Australia’s largest home builder narrowly staves off collapse as construction crisis mounts

Metricon, Australia’s largest home builder, struck a deal on Friday for an emergency doubling of its working capital credit facility, in an effort to stave off bankruptcy amid a mounting crisis in the country’s construction sector.

The possible collapse of Metricon threatens the jobs of about 2,500 directly employed workers, primarily in eastern Australia, where it currently has around 4,000 homes under construction. Also facing an uncertain future are the numerous subcontractors engaged by the company, as well as suppliers of building materials, home appliances and furnishings. According to the Housing Industry Association, Metricon completed 6,052 dwellings last year and 4,354 in 2020.

House under construction in Manly, Queensland [Photo by Orderinchaos via Wikimedia Commons / CC BY-SA 4.0]

Prior to securing the additional loan from the Commonwealth Bank of Australia, Metricon met with the New South Wales (NSW), Victorian and federal governments to discuss the possibility of a bailout package, rumored at $100 million or more. In an attempt to shore up consumer and lender confidence in the failing firm, Metricon shareholders have also provided a $30 million injection of cash into the company.

Even as the company was scrambling to secure additional funds, acting CEO Peter Langfelder, appointed after the sudden death earlier this month of Metricon’s founder and CEO Mario Biasin, denied the company had solvency issues and insisted the business remains viable.

Despite Langfelder’s assertions, the company has reportedly been pushing its salespeople to secure deposits for home construction projects in a bid to boost cash flow. Such deposits are 5 percent of the total cost of a build, therefore on an $800,000 home project, for example, the upfront payment would be $40,000. However, given the widely reported speculation of potential insolvency, it is highly likely that clients will either delay or withhold deposits undermining Metricon’s bid to overcome any liquidity problems.

The reality is that these eleventh-hour financial manoeuvres will do nothing to address the underlying crisis confronting the entire construction industry.

Russ Stephens, co-founder of the Association of Professional Builders (APB), estimated earlier this year that around 50 percent of Australian building companies were currently trading insolvent, based on the association’s monitoring of 2,680 Australian residential home builders over an extended period last year. 

An APB report stated that by October 2021, it was clear that the increasing price of construction materials, supply chain delays and COVID-related labour shortages were impacting the profitability of every single building company in Australia.

A number of the company’s major suppliers and subcontractors launched an advertising campaign designed to assure the public that there was no substance to reports of Metricon’s impending collapse. This includes Dulux, Fisher & Paykel, Fujitsu, Beacon Lighting Commercial and Civic Shower Screens and Wardrobes, all of which would undoubtedly be severely impacted by the failure of yet another major home building company.