Metcash goes big on acquisitions

Metcash seeks $300 million in outside investment to acquire three companies

Metcash has made its first significant post-COVID move, seeking to acquire a food services business, a chain of construction hardware stores headquartered in South Australia, and a significant frame and truss manufacturer in Victoria.

On 5 February 2024 Metcash announced that it was seeking financing through an equity raise comprising a $300 million fully underwritten institutional placement, along with $278 million from Metcash's own existing cash and debt facilities, to purchase three entities.

The first entity to be acquired is SFG Group Holdings Pty Ltd, known as Superior Food, which is a leading Australian foodservice distribution business, servicing clients such as aged care homes and canteens. The company has 23 branches around Australia, with a high concentration on the east coast, especially in Queensland. It employs around 1300 people.

The other two entities relate to the hardware industry. Bianco Construction Supplies Pty Ltd is a construction and industrial supplies business servicing the South Australian and Northern Territory trade market. Established for 40 years, it specialises in building materials, and its core customer base consists of builders, concreters, bricklayers and landscapers. It has ten sites, with nine in South Australia and one in Darwin, Northern Territory. Those sites include one frame and truss operation in Adelaide.

Alpine Truss Pty Ltd is one of the largest frame and truss constructors in Australia, located in Wangaratta, Victoria, and servicing both central/northern Victoria and southern New South Wales (as well as the Australian Capital Territory). Its core site is a 35,000 square metre (3.5 hectare) facility.

From the perspective of Metcash's food business, the acquisition of Superior Foods does signal a considerable change in the company. Superior Foods is evidently meant to form part of the Metcash food business, an expansion into an area that is somewhat outside the shadow cast by the dominant duopoly in Australia's food business sector.

Perhaps most importantly, it's a move by Metcash into an area where logistics relate less to supplying retailers, who then form a relationship with a customer base, and more a move into logistics that directly interface with the end customer. It's Metcash enhancing a portion of its business that is highly services based.

While the Superior Foods acquisition represents a genuine expansion in business categories, the acquisition of Bianco and Alpine Truss seems more like a "supersized" version of the background acquisitions that Metcash undertakes on a regular basis. It's a well-established feature of most of Metcash's contracts with its Mitre 10 members that Metcash is offered the final right of purchase on some store sales. As it seeks to expand its footprint in corporate-owned and corporate-controlled stores, there has been a steady flow of this type of acquisition.

Yet, as you read through the presentation to analysts for the hardware investment, and the accompanying materials, it becomes evident that Metcash CEO Doug Jones does see something of an equivalence between the investments in these two different sectors of the Metcash business. It's tempting to see this investment presentation as being almost a "mini" investor day outing, outlining not just how the acquisitions fit into strategy, but the details of that strategy itself.

In fact, part of what Mr Jones seems to really be doing here, through these investments and their presentation, is more clearly establishing the direction Metcash will take in the post-COVID-19 era, as inflation fades and some of the urgency leaves the overall housing market. The overall lift in hardware retail revenues across Australia has been welcome. However, it seems clear that FY2023 likely represents "peak hardware" - which raises the question of where corporates such as Metcash will find ongoing growth.

The hardware investment

The introduction to the Bianco and Alpine Truss acquisitions follows the pattern we're familiar with in regards to Metcash. The core strategy for the company - which has been somewhat replicated by Bunnings - as regards trade is referred to as "whole of house". It's the idea that the goal of its main hardware operation, the Independent Hardware Group (IHG) is to capture as much of the value of any house build that it supplies.

Added to that is an overall expansion opportunity, as Mr Jones describes it:

The addition of the Bianca and Alpine to the IHG network brings a broader range of products for our existing members to offer their customers and closes out a few gaps in our offering to the independent builder customers.

Not overtly mentioned anywhere as far as HNN can determine, is also that Bianco provides a decent slice of business in the South Australian market. Australian Bureau of Statistics (ABS) hardware retail revenue numbers indicate that the SA market, though relatively small, continues to grow at a higher rate than that of the larger east coast states.

Where we begin to see something of a departure, though, from a standard investment pitch on the part of Metcash is where Mr Jones shifts to speaking about what he sees as the recent "transformation" of Metcash:

You've heard me talk about the transformation of Metcash, and I just want to talk about that a little bit more. Explain what I mean. So in recent years, Metcash has been transforming itself from primarily what you would call an old fashioned food and wholesale liquor wholesaler to an integrated wholesaler, banner operator and retailer with sustainable business models, materially improved operations and transformed retail networks with healthy market positions.

He goes on to talk about what this transformation has meant for the food business of Metcash, then shifts to hardware:

In hardware, the addition first of Home Timber and Hardware and then Total Tools together with IHG's organic growth and continued consolidation of the fragmented market has underpinned the growth in the hardware pillar and the transition in the group.

Later he expands on this by describing more of the growth and transition.

When we bought Home Timber and Hardware, we committed to targeted synergies of $15 million and delivered more than $30 million, and of course, with Total Tools where we've committed to $5 million of synergies, we delivered $7.5 million. But much more importantly from a growth and EBIT returns basis, which was made possible from within Metcash and IHG through the structure of their operational support, sensible governance and healthy capital deployments.

After describing more of the details of the new acquisitions, and how they fit into the existing Metcash structures, he returns to outlining where he sees Metcash to be today in terms of its hardware strategy.

Turning now to the hardware acquisitions. You've heard me speaking often about the IHG whole of house strategy, and that's been at the core of our growth agenda for a number of years now. As I've said, when you establish a relationship with a builder at the frame and truss stage, it allows you to engage and serve that builder more meaningfully and expand the proportion of their total project needs - in other words, to allow us to win a greater share of their spend.
Bianco and Alpine support this in their respective markets and they both accelerate our expansion. They expand IHGs operational and financial scale and they fill obvious gaps in the network both geographically and in the case of Bianco through range.
...
IHG has got a great and strong track record of creating value through consolidation in this way. I'd say this is a well-trodden path of governance, operational support, sensible integration, and cross-selling to one another's customers. We see opportunities for over $5 million of synergies on a run rate basis by the end of year two, and we've got high conviction in those numbers ...
So Bianco Construction Supplies is well known and it's highly regarded in the market. The brand is strong and we will be maintaining it. It serves the South Australia and Northern Territory markets and has done so for more than 40 years from 10 locations. Included in those 10 locations is a frame and truss plant in Adelaide. As you know, we like frame and truss plants both strategically and financially.
Bianco specialises in the sale and distribution of building materials to builders, concreters, bricklayers and landscapers. What's noteworthy is the addition to the IHG range of new categories like reinforcing mesh, concrete slab hardware, structural steel and sand and soil ...
We turn to Alpine. This is a Victoria-based frame and truss operation, one of the country's largest. It's a 35,000 square meter facility in Wangaratta Victoria, and from there it serves the Victorian and Southern New South Wales building trade from small to large volume builders ... As you know, frame and truss is a key strategy for us and these two transactions expand our frame and truss total numbers to 24 in the network, 12 of which are co-owned or owned by us. In Alpine, we expect $2.7 million of synergies on a run rate basis by the end of year two.
Both hardware acquisitions, as I've said repeatedly, are in line with our current strategy and as I think I've said, we've got a great track record here. These are just larger in scale and impact. My own assessment is that the hardware acquisitions are about as aligned to proven strategy as it's possible to be. We're genuinely delighted to bring these into the fold and we are very confident with buying high quality assets at extremely attractive multiples.

Analysis

CEOs are forever rewriting the history of their companies to make the present-day situation seem like the natural outcome of longer-term planning. The current image of Metcash that is being presented is as an enterprise that is - to coin a phrase - post-conglomerate in its strategy.

This contrasts with the "pure" conglomerate activity which saw Metcash acquire automotive assets between 2012 and 2014, then on-sell these (as Metcash Automotive) to Bursons Auto Group in mid-2015. The investments that Mr Jones is seeking in 2024 have a much more distant investment horizon.

That's always been the case with IHG, formed through the acquisition of HTH. At the time of the acquisition of HTH, HNN and other analysts in the market predicted this would lead to the gradual "corporatisation" of not only HTH but Mitre 10 as well - which was somewhat dismissed by Metcash.

It has only been in the past two years or so that Metcash has been more open about these intentions. It now seems possible the network will eventually be over 70% owned and joint-venture stores. In other words, it's likely there will be broad similarities between the ownership structure for Total Tools and IHG store networks.

The overt reason for this was that, in fact, the acquisition of HTH brought some synergies, but not all that had been hoped for. It has been noted by several commentators that Metcash had expected to acquire a wider share of the independent market, attracting non-affiliated independents. That didn't happen, as independents found alternative means to acquire better contracts with suppliers, through fully independent groups such as the HBT National Buying Group.

As a result, the returns from hardware did not grow as much as hoped. To compensate, Metcash seems to have turned to the direct acquisition of retail operations, adding direct retail margins to its existing wholesale margins. As hardware was, overall, in a gentle growth phase even before COVID-19 hit, this helped to improve results. With the massive growth brought about by COVID-19, it turned out to be a brilliant strategy.

While there has been - and still continues to be - some pushback from IHG members regarding the ongoing corporatisation of the retail operations, this has, paradoxically, become more acceptable to store owners in the IHG networks precisely because the existential threat posed by Bunnings has decreased. It's paradoxical because Mark Laidlaw, the former CEO of Mitre 10 and then IHG, sold store owners on joining the Metcash network based on what he believed was the active threat Bunnings posed to independent store owners in general.

Defragmentation

Moving beyond that, and looking at the Metcash hardware strategy as it is today, there is one element of its strategy that seems something of a hangover from conglomerate thinking. That's the references to one of the main activities of both the hardware and food divisions as being the "defragmentation" of the market.

This is, of course, something of a logistics argument. The thinking goes that by consolidating the supplychain into a single source of supply, which negotiates with suppliers and then warehouses product for eventual dispatch to retailers, cost savings are made that outweigh the cost of the required infrastructure and services. For this to work successfully, of course, it's also necessary that the retailers themselves become less individuated, and more controlled by the consolidated source of supply.

One is reminded by this scenario of a famous statement well-known in the tech business community; that "there's only two ways I know of to make money: bundling and unbundling". Those words were uttered by Jim Barksdale, at the time working alongside Marc Andreessen - the two of them making up the principal driving force behind the early development of the first commercial web browser, Netscape. (Read more at the link below.)

Harvard Business Review

While there is a bit of a tug there towards the speculative benefits of any kind of volatility, what it really points to is that money typically gets made when goods and services move back and forth between being commodified and then de-commodified. It is the cycle between innovation in the development of new products (unbundling) and innovation in the production of products (bundling) that generates exceptional growth.

If we look at Metcash's current IHG strategy, it is classic value creation through bundling - that's what is at the core of "whole of house". The drive to obtain frame and truss facilities is to ensure that the bundle provides complete end-to-end coverage. Yet it is, by its very nature, an extremely conservative strategy, that admits to little if any real innovation.

Lacking fundamental innovation, the only way to find growth is to rely on the "economies" of scale. Hence, of course, the great emphasis Mr Jones places in his presentation on the "synergies" he sees being created by these acquisitions. In terms of scale acquisitions, it is from such synergies that the corporate equivalent of something like what economists term "spillover effects" originate.

The difficulty is, however, that the benefits of these synergies, unlike those of innovation, tend to be finite and confined. They are effectively a discount on acquisition costs, but tend to deliver only fading benefits over time.

That said, there is little doubt that these are "good" acquisitions, and that Metcash has followed a cautious and carefully planned path in seeking investment. It is just that at the end of the day, analysts and others could not be blamed for asking whether this is all that Metcash has to offer. Is this the very best use of well over half a billion dollars in the 2024 market, with its current opportunities?

companies

Metcash/IHG/Total Tools results FY2024 H1

The hangover after the boom?

Results for Metcash as a whole were subdued, and trended lower for its hardware division, which includes IHG and Total Tools. Sales for hardware overall were up 2.95%, driven by acquisitions, especially in Total Tools, but underlying EBIT declined by over 5%.

Metcash (MTS) released its results for its FY2024 H1 in early December 2023. These cover the six months from 1 May 2023 through to 31 October 2023. While the company portrayed the results as being relatively positive in the face of mildly adverse market conditions, the share price for MTS immediately subsequent to the results release fell to its lowest level since May 2021 - though remaining well above the pre-COVID-19 range.

For Metcash overall, total sales revenue rose by 1.3% to $7837.7 million. Meanwhile, "underlying" earnings before interest and taxation (EBIT) fell by 3.4% to $246.5 million.

For Metcash hardware overall - including Total Tools Holdings (TTH) and the Independent Hardware Group (IHG) - revenue increased by 2.9% to $1783.5 million, and underlying EBIT fell by 5.1% to $110.6 million.

Total Tools Holdings

For TTH total sales grew by 18.2% to $350.9 million, as the store network grew. The actual network sales were $589.7 million, up by 4.1%, but down 2.1% on a like-for-like basis. For the joint-venture stores, overall sales were up 27.8%, but down 1.5% on a like-for-like basis.

Total sales outside of acquisitions fell by 1.1%. In response to an analyst's question, Metcash CEO Doug Jones stated that like-for-like sales in TTH had fallen "in the low single digits". He also stated in response to another question that store margins for TTH had "compressed slightly in the last year, primarily in the last six months". He went on to suggest the causes for this:

There's three key reasons for that: slowing volumes and increased cost of doing business pressures similar, but not as dramatic as in IHG, and competitive and promotional pressures, as you've described. As you would expect, in any market like this, as volumes slow competitors are going to work harder for their customers' business. I think it's as simple as that.

EBIT for TTH went up by 5.3% to $49.3 million. However, outside of acquisitions, EBIT fell by 8.1%.

Independent Hardware Group

For IHG overall sales fell by 0.2% to $1.43 billion. Scan sales - taken from a subset of stores - rose by 0.7%, with DIY up 1.4% and trade up 0.3%. Like-for-like sales, however, were reported as "flat", with DIY up 0.8% and trade down 0.4%. Overall, DIY transactions were down 0.6%, while basket value (per transaction total) rose by 0.7%.

EBIT for IHG fell by 12.2% to $61.3 million.

It is somewhat difficult, given these numbers, to fully understand what Mr Jones has meant when he suggested Metcash hardware is tracking the overall market. For the period in question - 1 May to 31 October - total hardware retail sales across Australia, contrasting 2023 with 2022, fell by 0.13%. Moderate falls in Victoria were countered by gains in New South Wales.

Ben Gilbert, an analyst with Jarden Australia, asked a question about future trends for hardware:

There seems to be a bit of a view out there in the market with this that ... the forward order book comes off in a rational way around March, post-March. Just interested in how your customers are telling you they're seeing the forward order book. And then the pricing versus volume dynamic in hardware as well ... which you obviously called out.

IHG CEO Annette Welsh responded:

I think spot on in terms of how the forward order book looks. And I think it also depends by state. Certainly Metro Melbourne, and New South Wales Metro would be in a more challenging environment than those of our other states. Plus also, remember that we are number one to the small and medium builder who have generally a better line of sight and a more positive outcome on the future.
The other part to that being, you asked a question around the price versus volume. I would say, we have seen deflation - and we called it out in the pack - significant deflation in that timber market in the first half. That's really now come to a balanced position. We don't see too much more deflation coming through, but we also don't see too much inflation at the same time. So volumes, I think from that perspective in our view holding well.

Mr Jones continued the answer:

And last thing I'd add is that the position that Annette described of serving those small and medium homebuilders means two important things. One, we have really good relationships at our store level, whether they're owned stores or independent stores. And so we have good visibility to how they're feeling and how they're trading.
And secondly, they're telling us that in the main, they've worked through any of those fixed price contracts that were causing the network so much trouble. So by nature, they have less exposure to it. But that they're feeling much better about their pricing going forward.

Hardware performance

It's worth noting that the only reference to online business that we could find in relation to hardware was a note that online sales for TTH fell by a further 7.2% during the half, and now represent 5.1% of "non-account sales".

One reason given by Metcash for the drop in performance by hardware had to do with additional charges, as Mr Jones explained:

Firstly, approximately $4 million in regulatory occupancy costs and labor related costs, particularly in Victoria. And it's higher than other pillars because we're domiciled in Victoria. And we have a higher retail store base, which the other pillars don't have, which has a high exposure to CPI-linked occupancy cost, state land tax, and employee related Fair Work increases.

This point was taken up near the end of the results presentation, when analyst David Errington of Bank of America asked a key question about Metcash's hardware business:

So is it right to come out with the view that maybe there's some more opportunity to hold and maybe grow your margin a little bit in food, but going forward in hardware, as you say, as you're going into retail, you're going to have a bit more costs and the costs there seem to be more sticky in terms of Victoria, et cetera, et cetera, seem to be the cost of doing business with this regulatory stuff, labor costs going up. It seems that the cost lever in hardware is a little bit less available. Is that a fair approach to consider?

Mr Jones responded:

In hardware you're right to point out that particularly as a result of some of the Victorian specific increases FairWork, taxes, state land-based costs, those were significant hits. And we've spoken about that, and we did for one of them in our year-end results. That said, there is no shortage of efforts in the retail network, both in our own stores and those of our partners to manage those costs. It's very difficult to take out a big cost hit like that and manage a slowing in volume growth at the same time.
What happens in retail, of course, and again, we've spoken about this before, is that a retailer's EBIT margins are more exposed to volume ups and downs than a wholesalers. And in hardware and tools, which is more cyclical and less defensive, you have that aspect as well. As I've said a few times now, that will continue to improve as the long-term demand and the long-term market position that we have in IHG and Total Tools manifests in what we believe is an environment where more building is required.

Analysis

It's interesting to speculate whether without TTH, IHG might have returned more positive growth. In noting the categories that each saw growth opportunities emerge, Metcash lists paint, garden, kitchen, bathroom and laundry categories as growing at over 8% during the half for IHG. For TTH, Metcash lists cordless power tools, outdoor power equipment, accessories and hand tools as the key growth categories. Did some of TTH's growth take expansion away from IHG?

There are a range of different, interesting factors at work in these results and their presentation. It's worth noting, as Mr Jones did in response to a question by Lisa Deng of Goldman Sachs, that the current performance of Metcash hardware in relation to its pre-COVID-19 and pre-TTH days remains elevated.

The one thing that I do just want to point out, when you look at our hardware retail business, while the margins are down for reasons that I think we've discussed at length today, they actually remain above the long-term average. In fact, not just the long-term average, they're higher than they ever were pre-COVID. So while we would like them to be as high as they were in the peaks of the last two years certainly and we're working hard to bring them back up, it's a material indicator of the health.

HNN has pointed out clearly over the past five years that as Metcash has shifted from being mostly a hardware wholesaler to more of a hardware retailer that it is much more exposed to market risk. One way of viewing its current situation is that after the successful hardware retail party that happened over the COVID-19 years, it now faces the subsequent hangover as demand dips down again.

But that would be overly simplistic. The additional levels of revenue brought about by societal changes during the COVID years have changed something of the culture of hardware retail in Australia. There is, for example, more acceptance of the gradual corporatisation of Mitre 10 stores, largely because this is seen as less threatening to stores that choose to remain 100% independent, now that overall revenues are elevated.

Here we really need to circle back to Mr Jones' statement that the market position of TTH and IHG

...will continue to improve as the long-term demand and the long-term market position that we have in IHG and Total Tools manifests in what we believe is an environment where more building is required.

One difficulty with this view is that even the Housing Industry Association (HIA) doubts that a resurgence in building after the decline during FY2024 will see a radical increase in the number of detached housing starts. According to its November 2023 document "HIA State and National Outlooks: The home building rollercoaster":

Multi-unit starts will also continue to recover slowly from their decade lows through the pandemic, as investors respond to low rental vacancy rates ... [P]rivate sector investors will continue to return to the apartment market as the effects of the pandemic wane. This should see a sustained recovery in multi-unit starts, through to at least the end of the decade. There is also variance in the forecasts for each region and across buyer types. It is anticipated that New South Wales and Victoria will see the most significant slowdown in detached starts, and the most significant growth in unit commencements.

Given the housing crisis, those multi-unit dwellings are likely to be six-storeys and above - not the sort of jobs that the smaller builders IHG relies on will really take on. This means the medium-term markets might shift significantly away from those Metcash can readily access.

Yet what is slightly dangerous in what Mr Jones has to say from a purely corporate perspective is that corporations, unlike individually-owned retail businesses, must always find growth. We can admire the fact that Metcash has managed to squeeze out more growth from aspects of its business such as IGA and food, despite heavy competition from a dominant duopoly, and a range of additional discount chains. Likewise, its hardware operations remain in the shadow of what some might consider a "functional monopoly" instituted by Bunnings.

The question is, with the Australian economy arguably beginning to shift in the same direction as the far more successful US economy, towards what we might call the "post-industrial", do the existing hardware and food businesses really represent the best growth opportunities, from a corporate perspective?

Taken further, this could go in two directions. One direction might be to change strategy with hardware, from strong growth - Ms Welsh has the declared intent for IHG to be the number one supplier to trade builders - to a lean operation with a focus on lower sales but stronger return on capital (RoC).

The other, potentially parallel direction would be to see IHG as a platform with a specific retail presence in a wide range of communities. The "sideways" opportunities this enables might include, for example, converting Mitre 10 into a retail brand that also offers electric vehicle charging.

FY2025 is really going to be the first truly post-pandemic year. But that doesn't mean a return to the FY2019 economy. It's more going to be an economy suddenly slammed by developments that have already taken hold overseas, but been delayed in Australis due to the exigencies of pandemic recovery.

The ultimate question is, which hardware operations will be agile enough to take advantage of new opportunities, and which will remain trapped in a self-definition that has more to do with the 1990s than the 2020s.

companies

Supplier update: ARDEX Australia

Green star regional headquarters

The $140 million site in Kemps Creek, west of Sydney, helps to position the company as an Industry 4.0 building materials maker in Oceania

ARDEX Australia is nearing completion of its manufacturing regional headquarters in NSW. It is the single largest infrastructure investment - $140 million - that the privately-owned, global company has funded in its 70 years of operation.

Oceania regional managing director, Fabian Morgan, said the move underscores the company's future-focussed sustainable vision.

We are passionate people who are driven by innovation, responsibility, integrity and belonging. The site's 50-year design life and targeting 6-star green rating are testament to our vision, values and plans for reinvestment back into our people, profitability and planet.

The site's customised advanced design includes a world-class 35-metre high powder manufacturing tower used to vertically mix raw materials efficiently. The new liquids manufacturing plant is an industry-first for its orientation and size, and has a 20-metre silo tower for storage and transfer of raw materials to the multi-level mixing plant. Mr Morgan said:

Our commitment to local manufacturing and Australian-made supply brings certainty and stability to customers.

Other Industry 4.0 elements include automation, electric vehicles and forklifts, solar panel system spanning 17,000sqm, rainwater tanks, and energy efficient lighting - targeting the site a 6 Star Green Star Design As-Built v1.3 rating and a serious contender for awards.

The ARDEX Oceania HQ site doubles the size of the company's current research and training facilities. It is part of The YARDS industrial estate, developed by joint-venture partners Frasers Property Industrial and Aware Real Estate. It is the first in Australia to achieve a 6 Star Green Star Communities v1.1 rating from the Green Building Council of Australia. It includes solar installations, water harvesting and recycling, and full electrification to facilitate a seamless transition to fossil fuel-free energy sources in the future.

The location is strategic for an optimal national logistics network for the warehouse. It is nearby the 24/7 Western Sydney International Airport and future Southern Link Road in the Western Sydney Aerotropolis, close to the M4 and M7, and within Greater Western Sydney's sought-after industrial zone, alongside Microsoft and Amazon.

Bunnings is ARDEX Australia's largest customer and Mr Morgan told CEO Magazine the partnership has inspired more innovation within the company. He said:

We've launched an ARDEX-brand range of bespoke hand tools, which re designed from the ground up specifically for the consumables we sell.

For the first time, ARDEX will merge its manufacturing, warehousing and support office along with DTA Australia, Nexus Adhesives and WEDI, in April 2024.

The site also complements the other nine manufacturing and 14 distribution centres around Australia and New Zealand.

companies

Company update: Big River Group

New look, confirmed values

Big River Group said its strategic initiative is aimed at fortifying its market position by unifying the company's diverse portfolio of brands to foster synergies across its business operations

CEO of Big River Group, John Lorente, said the rebranding is a proactive step to streamline operations, create unity across the business and unlock new opportunities for growth.

By aligning our local service excellence with our national scale, we aim to enhance our operational efficiencies while driving excellence and innovation in our solutions to better serve our customers, suppliers, and shareholders.

With a legacy spanning over 120 years, Big River Group believes it is positioned for future growth while remaining committed to stakeholders. Mr Lorente said:

We understand the importance of clarity and consistency in how we represent ourselves to the market. Our rebranding effort signifies more than just a visual transformation; it leverages our extensive experience and service autonomy across the group, empowering the company to adapt swiftly to evolving market dynamics while maintaining a steadfast focus on customer satisfaction.
By consolidating our resources and expertise under a cohesive brand identity, Big River Group is poised to capitalise on synergies and drive sustained growth in the years to come.
There is a need to be representing ourselves as one Big River team showcasing our capability for our customers and suppliers.
Our mission, 'Committed to doing good business with good people to build better projects' serves as a testament to our commitment to operating as one team, delivering exceptional value and product solutions to the market.

The phased roll-out of the rebranding initiative will commence with the introduction of the new logo, followed by subsequent brand assets throughout the year.

Key highlights of the initiative include:

  • Big River Group's brand structure will adopt a hybrid approach featuring five key brands: Big River Group as the Masterbrand, with Big River Commercial and Big River Trade Centre as sub-brands, and Timberwood Panels and Plytech Panels as endorsed brands.
  • The rebranding initiative will align all Big River Group brands under shared common values, ensuring consistency in delivering exceptional products and services.
  • The rebrand means a new logo, website design, and name changes to existing brands, maintaining visual coherence to the Masterbrand, while reflecting the company's renewed focus on synergy and cohesiveness.
  • Related

    Big River Industries acquires Epping Timber Joinery & Hardware - HNN Flash, November 2022
    companies

    Supplier update: Industrial, safety & tools

    Industrial supplier ATOM sold to private equity

    Techtronic Industries ordered to pay a record penalty for resale price maintenance conduct: ACCC

    Private equity firm Pacific Equity Partners (PEP) will compete directly with Wesfarmers in the industrial and safety supplies category, after buying distributor ATOM and seeking to double its earnings in coming years.

    PEP managing director Tony Duthie said the firm had agreed a deal to acquire an 80% stake in the company, reports The Australian Financial Review (AFR). It plans to grow ATOM's footprint, including via bolt-on acquisitions of smaller rivals.

    While Mr Duthie declined to comment on the purchase price, the deal is expected to value ATOM at a few hundred million dollars. He told the AFR:

    There's a strong organic growth story both in terms of natural tailwinds given the sectors and the heightened focus on safety. There's also an ability to scale the network nationally and increase it from the 11 sites there now as well as some strong M&A opportunity.

    He said PEP would work with ATOM's management team to identify bolt-on acquisitions.

    There are a number of family-owned small players that are specialists from the product space or geographic space, and they could in-fill our network nicely.

    ATOM sells safety equipment such as gloves, protective goggles and workwear, along with lubricants, tools, nuts and bolts, cleaning supplies and other industrial consumable products. Its customers include miners, infrastructure builders and owners, and defence contractors. Mark Bishop has owned the business for about a decade.

    The company turns over about $350 million of products a year and is the second largest player in the sector behind Blackwoods, which is owned by Wesfarmers.

    ATOM's chief executive, Jason Johnson - a significant shareholder - would remain with the business as an executive and investor under the new ownership structure, Mr Duthie said.

    Related

    Industrial and safety products distributor ATOM seeks buyer - HNN FLash, June 2023

    Techtronic Industries

    Power tool company Techtronic Industries has been ordered to pay penalties totalling $15 million after admitting it had engaged in resale price maintenance conduct in relation to Milwaukee branded products, including power tools, hand tools and accessories, according to the Australian Competition and Consumer Commission (ACCC).

    The total penalties, ordered by the Federal Court, are the highest imposed for resale price maintenance in Australia. Resale price maintenance (also known as RPM) occurs when a supplier of goods specifies a minimum price below which a reseller must not supply, offer to supply, advertise, or display those goods for sale. In a statement, ACCC deputy chair Mick Keogh said:

    The ACCC submitted to the Court that this level of penalty was appropriate given the seriousness, duration and extent of Techtronic's conduct. It sends a strong signal to deter others from engaging in RPM, and should serve as a warning for all other businesses.
    Resale price maintenance is illegal because it is harmful to price competition, which may mean consumers pay a higher price than they would in a truly competitive market.

    Techtronic admitted that, between January 2016 and July 2021, it entered into 97 agreements with retailers and dealers which restricted the sale of Milwaukee products below a specified minimum price.

    Techtronic also admitted it enforced the restrictive RPM provisions in its contracts 29 times between December 2016 and May 2020, for example by issuing warnings to dealers who offered to sell, or sold, Milwaukee branded products below the specified minimum price, or by withholding supply from two dealers.

    The Court also ordered Techtronic to post corrective notices on its website and to its dealers, implement a compliance program and pay part of the ACCC's costs. The Federal Court will publish its written reasons at a later date.

    Techtronic cooperated with the ACCC. The parties filed joint submissions, a statement of agreed facts, and joint proposed orders.

    The ACCC instituted proceedings against Techtronic in November 2021.

    Related

    TTI in court for alleged resale price maintenance over power tools - HNN Flash, December 2021
  • Sources: The Australian Financial Review and Australian Competition and Consumer Commission
  • companies

    Category update: Building materials

    BGC to be placed on the market

    Irish building materials giant CRH and the Barro family make a $2.1 billion buyout proposal for cement maker Adbri

    Daniel Cooper, chief executive of building materials and home-building group BGC recently told The Australian Financial Review (AFR) that it plans to relaunch the sale of the company. He said:

    We will reinitiate the sale in the near future.

    However the price was yet to be determined. The company was previously on the market for around $1 billion.

    The revival of a sale process follows the sale of BGC's plasterboard and fibre cement divisions to Belgium-based global building materials manufacturer Etex, announced late last year.

    Included in this deal is BGC's plasterboard plant in Western Australia, a 56,000sqm facility located in Perth, and a network of nine warehouses across Australia and New Zealand.

    Prior to the acquisition, Etex already had a significant presence in Australia with 14 sites and commercial brands such as Siniat plasterboards, Promat passive fire protection and high-temperature insulation, and EQUITONE fibre cement cladding panels.

    This sale is expected to close in February, which BGC said would solve its debt troubles. Mr Cooper said.

    The sale strengthens our position, leaves us with zero debt and many millions in the bank.

    The company added that it "has returned to normal trading in [this financial year], as home builds return to normalised levels and margins."

    BGC had abandoned previous attempts to sell the business due to economic headwinds.

    Related

    BGC Group suspends sale again - HNN Flash, September 2022

    Adbri

    Building materials giant CRH and Australian family-controlled business Barro Group have offered to buy concrete maker Adbri in a deal that values the company at around $2.1 billion.

    The joint bidders still require the approval of the remaining Adbri shareholders for any transaction to proceed. New York-listed CRH's proposal is indicative and non-binding, and Adbri has granted exclusive due diligence, according to the AFR.

    Formerly known as Adelaide Brighton until a name change in 2020, Adbri has set up an independent board committee. It told the ASX it had "entered into a process and exclusivity deed" with CRH and Barro Group until February 28, 2024 to progress a potential transaction.

    The Adbri board intends to recommend the deal unanimously, subject to a binding agreement and an independent expert's assessment, in the absence of a superior proposal. The CRH bid will also require the approval of the Foreign Investment Review Board.

    In The Australian, analysts are expecting the offer to succeed given the size of the offer price premium - 41% - and outlook for the building market.

    Adbri turned over $1.7 billion in 2022 for a net profit of $102.6 million, down on the $116.7 million achieved the previous year. It operates more than 200 plants and facilities across Australia.

    For CRH, the proposed deal marks the first big move by the company outside its core European and North American markets since it acquired businesses in the Philippines and Brazil eight years ago under the EUR6.5 billion takeover of an international portfolio of assets from Lafarge and Holcim.

  • Sources: The Australian Financial Review, Irish Independent and The Australian
  • companies

    Metcash gets 100% of Total Tools

    Cost is set at $101.5 million

    Metcash has bought out the final 15% of Total Tools, bringing its stake to 100%. The current CEO of Total Tools, Paul Drumbrell, will be stepping down from the role in April 2024.

    On 13 November 2023 Australian retail conglomerate Metcash announced it would acquire a further 15% of Total Tools Holdings (TTH) later in the month, bringing its stake to 100% in the trade tool retail franchise. The price ticket runs to $101.5 million.

    This follows on from the initial acquisition of a 70% stake in December 2020 for $57 million, followed by an increase to 85% ownership near the start of FY2022/23 for $59.4 million.

    The ASX announcement trumpeted the success of the operation:

    The business has delivered remarkable growth with annual sales in the retail network almost doubling from $585m in FY20 to $1,085m in FY23. In addition to strong demand, the growth has been supported by an expansion of the retail store network from 81 to 112 stores, with plans to add around 10 stores a year for the foreseeable future.

    Associated with this, the current CEO of TTH, Paul Dumbrell announced he will be leaving that role, which he has served since 2018, effective some time in April 2024.

    Contrasts

    The ongoing growth of TTH stands in stark contrast to the relatively slow growth of the Wesfarmers rival in the tradie tool market, Tool Kit Depot (TKD). This currently has only 16 stores nationwide, mostly in South Australia and Western Australia.

    An article on News.com.au by Rebecca Le May quoted Ben McIntosh, chief operating officer, commercial at Bunnings, as setting out somewhat more ambitious plans back in December 2021.

    Tool Kit Depot in 2021 - News.com.au

    Ms Le May reports that he laid out a plan to build a network of 75 stores around Australia. As TKD grew out of the acquisition of Adelaide Tools in 2019, 16 stores would seem to be a relatively slow pace of development.

    Analysis

    Perhaps the most amazing element of the competition for this market is that no competitor has thought to emulate the highly successful Kingfisher owned Screwfix, which originated in the UK. Screwfix began as a catalogue-based trade tool supplier, then moved online. It has expanded into physical retail stores, but some 60% of its orders still originate online.

    What differentiates Screwfix from the online offerings of companies such as Total Tools is that it has moved to ultra-fast delivery, managing one-hour delivery times across 45% of the UK. For busy tradies on a worksite, it solves the supply problem when a job needs to be completed rapidly.

    companies

    SequenceRokset: Opportunity to grow

    A paint accessories powerhouse

    Two Australian businesses with long established histories unite to make many top quality brands available

    Almost four years ago, Sequence and Rokset were brought together because they recognised the strong synergies they shared could be combined to better serve the market. As SequenceRokset Consolidated (SRC), the companies have moved successfully from being fierce rivals into one customer focused enterprise, with an emphasis on innovation.

    Both businesses have a rich history independent of each other, and as Rokset celebrates a century of expertise supplying, and Sequence nears its 50th anniversary, together they have been serving Australians for almost 150 years.

    Rokset is known for being at the forefront of paint brush technology on an international level. Sequence has been recognised for its customer service, having been awarded supplier of the year many times by different retail groups over the years.

    Kris Gammaldi from Victoria-based Inspirations Paint Moorabbin (and another store in Camberwell), has been stocking SequenceRokset products for 20 years. He told HNN:

    For us, one of the big benefits dealing with SequenceRokset is that they're actively involved in our business. They're not a big corporate so we have a great one-to-one relationship with them over the history of our reps and sales managers. We have interaction directly with Ian (Green) and Peter (Clausen) as well. [Ian Green and Peter Clausen are both SRC directors and Ian is also CEO.]
    They'll present opportunities rather than products. They're very good at identifying a product that would be an opportunity rather than just saying, 'Here's something else that you've already got'. They like innovating. So often we'll have conversations about thinking about getting this product in, and discussing how do you think that would go? And they're always looking for something new. Like I said, it is more about opportunity than just selling a product.
    They understand margins so when they present products as opportunities, they have done the analysis and believe these are the things that can do well in the market. Rather than saying, 'Here's this and it's the cheapest version of this'.

    Since coming together, SequenceRokset's product offering has grown substantially by incorporating the individual brands that were previously distributed separately.

    The main ranges now include Sequence (surface preparation and protection, tapes, PPE, and workwear), Rokset (brushes, rollers, and buckets), Red Devil (caulks and fillers), Klingspor (abrasives), OLFA (knives & blades), Shurtape (tapes and accessories), Mirka (sanders and polisher, dustless extractors, and abrasives), as well as a number of other smaller brands.

    Australian Made mission

    Rokset has never lost its passion for supporting Australian manufacturers and continued these ideals into the SequenceRokset merger.

    In October 2023, SequenceRokset officially launched its Made in Australia range. Wherever possible, products are sourced or manufactured locally, including the huge task of shipping SRC moulds back to Australia. This can also mean reduced lead times and no shipping delays.

    Furthermore, 100% recycled plastic is used for many of the products these moulds produce. For retailers, this commitment to Australian Made and being environmentally minded has enormous market benefits.

    According to new consumer research from Roy Morgan (February 2023), Aussies' preference for Australian-made goods hasn't wavered. Data collected by Roy Morgan found that more than four in five (86%) Australians say buying Australian-made products is important to them. Few people, only 2%, said buying Australian-made wasn't important to them.

    Most Australians (67%) stated in the latest survey that they "often" or "always" buy Australian-made products, citing supporting local jobs and the economy as their reason for doing so, followed by the quality or reliability of Australian-made products. Over one-third (35%) of Aussies also claimed to purchase more Australian-made products now than before the pandemic. The research also found that buying Aussie products made shoppers feel good.

    From a branding perspective, almost all (99%) Australians aged 18 and over are aware of the Australian Made logo, with the logo having the highest recognition of any certification mark in Australia. Trust in the Australian Made logo is also high. 93% of Australians are confident products displaying the mark are made or grown in Australia, according to Roy Morgan.

    SequenceRokset packaging features the green and yellow Made in Australia kangaroo in large size and an enhanced recycled materials logo.

    Inspirations Paint Moorabbin

    For Inspirations Paint Moorabbin, working with SequenceRokset has provided opportunities for growth. Mr Gammaldi also has a long history in the paint industry that gives him additional insights in terms of suppliers. He explains:

    I've been around paint my entire life even though it was unintentional. My dad worked for Dulux for 25, 26 years so I grew up around paint. I had a couple of part-time jobs working in Dulux stores and for a period of time after I finished uni, I was working in head office at Dulux, then worked as a rep before leaving to go do something totally different. I was doing some part-time working in stores when John, my business partner, and a mutual friend, and I decided to get together to do this. John had previously worked as the Berger brand manager back when Dulux first bought Berger Paint.

    Mr Gammaldi said the last six months have been more challenging after the highs of the COVID and post-COVID periods.

    There's been a lot more issues coming into the marketplace of labour. Obviously interest rate rises, they haven't helped at all because the reality of what we sell is it is very much discretionary spend. Nothing goes wrong if you don't paint.
    But the coming 12 months will be a bit different. I know there's a lot of major construction work that's going on in Melbourne and we supply a number of large contractors. [Both stores are 80-90% trade.]
    But retail, unfortunately we're going to have to wait until probably next year when we start getting a little bit of rate relief when people start feeling as though things are moving in a positive direction, and they start feeling more positive about their homes and their surrounds.
    During COVID, a lot of money was spent on homes and people got things done. Now I think people tend to spend money on themselves like the holiday that they haven't been able to go on for three years or a nice dinner. But that will also wane, and once people have done a lot of that, they'll start getting back to purchasing habits of the past.

    SequenceRokset's relationship with Inspirations Paint Moorabbin shows that it delivers genuine value to its retail customers. Retailers will be able to consolidate suppliers when dealing with SequenceRokset and partner with a business that has a long, established reputation for supporting Australian communities.

    Visit the SequenceRokset website for more information:

    SequenceRokset Consolidated
  • Additional Source: Roy Morgan
  • Four in five shoppers believe buying Australian-made is important - Roy Morgan
    companies

    Supplier update: Nippon Paint

    Melbourne-based Pental sells cleaning products to Nippon Paint

    The Japanese paint and chemicals giant continues to expand in China despite the country's property market slowdown

    A number of Australia's popular cleaning products including White King bleach, as well as laundry and cleaning brands Lux, Country Life and Velvet, will be owned by Nippon Paint after a deal to buy the portfolio from Pental. The paint company will also take over Pental's manufacturing plant in the regional town of Shepparton in Victoria, according to The Australian.

    Pental's other well known brands include Little Lucifer and Jiffy firelighters, and cleaning brands Martha's, Sunlight and Softly.

    Under the deal, Pental said it had agreed to sell the bulk of its consumer products business and the Shepparton plant to Selleys, a division of DuluxGroup, for $60 million. Nippon Paint bought the then listed Dulux for $3.8 billion in 2019. (See more at the link)

    The new face of DuluxGroup - HNN Flash, April 2021

    Pental will maintain control of its Duracell battery operations and its Bondi Soap brand, and will also keep its e-commerce hampers arm, Hampers with Bite. It intends to focus on online retail and consumer retail opportunities outside of its traditional household cleaning, disinfectant, laundry powders and soaps business.

    Following the sale, Pental is expected to have a healthy positive net cash position. In its announcement to the ASX, Pental boss Charlie McLeish said:

    What we are announcing ... creates a simplified and more focused business, while also realising value for shareholders.
    Selleys is a highly regarded business with significant capabilities within the consumer products space, including household cleaning. We believe they are well equipped to continue to enhance the reputation of our products, including our flagship brand White King, as well as provide great opportunities for our employees.
    Selleys is committed to retaining manufacturing in Shepparton, offering employment to all current employees and growing the Pental consumer products business over time.

    China market

    Nippon Paint is heavily exposed to China's faltering property market, but betting it can still make "good money" by rapidly expanding its market share even as the country's developers flirt with default. In the Financial Times, Nippon Paint's co-president Yuichiro Wakatsuki said he remains "cautiously optimistic" about China despite investor concerns about the impact of the slowdown for the Japanese group, which makes 35% of its revenues in the world's second-largest economy.

    By selling lower value paints to a growing DIY market and focusing on home renovations, Mr Wakatsuki wants to rapidly grow the company's market share in China. He said:

    You have to be very agile, you have to adapt to the market, you have to know what's going on. You have to know what our competitors are trying to attack.

    Mr Wakatsuki's goal is to expand the market share of various business lines from between eight and 24% to 40% "relatively quickly". He added there is potential for growth through acquisitions:

    If there's an opportunity to buy companies, I will buy China.

    As Chinese property developers started collapsing two years ago, Nippon Paint began shifting its business model away from large-scale projects, writing down its exposures to developers and demanding cash on delivery instead of extending credit.

  • Sources: The Australian and Financial Times
  • companies

    Property update

    Hardware supplier buys office-warehouse

    Investment and development company Pelligra Group has secured Mitre 10 for its West Melbourne location

    A privately held hardware products supplier has purchased a new freestanding office and warehouse in an industrial area of Dandenong South in Melbourne for $31.5 million, reports The Age.

    The 23,476sqm property, with a building area of 13,154sqm, sits among well-known brands in the industrial and logistics hub at 25 Glasscocks Road.

    Gordon Code, Colliers' joint head of the Victorian industrial business, said the buyer was interested in the site due to growing occupancy costs in NSW, which incentivised the group to focus on expanding its Victorian footprint. Mr Code told The Age:

    It decided to double its local manufacturing base in metro Melbourne.

    Colliers data show the average south-eastern prime grade rent was $130 a square metre in the second quarter of 2023, up from $100 a square metre in the first quarter of 2021. Colliers' national director James Stott said:

    Prime-grade assets are the most sought-after by tenants as the buildings offer greater environmental performance. Adherence to organisational ESG, such as energy efficiency and carbon footprint, have shifted occupational demands and companies are seeking newer and updated assets.

    Mitre 10

    Mitre 10 will expand its presence in Melbourne's west, leasing a Laverton North property 18kms from Melbourne's CBD, developed by Pelligra Group and Citinova, according to Real Estate Source.

    The hardware retailer has committed to the 3661sqm office/warehouse as part of a complex at 1-11 Little Boundary Road, for an initial 10 years. The site is spread across 8500sqm, close to the other properties the group occupies.

    Other businesses in the estate, include Clennett Hire, Sydney Tools and Totally Workwear.

    Traditional office, industrial and retail projects are family-run Pelligra's bread and butter, and is headed up by Ross Pelligra. Mr Pelligra also believes he can make money, or at least break even, in the notoriously difficult financial world of sports club ownership. He recently acquired the Adelaide Lightning women's basketball club and Adelaide Giants baseball franchise, and is also rumoured to be closing in on a deal to take over the Adelaide United soccer club.

  • Sources: The Age and Real Estate Source
  • companies

    Supplier update: Iplex

    Ongoing dispute that involves BGC Housing in WA

    Iplex owner Fletcher Building was forced to temporarily halt its shares from trading to brief investors, analysts and media after BGC went public with its claims that Iplex pro-fit pipes was to blame for leaks and the product should be recalled

    BGC Housing estimates the cost to fully re-pipe its impacted homes to be about AUD700 million, which extrapolated equals about AUD900 million and about AUD1.8 billion to refit all the homes in WA and around Australia, respectively. According to BGC's findings, released in October 2023, a change in resin and formulation led to Fletcher Building's Iplex pipes failing.

    However at its recent AGM, Fletcher Building chief executive Ross Taylor said the cost to repair affected houses in Western Australia, the only area impacted, would be more like AUD50 million to AUD100 million for a fault he blames on "shoddy" installation practices.

    Mr Taylor told shareholders that BGC's cost estimate was based on removing Iplex pipes from all houses across Australia but said that was "sensationalist" and "a little bit fanciful", given there were no abnormal leak rates with the 15,000 houses on the East Coast, and only 10.9% of the 17,000 homes in Perth in Western Australia known to be affected.

    To date, the repairs had cost an average AUD4000 each, and were caused by issues such as over-bending pipes, he said.

    Wherever there's been a leak, there's been an installation failure. What that does is it puts extra stress on the pipe and it just takes time then for that to manifest itself in a leak.

    Mr Taylor said the issues were concentrated to two plumbers and one builder.

    Background

    BGC's independent experts say the problem is the pipe itself, and not its installation as Fletcher continues to claim.

    The average BGC house build will have about 90 metres of the Iplex Pro-fit pipe in it, carrying hot and cold water through the home. It estimates on average 6.7 of these Iplex pipes are bursting each day and it is peaking on homes built in 2019.

    Through its remediation programme, BGC has re-piped six homes completely, which took more than six months and cost on average AUD60,000, of which 25% came from relocating residents. Based on this, it claims the cost alone of repairing BGC housing stock is AUD709 million.

    It also claims it discovered problems with Iplex pipes in Victoria, suggesting it's not just a Perth issue.

    BGC is warning there are not enough workers to fix all the pipes and it claims what's been discovered so far is the tip of the iceberg. The company also said it wants the product safety regulator to issue a recall.

    Our advice is that litigation at this time will result in the regulators stepping away, so we encourage affected parties to let the recall process play out rather than engage in a three-to-seven-year litigation process.

    Fletcher maintains there is no valid basis for a recall.

    BGC's experts found the failure of the pipe was due to "environmental stress cracking" and the cause of that was the resin used to make the pipe. BGC told BusinessDesk:

    Its particular physical properties meant that it is not able to cope with reasonable bending stresses, or stresses expected for a pipe of this type. Essentially instead of a flexible, bending pipe we've got something that is behaving more like glass, particularly when it gets cold.

    BGC's experts hypothesise the problem started in 2017 when Iplex started using a different supplier of resin.

    Fletcher said BGC's report, supporting the allegations of a manufacturing defect, lacked credibility and relied on flawed methodologies and so could not be relied on for causation. According to Fletcher:

    To date we have also collected evidence from 270 individual inspections of homes in Perth constructed by 12 different builders and plumbers. This has conclusively identified significant installation failures, in breach of Australian Standards, the Plumbing Code and installation guidelines.
    Those failures are the type that generate the plumbing failures that have been experienced by homeowners.
    Despite being offered access to the AUD15 million fund that Iplex established to assist builders and their homeowners to fix plumbing failures that occur and in turn help to establish the root cause of the failures which have occurred in Perth, BGC has refused to access the fund and refused to facilitate Iplex's technical teams access to homes that they have constructed.

    Fletcher said its fund was planned to support repairs for one year and to date it has done 383 homes and used around 20% of the fund.

    Related

    In April, Fletcher Building set aside AUD15 million in a fund to help establish the cause of the leaks and appropriate fixes, and help Perth builders and plumbers complete repairs.

    Iplex is under investigation in WA for leaky water pipes - HNN Flash, April 2023
  • Sources: The Press (NZ), The Australian and BusinessDesk (Wanganui Chronicle)
  • companies

    Supplier update: Brilliant Lighting

    The company admits to engaging in resale price maintenance

    It has committed to sending corrective notices to all affected retailers and distributors as well as establishing a compliance program

    In late September 2022, Brilliant Lighting wrote to 42 retailers and distributors attaching a price list for 116 Brilliant Lighting products. The company informed them that they should not display headline prices on their websites below certain prices. It told retailers and distributors the right to distribute its products was based on adhering to these prices.

    Under Australian competition law, it is illegal for suppliers to prevent, or attempt to prevent, resellers from advertising or selling goods or services below a specified minimum price. This conduct is known as resale price maintenance. Australian Competition & Consumer Commission (ACCC) acting chair Mick Keogh said:

    Resale price maintenance is illegal because it can stop retailers from competing on price, which means consumers pay more for goods and services. This is particularly problematic at a time when many Australians are facing increased cost of living pressures.
    Businesses need to be aware that the ACCC takes resale price maintenance very seriously. Suppliers cannot maintain price premiums by setting minimum prices. Nor should they bow to pressure from resellers to impose minimum prices on competing resellers, particularly, those with lower-cost online business models.

    In the court enforceable undertaking accepted by the ACCC, Brilliant Lighting has committed to sending corrective notices to all affected retailers and distributors, establishing a compliance program, and not to enforce minimum resale prices.

    As a wholesale supplier of fans, lighting, and electrical products, it sells these products to a network of at least 1,439 retailers and distributors.

    Resale price maintenance is strictly prohibited by Australia's competition laws. It occurs when suppliers:

  • make it known they will not supply goods or services unless a reseller agrees to advertise or sell at a price below a specified minimum price;
  • induce, or attempt to induce, resellers not to advertise or sell below a specified minimum price;
  • enter into agreements, or offer to enter into agreements, for the supply of goods or services on terms including that the reseller must not advertise or sell below a specified minimum price;
  • withhold supply of goods or services because a reseller, or a purchaser from the reseller, has not agreed to not 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;
  • use, in relation to goods or services supplied or that may be supplied, a statement as to price which is likely to be understood as the price below which the goods or services are not to be sold.
  • Source: Australian Competition & Consumer Commission
  • companies

    Bradford Insulation supports NCC 7-star rating

    Redefines energy efficient homes

    The introduction of the NCC 7-Star rating will rely heavily upon the insulation sector, yet achieving this rating does not mean completely changing the way building and construction is implemented, according to Bradford Insulation

    As Australia continues to move towards a more sustainable future, it's likely that energy efficiency standards will continue to rise. The new NCC 7-Star rating not only demonstrates a commitment to energy efficiency stewardship but also presents many opportunities for better practices in building design and construction.

    The insulation industry in Australia is stepping forward to a 7-Star rating and, with it, the future of sustainable living.

    Insulation for the roof, walls and floor, is a cornerstone of energy-efficient building design. Proper insulation reduces energy consumption for heating and cooling, along with a comfortable and healthy living environment. It can significantly contribute to noise reduction, leading to quieter interiors.

    Given Australia's diverse climatic zones, insulation has to work both ways by keeping homes cool in the summer months and warm during the winters. A well-insulated home reduces reliance on air conditioning and heating systems, cutting energy consumption and greenhouse gas emissions.

    The new NCC 7-Star rating is a major step forward in promoting more energy-efficient and durable systems with a longer-term net zero goal design and construction practices in Australia. This standard primarily affects the residential sector, pushing the building trade to adopt new approaches and techniques to achieve higher energy efficiency levels.

    In addressing the forthcoming introduction of the NCC 7-Star rating, Kathy Hocker, general manager of marketing & customer operations at Bradford Insulation, said:

    We are at a pivotal point in the industry. The advent of this new rating is set to bring about a significant change in insulation installation and usage across Australian residences. We foresee a boost in demand for sophisticated insulation materials, to meet the increased energy efficiency standards. However, before we go through this transformation, there are a number of factors that builders, specifiers and architects should understand and which homeowners of new builds should also be across.

    With the new NCC 7-Star rating, buildings will need to have even higher insulation, glazing, sealing, design or layout and passive solar design to meet the increased standards. This update represents a 18-25% improvement for homeowners on the base energy efficiency requirements as compared to the older NCC 6-Star rating. (Sourced from "Shoot for the stars: Top tips to improve your home's energy efficiency" by the Climate Council)

    The following are practical tips and strategies designed to help industry professionals including hardware retailers to effectively explain these changes, enabling them to make well-informed decisions about their insulation choices.

  • Don't ignore R-values: An R-value is a measure of thermal resistance; a higher R-value is likely the most cost-effective choice for achieving energy efficiency in any design. Regardless of the climate zone, building orientation, or construction type, prioritising a higher R-value insulation should be a fundamental part of a building plan and recommendation to homeowners.
  • Look for quality products: Quality is key in insulation products for their effectiveness and longevity. Bradford Gold[tm] and Bradford Gold[tm] High Performance Insulation is designed for Australia's unique climate and has been independently tested for performance under various conditions. They are certified to Australian standards, meeting or exceeding compliance guidelines for thermal performance. Bradford products are also accredited for fire safety, environmental sustainability, and health considerations.
  • Don't overlook acoustic insulation: Alongside thermal insulation, consider the benefits of acoustic insulation to help reduce noise transmission between rooms and from external sources. Some insulation materials such as Bradford SoundScreen provide both thermal and acoustic benefits.
  • Install properly: Even the best insulation won't perform well if not installed correctly. It's essential that insulation fits snugly between studs, joists, and beams, without gaps or compression so it retains its design thickness. Installation in accordance with the NCC and Australian Standards is always recommended.
  • Seal it up: A well-insulated home isn't just about the insulation itself; it's also about preventing air leaks and minimising hot and cold draughts blowing through the home. Builders should ensure gaps around windows, doors, and other areas prone to air leaks are properly sealed.
  • Don't forget condensation control: While sealing a home for energy efficiency is important, so too is ensuring sufficient moisture control and ventilation to reduce the risk of condensation, mould growth, and poor air quality. Vapour permeable wall wrap and ventilation solutions should be considered as part of the overall design.
  • Understand the full cost: The cost of insulation isn't just about the price of the product. It also includes installation costs and the ongoing savings in energy costs that the insulation will provide over its lifetime. Optimising insulation is more cost-effective compared to enhancing other more expensive building components, as it provides an overall Star rating gain for less than the cost of other building elements.
  • Related: The National Construction Code (NCC) 2022 energy efficiency provisions for new homes is set to take effect (with various State transition periods) from October 1, 2023.

    Seven-star energy ratings for new homes - HNN Flash, September 2022
  • Source: Bradford Insulation, part of CSR Building Products Ltd
  • companies

    Haymes Paint launches latest colour library

    Colour Library Vol.17 is named Origins

    Colours that evoke security, comfort and belonging will be the most popular hues in 2024, according to the company's latest expert colour forecast

    Origins is a "transformative fusion of past wisdom and futuristic potential, designed for the architect, innovative interior designer, and discerning design enthusiast" according to Haymes Paint. At the heart of Origins lies "the courage to explore and adapt".

    The collection has been crafted in collaboration with muti-disciplinary design studio Nexus Design, home decor and furnishings brand Adairs, as well as design duo @joshandmattdesign.

    The Colour Library Vol.17 - Origins, offers six different colour palettes:

  • New Narratives
  • Heritage Hues
  • New Terrain
  • Retro Mash-Up
  • Solid Ground
  • Strong Haven
  • Interior design specialist at Haymes Paint, Erin Hearns, said:

    The company is delighted to launch Haymes Paint's Colour Library Vol. 17 for 2024. At Haymes Paint we understand the world around us constantly evolves, and there's a growing need for sanctuary in every space we occupy. The 'Origins' collection aims to provide that refuge, grounding us with a return to timeless essentials while infusing contemporary trends.

    Erin's career encompasses interior design, retail, and visual merchandising. This diverse background allows her to strike an ideal balance between colour and architecture in every project that crosses her desk. Working in harmony alongside builders, architects, painters, and DIY customers, she has a wealth of knowledge that enables her to bring out the personality in any space.

    To celebrate the release of Origins, Haymes Paint is set to host a panel event that will explore the scientific underpinnings of the forecast. This year's panel of experts, which includes its collaborators behind Origins will take an in-depth look into the intricacies of how colour, tone, and texture influences not only the look and feel of an environment but also the mood and intention for people in the space.

    About the partners

    Nexus Designs - Haymes Paint engaged the design studio to develop the colour palettes. Experts in providing analysis of global trends, coordination of colour ranges, colour advice and analysis, Nexus Designs used its extensive industry and consumers insights to develop these palettes. Multi-disciplinary to the core, Nexus Designs drew on its integrated offering including interior design, product development and visual communications to bring an innovative and nuanced response to the brief.

    Adairs - A leader in shaping the dreams of home enthusiasts, Adairs creates design solutions that transform ordinary spaces into dream havens. Leveraging over a century of expertise, Adairs leads the way in offering on-trend home decor and furnishings, blending luxury with affordability to elevate everyday living spaces.

    Josh & Matt (@joshandmattdesigns) - Josh Jessup and Matt Moss are a Melbourne-based couple who have gained traction on TikTok due to their eclectic and unique interior design style. With a following of 839k on TikTok and 633k on Instagram, Josh & Matt have a loyal fan base that values their talent and style.

    With their style revolving around curated maximalism, infused with a blend of postmodern and retrofuturism elements, Josh & Matt's aesthetic embodies their identity. Their content lets them use their space as an extension of themselves, connecting with people all over the world.

    Josh and Matt's eye for design and style allows them to see beyond current trends, their love of colour makes them a great collaborator for Haymes Paint.

    companies

    Home First Services relaunched

    One-stop tradie shop with same-day service

    Under new ownership, the group has almost 250 staff across Melbourne, Sydney and Adelaide offering home maintenance

    In a related sector to hardware retail, Home First Services is made up of a group of plumbing, electrical and home improvement companies that fell into administration after the COVID-19 lockdowns.

    James Hetherington co-owned the three companies - PlumbFirst, ElecFirst and Comfy First - which went into administration the week after builder Porter Davis collapsed, having been unable to meet the increased costs of materials, soaring wages and labour shortages brought about by the pandemic.

    One of his competitors, Australian Home Services group, saw an opportunity to bring these entities together under the one umbrella, refine the business model, rework the loss-making parts of the business, and re-brand it in Victoria and South Australia. It has plans to grow quickly to become a national business.

    Mr Hetherington was retained to lead the transition as chief executive of the new Home First Services organisation. He said:

    We're relaunching the Home First Services brand with a much more sustainable business model so we're planning to come back stronger, bigger and better than before. Most of our staff stuck by us through thick and thin during COVID so, as much as anything else, we're doing this for them. Now, they should all have great job security.

    A key differentiator is the company's guarantee of same-day service and if it doesn't live up to that promise, it will take $100 off a customer's bill.

    Mr Hetherington said he (and his customers) became so fed up with "the tradie experience" such as leaving messages on answering machines, having calls returned a day later, putting up with shoddy workmanship that he resolved to try and change that with his offering.

    We want to serve our communities and ensure our clients receive a level of service that's unmatched. That means breaking the traditional stereotype of the 'tradie' experience.
    If you make a promise that you'll give a customer same-day service, you've got to live up to it. We've all been there, booked in a trade only to have them not show up, cancel on us or just aren't as professional as we'd expect, so we're trying to make the whole process much more customer-friendly.

    Background

    Earlier this year, Melbourne-based Plumbfirst became the third major contractor to run into trouble with Victoria's largest privately-owned contractor Richstone Group also calling in voluntary administrators, and CDC Plumbing and Drainage placed in liquidation in February, with the loss of 197 jobs.

    WLP partners Alan Walker and Glenn Livingstone were appointed as administrators of Plumbfirst and five other group entities. At the time, WLP said:

    The administrators are now seeking urgent expressions of interest from suitable parties to recapitalise or purchase the group and its assets, or both. While that process advances, the administrators will continue trading the group with no interruption to ordinary operations expected at this stage.

    Mr Walker said the company's directors decided to place it in voluntary administration after rising materials costs adversely impacted its performance.

    The group comprises one of the largest plumbing and electrical contracting operations across southeast Australia with a well-established 170 strong workforce and customer base.
  • Sources: Australian Home Services and The Australian
  • companies

    Want Home + Gift

    Homewares create a welcoming store

    More independent retailers are broadening their ranges to include home decorating products. Want Home + Gift has found a niche with hardware stores by offering products that appeal to customers through authenticity.

    More independent retailers are revisiting their in-store stock, and exploring new options. That is largely because independent retailers have seen increases in general store foot traffic since the end of the COVID-19 restrictions. That is largely down to an increase in overall sales, with more people fixing up their homes. There have also been some shifts in the market dynamics between Bunnings and the independent market.

    One area they are keen to explore is the more decorative, homewares oriented area. At the same time, they have something of an aversion to goods that belong more in a gift shop, where all too often the twee meets up with the kitsch.

    Enter Want Home + Gift. A new supplier to the HBT National Buying Group, and exhibiting at the 2023 HBT Conference for the first time, they've attracted outsized interest to their small stand.

    HNN spoke with the two owner/directors of the company at the Conference, Mark Woolfson and Alan Duhamel. According to Mr Woolfson, while the company has been around for 25 years or so, the current owners acquired the company back in 2006. The reason behind their current success has been a crucial pivot from being all about "gift" type products, to products that customers would want to buy for themselves and their own homes.

    When we bought the company, just the fact that it had so many customers diluted the risk a lot. And we saw an opportunity to not narrow it down just to giftware, but to [open it up to] more decorative products, everyday products for anybody. Not just someone looking for a gift. This is just an easier purchase, so that if someone walked into a store they could purchase it not strictly as a gift. Narrowing it down to just strictly being a gift item was restricting.

    With that shift in purchase basis, this meant there was a whole new range of retail customers interested in stocking the products.

    We definitely got a different type of customer. More the garden centres and the hardware stores, which was much less "gifty" than going into a gift shop. Traditionally, if you're looking for a gift there is a gift shop or a newsagent, even a pharmacy. And so it just opened up completely. It's even the garden centre started and the hardware stores followed and we've been very successful and they've become our key customers, our core customers.
    So we tend to buy what our customers buy from us. We follow what they need. We followed them down that rabbit warren, it's gone down the garden and then hardware route. So our product is more applicable to hardware and garden centres than it is to gift shops.
    It's an easier sell for everybody, if that makes sense. If you're looking for a gift, that's more specific. It's more complicated. Will the person like it? Is it enough money? Maybe you should spend more money? So many questions. If someone falls love with a piece, it's a much easier sell.

    While that is a good beginning, Mr Woolfson points out that the company has also used the changed market conditions over the last year and more to improve the position of Want Home + Gift. As Mr Duhamel describes it:

    Some of the feedback we've been getting today is that we've continued to do business as usual. We have kept the same people, same level of service. We actually heard this from quite a number of visitors today. They were saying to us some of the other competitors in a similar space have just hiked their prices up. A lot of businesses have changed hands. The prices have really gone up and the level of service has fallen. So that was a good thing for us to hear. We've been consistent.
    We pride ourselves on talking to our customers and trying to do what we can for them. An example is freight. We'll work with them. If they have a forwarder, we'll work with them. We do what we can to make things work.

    Want's supply chain runs through China, but also through Indonesia. While they tend not to specify products from scratch, they take existing products and change some of their features to better suit the Australian market, such as colour, materials and textures.

    The company doesn't see itself as being any kind of a "wheeler and dealer" in the market, but more as offering a product that has a natural appeal, and offers an opportunity for add-on sales. As Woofson puts it:

    We've got in different directions. The size of the business has changed, we've grown, but it's growth in terms of better product, better authenticity. There's not so much sales pitch involved. That's been the best growth for this business sector. We don't have to force it on deals and things.

    For hardware stores, one the best things about the product - aside from its strong appeal to customers - is that it also helps to make hardware stores a more pleasant place to visit.

    We had one lady who came in here, and she said, this is exactly what we're looking for. It's like solving a problem for them. It's also solving a problem for them more in decorating the hardware stores, making them softer.
    It softens everything. The plants further soften these products. So our product is softening all the hardware, it's just making for a softer store.
    companies

    Supplier update: Fletcher Building

    Investment program announced

    Fletcher runs a NZD3 billion-plus business in Australia under brands including Tradelink plumbing and bathroom supplies, Laminex, Stramit roofing and structural steel, Iplex pipes, Oliveri sinkware and Fletcher insulation

    Australasian building products group Fletcher Building (Fletcher) - which is listed on both the New Zealand and Australian stock exchanges - said it has more than NZD800 million earmarked for investments over a four-year period.

    These investments include the Laminex Taupo wood panels plant, Comfortech insulation, a new frame and truss plant, and the acquisitions of Tumu and Waipapa Timber.

    Chief executive Ross Taylor said the investments would progressively mature over the coming couple of years and by the 2027 financial year the company expects they will add about NZD120 million in operating profit.

    Mr Taylor also told BusinessDesk (New Zealand Herald) the investment program is part of Fletcher's view that the medium- and long-term fundamentals are very strong on both sides of the Tasman.

    The company doesn't have a large presence in the timber sector and is investing more than NZD250 million in Taupo on value-added wood products, many of which are used overseas, while the Waipapa timber mill provides structural timber, which the company already sells. He told BusinessDesk:

    There's real opportunity there for us to actually help modernise some of the construction techniques, but equally to take the raw timber product in New Zealand and value add to it.
    What we're interested in beyond that is all the other opportunities with wood products broadly, whether it be for fuels, using pellets and by-products, or other value-add products around that.

    Fletcher also plans to boost automation at its frame and truss plant, which takes structural timber to make structural frames. Mr Taylor said:

    That allows us to both increase capacity but makes it more efficient both in cost and production, so it gives us productivity improvements.

    Other areas Fletcher is targeting for growth include code changes to ensure houses are warmer, so it will invest in modernising and increasing its insulation manufacturing facility in Auckland, with plans to triple capacity by 2027.

    Fletcher's new NZD400 million Gib plant in Tauranga is scheduled to be fully completed by the end of October, coming on time and within budget. The plant has already started production and has 50% more capacity than the previous Gib plant.

    The company also flagged another NZD250 million of capital spending on its growth program and NZD30 million for the Gib plant in the June 2024 year.

    Mr Taylor said Fletcher is holding off pursuing a "big opportunity to grow our residential business" until the firm sees the market starting to grow. Major investment plans for the cement value chain at Golden Bay are waiting for clarity from the New Zealand Government on carbon industrial allocations and border adjustments, he said.

    There's a good pipeline of existing stuff which will really start maturing in two or three years, but there's another really sizeable pipeline beyond that in New Zealand and Australia.

    The company also announced that the chief executive of its the Australian arm, Dean Fradgley, would be stepping down from his position in early 2024.

    Annual results

    Fletcher's annual profit fell 46% after it faced extra costs related to the troubled international convention centre in Auckland.

    Net profit fell to NZD235 million in the year to June 30, from NZD432 million the previous year, the company said in a statement to the NZX recently. The result included NZD301 million of one-time costs, largely due to NZD255 million in provisions for the convention centre and related Hobson St hotel project.

    Fletcher Building is losing money on the convention centre being built for SkyCity Entertainment Group after a fire in October 2019 resulted in extensive damage which delayed the project and escalated costs.

    Excluding one-time costs, the building supplies and construction company lifted operating profit 6% to NZD798 million, in line with its forecast for about NZD800 million. Revenue slipped 0.3% to NZD8.5 billion.

    Related

    Iplex is under investigation in WA for leaky water pipes - HNN Flash, April 2023
  • Sources: The Australian Financial Review, The New Zealand Herald; 21 Aug 2023 and Stuff NZ
  • companies

    Supplier update: Building materials

    James Hardie price increases helps to deliver results

    CEO Aaron Erter said the company focused on what it could control. This focus has enabled it to "start the year strong, delivering our best ever first quarter results for both adjusted net income and operating cash flow," he said

    James Hardie's sales in Australia rose 5%, although this was mostly due to recent price rises. Australia is part of the company's Asia-Pacific region that also includes New Zealand with a small contribution from the Philippines, according to The Australian Financial Review (AFR).

    The company said average net sales prices at its Australian and New Zealand operations were up 12% to a record $209.7 million in the quarter compared with a year ago, while volumes were 8% lower.

    Over 12 months in the Asia-Pacific, prices rose 10%, double the rate of increase last year, and significantly higher than in 2019, 2020 and 2021.

    Earnings before interest and tax margins in the Asia-Pacific region rose 35% to $69.5 million in the three months to June.

    The company's overall net profit for the three months ended June 30 fell by 3% to USD157.8 million ($240.1 million) compared with the same period a year earlier. Sales revenue was down 5% to USD954.3 million.

    Chief executive Aaron Erter warned of a tougher housing market (in North America) for the rest of the financial year, with sales volumes likely to slow as high cash rates there hit prices and consumer confidence. In the North American market - which makes up 73% of the company's sales - the total addressable market for its products would drop by between 5% and 18% in calendar 2023, compared with 2022.

    In Australia, labour shortages continue to hamper the housing market, which is also likely to weigh on local sales.

    Last November, James Hardie was forced to lower its profit guidance as it began to see a "significant change" to the Australian housing market outlook. Labour shortages and unfavourable weather conditions were cited as the main challenges despite backlogs.

    Mr Erter also said there was less activity in the renovation market, a key driver of the company's earnings, as higher interest rates and economic uncertainty made households more reluctant to commit to large projects. He told an investor briefing:

    People are sitting on the sidelines and waiting for a little bit.

    However he said the long-term growth opportunities to tap into the North American renovation market were robust because there were 40 million homes in the US that were more than 40 years old, and therefore ripe for updating.

    Mr Erter said there had been a review of capital spending plans across the company, and a planned greenfield plant in Melbourne was a casualty. James Hardie announced it would scrap plans to build a $400 million factory at Truganina outside Melbourne as it reassesses capital spending priorities in uncertain economic times.

    The new facility had been designed to produce fibre cement for the local housing market and export markets and was on track to be up and running by 2025.

    Construction on the plant was already 18 months in, with design and construction contracts in place. The exercise to shut down the project will be expensive, although the sale of land may ease the financial hit.

    The factory, commissioned under previous boss Jack Truong, who was dramatically forced out of the company last year after bullying accusations, was expected to generate as many as 200 full-time jobs when it was up and running.

    There were another 500 jobs expected during peak construction. Some of these jobs will now go to Sydney under Mr Erter's preferred option that will see capacity expand at James Hardie's existing operations near Parramatta, and outside Brisbane.

    Mr Erter puts the Melbourne decision down to a shift in strategy and was careful to say that inflation or surging construction costs had "zero" impact on the cancellation. He said brownfield - using existing operations - was now the preferred path when adding capacity to the company's manufacturing network rather than a greenfields approach of the Melbourne plant. In The Australian, he said:

    One of the most important things that we do is capital allocation and this was really looking at this, scrutinising this, and just realising that we had other options here.

    Faced with being caught out with surging commodity prices, James Hardie under Mr Erter's direction, has aggressively pulled back spending and sought to protect profit margins over market share.

    Mr Erter said James Hardie aimed to keep winning market share, but not at the expense of profitability.

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

    Supplier update: Haymes Paint

    It has won a Canstar Blue award for the sixth consecutive year

    The local manufacturer has claimed "Most Satisfied Customers - House Paint" in the 2023 Canstar Blue Awards

    Competing against brands such as Dulux and Taubmans, Australian-owned Haymes Paint is once again the only company to score the maximum five stars across the criteria of overall satisfaction, durability, ease of application, quality of finish, value for money, and variety of products. Haymes Paint CEO Rod Walton said:

    Winning this award for the sixth consecutive year is testament to the unwavering dedication of the entire team here at Haymes Paint, and the support of our highly valued customers who have rated us number one. It's very rewarding, and a great honour to be acknowledged time and time again.
    At Haymes Paint, we are passionate about our products and proud to be largest Australian made and owned paint manufacturer. To know that our products are resonating strongly with our customers across Australia is so meaningful.

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

    Canstar Blue group manager - distribution, Morgan Mantova, shared her congratulations with Haymes Paint:

    Haymes Paint has done it again, for the sixth year in a row. For the Ballarat-based company to go up against all the major paint brands and take out the win reflects their ongoing commitment to providing top quality paint.

    Related

    Rated "Best in Australia" five years in a row by Canstar - HNN Flash, August 2022
    companies

    Supplier update

    Kress brand awareness launch in Australia

    In 2022, the company focused on its electric-power outdoor power equipment range (OPE) and battery platform for its entry into North America and Canada

    Founded in 1928, the German-made Kress power tool range includes the cordless 20V MAX KROSSPACK platform of products, featuring hammer drills, impact drivers, impact wrenches, angle grinders, saws, rotary hammers, lasers and more.

    Kress tools are currently sold exclusively online through Total Tools, according to its PR agency, InsideOut PR. The agency has been appointed by parent company Positec to support the brand launch of Kress in the Australian market.

    US launch

    The company concentrated on its commercial range of electric-powered OPE products for lawn care and landscape professionals when it officially entered the North American market last year. The lineup includes robotic lawnmowers, leaf blowers and chainsaws. At the time, it announced that Kress Commercial was offering the opportunity for OPE professionals to transition away from gas-powered products.

    Its North American debut also had the prosumer and weekend warrior in mind. The company said its new Kress 40V (2x20V) and 60V lines of OPE provide the ideal solution to achieving high-quality results with clean, quiet products. In a statement, Don Gao, chairman and CEO of Positec Group, said:

    Kress is recognised in Europe for its quality, durability and innovation, particularly among commercial-grade users. This new, battery-powered equipment will quickly establish Kress as a powerhouse in the consumer space, too. Inspired by our commercial line of products, we are glad to provide homeowners with technology built just for them.

    The Kress 40V line of outdoor power equipment is supported by Kress 20V KROSSPACK lithium-ion batteries, designed for higher power output and longer runtimes.

    Its professional OPE is powered by Kress' exclusive cordless battery technology. The commercial Kress 8-minute Cybersystem[tm] battery platform features both 4Ah and 11Ah battery packs with the ability to recharge each 60V battery pack to 100% charge in eight minutes or 80% charge in five minutes.

    Due to its proprietary battery cell technology, each 60V Cyberpack battery is capable of producing up to twice the power output of standard lithium-ion batteries. The added power output allows Kress OPE to meet or exceed the same performance as comparable commercial gas-powered machines but with less noise and zero harmful emissions, the company said.

    In addition, the Kress Cyberpack battery can be re-charged thousands of times - up to 10 times more than standard lithium-ion batteries. The extended battery life supports multiple re-charges per day and reduces the cost of replacement battery packs over the life of the equipment.

  • Sources: Mumbrella and PR Newswire
  • companies

    Supplier update

    Visy acquires Zenexus

    Zenexus is one of the largest suppliers to Bunnings and the deal will mean additional annual revenues of $170 million for Visy

    Packaging and recycling company Visy has acquired moving and storage boxes supplier and hardware retail products distributor Zenexus.

    Privately-owned Zenexus owns home improvement brands such as FlexiStorage, RackIt and Wrap&Move amongst its product offerings. It distributes these products exclusively through Bunnings in Australia and New Zealand, as well as through Homebase in the UK. There are no plans to change or discontinue any of Zenexus' products and they will continue to be sold through Bunnings and HomeBase.

    Financial terms of the transaction have not been disclosed. Executive chairman of Visy Industries and Pratt Industries Anthony Pratt said in a statement:

    The purchase will allow Visy to join our sister company Pratt Industries in the US with a dedicated, retail-facing business unit called Visy Retail Services.

    Zenexus' managing director Rodney Sutton will serve as the general manager of Visy Retail Services. Mr Sutton's initial focus will be on integrating Zenexus into Visy.

    In addition, Zenexus' 160 employees of the company will transfer over to Visy Retail Services.

    Visy has a workforce of more than 7,000 people and operates in more than 140 sites across Australia, with additional trading offices across Asia, Europe and the US.

    Related

    Zenexus moving into new premises - HNN Flash, February 2022
  • Sources: Packaging Gateway and Sky News
  • companies

    Category update: Timber

    Major plans to overhaul Pie Creek sawmill

    Over $108 million in funding will be allocated to timber manufacturing companies around Australia to encourage more value adding and innovation in the industry

    Manufacturer and distributor Dyna Group has lodged a proposal with Gympie Regional Council, to overhaul its timber yard and sawmill which has been a fixture at Pie Creek for over 50 years. Pie Creek is located on the outskirts of Gympie, QLD.

    Under the plan, the existing buildings will be torn down and replaced with a new 43m x 39m structure, reports The Gympie Times.

    The structure will cover the remaining buildings as well as provide storage for timber at the mill. The timber retaining wall running alongside the road will be replaced with a blockwork retaining wall.

    According to the proposal, the existing buildings have stood at the sawmill for half a century. The development application says:

    These buildings have deteriorated over time, and are causing many issues such as leaking roofs, which is causing WHS (work health and safety) issues for the workers. It is more economical to replace, rather than to repair, the buildings.

    The Dyna Group was founded in 2010, but CoreLogic RP data records show the Baker family has owned the sawmill since 2004. LinkedIn also lists Nathan Baker as the company's managing director. Its website says:

    DynaGroup is a 100% Australian-owned specialty manufacture of treated pine fencing and landscaping products...We partner with the best and most prestigious family-owned timber resellers across QLD and NSW to deliver the highest quality products to contractors and end users.
    We like to think of ourselves as a supply chain partner to our customers. For resellers to offer the highest quality products for their regular trade customers, or to DIYers doing a home improvement, they need suppliers that go above and beyond a transactional trading relationship. DynaGroup has a team that has a passion for helping resellers, and constantly strive to do better...

    Timber grants

    The Albanese Government recently announced the recipients of the Accelerate Adoption of Wood Processing Innovation grant program.

    These grant recipients will undertake a wide range of projects which will see the implementation of upgraded and innovative work practices across various industries, including production of activated carbon, housing and construction, packaging, and culturally significant timbers to higher end markets.

    Minister for Agriculture, Fisheries and Forestry, Murray Watt, made the announcement with local MP Brian Mitchell at Western Junction Sawmill near Launceston, Tasmania. He said the program delivered on the Albanese Government's strong support for Australia's sustainable forestry industry.

    Our government understands how important the forestry industry is for communities around the country, but particularly here in Tasmania.

    The Western Junction Sawmill in north Tasmania is one of five mills in the state which will receive grants totalling $15 million from the Federal Government.

    Mr Watt also said:

    A total of 34 grants will be made, selected by an independent panel, including funding for four projects involving First Nations organisations, enabling the use of sustainably sourced timber from traditional lands. These grants are about creating more long-term jobs in the forestry sector.
    In the October budget, we committed more than $300 million to support Australia's forest industries to innovate and improve the capacity and capability of the sector. In addition to this, the government is establishing the National Institute for Forest Products Innovation and has committed support for specific training for the forestry and wood products industries.

    Mr Mitchell said the grant program will support wood processors by stimulating investment in upgrades to existing manufacturing lines and innovation to diversify domestic products.

    Enabling wood processing facilities to use innovative technologies in their production will enhance the forestry industry's ability to supply more of Australia's wood demands into the future.
    Here in Tasmania that includes projects that improve production processes, and value add to existing operations. More than $15 million in government funding will be spent across five projects, with the total value of new investment set to reach over $45 million.

    Funding of between $1 million to $5 million will be provided under the Wood Processing Innovation grant program to 34 successful applications from 2022-23 to 2025-26.

    Under the program, recipients are required to provide at least 60% of the total project costs. This brings the total new investment, including public and private sector funding, to $361 million.

    Grant recipients

  • Hyne & Son, QLD - $5,000,000
  • Timberlink Australia, TAS - $5,000,000
  • Capital Battens, ACT - $4,985,250
  • Wesbeam, WA - $4,486,478
  • Wespine Industries, WA - $3,509,857
  • Western Junction Sawmill, TAS - $1,984,000
  • XLAM Australia, VIC - $5,000,000
  • A.J. Forster, SA - $1,421,112
  • AKD Queensland, QLD - $5,000,000
  • Kennedy's Classic Aged Timbers, QLD - $1,654,285
  • NSFP Southwood, TAS - $4,957,570
  • Duncan's Holdings, NSW - $3,253,890
  • Gidarjil Development Corporation, QLD - $3,217,000
  • Mareeba Sawmills, QLD - $1,793,640
  • Tilling Timber, NSW, VIC, QLD - $4,495,583
  • Dyna Group Australia, QLD - $1,194,186
  • Highland Pine Products, NSW - $4,019,325
  • Whiteheads Timber Sales, SA - $3,947,225
  • Dja Dja Wurrung Clans Aboriginal Corporation (trading as DJAARA), VIC - $1,441,915
  • Parkside Building Supplies, QLD - $3,480,000
  • Superior Wood, QLD - $4,200,000
  • Worldwide Truss & Frames, WA - $2,370,157
  • AKD New South Wales, NSW - $5,000,000
  • Mcdonnell Industries, SA - $4,005,687
  • KSI Sawmills, SA - $1,440,000
  • Weathertex, NSW - $2,400,000
  • AKD Victoria, VIC - $2,556,000
  • Dindas Australia, QLD - $1,049,100
  • Albert Johnson, NSW - $1,994,544
  • Bedford Phoenix Incorporated, NSW - $3,140,000
  • CLTP Panel Products, TAS - $2,070,000
  • Project.E, NT - $5,000,000
  • Stronach Industries Group, TAS - $1,000,000
  • Ashborn, SA - $2,709,941
  • Sources: The Gympie Times and Minster for Agriculture, Fisheries and Forestry
  • companies

    Supplier update: Iplex

    Iplex is under investigation in WA for leaky water pipes

    Parent company Fletcher Building is establishing a fund to help plumbers and builders who installed products found to be defective

    A preliminary investigation by the Department of Mines, Industry Regulation and Safety (DMIRS) found that "faulty piping" - made by Iplex - has been installed in around 1200 West Australian homes.

    Within two years of the home builds being completed, hundreds of homeowners reported flooding issues, with some requiring all their plumbing to be ripped out and replaced. In a statement to the Australian Stock Exchange, Iplex said:

    DMIRS has advised Iplex Australia that, while its tests are not yet complete, Iplex Australia should expect its results to lead to DMIRS finding that the leaks are due to a manufacturing defect.
    A Western Australia group home builder has also advised it expects to deliver to Iplex Australia the results of its own tests once they are completed.

    Iplex said its own investigation into the high number of leaks, while ongoing, had not identified any manufacturing defect.

    While not admitting responsibility for the issue, Iplex has offered to assist the two major builders caught up in the pipe leaks - BGC and Delstrat - which account for 90% of the 15,000 homes built with Iplex piping during the five-year period being investigated.

    The polybutylene plumbing piping at the centre of the investigation - branded Pro-fit - is no longer being sold, with Iplex noting the product did not experience similar issues in other states, despite being sold across Australia. In statement, Fletcher Building chief executive Ross Taylor said:

    We acknowledge the frustration and inconvenience impacted homeowners and their families are facing. We are working hard with builders to arrive at an acceptable outcome for affected homeowners.

    The company made an initial provision of AUD2 million for the affected homes, but that has now been expanded to AUD15 million.

    Background

    New Zealand-headquartered Fletcher Building revealed problems after receiving many complaints about the hot and cold water polybutylene pipe product. The company told the NZX (New Zealand Exchange):

    The complaints relate to leaks in homes, primarily built by group home builders in Western Australia, which have required repair or replacement of the pipes and, in some cases, damage to the affected homes.

    Reports to Iplex Australia show about 1200 of the 15,000 Western Australia homes with Pro-fit installed between 2017 and 2022 had leaks.

    The date range is relevant because builders have told Iplex Australia they have not experienced unusual levels of leaks in homes built previously. Fletcher said:

    The Pro-fit product was also sold in other states of Australia in that period. Reports to Iplex Australia are that the leak rate in those states is not materially unusual for a product of this type.

    The Pro-fit product was sold only in Australia and the resin used in it during the period in question was not used by Iplex New Zealand or any other Fletcher Building company for any other product, the company said.

    Grant Swanepoel, Jarden's equity research director in New Zealand, noted the pipes in Perth homes were installed in ceilings - unlike here (New Zealand) where they are in floors - so had the potential to cause far more damage to homes there than here.

    The extent to which Iplex Australia will ultimately have accountability for this matter, the cost and timing of any payments can't be established right now, the company statement said.

    Final costs incurred by the leaks will be affected by how much third parties are responsible, insurance payouts and the remediation required. The Iplex provision and costs relating to the Pro-fit pipe problem have been excluded from Fletcher's fiscal 2023 group earnings guidance.

    Fletcher is listed on the New Zealand and Australian stock exchanges. The company runs a $3 billion-plus building products business in Australia under brands including Tradelink plumbing and bathroom supplies, Stramit roofing and structural steel, Iplex pipes, Oliveri sinkware and Fletcher insulation.

  • Sources: WA Today, Wanganui Chronicle, The Australian, Australian Financial Review and The Northern Advocate
  • companies

    Supplier update: Jeld-Wen

    Jeld-Wen's Australasian business sold to private equity

    Platinum Equity expects the company to deliver a solid performance in a housing downturn

    Los Angeles-based private equity group Platinum Equity has paid AUD688 million for Jeld-Wen's Australasian business that includes brands such as Corinthian, Stegbar and Breezway.

    Jeld-Wen chief executive William Christensen said the company intended to use most of the proceeds of the sale to pay down debt. The transaction is expected to settle in the September quarter.

    In 2022, net income in Jeld-Wen's Australasian business fell USD6.8 million to USD25.4 million and adjusted earnings before interest, tax, depreciation and amortisation fell USD5.9 million to USD65.6 million due to the building downturn, according to The Australian.

    During the same period, its net revenue fell USD4.7 million to USD585.4 million, reports The Australian Financial Review (AFR).

    At the start of this year Jeld-Wen said the Australasian operations had suffered a mid-single-digit volume decline but had a solid backlog.

    Platinum Equity managing director Adam Cooper said Jeld-Wen had strong brands and enjoyed a long history of manufacturing high-quality products. He told the AFR:

    The business is resilient, has performed well through numerous cycles, and is well-positioned for long-term success.

    Jeld-Wen's parent company is listed on the New York Stock Exchange and the business in Australia and New Zealand accounts for about 11% of Jeld-Wen's global revenue.

    On an international scale, it operates more than 120 manufacturing facilities in 19 countries, producing and distributing interior and exterior doors, wood, vinyl and aluminium windows.

    As a listed company with a market value of USD1.2 billion, Jeld-Wen counts hedge funds among its top investors, and they are likely to be putting pressure on the group to release capital or boost performance.

    Related

    Jeld-Wen is conducting a review of its Australasian operation in preparation for a potential sale - HNN Flash, September 2022
  • Sources: The Australian and The Australian Financial Review
  • companies

    Supplier update: Dulux and Nippon Paint

    DIY concrete and paving

    DuluxGroup owner Nippon Paint is seeking acquisition deals, and has been on a four-year push to buy assets overseas and seek international growth

    Dulux has just launched its first range of concrete and paving products, a three-stage, heavy duty coating system for consumers to upgrade the exterior of their home.

    Available to coat both bare concrete and sealed surfaces, Dulux Concrete and Paving has been developed with an advanced product formulation suitable for applications on concrete and paving areas such as driveways, garage floors, paths and patios. Dulux brand manager, Sorren Henderson said:

    Replacing concrete or other paved surfaces can be quite costly, not only requiring you to fork out funds for building materials, but also setting aside a hefty fee for a trade specialist to complete the work, and in some instances, additional fees for council permits.
    With this new product range in market, we hope to be able to educate consumers, so they have the knowledge and tools to be able to execute a more affordable, yet effective upgrade to these areas of the home without needing to rip up the existing surfaces.

    Suitable for application over worn and stained surfaces, the Dulux Concrete & Paving range is slip resistant, able to be tinted to Dulux's full colour library and has durability for a premium finish that is ideal for high traffic areas.

    Launching in Bunnings and select independents nationwide from April 2023, Dulux Concrete and Paving will be available in a range of sizes: 1L, 2L, 4L and 10L (depending on the product).

    Nippon Paint

    Co-president of Nippon Paint Holdings Yuichiro Wakatsuki recently said in an interview with Bloomberg, the company will seek acquisitions overseas and finance the deals by borrowing in Japan where interest rates are low.

    Mr Wakatsuki, a former banker, advised Singapore mogul Goh Cheng Liang's Wuthelam Holdings in 2021 when the company took a majority stake in Nippon Paint, the world's fourth-largest paint manufacturer, in a USD12 billion deal. Mr Wakatsuki became Nippon's co-president in 2021.

    At 95 years old Mr Goh is Singapore's second-richest person, with a net worth of USD14.3 billion, according to Forbes' latest billionaire list. Through his company, Wuthelam is the largest shareholder of Nippon Paint, holding 58.7% of its stock.

    Nippon Paint has been on a four-year 700 billion-plus yen push to buy assets (outside of Japan) and seek growth abroad. Interest rates on Japanese yen loans are expected to remain relatively low compared to overseas markets, and the company believes it is in an advantageous position to build strong relationships with Japanese banks. Mr Wakatsuki told Bloomberg:

    Even if long-term interest rates go up in Japan in the future, it will probably be in the range of 2% to 3%. That is still much cheaper than borrowing in United States dollars.

    The company had been debt-free for many years, but at the proposal of Wuthelam, it changed its focus towards maximising shareholder value.

    In China, the company's largest market and income earner, the economy is expected to recover from the coronavirus pandemic in earnest this year. If the Chinese market slows down, there is a concern the ability to generate cash for repayment will decline.

    Nippon Paint's balance sheet showed 1.29 trillion yen in total liabilities at the end of December. Mr Wakatsuki declined to comment on whether he has any acquisitions currently in the works.

    Related

    The new face of DuluxGroup - HNN Flash, April 2021
  • Sources: Dulux Australia, Straits Times and Japanese Posts
  • companies

    Category update: Pets

    Woolworths takes majority stake in PETstock

    Pets Domain stores return to Tasmania and Pet CIRCLE's Queensland distribution centre

    Supermarket group Woolworths has spent $586 million for a 55% stake in Petspiration, the company behind the PETstock brand.

    Woolworths chief executive Brad Banducci said the retail giant's market research revealed an opportunity to cater to all kinds of pet owners, including those in regional Australia who have bigger animals with different needs. In a statement, he said:

    Specialty pet is a large and growing retail segment in which we have limited presence...Specialty pet is a logical adjacency given the high penetration of pet ownership across Australia and New Zealand.

    Australians spend tens of billions of dollars on their pets each year - close to 70% of Australian households now have a pet, with Animal Medicines Australia forecasting that households spend about $3200 on their dogs and $2100 on their cats each year.

    This pet ownership trend was magnified over the COVID period while people were working from home during lockdowns, leading some analysts to question whether the growth rates are sustainable. Between 2019 and 2022, dog ownership grew by 25% and cats by 42%.

    The rate of revenue growth in the pet goods sector more than doubled between 2020 and 2021, according to industry research firm IBISWorld.

    Mr Banducci believes there is still room for growth across the pet-care sector, which now goes well beyond food and toys to services such as virtual vet care, doggy daycare, training and grooming services.

    Petspiration has been identified by Woolworths as the number two player in a fragmented industry, but Mr Banducci has big plans. Its major competitor is Greencross/Petbarn/Animates now owned by US private equity giant TPG.

    PETstock has a network of 276 stores and established online platforms such as Pet.co.nz, a 2.4-million-member Petspiration loyalty program, and an own brand range such as Caribu and Glow. Its products and services include food, boarding, grooming and veterinary services. Mr Banducci said in a statement:

    The partnership will allow us to meet more of our customers' pet family needs with a complementary range of specialty pet products and services, strengthen the Everyday Rewards loyalty program and unlock opportunities for material value creation across both businesses.
    We will work together to support Petspiration's growth through access to our retail capabilities in areas such as Digital and eCommerce, Supply Chain, Retail Media, Format and Network Development, and Advanced Analytics.

    Woolworths said the new business had turnover of $979 million in the year to September, with estimated net financial debt of around $290 million and lease liabilities of about $380 million as at September 2022. The investment deal puts the enterprise valuation of the business at $1.7 billion. In a statement, Woolworths said:

    Petspiration is well positioned to continue to grow strongly, as the business builds out and consolidates its national footprint and brand. The transaction is expected to achieve a mid-teens internal rate of return, with identified value creation opportunities to support strong earnings growth.

    In The Age, Mr Banducci said Petstock had experienced a strong earnings growth trajectory over the past 10 years as the beneficiary of what he describes as megatrends.

    One in particular that he noted is pet longevity, which has greatly increased as owners spend more on nutrition and exercise, and presumably vet bills. Another will be owners' reluctance to leave the family pooch at home alone. This has led to the increasingly popular doggy daycare, which can rival the cost of childcare, depending on the provider. There is also doggy grooming which can involve booking a week in advance.

    The founders of Petspiration, brothers Shane and David Young will continue to run the business, which will operate as a standalone unit. They will hold 45% of the business in conjunction with existing shareholders.

    The majority stake was funded by a sell-down of Woolworths' stake in Endeavour Group, the owner of a string of alcohol retail chains including Dan Murphy's and pubs across the country. The sell-off leaves Woolworths with a 9.1% stake in the bottle shop owner. Endeavour was spun out of Woolworths and floated as a separate listed company in 2021.

    Related: Woolworths already has a pet insurance offer and has entered a joint venture with Hollard Group's PetSure for an online specialty pet goods business called PetCulture.

    Woolworths launches PetCulture - HNN Flash #35, March 2021

    Pets Domain

    Pets Domain, which previously operated six Tasmanian stores before its local assets were purchased by competitor Petbarn in late-2011, recently opened its 63rd location Australia-wide at Cambridge (TAS). Two more mainland stores were launched in December, taking the total to 65.

    Chief executive Jason van Peelen opened his first retail store on Brisbane Street in Launceston after starting out breeding and selling fish from his parents' garage over 35 years ago. He had six stores when Petbarn came knocking. He told The Mercury:

    The offer at the time was significant. We decided we would accept, it was not necessarily easy to do, selling the original stores.

    However, the injection of capital enabled Pets Domain to undertake a "massive growth campaign". Mr van Peelen said Pets Domain will be opening 25 new stores a year "for the foreseeable future".

    Outside the capital cities has been a focus for Pets Domain. He said:

    Because of our roots in Tasmania, we identify with regional Australia better than metro. Our network of stores is predominantly in regional Australia, it seems to be a good fit for us.

    Pets Domain is also investing into more than just bricks-and-mortar stores. Last year, the company established "Australia's largest fish wholesaler", Aquarium Industries, which breeds from a farm in Queensland.

    There is also a manufacturing and importing division, Nature's Best, which produces lines such as Peckish, Tidbits, and Dan & Sam animal fashion accessories. Many of these products are stocked in Pets Domain.

    PET Circle

    E-commerce pet supplies company PET Circle has a new fulfilment centre near Brisbane to deliver faster to its Queensland customers, reports The Courier-Mail.

    It measures 26,000sqm, or close to four football fields, and currently has 13,000 unique pet products and has the capacity for up to 30,000 unique products.

    Related

    Spending on pet vitamins and supplements is growing and PET Circle investment - HNN Flash #89, April 2022
  • Sources: Sydney Morning Herald, MarketWatch, ShareCafe, The Age, The Mercury and The Courier-Mail
  • companies

    Supplier update: Elders

    Elders buys into PGG Wrightson

    Australian rural services company Elders has bought a strategic 11.3% stake in New Zealand-based PGG Wrightson

    One of Australia's largest agribusinesses, Elders said the investment in PGG Wrightson (PGGW) is part of its geographic diversification strategy. The company said in a statement:

    Elders does not currently intend to initiate a proposal to acquire control of PGG Wrightson.

    Similar to Elders, PGGW is an agricultural supplies and services business, dealing in livestock, wool, horticulture, water and irrigation, agribusiness, real estate and insurance.

    The company is New Zealand's largest rural services firm and is listed on the New Zealand Stock Exchange with a market value of about NZD312 million, according to The Australian.

    It employs more than 1800 people in 170 locations throughout New Zealand. In October, it said it expected full-year earnings to fall because of rising costs caused by inflation. PGGW's shareholder is Chinese controlled Agria with a 44% stake.

    Elders has been a player in the primary sector in New Zealand throughout much of the 20th century, but sold its finance arm in 1999 to Hanover Finance, and then its remaining 50% stake in a rural services in 2014.

    Elders AGM

    The company announced underlying earnings before interest and tax of $232 million - a 39% increase on 2021 - at its annual general meeting in Adelaide (SA). Rural products sales and real estate were the main contributors to its latest results. Retail products sales rose 44% to $2.4 billion, while wholesale products sales rose 22%.

    Elders reported a profit of AUD162.9 million for the year ended September, a rise of 8.7%.

    Chairman Ian Wilton said reinvestment played an important role in Elders growth strategy. The company announced a $25 million investment in a world-first automated wool handling business this year, while it acquired 13 businesses in ten locations with 115 new employees during the course of the 2021/22 financial year. Mr Wilton said:

    The business development pipeline for the coming year is also encouraging, with numerous successful businesses expected to join Elders in the next 12 months and furthering our growth.

    Related

    Elders' retail expansion - HNN Flash #95, May 2022
  • Sources: Radio New Zealand, The Australian and Stock Journal
  • companies

    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.
  • Download hnn-brief-011

    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.
  • Download hnn-brief-011

    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.

  • This a summary of the article. To read the full version, please download the full version by clicking the image/link below.
  • Download hnn-brief-003

    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