But the company, formed out of the acquisition of Boral’s Montoro bricks and Hollostone masonry businesses in 2021, faced problems of its own making, too.
Last month Lutum, which manufactures at sites in NSW, Victoria and South Australia, filed its most recent financial report – for the year to June 2022, its first year as a standalone business.
Even as they reported a pretax profit of $8.6 million on revenue from trading activities of $44.6 million – plus a further $18 million in revenue booked as “gain on acquisition” – and a net after-tax profit of $11.1 million, directors Andrew Warburton, Charlie Condo and Jason Eisner also flagged a number of problems.
The demerger from Boral “significantly impacted” the business and created a number of one-off costs. There were also quality issues in the NSW manufacturing operation they apparently hadn’t known about.
“A deeper review of operations following acquisition highlighted that poor product quality in both concrete and terracotta tiles manufactured in NSW had resulted in a significant loss of market share in NSW,” they said.
Mr Kelly said the NSW quality issues were something the administrators would look into, but said the main problem was the company’s inability to sell enough to cover its rising financing and materials costs at the same time as payment times to suppliers were lengthening.
“They haven’t been able to scale the business fast enough to keep up with the rapid increases in interest rates and input costs,” he said.
Casualties in Australia’s precarious home-building sector are spreading beyond builders and subcontractors to suppliers.
Figures from corporate regulator ASIC to end-March show the number of construction industry insolvencies was up by more than one-third to 2142 from 1598 over the same period a year earlier.
Construction accounts for 27.7 per cent of economy-wide insolvency appointments, down slightly from 28.1 per cent a year earlier.
Boral sold the roofing and masonry business on November 1, 2021, for a price tag of $12 million, but kept the Emu Plains site on which part of the company was based because other Boral businesses operated from it.
Boral’s annual report of 2022 revealed that the company booked a loss of $3.8 million on the sale of the business to the new owners.
The sale was part of a refocus by Boral on the core Australian operations of concrete, asphalt and quarrying products under the influence of the billionaire Stokes family, which is now poised to take full ownership of all of Boral in a $1.9 billion buyout of the remaining shareholders.
Ryan Stokes, son of Kerry Stokes, became chairman of Boral in July 2021, with the Stokes’ Seven Group heavily influencing a shift in strategy by Boral back to Australian-only operations, with $4 billion of North American operations offloaded.
Seven Group on Tuesday revealed that it had increased its stake in Boral to 82.4 per cent as more Boral shareholders accepted a Seven offer revamped on April 12, whereby both sets of shareholders will receive one-off dividends as a sweetener to speed up acceptances of a cash and scrip proposal.
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https://www.afr.com/property/commercial/building-materials-supplier-lutum-goes-into-administration-20240423-p5flzj
