Metricon’s year-on-year sales volumes reveal why it’s in strife now

From 2016 to 2020, Metricon’s sales volumes were as flat as a concrete slab. Then they soared, exclusive analysis can reveal. But with costs skyrocketing, the home builder is in strife.

Under-siege Metricon’s fixed-price home sales exploded just as material costs began to surge and construction timelines blew out.

Australia’s biggest house builder by volume commenced more than 6000 new homes in 2020-21 after four consecutive financial years in which the number of starts was between 4350 and 4550, analysis by The Daily Telegraph reveals.

Sources said Metricon was one of the construction companies that exploited consumer interest in the federal government’s Covid-era HomeBuilder incentive to massively increase sales.

“They expanded their business in Queensland a lot,” one source said.

Housing Industry Association data shows Metricon’s starts in the Sunshine State last financial year were up by 95 per cent compared to 2019-20. Nationwide, its commencements rose by a third.

The four largest house-building companies in Australia. Source: HIA

Metricon does not make its financial statements public, but according to analysts IBISWorld, revenue skyrocketed to $1.4 billion last financial year “with the boost from the HomeBuilder scheme”.

But just as Metricon was embarking on its expansion — mostly via fixed-price contracts — building materials cost began to go through the (yet to be built) roof.

Figures from CommBank Economics show the cost of steel has soared by more than 40 per cent and timber has gone up 20 per cent in the past year.

Electrical fittings are 14 per cent more expensive while ceramics are 13 per cent pricier.

Collectively, these are the steepest increases this century.

What’s more, labour costs are up 5 per cent year on year.

That’s if you can manage to find a pro with a hammer or trowel.

Metricon CEO Mario Biasin died unexpectedly earlier this month. Picture: Supplied

A shortage of everything from truck drivers to tradies has seen construction times blow out by half, to 12 months, meaning building companies’ cashflow slowed.

The skilled worker drought is due to factors including closed borders and high levels of competition internationally for labour because governments in other nations also put in fiscal stimulus measures akin to HomeBuilder to keep their economies alive during the pandemic.

That’s left Australian construction companies with a backlog of work on which they are not making any money, in what experts have called a “profitless boom”.

“It’s a perfect storm — a cashflow and cost crunch at the same time,” a source said.

Metricon’s Peter Langfelder spoke to the media last week. Picture: Kiel Egging

Metricon was already the subject of speculation about its financial position when news of the “sudden and unexpected death” of CEO and founder Mario Biasin emerged last week.

The company said Mr Biasin had been experiencing mental health issues.

A source said Metricon’s cashflow situation could become worse because prospective new home customers would be reluctant to sign with the company.

Metricon was contacted for comment prior to publication.

BUILDERS CRY FOR HELP AMID ‘PROFITLESS BOOM’

The housing industry has urged the Albanese government to attract more skilled workers to Australia as the sector confronts a “profitless boom” caused by an explosion in material costs, spike in demand and shortage of tradies.

A new report to be formally released today by the Housing Industry Association (HIA) shows there are 75 per cent more detached homes under construction now than in 2019 after families took advantage of pandemic-era building grants and cheap finance to pursue the Australian dream.

The report also reveals build times have blown out — from about eight months to a year — due to a lack of labour, land and materials.

With construction costs rising at an annual pace of 15 per cent which is the fastest rate since 1980, meaning housing companies including Metricon now face a cashflow crunch as they struggle to clear a backlog of billions of dollars of work from early 2021 on which there is no longer any profit under fixed-price contracts.

“They are the contracts that are challenging,” said HIA chief economist Tim Reardon. “Profitless boom is an accurate turn of phrase.”

The housing industry has issued a cry for help to the new Labor government. Picture: Zak Simmonds

The cost of steel is 42 per cent higher than this time last year; timber is 21 per cent more expensive. Electrical products are 14 per cent pricier and bathroom fixtures have gone up by 13 per cent.

There isn’t much that can be done to help the sector deal with those surges; but it can be assisted on the shortage of workers, from cement truck drivers to carpenters.

Tim Reardon, Chief Economist from HIA. Picture: Supplied

“The big area that the government can get involved in is skilled labour,” HIA’s Mr Reardon said. “Every step of production is constrained.”

Western Sydney federal Labor MP Jason Clare, who is in line to be Housing Minister in the new Albanese government, was “well aware” of the situation, Mr Reardon said.

Mr Clare and his office did not respond to repeated requests for comment.

The spotlight has been shining on home builders since rumours emerged suggesting sector leader Metricon was in financial strife.

Labor MP Jason Clare, who is expected to be appointed the Housing portfolio. Picture: Monique Harmer

The company’s financial statements are not publicly available, but a new report by IBISWorld put Metricon’s annual revenue at $1.4 billion.

The IBISWorld report said Metricon’s housing starts had rapidly increased over the past five years, including a 34 per cent surge in 2020-21 off the back of the federal government’s HomeBuilder scheme.

IBISWorld said Metricon had raised prices “in response to the stronger demand conditions and the upward trend in the price of building materials such as cement, bricks, plasterboard and timber.

“The company has also moved to renegotiate a limited number of contracts to reflect the change in pricing,” IBISWorld said.