Who will fix these renovators?


Boral chief executive Ross Batstone recently said that conditions in the building and construction sector were the worst in 20 years.

In an effort to highlight the sector’s plight, the Housing Industry Association (HIA) held a industry meeting at Parliament House in Canberra yesterday, with 40 building industry representatives attending. The HIA has pressed the government to provide more stimulus to the industry. HIA managing director Shane Goodwin has told the Australian Financial Review (AFR) that the industry is building 20,000 fewer homes each year than had been the average for the past 20 years. He also said residential construction is experiencing its second recession in just four years.

The renovation industry is also facing tough conditions with the HIA reporting that March 2012 renovation activity was down 5.5% compared to the previous year.

Fittings and fixtures suppliers like GWA International Limited (ASX: GWA) and Alesco Corporation Limited (ASX: ALS) have both seen their profits and share prices head south in the last year, both falling by more than 20% in the last twelve months. Alesco’s result would have been worse if not for the takeover offer by DuluxGroup Limited (ASX: DLX), which lifted Alesco’s share price.

Alesco’s poor showing yesterday, when the company reported a full year loss of $13.9m, suggests it will be tough to rebuff its suitor. According to the AFR, DuluxGroup has slammed the result, adding Alesco’s net losses over three of the past four years now totalled $137.4m.

Plumbing and bathroom supplier, Reece Australia Limited’s (ASX: REH) shares have held up better than Alesco and GWA, but still fell by more than 10% over the last year. The company’s earnings have been flat since 2008, thanks to revenue growth that has averaged just 1.8% per year.

The building and construction sector is looking for further interest rate cuts, but also for Federal and state government action to lift a substantial portion of the taxation burden from new housing.

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Motley Fool writer/analyst Mike King doesn’t own shares in any companies mentioned. The Motley Fool‘s purpose is to help the world invest, better. Take Stock is The Motley Fool’s free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. Click here now to request your free subscription, whilst it’s still available. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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