Fletcher Building shares jump on joint industry response to WA pipe leaks
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More news: Fletcher Building shares rocketed as they resumed trading on the ASX, after the building products supplier secured an agreement with the Western Australian government to address plumbing failures in WA homes fitted with pipes provided by its subsidiary Iplex Australia.
Shares were up 11% to $2.92 by 1:40pm AEST, bit have reduced by around a third since the turn of the year.
Fletcher agrees joint industry response on WA pipe leaks
More news: Fletcher Building has reached an in-principle agreement with the Western Australian government and industry stakeholders to address plumbing failures occurring in Western Australian homes fitted with pipes provided by its subsidiary Iplex Australia.
The numbers: The joint industry response (JIR) between Fletcher, the WA government and relevant WA home builders will see Iplex cover 80% of direct costs of repairs by participating builders, with the state government contributing the remaining 20%.
Fletcher said that it expects to record a pre-tax provision of $155 million in its FY25 financial statement, on the assumption that the agreed JIR is finalised.
The provision will cover Iplex's share of costs to repair affected homes, totalling around $120 million. It will also cover $20 million in costs to instal leak detectors to all relevant homes and $15 million in associated administration costs over the life of the JIR.
The context: The agreed work programme under the JIR will include pipe and damage repairs, ceiling pipe replacements and full-house repiping for homes with "extensive failures". Temporary accommodation will be offered for full-house repipes.
Iplex will also offer all homeowners, free of charge, the installation of a leak detector unit, reducing the impact in the event of a plumbing failure.
The JIR comes just days after Fletcher confirmed that WA home builder BGC had filed legal proceedings against Iplex in relation to the pipes issues that have plagued homeowners. BGC has not joined the JIR but will be eligible to join if it is willing to do so on the same terms as the rest of the industry. BGC's share of the relevant homes is estimated to be between 50% to 60%.
Fletcher shares entered a trading halt this morning ahead of the announcement, having lost more than 40% of their value so far this year.
What they said: "We acknowledge the efforts of Minister Ellery and the WA government in facilitating a mediated outcome for the benefit of WA homeowners," said Fletcher's acting CEO Nick Traber.
"We welcome this in-principle agreement with the WA government and the many builders involved to address the WA plumbing failures," he said. "We further acknowledge the WA government's recognition that a product recall is not an appropriate response given the circumstances involved."
Fletcher in trading halt ahead of WA response on pipe leaks
The news: Shares in Fletcher Building are in a trading halt as the embattled building products supplier awaits the Western Australian government's response to plumbing issues dogging its Iplex Australia pipes.
The numbers: Fletcher said it is expecting the WA government to make an announcement on the issue on Friday.
The dual-listed company’s ASX-listed shares have lost more than 40% of their value so far this year.
The context: The halt comes just days after Fletcher confirmed Fletcher confirmed that WA home builder BGC had filed legal proceedings against subsidiary Iplex Pipelines Australia in relation to the Iplex Pro-Fit Pipes issues that have plagued homeowners.
The company said on Friday it has been in mediation with stakeholders, including the state government, about developing a joint industry response to this issue.
The issue comes as Fletcher faces other regulatory troubles in New Zealand, where the NZCC also opened legal proceedings against the company over volume rebates.
The building products supplier reported a worse-than-expected full-year net loss of NZD227 million ($207 million) earlier this month.
The sources: ASX announcement, ASX announcement
