Urgent crisis talks over future of Metricon Homes

An SA couple say they are ready to walk away from a deal with major building firm Metricon as the company begins crisis talks with Victoria’s Treasurer over skyrocketing costs.

Metricon Homes have been forced to renegotiate contracts with clients amid soaring costs of building materials. Picture: Ian Currie

Crisis talks are being held with building giant Metricon as rising costs have it facing severe financial pain, with insiders fearing for its future.

The Melbourne-based company, which claims it is “a strong viable business’’, will meet with Victorian Treasurer Tim Pallas about an explosion in material and labour prices, as pressure mounts on builders struggling to meet contracts. The Victorian government has $195m worth of home building project contracts with the construction giant and Premier Daniel Andrews said the government stood ready to provide support.

Metricon has nine display home locations across the Adelaide metropolitan area and the Hills, offering 97 home designs in SA.

According to Metricon’s website, it builds from Victor Harbor and Normanville in the south to Eudunda, Balaklava and Port Wakefield to the north of Adelaide, and at Murray Bridge and Mannum to the east.

Erin Winchester and Michael Furtak, with son Luca, had been waiting months for work to start on their first home at the Lovegrove Estate in Angle Vale but are now ready to walk away. Picture: Keryn Stevens

Adelaide couple Erin Winchester and Michael Furtak said they signed on with Metricon to build their first home in 2020, but say they are now are now beset by financial disputes and ready to walk away.

“There is nothing that we wish more than to default on our finances and pull out,” Mr Furtak said.

After a series of delays, the couple said they were now under serious financial stress themselves and in a three-way standoff with the builder and their bank over a $4000 charge Mr Furtak said was the result of an error in the company’s paperwork.

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“We are a happy couple of six years, but this is starting to affect our relationship,” Mr Furtak said.

“We wanted to build a nursery for our son.”

Neither Metricon nor Master Builders SA responded to requests for comment on how many homes the company was building in SA.

Internal memos seen by the News Corp raise concerns about business cashflow and telling staff “it has come to crunch time” regarding unsigned contracts.

The internal turmoil comes during an emotional week for Metricon, with the unexpected death of founder and chief executive Mario Biasin.

In a statement the company said Mr Biasin had been experiencing mental health issues.

Metricon founder Mario Biasin unexpectedly died earlier this week.

Metricon, which employs about 2500 people and is building thousands of properties across Australia, was last year ranked the nation’s biggest home builder.

It recently brushed off as industry scuttlebutt claims it was on the brink of disaster; but has been trying to alter, offload or delay some contracts due to a squeeze on project materials and labour.

Material and trade cost increases are piling pressure on the company with figures showing that across the industry the cost of timber rose 21 per cent and the cost of steel soared 45 per cent in the year to March.

There have also been increases of at least 10 per cent or more for plumbing, electrical and ceramic products.

At the same time there is so much work available for tradespeople that many have significantly hiked rates.

Peter Langfelder has been appointed acting chief executive following Mr Biasin’s sudden death.

Metricon staff have begun speaking out about the situation they face, with some saying a push to secure deposits was made to ensure cash was flowing in even though contracts were often being delayed.

One veteran Metricon salesperson who is owed hundreds of thousands in commission, said “we have been pressured now to push for as many deposits as possible”.

“They are 5 per cent, so on an $800,000 build that’s a $40,000 payment – then buyers would be charged as the build progressed, for the slab, then frame, et cetera,” the salesperson said.

The talks with Mr Pallas will cover the $195m worth of state housing contracts on the go, as well as the proposal to add costs to contracts due to legitimate price escalations – something the government has consistently rejected.

Metricon’s acting chief executive Peter Langfelder denied the company was in financial difficulty.

“There is simply no basis to these rumours. Metricon is a strong viable business without any solvency problem,” he said.

“The biggest challenge Australia faces is to get more homes built for more Australian families and as the biggest home builder in the country we are the ones to deliver.

“We are dealing with ‘business as usual’ issues sensitively because of Mario’s sudden and untimely death.

“Mario was much loved and admired and his loss has been heartfelt by many of the Metricon family. No one plans for these things.

“I ask for patience and consideration from our customers while our executives and staff deal with their loss.

“We are focused on the business running as smoothly as possible, servicing all our customers and continuing to get homes to site and completed on time.

“We have delivered a message to our team that the goal is business as usual, as Mario would have wanted. However, Mario was a very loved and admired leader of the company he co-founded so it is a sad time for all here at Metricon. As you would expect it may take us slightly longer to manage inquires.”

Late last week key representatives of Metricon met with the Andrews Government to discuss the crisis gripping the sector.

Mr Pallas has previously been asked to back a change of law that would allow companies to add-on costs to contracts if there were legitimate price escalations but that has so far been rejected.

Internal memos have raised concerns about Metricon’s cashflow and tell staff ‘it has come to crunch time’. Picture: Ian Currie

This was a recommendation by Commissioner for Better Regulation and Red Tape Commissioner, Anna Cronin, who was asked to look at material cost increase by the government.

Shadow Treasurer, David Davis MP hit out at rising taxes and levies that had increased the cost of business for the construction industry.

“Daniel Andrews and Labor have jacked up taxes on the building industry to breaking point and that doesn’t include their planned $20,000 big new housing tax,” he said.

“Hundreds and hundreds of Victorian workers, including tradies, face being left on the scrap heap because the Andrews government has not acted.

“With ProBuild they left subcontractors swinging and unpaid.

“Given the key Metricon sites in Victoria, Daniel Andrews must urgently meet with Metricon to develop a rescue package to save the jobs.

“While this may not be all Mr Andrews fault, his increasing taxes and heavy charges on building and construction have been a king hit.”

Development industry insiders said they wouldn’t be surprised if larger builders such as Metricon or lobby groups like the HIA were talking with the government about fixed contract arrangements given the soaring prices of materials.

However, one indicated it was unlikely Metricon was in financial stress as they were continuing to build townhouses in Victoria under 10-90 contracts in which a buyer pays a 10 per cent deposit upfront and the builder covers 90 per cent of the cost until the home is settled and the keys handed over to the buyer.

“The fact that they are still doing that means that they have money in the war chest,” the source said.

Master Builders Victoria chief executive Rebecca Casson said they were aware of rumours about Metricon’s future.

“We are in close contact with them, and we are very optimistic about the company’s future,” Ms Casson said.

“It is incumbent on everyone not to join in with the rumour narrative, especially during this incredibly challenging time.

“Now, more than ever, it is vital that our industry sticks together and supports each other.

“We also encourage Metricon’s clients and suppliers to be kind and patient with them as they navigate through these unprecedented challenges.”

Figures show there have been 342 building and construction insolvencies in Victoria in that same 12 months, with the most high profile being the billion-dollar company Probuild.

Originally published as Urgent crisis talks over future of Metricon Homes