Leaky pipe claims ‘crude’ attempt at pressure - Fletchers

Friday, 14 June 2024

Fletcher Building is involved in a dispute over leaky pipes in Perth in Western Australia.

Australian building firm BGC has made new claims about the Fletcher Building product involved in Perth’s leaky pipe problem, but Fletcher’s is not having a bar of them.

Fletchers announced last year that 1200 of 15,000 houses constructed in Western Australia using its pro-fit pipes had experienced leaks between mid-2017 and mid-2022, when its Iplex Australia unit stopped selling the product.

BGC was one of the largest users of pro-fit pipes in the state, and in October last year it said that its investigations found manufacturing issues were responsible for the leaking pipes.

This week BGC claimed the problem was getting worse, and the rate of bursting pipes was increasing.

BGC’s general manager of strategy and commercial Sam Gray told media there had been just over 3000 total bursts in 1500 Perth homes built by the company.

There had been “about 110 bursts per month over summer, with about 40 homes bursting for the first time each month”, he said. That meant they were getting more bursts now than at the same time last year.

On average it cost A$80,000 (NZ$86,130) to do a full pipe repair in BGC homes, and it was a pipe manufacturing problem, Gray said.

Former Fletcher Building CEO Ross Taylor disputed BGC’s claims last year, and the company still stands by what he said.

Fletchers responded to the claims with a statement released on the NZX on Friday morning.

It said it was participating in mediated discussions with the Western Australian Government and many builders, including BGC, to finalise a response to the plumbing failures in Perth.

The negotiations were confidential and had not yet been concluded, and the public claims made by BGC were a “crude and apparent attempt to place pressure on those negotiations”, it said.

“The conclusions shared by BGC have not been verified, shared with Iplex and are, in many respects, inconsistent with evidence we have gathered first-hand or been provided by other parties.”

Fletchers stood by the view on the reasons for the problem that it had previously shared with the market, it said.

In response to BCG’s claims last year Fletchers’ now-former chief executive Ross Taylor said the problem was due to “shoddy” installation work not manufacturing faults, and that BGC was trying to shift blame for the faults.

At that time, Fletchers’ shares were put into a short trading halt while the company prepared a response to the claims.

The International Convention Centre in Auckland, which was destroyed by fire in 2019, has also caused problems for Fletcher Building.

In its response, Fletchers provided details of testing undertaken by multiple Australian laboratories and international scientific experts which found no evidence of a manufacturing fault with its product and found flaws with BGC’s claims.

Taylor also said there were no abnormal leak issues on its plumbing pipe installed elsewhere in Australia, only in Perth in Western Australia, which pointed to installation practices as the cause of the plumbing leaks.

Fletchers had established an A$15m fund to work out the causes of the problem and help with repairs in April last year, but BGC had refused to work with the group, he said.

BGC’s cost estimates were “sensationalist”, and the cost for the industry to repair affected houses in Perth would be more like A$50m to A$100m, Taylor said.

On Friday, Fletchers said it noted BGC’s acknowledgment that early intervention had proven to be a valuable mitigant, and it was looking forward to settling an industry-led response if possible.

The company remained committed to a sensible, data-led and proportional solution from all parties and to playing its part in that process, it said.

It has been a difficult year for Fletchers. In February, Taylor and board chairperson, Bruce Hassall, announced they would step down after the company reported a $120m first half loss after tax.

The loss followed an earlier announcement that costs on the New Zealand International Convention Centre in Auckland and the Wellington International Airport car park building had swelled by $180m.

Since then, its recent profit guidance for the 2024 financial year was well below analyst estimates, the chief financial officer and two directors have also resigned, and commentators have been questioning what is going on at the company.