Coronavirus hits construction demand forcing Brickworks to cut jobs

Brickworks makes 200 employees redundant after cutting back production on reduced demand.

Brickworks CEO Lindsay Partridge. Picture: AAP

Brickworks expects the housing construction market to emerge from COVID downturn as one of the stronger and more resilient sectors within the economy.

Even so the Building materials producer has been forced to lay off 10 per cent of the workforce – or 200 jobs ­- as the company navigates the slowdown.

Brickworks CEO Lindsay Partridge said that although recent acquisitions in the US market has helped grow the business, sales in April and May declined by “over 30 per cent” due to the coronavirus pandemic adversely affecting demand, resulting in “negative earnings in recent months.”

Although the Australian division – which includes brands like Austral Bricks, Bristile Roofing and Austral Masonry – remains in the black with sale revenues down just 10 per cent in the four months to May, the decision was made to expedite the “rationalisation” of staff, with 150 US employees and around 50 Australian employees made redundant, Mr Partridge told The Australian.

However Mr Partridge said the company was “reassured” by overtures made by the federal government as to the importance of the construction industry helping the economy out of the COVID-19 slump and urged them to release specifics as soon as possible.

The government is set to announce a package to restore the construction industry's fortunes this week which will include measures such as direct cash grants for home renovations and grants of at least $20,000 for the purchase of new homes.

“Medium term outlook for building activity is unclear, but governments in Australia and the United States have indicated that construction is integral to the post COVID-19 economic recovery," Mr Partridge said.

“We believe that the construction and housing sectors will emerge as one of the stronger and more resilient sectors within the economy.

“So encouraging people to bring forward their spending is important – the new home grant won’t just benefit first home buyers, it will also encourage people who are looking to upsize to buy a bigger home as well.”

Mr Partridge said that the government must also keep an eye on the apartment market, which is threatened by the spectre of oversupply as the coronavirus-pandemic border controls threaten to reduce immigration by 270,000 people by the end of next year.

"Housing has always been under-supplied, or at best, at equal demand," Mr Partridge said.

Rental vacancies to climb

"The unit market is going to be knocked around. Rental vacancies will climb because all of these workers and students who come and live in apartments for a few years just aren't coming anymore."

Mr Partridge said that in addition to grants to individuals, the government should partner with the states to build social housing.

“It’s important for social cohesion at this time. You don’t want to see a situation like they have in the US.”

Social cohesion will also be key to resolving the company’s troubles in the US, with the current protests over George Floyd’s death at the hands of the Minneapolis Police Department occurring close to a design studio being constructed in Philadelphia.

"Getting people back to work is the best way to stop them protesting and rioting," Mr Partridge said.

"We’re hoping New York will open up for construction next week. We’re just happy to go back to work."

Mr Partridge said the government could also help the construction industry by ensuring the COVID-19 Coordination Commission's manufacturing taskforce, chaired by Andrew Liveris, delivers a clear path forward for lower energy prices.

“I think it’s sort of understood now that the price of gas sets the floor for the electricity price and therefore we need plentiful and reasonably priced gas," he said.

“Spot prices are low at the moment, but it is a temporary thing. The market is dysfunctional and private providers won’t fix it, so the government has to step in – but it doesn’t help when some states won’t allow gas exploration."

Brickworks Ltd closed at $15.93 a share on Tuesday, up 1.9 per cent.