BUILDING COMPETITION

Fletcher under pressure

FLETCHER BUILDING’S margins are under pressure from rising competition in its home base of New Zealand as the strong Kiwi dollar and low shipping costs allow smaller groups to import building materials rather than buy them from local suppliers.

In the past 12 months, a New Zealand cement collective has built a 50,000 tonne-a-year clinking grinding facility in Tauranga which recently began production.

The collective, which distributes mainly to its own Readymix concrete operations, is importing and selling clinker – a key component of cement – at a discount of between 10 and 20 per cent to locally made product.

‘‘With the New Zealand dollar remaining strong, the threat of imports remains a prominent risk for Fletcher Building,’’ said JPMorgan analyst Jason Steed.

While the new entrant’s capacity represents a small portion of the New Zealand clinker market, which measures just over one million tonnes a year, it is expected to put pressure on the margins of Fletcher Building’s concrete divisions Firth Industries, Golden Bay Cement and Winston Aggregates.

Clinker is not the only example of import competition for the company, however.

German conglomerate Knauf, which bought the Australian gypsum operations of Lafarge for A$164.4 million in 2011, has begun importing insulation into New Zealand. Knauf is also said to be shipping excess insulation from its Californian operations to Queensland and then across the Tasman.

And now it appears it has become government policy to facilitate increased competition with a dominating Fletcher Building.

Last week, Knauf was given a chunk of a $40m plasterboard supply deal for the Christchurch