Fletcher Building is expecting a "short-term" hit from the Gib crisis but company bosses told investors today that New Zealand's plasterboard market will "return to equilibrium" soon.
At an investor day presentation, chief executive Ross Taylor spoke of measures being taken to control and increase supply - including its allocation model, importing Australian board and changes to its Penrose mill.
"These moves will increase our supply into the New Zealand market by around 10 per cent. This should see the market come back into equilibrium by around October 2022," Taylor said.
The company gave guidance confirming its full-year operating earnings before significant items which is expected to be around $750 million.
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Second half operating margin before significant items is expected to be around 9.5 per cent.
Hamish McBeath, chief executive of building products which includes dominant Gib manufacturer Winstone Wallboards said the company was focused on delivering plasterboard products to its customers. Wallboards has an approximately 95 per cent market share in the New Zealand construction sector.
Australian plasterboard was selling at around a 30 per cent premium compared with Gib's wholesale prices, McBeath said.
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Asked about the new $400 million Tauriko Gib plant and how that would change the business when it opens next year, McBeath cited growth in Gib's Weatherline and Barrierline products.
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Advertise with NZME."The Tauriko opening - our plan is to unleash the capacity on that particular market. We're also working on our other boards. We'll be able to produce products at the new plant that will take on the fibreboard cement market. We have plans for that."
Asked about reputational damage from the Gib supply shortage, McBeath said the company was closely connected to builders "and we pride ourselves on that. We think we will take a hit as we come through this. We're confident we will get back fairly quickly.
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"The way we service the industry, we reduce overall costs of install and comply. We give them all the help in terms of knowing which colour boards [to use]. So I'm pretty confident once we get through this ... we might have taken a hit on the shares but with our new asset online, we've got a few things coming. I'm pretty confident we'll get back," McBeath told investors gathered at The Cloud on Auckland's waterfront.
Fletcher was asked about the pricing versus cost increases in plasterboard but Taylor said Gib board prices only went up 10 per cent in the last two years and were "very reasonable. We're covering inflation but we're not gouging along the way".
On Fletcher's announcement today that it had granted 10 trademark royalty-free licences, Taylor gave background on board having different uses like moisture and a colour code so when inspectors visit sites, they can identify board in different locations.
"So we've got a colour palette we've registered as our colour palette. People are looking for help to use the same colour palette as the same type of board. We've given licences for people to use the same colours but we don't take responsibility that the right colour is on the right board. We're having nothing to do with that. Companies with a longer position could get their own colour palette. It's been leaning into the problem," Taylor said.
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Oliver Mander, Shareholders Association chief executive, asked if there was concern about political involvement stemming from the Gib shortage.
Taylor said the company was working 24/7, getting extra volumes and importing, as well as working with merchants.
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Advertise with NZME."We've spoken to [Housing Minister] Megan Woods. We're happy to participate with the task force but the focus is getting through this demand period," Taylor said. He was referring to the Building and Construction Minister's announcement yesterday that she would form a taskforce to investigate the Gib crisis and what action needed to be taken.
McBeath referred to planned upgrades to thermal elements of homes and said the business was well-placed to provide more insulation products to meet those demands.
The investor presentation went into further detail about the Gib shortage, referring to the plasterboard market volumes having been met up until last August.
"Following the Auckland lockdown, the industry shortages across a range of key building supplies including timber, insulation and plasterboard caused customers to bring forward their orders to ensure they had stock," the company said.
Order volumes more than doubled between November and February: "This volume is approximately twice the industry's current capacity to build."
The company was able to meet some extra demand through this period by drawing down on inventory below normal levels and by importing some additional volume from Australia.
But the exporter stopped that last November, due to high industry demand in Australia.
"Due to the extent of the demand surge, we introduced an allocation model in February to give merchants certainty on what we could supply and to allow us to clear the order backlog," the slide said.
Fletcher's PlaceMakers and other merchant customers would run an emergency allocation fund to alleviate smaller customer hardship issues, the company said.
Fletcher shares are today trading around $4.84, down from $5.70 late last month.
• Full investor presentation is on the NZX under Fletcher Building
