, October 2021
  • Sources: The Australian and Independent Balkan News Agency
  • companies

    Supplier update: timber

    Finlayson's Timber and Hardware joins QLD business Hall of Fame

    A newly formed industry body, the Timber Framing Collective puts timber in focus in a new brand campaign

    Founded in 1875 by a Scottish immigrant as one of Queensland's first sawmills,

    Finlayson's Timber & Hardware has been inducted into the Queensland Business Leaders Hall of Fame.

    It has been recognised for its outstanding contributions to Queensland's timber and building industries and internationally recognised product innovation.

    The company has a long, storied history in the state. After emigrating from Scotland in 1870, Charles Patterson and two brothers established the family's first sawmill in the Indooroopilly area in 1875.

    Patterson Brothers, as it was then named, specialised in milling local timbers for structural and decorative use in the building of archetypal ''Queenslander'' houses, contributing greatly to the rapid expansion of Brisbane's suburbs.

    By 1884, and under the sole control of Charles Patterson, the business relocated to Toowong where it was to be a landmark for nearly a century. The first of many fires and other natural disasters to confront the business, all but obliterated the Toowong mill in 1888.

    With remarkable resilience that was to be demonstrated time and again over the next 130 years, most recently following 2011 floods, many damaged mills were immediately rebuilt and improved.

    Mr Patterson through his business leadership, extensive community service including several terms as Mayor of Toowong, and his support for the Presbyterian Church, infused the business with a character that remains central to Finlayson's today.

    In 1961, Malcolm Finlayson, a grandson of Charles Patterson and long-term employee of the business became a director before becoming managing director in 1979.

    Together with his experienced fellow shareholders who had acquired the business, Mr Finlayson was able to convert a moderately successful family business into an industry leader. The business invested heavily in technology to underpin its manufacturing operations while leveraging its reputation and loyal customer base.

    The Finlayson family took full control of the business in 1998 with Malcolm as managing director and sons Skene and Michael as co-directors. With its focus on milling and moulding sustainably sourced Queensland hoop pine, the company has developed a significant reputation for its colonial woodwork, mouldings, and joinery.

    Now, in its fourth generation as a Queensland business, Finlayson's employs more than 300 staff in Queensland and New South Wales and is a significant timber exporter.

    Co-director Michael Finlayson recently told The Courier-Mail it was an honour to receive the award on behalf of the family but he was saddened his late father - who died in 2018 - could not witness it.

    Mr Finlayson also said Mitre 10 purchased the hardware operations of the business in 2020. But the family continues to own the two timber mills and manufacturing facilities.

    Now in its 12th year, the Queensland Business Leaders Hall of Fame was established by the QUT Business School, State Library of Queensland and Queensland Library Foundation to recognise outstanding contributions made by business leaders and businesses to the state's economic and social development.

    Inductees are assessed and selected by the Queensland Business Leaders Hall of Fame Governing Committee, who look at criteria including leadership, financial contributions, and pioneering achievements.

    Timber Framing Collective

    A number of timber companies have come together to form the Timber Framing Collective to market and promote the benefits of timber framing in Australia. The collective also has a full brand strategy, according to creative communications agency Engine Group.

    The collective receives financial support from Australian sawmills, timber importers, industry associations and peak bodies, building products and treatment suppliers. They currently include Australian Forest Products Association (AFPA), AKD, Boral Timber, Hyne Timber, OneFortyOne, Timberlink Australia, Wespine, Australian Timber Importers Federation (ATIF), Forest & Wood Products Australia (FWPA), Frame & Truss Manufacturers Association (FTMA), Koppers, Lonza, MiTek, Multinail, Pryda, Responsible Wood, Stora Enso, TABMA, Timber Queensland and Vida Wood. Timber Framing Collective spokesperson Marita Pierce-Indugula said:

    While competitor building materials may have deeper pockets than ours in terms of advertising media spend, what we have is a supply chain that is unrivalled in size.
    Within that supply chain are people who are passionate about timber and are chomping at the bit to work with us to promote the many benefits of timber framing over other building materials.
    Timber has no equal when it comes to its environmental credentials...
    With a typical Australian home absorbing more than seven tonnes of carbon dioxide (CO2) from the air and storing almost three tonnes of carbon, it really makes timber framing the superior choice and the ultimate renewable.
    Right now, demand is outstripping supply but this will level out in time so it's important that builders, consumers, decision makers and influencers understand the many benefits of timber framing through the efforts of the new Timber Framing Collective.
    We're asking builders and consumers to continue being patient as supply catches up with unprecedented demand, in the knowledge that they are making a fantastic environmental decision to build with timber framing.
  • Sources: Queensland University of Technology, The Courier-Mail, Australasian Timber and Campaign Brief
  • companies

    Supplier update

    Nippon Paint to buy France-based Cromology

    Plumbing supplies group Reliance Worldwide expands its US presence with EZ-FLO acquisition

    Nippon Paint plans to acquire French construction and decorative paint maker Cromology for EUR1.15 billion. It will purchase all Cromology shares during the first half of 2022.

    The acquisition will be carried out through Nippon Paint's Australian paint subsidiary, DuluxGroup.

    Cromology is the fourth-largest maker of decorative paints in Europe, and Nippon Paint expects to use the acquisition to expand its reach in France, Italy and other European countries.

    Nippon Paint said Cromology has a high market share of construction paint in France, Italy, Spain and Portugal.

    It believes Cromology will provide the right level of scale, volume and manufacturing capability for Nippon Paint to develop a decorative paint and coatings business in Europe, and provide a platform for other bolt on acquisitions.

    Cromology's wholly owned network of 386 company operated stores across France, Portugal and Switzerland presents an opportunity to leverage DuluxGroup's operational capability in running trade centres. The acquisition also provides a way to use DuluxGroup's capabilities in selling to DIY consumers in retail channels including big box home improvement stores and independent hardware.

    The acquisition presents an opportunity to launch other products in the DuluxGroup's portfolio, including in woodcare, texture coatings, sealants, adhesives and fillers.

    Related: DuluxGroup after Nippon Paint acquisition.

    The new face of DuluxGroup - HNN Flash #41, April 2021

    Reliance plumbing

    US-based appliance connector business EZ-FLO has been acquired by Australia's Reliance Worldwide for USD325 million, reports The Australian Financial Review (AFR).

    Reliance chief executive, Heath Sharp told the AFR the main product sold by EZ-FLO is the Eastman brand of appliance connection products used by plumbers to connect washing machines, dishwashers, water heaters and fridge ice-makers to household water supplies.

    Mr Sharp said the Eastman brand is the No. 1 business in its category and the acquisition enables Reliance to enter into a new segment of installing and servicing major appliances. The company believes there is enormous potential even as appliance sales boomed during the pandemic when people spent a lot on home improvements. He said:

    We think there's a lot of runway here.

    Established in 1980, EZ-FLO has a large manufacturing plant in the Ningbo Free Trade Zone in China which makes most of its products. It also uses other third-party manufacturers in China for supplies.

    In the US, EZ-FLO operates seven distribution centres, including in California, Florida, New Jersey and Texas, which send products to about 5000 hardware and trade outlets.

    Mr Sharp said Reliance had done extensive due diligence on EZ-FLO, which before COVID-19 had been generating sales growth of more than 10%, but has now jumped higher. He said was impressed by the way EZ-FLO had been able to make price increases stick as input costs and logistics disruptions increased.

    The ability to move prices through the market - very strong. Their pricing power has really been evident as we moved through the details.

    Reliance has been implementing price increases across most of its products. Mr Sharp said:

    It's happening across the board, it's not just with us.

    The cost of copper, steel, resins, packaging and freight have all been rising, while shipping delays have caused disruptions.

    Reliance's sales for the three months ended September 30 were up 8% to USD246 million, while earnings before interest and tax were up 5% to USD56.2 million.

  • Sources: MarketWatch, Nippon Paint and Australian Financial Review
  • companies

    Supplier update

    Briggs & Stratton releases battery technology

    Stanley Black & Decker's first sustainability-led product line, reviva, uses Eastman's Tritan Renew copolyester

    Briggs & Stratton's new Vanguard(r) Lithium-Ion 1.5kWh Swappable Battery Pack will join the lineup of the current Vanguard Commercial Lithium-Ion Battery Pack models at two events: The American Rental Association's annual trade show and convention in Las Vegas, Nevada, and GIE+EXPO in Louisville, Kentucky. Chris Davison, Briggs & Stratton's US-based senior marketing manager - commercial power, said:

    Electrification is quickly revolutionising the power application industry and we're proud to play a significant role in that process ... [Our] current Lithium-Ion battery models, as well as our new swappable battery pack, continue to show the industry that Vanguard is leading the industry forward.

    The Vanguard Lithium-Ion 1.5kWh Swappable Battery Pack is designed to provide users with an efficient, versatile and reliable battery power option. The battery has an exchangeable design, allowing users to easily remove and replace the battery as needed with minimal downtime. They can combine multiple swappable batteries in parallel to make sure larger power needs can be met.

    The swappable battery is set up for optimised network communication with the product and the internet via an IoT (Internet of Things) device. The connectivity also means that users can monitor the battery remotely, control battery-powered products remotely and conduct fleet management. This battery is tested to ensure that it is able to withstand tough environments and is durable against abuse, debris and dirt.

    Black+Decker

    Stanley Black & Decker (SBD) announced that its Black+Decker brand will release a new product line of power tools that will use Eastman's Tritan Renew copolyester. With 50% certified recycled content in the enclosures, the Black+Decker reviva line is set to launch in early 2022.

    Engineered in partnership with Eastman, the reviva power tools will be manufactured using Tritan Renew material produced through circular recycling, also known as molecular recycling. Molecular recycling transforms single-use waste plastic into basic building blocks that are then used to make durable, high-performance materials. This process reduces the use of fossil-based resources and lowers greenhouse gas emissions while reportedly providing the performance of virgin plastic materials and environmental benefits of 50% recycled content.

    In addition to sustainably engineered material in this new product line, reviva packaging will be 100% recyclable. SBD is also creating and implementing programs for battery and end-of-life tool recycling. Steve Crawford, executive vice president, chief technology and sustainability officer for Eastman, said:

    ...Consumers trust their products because they know they will perform, so Eastman is excited to partner and leverage our molecular recycling technologies to provide Stanley Black & Decker more sustainable materials without any compromise on product performance.
    This collaboration is a prime example of how value chain partners who share a vision for a sustainable future and a commitment to addressing both the climate and waste plastic issues can leverage material circularity to provide solutions with technologies we have today.

    SBD aims to design products for circularity across material selection, use and end-of-life considerations, with a near-term goal of 100% reusable, recyclable or compostable packaging by 2025.

    In 2018, Stanley Black & Decker joined with leading businesses and governments to sign the New Plastics Economy Global Commitment, an initiative of The Ellen MacArthur Foundation and United Nations Environment Programme. Eastman is also a signatory to the New Plastics Economy Global Commitment.

  • Sources: PRNewswire, Briggs & Stratton and Plastics Technology Online
  • companies

    USA update

    True Value Company has exclusive partnership with GE Lighting

    Fastener solutions company, Hillman has doubled its distribution centre capacity and is using an artificial intelligence automation system

    The new agreement between hardware retail wholesaler, True Value Company and GE Lighting means True Value will be able to provide its member stores with exclusive warehouse access to the growing CYNC[tm] family of whole-home automation products. CYNC is a premium, GE-branded line of smart home products formerly known as C by GE.

    The partnership between True Value and GE Lighting becomes effective January 1, 2022. Jake Kalnitz, vice president of merchandising at True Value, said in a statement:

    Providing our retailers exclusive access to this best-in-class line of smart home automation products, from one of the best-known light bulb manufacturers in the world, is a game changer for True Value.
    This is a true differentiator for us that will allow our retailers to provide their customers with a next-level smart home experience.

    GE Lighting is now part of Savant Systems, an established industry leader in the professional smart home space. CYNC products include an Indoor Smart Camera, Indoor and Outdoor Smart Plugs, LED Full Colour Light Strips, and a Wire-Free Smart Motion Detector. The new CYNC app, powered by Savant, provides intuitive and easy-to-use control for the entire CYNC ecosystem from anywhere.

    Hillman

    Hardware supplier, Hillman Solutions, has unveiled the completion of its state-of-the-art distribution centre in Jacksonville, Florida. Ben Wilcox, senior director of distribution at Hillman, said:

    The original Hillman Jacksonville distribution centre is barely recognisable today after a multi-million-dollar investment to expand the footprint of 92,000 square feet to its current 190,000 square feet.

    The expansion allowed Hillman to modernise its operations enabling more growth in the future. To increase productivity, Hillman uses an artificial intelligence automation system that maximises efficiencies. Mr Wilcox said:

    We incorporated several automated vehicles to reduce the amount of manual labour needed to move inventory.

    To ensure a safe working environment for its employees, Hillman incorporated significant design elements that improve ergonomics for associates. These elements included a raised floor in storage locations to minimise bending.

    Founded in 1964 and headquartered in Cincinnati, Ohio, Hillman is a leading North American provider of complete hardware solutions to over 26,000 customers. The company designs product and merchandising solutions for "complex" categories that deliver an "outstanding customer experience" to home improvement centres, mass merchants, hardware stores, pet supply stores, and OEM & industrial customers. Leveraging an international distribution and sales network, Hillman aims to deliver a "small business" experience with "big business" efficiency.

    The Hillman Group going public - HNN Flash #30, January 2021
  • Sources: BusinessWire and Hillman Group
  • companies

    Supplier update

    Stanley Black & Decker to acquire OPE maker

    Vulcan Steel hopes to raise $371.6 million from an IPO with shares sold at $7.10 each, taking its value to $933 million or $1.2 billion including debt

    Stanley Black & Decker Inc. (SBD) said it has agreed to buy Excel Industries, a maker of commercial and residential turf-care equipment, for USD375 million in cash. The acquisition is expected to boost its commercial outdoor equipment business.

    Kansas-based Excel, which has about 600 employees, makes equipment under the brands Hustler Turf Equipment and BigDog Mower Co., and serves about 1,400 independent equipment retail outlets that stock, sell and service these products. It launched the first hydrostatic zero-turn mower in 1964.

    According to analysts, the addition of Excel Industries' expertise in turf-care equipment and professional team will help strengthen the outdoor product offerings and innovation capabilities of SBD. Excel Industries' widespread dealer (retail) network along with its customer base should enable the company to enhance its footprint in the outdoor equipment market. SBD's CEO James M. Loree commented:

    This is a strategically important bolt-on acquisition as we build an outdoor products leader. Excel brings a range of premier, commercial grade and prosumer turf-care equipment, an extensive dealer network, a talented team and a loyal customer base.

    In January 2019, SBD acquired a 20% stake in MTD Holdings, a manufacturer of outdoor power equipment. By August 2021, the company announced its decision to buy the other 80% stake in MTD for USD1.6 billion in cash.

    Stanley Black & Decker to buy remaining stake in MTD - HNN Flash #59, August 2021

    More recently, an analyst at BofA Securities said that SBD could face a potential risk in the medium term due to a legislative development in California.

    The legislation reportedly signed by California Governor Gavin Newsom mandates that all newly sold small-motor equipment, primarily used for landscaping, to be zero-emission by 2024 or as soon as the California Air Resources Board determined is feasible

    Analyst Ross Gilardi said the mower ban faces significant lobbying pushback from professional landscapers and gardeners who would be forced to upgrade and convert their fleets. About USD30 million has been set aside to help these groups make the transition, he noted.

    There could perhaps be a pre-buy of gas-powered equipment into the deadline that incentivises California-based retailers to continue carrying gas-powered equipment, he said. Some of the retailers, however, could de-emphasise gas equipment at an accelerating pace to highlight their environmental consciousness.

    Through its pending Excel Industries acquisition and remaining MTD stake, SBD could be exposed to the risk of the phasing out of gas-powered equipment, Mr Gilardi said.

    However SBD would point to its strong battery technology in its legacy outdoor business and its intention to electrify the MTD lineup over the next few years. The California ban will put pressure on MTD to accelerate its electrification effort at a time of enormous supply chain challenges that are making battery cells harder to come by. The time crunch is also weighing on the legacy gas engine market which is experiencing acute shortages, Mr Gilard added.

    If California is about to ban the product in the next few years, it is less likely that capacity is added in this market to alleviate the situation, he said.

    Vulcan Steel

    The steel distributor is understood to have already locked in $220 million of demand from early investors for its initial public offering, according to DataRoom in The Australian.

    Stockbroker UBS estimates in a research note Vulcan has about 4% of the Australian steel distribution market. It puts a valuation of between $1 billion and $1.4 billion on Vulcan's equity value. Vulcan has $100 million in debt, giving an enterprise value of between $1.1 billion and $1.5 billion.

    The company managed to achieve a price ($7.10 per share), that equates to 8.8 times its earnings before interest, tax, depreciation and amortisation and 13.2 times its net profit. This is more than the five times steel distributors' trade at in Europe and North America, but less than the Australian companies it is comparing itself to like plumbing and bathroom supplier GWA, which trades at about 12 times its EBITDA.

    The float comes as steel prices remain high. However, some believe the share price is expensive and will fall when the steel price is expected to come down after it lists on November 10. Others say the selling point is its unique market position in New Zealand and dominance in the Australian market. New shareholders will own almost 39.8% of the company.

    Chief executive Rhys Jones believes the company is poised to benefit as customers seek to reduce their dependence on China. In the Australian Financial Review (AFR), he said the COVID-19 pandemic was triggering some large structural shifts in sovereign capabilities among manufacturers, governments and policy makers which were likely to underpin extra demand for the group's steel products.

    There is more focus on companies wanting to shift manufacturing to Australia and New Zealand, and be less reliant on China. Mr Jones told the AFR:

    It's been so disruptive to so many businesses.

    Mr Jones said in the 12 months ended June 30, Vulcan had delivered about 270,000 tonnes of steel products to customers. He said because of the nature of its business, where it was not actually making steel, it had a buffer against the volatility of the steel cycle. He said:

    We don't go up and down with international steel prices like others.

    Vulcan buys and distributes some of its steel products from BlueScope as part of its operations. But it is also a competitor to BlueScope in some segments. BlueScope recently announced the highest annual profit in 19 years.

    Mr Jones said the group operated its own fleet of 92 delivery trucks which gave it an extra edge in "just-in-time" deliveries to customers across a broad range of industries including engineering, construction, water infrastructure, agriculture and wine.

    Mr Jones said Vulcan, which has 12,000 customers and a workforce of 840, is on the front foot for expansion which is likely to involve acquisitions and organic growth. He said the group had doubled in size in the past seven years and was in a strong position to keep going.

    The Auckland-based business is owned, founded and chaired by Peter Wells, Vulcan sells steel for manufacturing and construction across 29 sites, 16 of which are in Australia. About 60% of revenues come from the Australian operations, with 40% from its home market of New Zealand.

    Vulcan chief financial officer Kar Yue Yeo said the total steel usage market in Australia was between 6 million to 6.3 million tonnes a year, and with a strong pipeline of infrastructure spending outlined by federal and state governments, experts expect that will grow by at least 2% a year.

  • Sources: MarketWatch, Benzinga Newswires, The Australian and The Australian Financial Review
  • companies

    Supplier update

    CSR Gyprock celebrates manufacturing milestone in WA

    In 2021, the company marks the 50th anniversary of Western Australian manufacturing with an ongoing commitment to new technology

    Opening its first Western Australian plant at Welshpool in 1971, and its fifth factory in the country, Gyprock has continued its tradition of evolving its product range to meet the needs of the ever-changing construction and building industry.

    Built at a cost of $1.4 million, or over $15 million in today's currency, the factory was officially opened by then-Premier J.T. Tonkin on 10th September 1971, after starting production in July of the same year.

    In the proceeding 50 years, tens of millions of tonnes of plaster and compound has been produced.

    Premier Tonkin said of the factory in his remarks, "It will employ Western Australian labour in processing a high-proportion of Western Australian raw materials" which remains true today as it did half a century ago. Welshpool still produces plasterboard using gypsum mined from Jurien Bay to the north of Perth.

    This commitment to Western Australian building also extended beyond the factory. Gyprock faced strong opposition from established Plasterglass producers in Perth who referred to the relatively new board as "paper board". In response, Gyprock gave builders and installers guided tours of the new facility to bolster confidence in plasterboard. In addition, teams from NSW were brought over to train and educate installers who upon completing the course became known as "30-day wonders". CSR Gyprock soon became the bulk plasterboard supplier for many former Plasterglass customers.

    Gyprock remains proudly (West) Australian Made, having just recently been certified by the Australian Made Campaign as part of an ongoing commitment to Australian manufacturing jobs. Brendon Cave, Gyprock regional general manager, said:

    We are very proud to have manufactured more than 200 million square metres of Gyprock plasterboard at our Welshpool factory over the past 50 years, most of which would still be installed and doing its job in Western Australian homes, offices, hospitals, schools and the like.

    Gyprock's Welshpool site now employs over 80 people and produces more than 5 million m2 of board on average every year, enough to cover the playing field of Perth's Optus Stadium nearly 300 times.

    It actively supports plasterboard recycling both to help the environment by reducing waste going to landfill and because it is often a great way for builders to save on waste tipping fees and site clean-up costs as well as improve site safety with better resource management.

    Related: Gyprock displays Australian Made on its products.

    Gyprock supports Australian Made - HNN Flash #39, April 2021
    companies

    "Smartwood" singled out for innovation

    Sold at a number of Bunnings stores

    The business that makes the smartwood, 3RT, is a finalist in the South Australian government's Science Excellence and Innovation Awards

    3RT is being recognised for its technology that can turn wood waste into timber that looks and performs like 100-year-old tropical hardwood.

    Based in Adelaide and Melbourne, 3RT has spent over six years developing this technology in collaboration with the Flinders Centre for NanoScale Science & Technology (part of Flinders University in South Australia). It launched its first commercial product, Designer Hardwood in 2019 which is sold through some Bunnings outlets.

    The technology uses a water-based "nano-glue" that is mixed with the waste wood to replicate the properties of mature natural hardwood. 3RT managing director Peter Torreele told The Lead in 2020 that the final product was comparable to the highest quality hardwood but was sustainable as it was made from waste timber residues that would otherwise be woodchipped. (The company name stands for the three Rs of sustainability - Reduce, Reuse and Recycle.)

    This year, it is one of the finalists to win $10,000 as SA Innovative Team of the Year in the state government's Science Excellence and Innovation Awards, to be announced in December.

    3RT manufactures its smartwood products at its innovation centre in Adelaide using robots. They are used for indoor furnishings such as tables, flooring, stairs, doors and panelling. Associate professor Jonathan Campbell from Flinders University said:

    This project has led to internationally patented technology that can turn low value plantation timber into sustainable, high quality and affordable hardwood, with the first products made at 3RT's new Adelaide manufacturing plant now on sale at Bunnings.

    Bosch deal

    In 2020, the company announced it entered an agreement with Bosch that will allow it to boost its own capacity and license the units to companies overseas.

    Mr Torreele said the licensing units would be ideally suited to Laminated Veneer Lumber (LVL) and plywood producers that used plantation resources and generated a lot of wood waste suitable for use in the units. He told The Lead:

    The units are plug and play units that are very compact and agile with a small footprint so we can place them around the world very quickly in locations that we believe are suitable to give access to those local resources.
    We already have one running in Adelaide and Bosch is adding Internet of Things capability, which means that if we have a unit somewhere else it is remotely connected to our innovation centre so we can track all the data, develop new products and undergo maintenance.

    Mr Torreele said the relationship with Flinders University would continue to develop products and create specific recipes as new customers came on board.

    For instance, if we find a resource in Canada, we first develop the specific recipe in Adelaide, Bosch builds the unit and once we put the unit in Canada we can straight away produce the product that we have already developed and tested at the innovation centre in Adelaide.
    It's a very fast way of scaling up thanks to the relationships with Flinders University and Bosch.
    We also have a very aggressive technology roadmap with Flinders University, which is around the product itself. The idea with that is everything you put on top of a piece of wood today we want to put inside the product so you don't have to maintain it anymore and it's done in a non-toxic way.
    Most of the products used to make a product waterproof for instance are harmful ingredients so we want to work with Flinders University to create products with additional benefits of, for instance, termite, water or fire resistance.

    Flinders University owns a share of 3RT as part of the research contract. Flinders University Professor and co-developer David Lewis is also a director of 3RT and said the sustainability of its Designer Hardwood product and a resurgence in the popularity of wooden products were attractive selling points. He told The Lead:

    It really is an exciting development and the commitment from Bosch has been wonderful and is appreciated by the company and the university because it is a pathway to expansion.
    Actually seeing real world results of the research we are doing is very satisfying for us as individuals but also for the university because we are having an impact in the world.

    The Bosch Group's board of management member responsible for Asia Pacific, Peter Tyroller, has visited the Adelaide innovation centre and said 3RT's technology was a great example of Australian innovation.

    3RT is addressing the significant environmental and supply challenges relating to old growth hardwood, applying Bosch technology and knowhow.

    To read more about 3RT and Bosch, go to the following link:

    Bosch deal fast tracks smartwood technology
  • Sources: Adelaide Advertiser, The Lead South Australia and Flinders University
  • companies

    ACCC investigates shipping and port charges

    It is looking into alleged price gouging by shipping lines and port operators

    Retailers and the ACCC believe surging freight costs have pushed up the price of goods for shoppers

    The Australian Competition and Consumer Commission (ACCC) chairman, Rod Sims told the ABC's The Business program that the regulator is investigating if anti-competitive conduct has led to price rises in the container transport industry. He said:

    We have a narrowly focused investigation as to whether there is a breach of competition laws in relation to containers. Is there a breach? Is there not a breach? And we'll get to the bottom of that.

    Mr Sims said the wider issue of shipping and freight costs would be looked at in more detail in the ACCC's annual stevedoring monitoring report, which will be released in November. He told The Business:

    We're going to look at to what extent this is a structural problem - due to the fact that you've got concentration in shipping, which has occurred a lot - or to what extent is it a short-term issue, due to the spikes in demand as people consume more goods and less services as COVID-19 interrupts the supply chain.

    Importers and exporters have welcomed the regulator's inquiry into the dramatic price increases on the waterfront. However, Shipping Australia said high freight rates are caused by higher demand for products and port congestion.

    Shipping fees have jumped amid a global supply chain squeeze caused by a rebound in demand for products after COVID-19 shutdowns, and pandemic outbreaks that have crippled the world's ports.

    The cost of hiring a shipping container to transport imports and exports is now the highest on record. Recently the spot price for a 40-foot import container from Shanghai in China to Rotterdam in The Netherlands, the world's most expensive shipping route, soared to USD14,287 (AUD19,405) per container according to the Drewry World Container Index (a leading barometer of international shipping charges). That's a rise of 564% over the past year.

    However, the body representing the local shipping industry, Shipping Australia, denied there was price gouging by global shipping lines. Shipping Australia boss Melwyn Noronha said the ACCC's investigation was a good move. He said:

    We welcome the investigation as it will show that the current issues are caused by normal market mechanisms and by bottlenecks in the supply chain.

    Shipping Australia also disputes that ocean shipping is a concentrated industry, telling the ABC in a statement that '"there are many shipping services to and from Australia." It also disputes that market concentration has led to high freight rates and said that surging demand helped "induce" the current freight rates.

    Shipping Australia said that prior to COVID, freight rates were around USD1,200 to USD1,400 (AUD1,640 to AUD1,913) per container for a 40-foot shipping container.

    Retail industry

    Retailers and importers have told the ABC they have been forced to pass on price rises to customers. The Australian Retailers Association's chief executive, Paul Zahra, told the ABC the high cost of shipping products added to the challenges faced by retailers.

    Shipping costs have quadrupled in the last year, during the course of the pandemic, and most Australian retailers who are doing their best not to pass these costs on to consumers in the short term are seeing their margins heavily squeezed.
    This is happening at a time when most retailers have already been decimated by the lockdowns and additional COVID-safe cost imposts. This is clearly not sustainable and something needs to change.

    Anthony Scali, CEO of furniture chain Nick Scali, told The Australian:

    The problem is, there are two ways to buy freight: either you deal through a freight forwarder or you deal directly with shipping lines. We always deal with big forwarders and every time you dealt with shipping lines the price was higher than what I could get with a forwarder.
    We know the shipping lines are not always providing the shipping containers when they should, unless you pay a premium price. I have had agreements in place (with freight forwarders) that have just been ripped up because they can't get to the container - the shipping line won't give it to them.

    Mr Scali previously warned that the rocketing price of shipping would force him to ratchet up his prices, and he welcomed the ACCC investigation. He added:

    Everyone (retailers) is raising prices already. In furniture, lounges are a big volume user so there have been cases where the freight costs are more than the price of the lounge. That's crazy at the cheaper end, and you have to pass prices on.

    Wesfarmers CEO Rob Scott also recognised the explosive growth in shipping prices. He told The Australian:

    The pandemic has caused significant disruption in global container shipping markets and we have seen this translate to higher costs as well as delays. We have made changes to our ordering processes to adapt to these disruptions and we are continuing to work with our suppliers.

    Paul Zalai runs the Freight and Trade Alliance which represents importers and exporters. He also welcomed the ACCC investigations and said the Alliance had been working with the regulator on shipping competition reforms.

    He said stevedore charges had gone up by around one fifth over the past year on "already high fees" and fees charged by the shipping companies were triple what importers had traditionally paid.

    To watch the videos from ABC News, go to the following link:

    ACCC launches investigations into 'exorbitant' shipping and port charges - ABC News

    Related: US home improvement retailer Home Depot reserved its own ship to deal with its supply chain problems.

    Home Depot contracts its own container ship - HNN Flash #50, June 2021
  • Sources: ABC News (The Business) and The Australian
  • companies