Fletcher Building’s plastic pipe and insulation products are most exposed to fuel price rises, according to an analysis from the company.
Chief executive and managing director Andrew Reding today said Iplex here and in Australia, and Fletcher Insulation, were the most exposed.
“The most immediate exposure is in plastics (ie resins), with Iplex New Zealand and Australia most impacted,” Reding said in an NZX announcement.
“Urea used in Laminex Australia, Laminex New Zealand and Fletcher Insulation products is also exposed. Short-term supply has been secured, with mitigation actions underway to diversify sourcing and manage potential constraints.”
Fuel remained a material cost driver to Fletcher Building, with diesel representing the majority of consumption across the group.
While the price increases due to the Middle East conflict were significant, the impacts were being partly mitigated through bulk purchasing, hedging and pass-through pricing mechanisms, Reding said of the company, which has a $3.2 billion market capitalisation.
Unhedged, a 10c increase in diesel prices resulted in an incremental cost of approximately $3.4 million per annum at a group level, or $2.4m per annum excluding construction.
A 10c increase in petrol prices equated to an about $200,000 annual incremental cost at a group level.
The group consumes nearly 36 million litres of fuel annually, with diesel accounting for 94% of total usage.
The heavy building materials division represented more than half of total consumption, with the construction division accounting for nearly a third.
Price increases across divisions range from modest, approximately 1% to 5%, to more significant in plastics, up to 36%.
This includes fuel-linked surcharges, reflecting input cost pressures, Reding said.
These have been broadly in line with wider industry responses. Early signs of demand softening are emerging, particularly through some project delays.
Direct impacts on employees were limited to date, with anecdotal feedback on increased commuting costs, some requests for greater work-from-home flexibility and references to fuel-driven cost-of-living pressures in union discussions.
Activity has primarily focused on planning, with expectations that workforce impacts may increase if conditions escalate.
Last week, the Herald reported how New Zealand plumbers are about to be hit with a 25% price rise on pipes next month, due to manufacturing problems affecting the supply of resins from petrochemicals to make the pipes because of the Iran conflict.
Dave Good, general manager of D.L. Good & Son Plumbers in Henderson, said Fletcher Building-owned Iplex had last month told merchants of a 25% price rise coming from May 1.
The Herald was subsequently sent information showing that on March 26, Marley also told merchants of plastic pipe price rises of up to 25%.
Good’s business, founded by his father, employs about 80 plumbers on large commercial sites.
Contracts already bid for would now be far less profitable for the company, Good said.
Anne Gibson has been the Herald’s property editor for 26 years, written books and covered property extensively here and overseas.