Fletcher Building moves to rectify piping problems in WA

The company will set aside $15m to help fix problems encountered by builders and plumbers who installed pipe products supplied by Fletcher subsidiary Iplex in Western Australia.

Fletcher Building will set aside $15m to aid plumbers and builders who installed pipe products supplied by its subsidiary Iplex in Western Australia.

The unit is being investigated in the state over issues with leaking water pipes and Fletcher chief executive Ross Taylor has acknowledged the problems with the Pro-fit product.

“We acknowledge the frustration and inconvenience impacted homeowners and their families are facing. We are working hard with builders to arrive at an acceptable outcome for affected homeowners,” Mr Taylor said.

Fletcher made a small provision for Iplex at its interim results but this has blown out and Fletcher shares dropped by 16c to $4.25 in early afternoon trade.

The company disclosed it had made a proposal to two group home builders and set up a fund to support other builders, which meant Iplex would increase an earlier provision from $2m to $15m.

The company warned that the extent to which Iplex would ultimately be accountable and the extent of the costs could not yet be established. Final costs incurred by the leaks will be affected by how much third parties are responsible, insurance payouts, and the remediation required.

The Iplex provision and costs relating to the Pro-fit pipe issue have been excluded from Fletcher’s fiscal 2023 group earnings guidance. Fletcher revealed problems after receiving many complaints about the hot and cold water polybutylene pipe product.

In February, it said Iplex had received a number of product quality complaints relating to Pro-fit hot and cold water polybutylene pipe products it previously manufactured.

The complaints relate to leaks in homes, mainly built by group home builders in WA, which have required repair or replacement of the pipes and, in some cases, damage repair in the affected homes.

The company said in February that the WA building regulator, the Department of Mines, Industry Regulation and Safety, was undertaking its own investigation.

The WA department has advised Iplex that, while its tests are not yet complete, it should expect the results to lead to it finding that the leaks are due to a manufacturing defect.

Reports to Iplex are that, to date, about 1200 of the 15,000 houses constructed in WA using Pro-fit in the period mid-2017 to mid-2022 have experienced leaks.

Builders have told Iplex that they have not experienced unusual levels of leaks in homes constructed prior to that period and the company also stopped selling Pro-fit in mid-2022.

The Pro-fit product was also sold elsewhere in Australia but the leak rate in those states is not materially unusual.

A WA group home builder has also advised it expects to deliver to Iplex Australia the results of its own tests once they are completed.

Fletcher said Iplex expects to work with the department and other stakeholders on the appropriate path forward. It may replace products in the homes where it was installed, in whole or in part, and is working with builders.

Iplex is dealing with two large group home builders in Perth, which together constructed about 90 per cent of the affected homes there, to assist them. They are replacing ceiling products in homes that have leaked and are repairing damage.

Iplex will also set up a $2m fund to assist other WA plumbers and builders who also constructed affected homes on a no-admissions basis.