Fletcher Building says vitriol online over plasterboard shortage is affecting staff

Thursday, 23 June 2022

Fletcher Building chief executive Ross Taylor expects the plasterboard market to come back into equilibrium by October.

Fletcher Building chief executive Ross Taylor says social media vitriol about the plasterboard shortage is hurting staff who are doing their best to get product out to customers.

The company’s Winstone Wallboards unit holds a 94% share of the plasterboard market with its Gib product and it has come under fire for failing to keep up with the surge in demand during the Covid-19 pandemic, causing a construction bottleneck and stress for builders and the wider industry.

“When the team see some of the vitriol online, that impacts them because they care deeply about getting the product out,” Taylor said. “I spent a fair bit of time with the teams that are working very hard just to keep them focused on doing the things we can do that are in our control, and keep them feeling good about themselves.”

The impact on Fletcher Building’s reputation was “not good”, he said. “The media we’re getting and the commentary we’re getting, that hurts. It’s felt from my role right through the organisation when these things happen.

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“We really care about customers and how we’re servicing them and we have really been working hard.

“The reality is we’ve got a large market share, we’re not meeting demand, and there’s customers hurting out there. Rather than spending a lot of time in the market debating that, and bemoaning it, we're better off leaning into that, getting the volume in, solving it and ending the pain for the customers and then, rightly, that’s when our pain starts to end,” he said.

“I am not denying our obligations in the marketplace to our customers. We just need to solve it, because they are hurting and we just need to get in, and get it fixed.”

Fletcher expects the market to come back into equilibrium by October as it runs its factories 24/7 to boost supply, reconfigures plants to lift production, allocates supply, and imports plasterboard from Australia.

Building consents hit a record 50,000 in the year to March – ahead of the country’s capacity to build 35,000 to 40,000 homes a year. Building products have been in short supply as a surge in demand collided with constrained supply caused by lockdowns and supply chain disruptions during the pandemic.

Fletcher had been meeting demand for plasterboard up to August last year, but the subsequent move of Auckland into a Level 4 lockdown for five weeks disrupted manufacturing and distribution of building products throughout the country.

Building consents hit a record 50,000 in the year to March – ahead of the country’s capacity to build 35,000 to 40,000 homes a year. (File photo)

After the lockdown, people brought forward orders to ensure they had stock and rival plasterboard supplier USG Boral, owned by German company Knauf, pulled the plug on its New Zealand business, further denting supply.

Fletcher's order volumes for plasterboard more than doubled from November 2021 through to February 2022, which was about twice the industry’s capacity to build.

“I think it’s unreasonable to think anyone could have predicted that doubling of volumes overnight,” Taylor said. “It’s important to us to respond to it, but I don’t lament that we couldn’t respond to a sudden doubling of volumes, which clearly is not sustainable.”

He said a “fear factor” developed as people “piled in” to secure product on concern they may not be able to source it in the future.

“We saw it in our Placemakers business as firstly, structural timber became scarce, and that caused panic, then it moved into insulation, and then it just naturally translated into ‘oh gee, we better get plasterboard’, and before we knew it, everybody was ordering plasterboard,” he said.

Fletcher met some of the extra demand by drawing down inventory below normal levels and importing plasterboard from Australia, although its Australian supplier paused shipments in November due to high demand in its home market.

When that didn’t calm the market, Fletcher moved to allocate supply to give certainty to merchants and clear the backlog of orders. In hindsight, Taylor said the company should have allocated supply for smaller builders in hardship earlier.

The company is investing $400 million in a new factory in Tauranga, which is scheduled to open in May next year and will add an extra 30% capacity to its local production.

Taylor said the pandemic had shown the importance of local manufacturing when global supply was disrupted.

“You want local manufacturing because it actually makes you more resilient,” he said.

“We haven’t kept up with this demand spike, but without that you could have had international players behaving quite differently and really shorting the market. Having local manufacturing in these sort of global supply chain disruptions is a positive because at least you know you’ve got some of your capacity locked down.”

Winstone Wallboards produces about 35 million square metres of plasterboard a year, and pallets that haven’t been returned suggests about 2 million square metres may be stockpiled around the country, he said.

Building and Construction Minister Megan Woods on Tuesday announced a ministerial taskforce to look for solutions to the plasterboard supply crisis.

Taylor said he was “very happy” to talk with Woods and the taskforce.

It was “odd” that the company hadn’t been approached, given it was the biggest plasterboard supplier in the market, he said.