Trouble @ Fletcher Building AND How it will affect us
So many parts of this situation are unbelievable - it is really interesting reading up on the various commentary.
Fletchers Vertical Construction arm has lost an eye watering $980m in the last 2 years. mainly on 2 major contracts that were underpriced by a huge amount. NZICC @ Skycity(pictured above) will cost 100% more than expected - the company underpriced by around $400m!! This is certainly one of the biggest losses seen in NZ business in the last few years.
Now the new CEO of Fletcher is on the record as saying that they will likely be exiting this segment of the market altogether saying that the way the contracts are structured is skewed against the main contractor which definitely has some merits. there will now be a lack of capacity in the $50m - $500m contract space which cannot be filled easily especially in this tight market.
Although you can understand where they are coming from we would like to strongly emphasise 2 points we believe to be accurate after assessing the Fletchers situation and the state of the market:
1- We have many clients in this space and most of them are certainly well in the black at present. If you approach these contracts with the right approach there is certainly scope to make great money. The margins are tight but big contracts can be delivered with a minimal amount of capital investment/employment investment. On a $1b annual turnover in this segment this company should have been making a Net Profit of between $50m - $100m.......AND
2- The operators in this space are limited in NZ. some of the companies in the $100m to $500m space can probably upsize to fill some of the gap but even this will take time. this part of the industry will most likely be dominated by foreign companies going forward which is a real shame for both the NZ industry and NZ as a whole.
So this change will be good for neither Fletchers, nor the NZ industry or the country as a whole. Lets hope they reconsider at least partly in time
Sustainability Advocate and Consultant
7 年How and why has this occurred? Is there a flaw in quantity surveyor education and training? OR were people further up the chain so keen to get the work (and possibly earn bonuses?) they cut the pricing submitted? What does it also say for the quality of the scoping and specification documents. And also for the client assessment of and evaluation of bids as the clients too should have had good estimates. Were there good tender evaluation protocols and methodologies in place? Only 'fools' would accept bids which are too low.
Auckland Print Specialist l CA l Ex Banker l Owner: Presentations Design & Print present.co.nz
7 年In Asia, large Chinese, Korean and Japanese constructions companies are actively involved in major projects. NZ can be attractive to them if they can bring in their own construction crew. We've got to up our efficient and productivity.