GIB board shortage: Companies seeking answers

Simplicity chief executive Sam Stubbs says answers are needed. Photo: RNZ.

A not-for-profit KiwiSaver provider and the Shareholders Association will meet with Fletcher Building's board this week to discuss concerns shortages of GIB plasterboard could hurt investor returns.

The company has a near monopoly of the plasterboard market and the chronic shortages, which have been blamed on unprecedented demand, have been well publicised.

Some in the building sector have warned that the ongoing shortages could result in builders going broke because they could not finish residential projects.

Simplicity, which owns 0.8 per cent of the company through its KiwiSaver schemes, says it initiated the meeting because it wants to have an open and constructive conversation about the supply issues.

"We are going to go and ask our representatives on the board, the directors, how did this come about, what will be done in order to fix it, and what is it about looking after the stakeholders that needs to be improved at the company level," Simplicity chief executive Sam Stubbs told RNZ.

"This is the sort of shareholder activism KiwiSaver funds should be getting involved in," he says.

Simplicity's social housing developer, Simplicity Living, recently fired Fletchers as its supplier due to lengthy products delays and was now resorting to importing a cheaper alternative from Thailand.

Stubbs says Fletcher Building is an important company and its actions affect millions of New Zealanders, either through the supply of its building products for news houses or the performance of its share price.

He would not comment on whether it would try to force a change on the company's board.

"It's too early to judge at this stage, the board of Fletcher Building and the management of Fletcher Building deserve a fair hearing.

"Let's have this discussion, let's find out what's going on and most importantly let's find out what the plan is for the future and how this company will best service stakeholders."

The New Zealand Shareholders Association will also attend the meeting.

"We're concerned about the political and reputational impacts caused by the GIB supply issue on the sustainability of shareholder returns," says NZSA chief executive Oliver Mander.

"Simplicity have uncovered some deep dissatisfaction amongst customers of the Fletcher plasterboard product and, ultimately, for shareholders we're concerned about that."

Fletcher working to alleviate problem - CEO

Simplicity's social housing arm has had 60 construction companies get in touch for advice on how to import plasterboard directly.

Fletcher Building says it will be another year before its new Tauranga factory comes online.

It says it is working around the clock producing GIB, but nobody could see the scale of supply problems coming.

Fletcher Building chief executive Ross Taylor had told Checkpoint in 2019 the firm was committed to building the GIB factory at Tauriko in Tauranga.

Ross told Checkpoint this evening his company had no dragged its heels with the project, which he said won't be ready until this time next year. But the firm could not have foreseen problems of supply and demand faced by the industry today, he added, and said it had invested responsibly and reasonably.

"At that stage back in 2019 consensus for about 30,000 houses per annum," he says.

"We had a capacity... to deliver for 50,000 houses. So, we made a decision to invest $400 million in manufacturing in New Zealand quite some time ago."

But Covid-19 and subsequent border closures caused delays of six-to 12-months, Taylor says.

"What then also happened through the Covid-19 period is what no one saw coming... once people couldn't travel they started investing in houses, alterations, additions, new houses, and the consents and demand for housing went from 30,000 to 50,000 quite quickly.

Fletcher is an intrinsic part of the building industry and accepts that onshore manufacturing is critical to levels of resilience when these situations arise, but it's doing everything it can to alleviate the problem, he says.

"We're working our plants 24/7 and we've looked to source product offshore, but there's very limited avenues to do that because offshore markets and capacity are also limited and you can't get much in."

His company is importing alternative products in the same why Simplicity Living has been doing, Taylor says, although the quantity of product is not that significant.

"It's not in very large volumes because those companies offshore are still quite busy and still unable really don't do much to put a very large dent in what's going on here in New Zealand."

Merchants prioritised customers differently, so that the time it takes to deliver GIB board to a customer varies, he says.

Merchants bringing in alternative plasterboard products is a direct consequence of not having enough of Fletcher's products to go around, he says.

Taylor says his company's hold on the market of about 94 per cent did not affect competition.

"What we did with all our building products is compete against imports generally," he says.

The firm needs scale to compete with those big manufacturers overseas who have a cost advantage, hence the $400 million plant it had planned to operate to be competitive, Taylor says.

"We have to stay on our toes as when manufacturer plasterboard and other products in New Zealand to make sure we stay competitive. There are no tariffs, no barriers to entry to products in New Zealand, which is a healthy thing for the economy and keeping local manufacturers competitive."

There was no bias on the industry towards GIB board, he says.

System 'wrong'

Elephant Plasterboard's managing director Kevin Van Hest told Checkpoint there is something inherently wrong with the system that has helped create Fletcher Building's monopoly on the market with GIB.

One big problem is when the word GIB is written on building plans, because people think it's a generic term, not a brand name, he says.

On top of that council has made it difficult to use any other type of plasterboard. In his experience, he has also found a prejudice against a product that has not made in New Zealand, he says.

"We've all put our eggs in one basket... the authorities, council compliance, the building code, they've made it really hard for there to be competition."

MBIE spokesperson John Sneyd told Checkpoint councils are willing to be part of the solution to the plasterboard shortage.

"There's no silver bullet to this but there is stuff that we are doing.

"We know there are credible alternatives out there... That's one of the things we've asked [consenters] - thinking about the products that are available out there that they can use, using generic products where they don't need to have specialist performance, thinking about designing differently for fire protection and bracing."


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Monopoly never works

Posted on 15-06-2022 09:26 | By an_alias

We have the same problem in all sectors that the govt has allowed to become monopolies. This is both major parties have allowed. So it seems govt is our problem.

Too Long

Posted on 15-06-2022 08:02 | By Yadick

This right pickle has been going on for far too long. The shortage of supply has been crippling people and businesses for months and months. It should have been investigated and comprehensive plans put in place to remedy it a long time ago. The sooner this is sorted the better for everyone. The Government should be cracking down on monopolies and getting them sorted. Just like the game Monopoly, there can only be one winner and they control everything while others lose out and eventually go under.

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