Fear builds over retreat of Fletcher
Fletcher Building’s woes are expected to open the door wider to Chinese and Australian construction giants, which one local industry leader fears may mean less support for industry training.
Simon Fraser, who is the managing director of Higgs Construction in Christchurch, one of the country’s largest privately-owned construction firms, believed Fletcher Building would pull back on bidding for very large construction projects worth more than about $50 million.
Fletcher hinted it would be more selective about the construction work it took on after bloodying its nose on two big projects.
Last week it emerged that its construction division had underpriced contracts to build SkyCity’s $700m International Convention Centre in Auckland and the Justice Ministry’s $300m Justice and Emergency precinct in Christchurch by a total of about $250m.
Fletcher is expected to provide more information about its tighter focus when it releases its annual results next month.
But Fraser believed it would move more into competition with the likes of Higgs in the midmarket, for projects costing $10m to $50m. Customers that needed buildings needn’t be concerned about a lack of competition for their jobs, especially as construction work was likely to fall back after this year, he said.
Instead, Fletcher’s pull-back ‘‘would probably open the door for another large competitor to come into New Zealand to take their spot’’, he said.
One recent new entrant is China Construction NZ, a subsidiary of the giant China State Construction Engineering Corp that set up shop in Auckland in 2015.
Another foreign builder that has become more active in the New Zealand market is CPB Contractors, formerly Leighton Contractors, which is a subsidiary of Australian-listed Cimic Group.
CPB, as Leighton, has been in the country since 2003 and last year secured a $300m contract for Christchurch Hospital’s new Acute Services Building.
The country’s second-largest construction company, Hawkins Construction, is also Australianowned, after being bought by ASXlisted engineering giant Downer EDI last month.
Fraser said Fletcher Building had a strong reputation for supporting the industry through the likes of industry training and apprenticeships.
‘‘They are a bit of a backbone for the construction industry, which has been watered down over the years.’’
In comparison, former numberthree player Mainzeal, which collapsed in 2013, did not train many people ‘‘or put a lot back’’, he said.
CPB operates a training and apprentice scheme, while Hawkins says it has helped support 1800 unemployed Maori and Pacific Islanders with training in the trades over the past five years.
Institute of Building spokesman Malcolm Fleming agreed Fletchers had demonstrated ‘‘an incredible amount of commitment and investment in terms of its training and apprenticeships’’.
‘‘It would be unlikely an overseas entrant coming to do a project would demonstrate the same level of commitment.’’
But only time would tell whether new foreign companies would stay the distance or prove opportunistic, he agreed.
‘‘Some of them may be taking a very long-term view.’’
Kiwi companies such as Leighs Construction, Dominion Constructors and Naylor Love also had a growing capability to take on large projects, Fleming said.
But bonds demanded by customers to cover risks such as delays or insolvency were ‘‘a real problem’’, as they restricted the number of large projects local construction firms could bid for, he said. ❚ Troubles highlight strain, C10