Hutchinson Builders’ net profits fall almost 93 per cent amid rising costs, labour shortages

Brisbane-based national construction giant Hutchinson Builders has suffered a big slump in profits amid nightmare conditions, but the company remains confident it will survive.

Hutchinson Builders chairman Scott Hutchinson says the construction giant will survive despite a downturn in profits.

The boss of Hutchinson Builders says conditions in the sector ­remain “terrible”, with the ­nation’s second-largest private building firm reporting a big slump in profit.

Brisbane-based Hutchinson’s net profit for the 2023 financial year fell almost 93 per cent to $1.34m, despite revenue increasing almost $500m to $3.12bn, ­documents lodged with the Australian Securities and Investments Commission show.

Hutchinson chairman Scott Hutchinson said builders would continue to face rising costs as well as difficulties hiring the required number of tradespeople to complete projects.

“It’s terrible out there,” Mr Hutchinson said. “We did not make much money this year and next year we may scramble into the black. The problem is that building costs have gone up 30-40 per cent in the past year.”

Construction giant Hutchinson Builders’ has seen profits slump almost 93 per cent.

He said a building boom centred on the Gold Coast in 2021 had been predominantly responsible for driving costs higher. “It was that boom out of Goldie that killed us,” he said. “It sounds counterintuitive but in construction when turnover goes up profit can go down because you are caught in these fixed-price contracts.”

Mr Hutchinson said he expected more failures in the sector as trading conditions continue to worsen.

He added 111-year-old Hutchinson had the financial strength to survive with a significant cash buffer.

“We still have plenty of cash, but for the industry it is not a nice situation to be facing,” he said.

“It really has been a struggle the past couple of years.”

Hutchinson Builders reported a profit of $21.2m in 2022 and $27.7m in 2021.

The building industry has been hit by a perfect storm of labour shortages and material price hikes in the past three years that has seen the demise of major builders including Probuild, Condev, Privium Homes, and Pivotal Homes.

Sydney-based National Projects appointed voluntary administrators this week shutting down major projects across the country.

The company was responsible for projects across Brisbane, NSW, Victoria, Western Australia, the Australian Capital Territory and South Australia.

There were 815 construction-related company failures from July 1 to October 8, according to the latest figures from ASIC.

That represented a 28 per cent increase on the number of external administrations for the sector for the same 14-week period a year ago. Construction represents almost 31 per cent of all company failures so far this financial year.

Mr Hutchinson said his company was increasingly bringing more tradespeople in-house rather than relying on subcontractors.

Hutchinson Builders earlier this year announced it was forming its own in-house team of tradies to keep its high-rise projects on schedule. Mr Hutchinson said a team of 106 concrete form workers had been established from former employees of subcontractors who had gone into liquidation.

In the past, Hutchinson had ­established its own in-house trades with cranes, hoists and scaffolding to avoid the impact of ­industry shortages.

Mr Hutchinson predicts that as turmoil in the construction industry persists, more subcontractors will be unable to meet their obligations and liquidations and insolvencies will continue to be high this year.

He also has urged builders to work together to survive the increasingly tough times facing the sector.

More than ever builders need “genuine working relationships” with clients and subbies to continue in business, he said.

“There is strong demand for property, with builders struggling to keep up with supply, trade and material shortages and costs exacerbated by the impact of Covid-19,” Mr Hutchinson said.

“Ironically in these boom times many builders slip into negative profit territory as the rising cost of labour, products and services on fixed-price contracts present a real test of builders’ management skills, at which some fail.”

Originally published as Hutchinson Builders’ net profits fall almost 93 per cent amid rising costs, labour shortages