The failure of Strongbuild last week has already opened the door to new possibilities in the industry. Replacing the initial shock of the failure of the popular company is a sense of new opportunities for those who missed the prefab boat a few years ago.
A list of the country’s top builders is said to be eyeing off Strongbuild’s prefab building facility at Bella Vista in Sydney’s north-west after the company was forced into voluntary administration last week.
Among the names touted are builders Hutchinson, John Holland, Watpac and Lipman. Lendlease could also be in the running as snaring the Bella Vista facility could add to its own timber prefab facility at Eastern Creek and ensure dominance in the sector. Currently, it supplies only inhouse projects and some universities.
Xlam, which started operations of its cross-laminated timber facility at Albury in April, is not believed to be a contender. In recent times its business was split in two – an advisory business that can assist clients with solutions (whether with timber prefab or other materials) and the factory, which will take time to fully scale up.
Industry sources say that at least part of this business might be for sale, but when asked for comment on this, general manager Australia and New Zealand Gary Caulfield said, “not to my knowledge.”
Either way, this is a time of significant ructions in the building and construction sector in Australia.
The demands are to modernise and implement best practice technology but like any sector undergoing change, the transition is not proving to be smooth.
Strongbuild was forced into voluntary administration last week after Frasers Property pulled the pin on a major contract worth around $45 million including add-on manufacturing value, just two weeks before the commencement date. Frasers has not returned calls to comment on its reasons for triggering the “convenience” clause as an exit mechanism.
Strongbuild chief executive officer Adam Strong told The Fifth Estate on Monday that the move was triggered by the sharing of incomplete but sensitive financial information by a consultant who had also worked for Frasers. He said a decision about potential legal action over this was now up to the administrators.
However, industry sources said the consultant was highly regarded and the sharing of information was not unusual. The Fifth Estate has obtained the consultant’s name but calls to his office were not returned.
Mr Strong said that about 120 staff from a total of 150 had lost their jobs and that the most viable part of the business was the factory where about 30 people were employed. He said he and his family were hopeful a positive solution could be resolved that might continue the family’s association with the business.
Leading commentator and regular contributor to The Fifth Estate, David Chandler of Western Sydney University in an article published on Monday on this website, took a swipe at poor practices in the industry that might have contributed to the Strongbuild collapse. He said innovation and more collaborative practices were essential.
Part of the problem he told The Fifth Estate on Tuesday was also the entry into the industry of project managers who shopped around for competitive tender prices, undermining the viability of good manufacturers such as Strongbuild.
Interest in prefab is growing
By Tuesday some optimism had surfaced around the prospects for the Strongbuild facility and the strength of interest in the factory surprised industry observers.
Mr Chandler said that even more interesting than the strong competition for the Strongbuild facility would be what the losing bidders would do: Plan B.
Mr Chandler said, “Whoever comes second is going to turn around and say what comes next?”
In his view there are several high performing companies doing very well and though not necessarily for sale now, might be persuaded to consider offers at the right price.
Not all are in timber prefab and Mr Chandler was adamant that the future of off site construction needs to be agnostic as to the materials.
Among those that could be attractive to a “Plan B” cohort could be Austruss at Mittagong and Dynamic Steel at Dandenong South in Victoria – both lightweight prefab steel manufacturers and both good operators in his opinion.
The overall implications for the industry, Mr Chandler said, was a big wake up call for the people in the industry who had been ‘asleep at the wheel”.
“I would be unsurprised to see if there is more interest in this business than is apparent on the surface.”
“And the people who missed the entry when this started three to four years ago might have a catch up opportunity.”
Was there a role for government? “The government role in this is in the pre-competitive space.”
But the government needed to research well before any investment to make sure this was well targeted.
The Xlam business is not well understood
According to Xlam general manager Australia and New Zealand Gary Caulfield Xlam recently split the company in two – one for manufacturing and one to handle growing demand for services and solutions.
He said questions about the Australian CLT product being more expensive than European were short sighted: they failed to take account of the whole picture.
He said: “Look “I’m not aware we’re more expensive than the European product. It depends on when you measure the price.”
At point of sale the European panels might be cheaper.
“However you have got to get it to Australia; you’ve not only got to do all the logistics and deliver it on site. All our market intelligence points to the fact we’re actually cheaper, however, the industry is exceptionally dumb and it measures the entry price of something not the exit price.”
Other factors that make his product viable are that the Australian panels were around 50 per cent bigger than those of the European panels. This means fewer joints with less chance of moisture penetration, fewer fixings, which can be expensive and fewer crane movements.
The Europeans also expect 100 per cent upfront payment, he said, not so in Australia. “If you go through the process of valuation and all the services the top line of every page will be cheaper but by the time you get to the bottom the price line will be a lot dearer.”
And getting that understanding of the nuances of this emerging industry is exactly the challenge at hand.