Knauf pullback to have "little effect" on housing costs

Fletcher says Knauf pullback would have "little effect" on housing affordability

By Tina Morrison

Nov. 17 (BusinessDesk) - Fletcher Building, New Zealand's largest building company, says the potential scaling back of the local operations of its plasterboard rival Knauf would have "very little effect" on housing affordability.

"The key to housing affordability is availability of land, the fraction of a new house that is plasterboard is absolutely tiny, so the fact that one player may well be pulling out should have very little effect on that," Fletcher chief executive Mark Adamson told BusinessDesk on the sidelines of the weekend's G20 meeting in Brisbane. "The way to sustainably reduce the cost of housing is to build more houses and build them more cheaply."

Knauf, the world's second-largest plasterboard maker, confirmed to BusinessDesk this month that the Australian and New Zealand chiefs of its plasterboard operations have resigned and the New Zealand business is under review, having posted a loss in its first nine months of operations.

Knauf has struggled to gain traction in the New Zealand building market, which is dominated by Fletcher, the country's largest listed company. It took Knauf longer than expected to gain approval for its products from BRANZ, and even then, the company said it faced resistance getting its products into stores which had established relationships with Fletcher and looked at establishing its own independent outlets.

Fletcher's Adamson, who was in Brisbane representing New Zealand business as part of the B20 business group, said he knows Knauf from his days running the European building products business.

" I know the guys at Knauf, I have a lot of respect for them, I meet them occasionally," he said. "They are a huge organisation. In plasterboard and insulation they are far, far bigger than Fletcher. They can deploy a lot of innovation and technology and wherever they go, they tend to win. They came to New Zealand, we took them on with our service model, with our product offer, with our innovation, and we hope to win through that."

"The key thing to the product is to make sure it arrives when the builder wants it, in the condition he wants it, and that the product is a high-quality product," he said. "That is worth its weight in gold if you are a builder or if you are a house owner and we have made sure that we service the market in a way that’s very difficult to replicate."

Fletcher told shareholders at its annual meeting last month that it wants to triple the pace of home building in New Zealand to capitalise on strong demand for housing, particularly in Auckland and Christchurch. Fletcher has historically built and sold around 300 houses a year and has now set a goal of achieving an annual rate of more than 1,000 homes sold each year, the Auckland-based company said. It is also pursuing partnership opportunities with government agencies to improve the quality of social housing.

Finance Minister Bill English, who is eyeing a range of reforms to bring down the cost of housing, said financiers and builders had told him lower building costs would flow from bigger developments.

“They need pretty large scale procurement to get the benefits of having that kind of competition and so we would be hoping that larger scale development will lead to a bit more pressure in the market,” English told BusinessDesk on the sidelines of the G20.

(BusinessDesk)

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