Fletcher Building shares halted ahead of briefing on leaky pipes problem in Australia

Friday, 13 October 2023

Fletcher Building chief executive Ross Taylor is due to update the market on a problem with leaking plumbing pipes in Australia. (File photo)

Fletcher Building shares are halted from trading until Monday to give the building supplies and construction company time to update the market on a problem with leaky plumbing pipes in Australia.

When releasing its annual result in August, Fletcher Building said about 1500 of 15,000 houses constructed in Western Australia using its pro-fit polybutylene plumbing pipes had experienced leaks between mid-2017 and mid-2022, when its Iplex Australia unit stopped selling the product.

In April, Fletcher Building set aside A$15 million (NZ$16m) to cover damage to homes.

At the time, the company said its investigations had not identified a manufacturing defect with the product in houses primarily built by group home builders in Western Australia.

However, analysts at brokerage Forsyth Barr said claims by Western Australian homebuilder BGC this week that its investigations had concluded manufacturing issues were responsible for the leaking pipes and warranted a product recall seemed “credible”.

BGC was one of the largest users of pro-fit pipes in Western Australia, and has estimated it would cost A$1.8 billion to re-plumb all 30,000 homes potentially impacted in Australia, Forsyth Barr analysts Rohan Koreman-Smit and Paul Koraua said in note published on Thursday.

The Western Australia building regulator, the Department of Mines, Industry Regulation and Safety (DMIRS) is investigating the issue, as is the Australian Competition and Consumer Commission (ACCC).

DMIRS undertook an investigation earlier in the year, where it identified concerns with the manufacturing process and referred the matter to the ACCC.

From design right through to handover, this Fletcher Living house will be worked on by an all-female crew of tradies, consultants and managers.

“Ultimately, the final determination as to the cause of the leaks will be made by the regulators, and this will likely be a drawn out process,” Forsyth Barr noted.

Fletcher Building shares were halted from trading at midday on Wednesday at the request of the company, after it became aware that BGC was briefing people about its findings into the leaks.

“FBU wishes to ensure that the market does not trade materially influenced by false or misleading information and has sought a trading halt until it can respond to BGC’s briefing,” the company said.

On Friday, Fletcher Building said it would provide an update on the Western Australia plumbing issues in a 2pm briefing, and its shares would remain halted until Monday to enable the market to consider its response to BGC’s claims.

Forsyth Barr analysts said they expected a negative share price reaction when trading resumed, with the severity dependent on the credibility of the company’s rebuttal.

Shares in Fletcher Building last traded at $4.90, and are up 12% this year.