Australia: construction downturn has cement maker reduce profit expectations

AdBri reduced its market expectations at its full-year results presentation on Thursday, after worse than expected construction activity in the residential and non-residential sectors.

Poor building conditions are driving a steady stream of companies in the construction sector to the wall. The trend is alarming industry groups and causing major companies such as cement maker Adelaide Brighton (AdBri) to lower their profit expectations.

AdBri managing director Mark Chellew said building activity was particularly weak in southeast Queensland and Victoria.

"Our view is that non-residential and residential [sectors] have been weaker than what we thought even two months ago," Mr Chellew said.

Master Builders Australia CEO Wilhelm Harnisch said the number of insolvencies was a huge concern to the industry as there was little work coming up, returns on existing projects were slim, and it was difficult to get finance and to get paid for work done.

"The word we're getting is architects and engineers aren't getting a lot of work," Mr Harnisch said.
"More contractors are vulnerable and likely to collapse if conditions don't improve, and that's particularly in the commercial building sector."

He said there were "glimmers of hope" in the residential market after recent interest rate cuts, but business was still slow and there were questions over whether the recovery would be sustained.

A June-quarter survey of builders by Master Builders Australia found the industry was "in survival mode as activity grinds to a halt".