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· Posted on
February 21, 2024

The Gov is bricking it over Metricon's possible collapse so it might be forking out cash to save it (and the rest of the industry)

It's not a good few years for the construction industry is Oz, but especially for Metricon.

What's the key learning?

  • Construction companies run on tight margins.
  • When circumstances change, these companies can be put at risk of collapse.

👉 Background: Metricon is Australia’s largest homebuilder, with more than 6,000 homes under construction in 2020-21. Lately there's been speculation that the company's in financial difficulty, along with many others in the industry.

👉 What happened: Metricon received fresh funding from CBA and its shareholders (who tipped in $30 million!) to shore up its balance sheet. Despite that, there are still reports that NSW government is considering a bailout package for the company if it's necessary.

👉 What else: It's interesting timing, considering the recent collapse of one of Australia's biggest construction companies Probuild in March this year.

🔔 What's the key learning?

💡 While all industries are feeling the pinch at the moment, the construction industry is experiencing an imperfect storm. You've got:

  • A 15-20% increase in raw materials costs
  • COVID-19 shutdowns
  • Supply problems for timber
  • Labour shortages

💡 Construction companies run on pretty tight margins and they commit to them far in advance. That means there's not a lot of wiggle room when things go wrong... Margins end up being squeezed tight and sometimes companies fold.

💡 In Oz, the construction industry records more insolvencies each year than ANY other sector, so we may see a shake-up in this industry as companies fight to survive. As for Metricon, what it's saying and what's happening might not be matching up.

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