NSW racing to rescue construction giant Metricon as government fears collapse

The NSW government at its most senior levels is scrambling to finalise a twin rescue package for the state’s building industry and customers of construction giant Metricon.

Metricon acting chief executive Peter Langfelder. Picture: Kiel Egging

The NSW government at its most senior levels is scrambling to finalise a twin rescue package for the state’s building industry and customers of construction giant Metricon amid fears the company is at imminent risk of collapse.

While Metricon – one of the country’s largest home builders – insists that it is solvent, The Australian has confirmed that the NSW building regulator has already sought legal advice about how and when to engage receivers. Metricon has been under intense scrutiny since early this year, and was forced to tell staff and customers that it was not experiencing financial problems.

“In a small proportion of cases, where customers had incurred delays in taking possession of their land titles, we were renegotiating contract prices with this small group due to unprecedented price increases over recent months,” its then chief executive, Mario Biasin, told staff in March.

The unexpected death earlier this month of Mr Biasin created similar concerns, and Metricon held talks with the Victorian government last week – although acting chief Peter Langfelder said it was “business as usual”.

Discussions in NSW continued on Thursday – partly to determine the scale of the problem – with representatives from Infrastructure NSW, Treasury, the office of Premier Dominic Perrottet and the State Insurance Regulatory Authority examining proposals to bail out the company and support the ailing construction sector.

One option being examined is a rescue package at a cost of hundreds of millions of dollars that would shore up industry players at risk of collapse due to a confluence of factors, including the pandemic, rising material costs, recent flooding and labour shortages.

Metricon Homes ranked as Australia’s largest builder in 2021 for the sixth year in a row. Picture: David Caird

A second package would be targeted at Metricon to complete some 300 active construction sites, or compensate buyers of house and land packages that may not be able to be completed.

Sources familiar with the company’s finances who spoke on condition of anonymity said cashflow remained dire and, without assistance, the business was teetering on the verge of bankruptcy.

The state’s building commissioner, David Chandler, who has sought the legal advice about the appointment of administrators, met with Metricon executives on Thursday to discuss the matter.

The company has more than 1000 sites, but roughly 300 have undergone construction work; the rest have not commenced, The Australian understands.

The support package may require the passage of legislation and includes discussions to distribute ex-gratia payments not only to Metricon but to other building companies, plus other measures that would alleviate the cost of levies and government charges.

In its meetings with Victorian Treasurer Tim Pallas, Metricon said it had paid all its trade creditors in full and on time and expected this to continue.

“We understand the pressure on builders on the eastern seaboard due to increases in costs, and the impacts this is having on the construction industry and residential clients,” Mr Pallas said after the meeting on May 19.

On Wednesday, Reserve Bank assistant governor Luci Ellis warned that pressures on builder profits and costs were set to continue for some time.

“Exactly when that will happen is hard to know. But when it does, we can expect some of the current rate of cost escalation and squeeze on margins to ease,” Dr Ellis said in a speech to the Urban Development Institute of Australia.

Separately, Australian Bureau of Statistics data released this week showed that residential construction costs blew out by 10 per cent over the year to March, with official figures having shown they contributed a quarter of the 5.1 per cent annual jump in consumer prices that triggered the first rate hike in over a decade in May.

Metricon Homes ranked as Australia’s largest builder in 2021 for the sixth year in a row. The company reported 6052 starts, a 33 per cent increase from the previous year. The private company, which is biggest in Victoria and Queensland but also has operations in NSW and South Australia, is an industry fixture but has kept a low public profile.

Metricon did not respond to requests for comment.

Metricon has more than 1000 sites, but roughly 300 have undergone construction work. Picture: David Caird

It had also held discussions with the federal government and its lenders, the Commonwealth Bank.

“The reality is, we’re strong. We’re paying everybody on time. Nobody’s been behind in any payments,” Mr Langfelder said last week.

The financial pressure on the industry has already claimed several large builders, including the Gold Coast-based Condev, which went into liquidation in March after it failed to secure $25m from clients to keep operating.

Probuild called in administrators in February after the company’s South African owners Wilson Bayly Holmes-Ovcon pulled the pin on providing further financial assistance, just four months after guaranteeing at least a year of support.

WBHO Australia suffered a $32.7m net loss in the last financial year and $104.6m of red ink in 2020, according to the annual report. It also lost $20.9m in 2018-19.

Most recently it was battered with a $28m provision related to work on the Western Roads Upgrade Project in Victoria.

WBHO’s accounts in 2020 revealed a blowout in losses on the project from $82m to $133m.

It admitted the job was its biggest mistake in 50 years amid as subcontractors were left stranded on the project until a deal was reached with the government.