Crisis talks underway as building giant on brink of collapse

The CEO of the latest major Aussie construction firm on the brink of collapse died just days before the crisis talks.

Houses under construction in Minta Estate Berwick. Picture: David Caird

Building giant Metricon is in urgent crisis talks with clients after falling into financial strife. 

Sales staff within the company were being instructed to increase cash flow by securing more deposits, the Herald Sun reported on Wednesday.

Metricon bosses are expected to meet with major clients including the Victorian Government on Thursday.

Earlier this week, the company co-founder and CEO Mario Biasin died unexpectedly at the age of 71.

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

In a statement, an executive from Metricon, Ross Palazzesi, revealed his colleague’s sudden death was a shock.

“As friends and colleagues of Mario, we are shocked and so saddened by the news,” he said on Monday.

“Our hearts and thoughts are with the Biasin family. We will ensure Metricon Homes continues all operations and on-site construction as usual during a very emotional time.”

Just days later, though, the company has entered crisis talks.

Metricon employs approximately 2500 staff, primarily in eastern Australia, where it has a pipeline of roughly 4000 homes under construction.

This afternoon we are mourning the sudden and unexpected death of company Founder and Chief Executive Officer Mario Biasin. Mario jointly founded Metricon in 1976, growing it to become an industry leader. Our hearts and thoughts are with the Biasin family. pic.twitter.com/BKznoZT0qx

— Metricon Homes (@MetriconHomes) May 16, 2022

The company is reportedly renegotiating contracts amid serious and industry-wide price pressures. Picture: David Caird

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Acting CEO Peter Langfelder denied the company had solvency issues and said the business continued to be viable.

“There is simply no basis to these rumours. Metricon is a strong viable business without any solvency problem,” he said.

The biggest challenge Australia faces is to get more homes built for more Australian families and as the biggest home builder in the country we are the ones to deliver.”

Construction businesses across Australia are facing difficult circumstances in the face of rising materials costs and labour shortages.

Earlier this year, giant firms Probuild and Condev went into liquidation, impacting thousands of staff and subcontractors.

Government efforts to support construction during the pandemic have boosted production rates beyond what key supply chains can support.

Metricon has been trying to alter, offload or delay contracts to help deal with the constraints.

RELATED: ‘Freaking out’: Metricon crisis spreads

Following the sudden death of its co-founder, Metricon said it was looking to maintain normal business operations. Picture: Ian Currie

One salesperson told the Herald Sun they were owed hundreds of thousands of dollars in commission and were being pushed to secure more cashflow to help keep the business afloat.

“We have been pressured now to push for as many deposits as possible,” they said.

“They are five per cent, so on an $800,000 build that’s a $40,000 payment – then buyers would be charged as the build progressed, for the slab, then frame, et cetera.”

Mr Langfelder said the goal was for the company to continue operating as usual following the sudden loss of Mr Biasin.

“We are focused on the business running as smoothly as possible, servicing all our customers and continuing to get homes to site and completed on time,” he said.

“We have delivered a message to our team that the goal is business as usual, as Mario would have wanted.”

Mario Biasin died unexpectedly this week after reportedly experiencing mental health issues.

Partner at Jirsch Sutherland, Andrew Spring explained rising interest rates would put further pressure on the construction sector as a whole and “inevitably” lead to a lot more insolvencies.

“The concern that interest rate rises bring is that it softens the property boom, or eradicates it to a point where the purchaser is worried that the value of their property is not continuing to rise, and in fact may well decline,” he told Nine news.

As one of Australia’s largest housing developers Metricon is vulnerable to changes in real estate values, as flagged by experts following the recent interest rate rise.

Last week HSBC chief economist for Australia and NZ Paul Bloxham forecast rates would rise to 1.35 per cent by the end of 2022 and reach as high as 1.85 per cent by early 2023, warning the changes would see the property market plunge by 16 per cent over the next two years.

“The pace of housing price growth has slowed recently though, such that housing prices are up by only 1 per cent since the beginning of 2022, after a gain of 21 per cent,” mr Bloxham said.

“The Sydney and Melbourne housing markets have stalled since the beginning of the year.”

In response HSBC revised its 2023 housing price forecast from one to four per cent growth to a whopping five to 10 per cent fall.

Chief economist at AMP Capital, Shane Oliver also predicted a significant plunge in the property market, centred on Sydney and Melbourne which he said would plummet 15 per cent by the end of 2023 or early 2024.

Originally published as Crisis talks underway as building giant on brink of collapse