Christchurch building firm Maxim has gone into liquidation this week – and construction leaders warn there will be more business failures to come over summer
The auto-reply on company director Logan Townsend’s email is brutally concise: “Maxim Design Limited (Homes By Maxim) was placed in liquidation on the 17/11/2021. For further information please contact the liquidator.”
Yesterday, insolvency practitioner Brenton Hunt gazetted the voluntary liquidation of the 31-year-old Christchurch company, whose team had built 30 to 40 houses a year.
Townsend said the company had four staff when shareholders resolved to put it into liquidation. It had 10 houses at various stages of completion, which would be covered under the Master Build warranty. “Covid-related delays as a result of lockdowns and major supply chain issues mainly around timber supply have exacerbated the company’s position and made it untenable for the company to continue to trade,” he said.
For those who represent smaller players in the building industry, this is just more evidence of the need for a Commerce Commission study of competition in building supplies – to be announced this weekend. “The Commerce Commission needs to step in on supply issues as this will affect many more firms’ consistency of work flow in the future,” Townsend told Newsroom.
Mike Blackburn, from builders’ co-op Combined Building Supplies, said the economic impact on builders needed to be discussed.
“You sign a contract to build a house for someone and and if you can’t get materials to complete that job, then you can’t send an invoice to the client.”
“They’ve got wages, they’ve got other costs that they’ve got to pay for. And and all of a sudden, small and medium sized builders are going to start to go to the wall, simply because they haven’t got the cashflow coming through.”
“They’re certainly not a small builder, and they have been around here in Canterbury for a while. And look, I betcha that they will just be the first of many who will go to the wall and in the new year, we will see an epidemic of this.”
– Mike Blackburn, CBS Cooperative
Blackburn said he was aware of a Maxim going into liquidation this week.
“They’re certainly not a small builder, and they have been around here in Canterbury for a while. And look, I betcha that they will just be the first of many who will go to the wall and in the new year, we will see an epidemic of this.”
CBS Co-op represents 700 members, mainly builders, but also some plumbers and painters and landscape gardeners, providing them bulk purchasing clout in dealing with the big suppliers.
The five big wholesalers are Carters (owned by Carter Holt), Placemakers (owned by Fletcher), Mitre 10, Bunnings and ITM. There are others like Mico (again owned by Fletcher) and Plumbing World that just supply certain industries.
“Like with the grocery sector, there are suspicions that people have had for a long time. But in order to actually make change for the better, you need robust analysis that people can get behind. It’s no different in the building sector.”
– David Clark, Commerce Minister
As global supply of building products has tightened, there have been claims that the big suppliers and dominant producers like Winstone Wallboard (Fletcher) favour bigger customers. And Carter Holt Harvey Woodproducts faced criticism this year for selling timber to big clients in China, leaving a shortage in New Zealand.
According to Blackburn, builders are finding it nigh-on impossible at present to source timber framing and trusses, plywood bracing, insulation batts, Hardie linea weatherboard, Winstone Gib board, coil steel for long-run roofing, and reinforcing mesh for foundations.
There were big builders that had run out of reinforcing mesh entirely, he said, and builders who ordered timber framing now were being told they wouldn’t receive it until May or June.
Labour promised in last year’s election campaign that after the Commerce Commission completed its inquiry into supermarkets, the next industry to face scrutiny would be building suppliers. Commerce Minister David Clark is to announce the study of competitive behaviour in the sector on Sunday, but that’s expected to be pre-empted by questions on Friday when he addresses the big Building Nations infrastructure conference by zoom.
Clark said he would like the Commerce Commission to examine questions like whether a lack of competition was contributing to delays in the supply chain.
“There’s no doubt that global supply chains have been disrupted, and that’s why you would want careful analysis,” the minister told Newsroom last month.
“Like with the grocery sector, there are suspicions that people have had for a long time. But in order to actually make change for the better, you need robust analysis that people can get behind. It’s no different in the building sector.”
Roger Levie, the chief executive of the Home Owners and Buyers Association, welcomed the Commerce Commission probe.
“It’s not before time,” he said. “We have major concerns. Unlike supermarkets, where it’s the retail end, with building products the problems come at the manufacturing and supply end.
“When you look at certain products, for example, windows and door joinery, linings and other key products, there are very few companies manufacturing. In some key areas, they end up being able to attract large margins on products.
“And they are able to block import and availability elsewhere because products have to meet building code standards, and New Zealand has a view of the world that our building conditions are different, so it’s hard to get products certified for New Zealand standards.”
He expressed concern that every person in the supply chain was adding their own mark-up, and builders and tradies were claiming on big rebate schemes – “some of the highest in the world” – if they bought their supplies from certain wholesalers.
“They get the rewards and the rebates and the trips, but for consumers none of that flows through. I don’t know if that’s going to be included in the Commerce Commission’s investigation, but it needs to be.”
Views are mixed. Some in the construction sector say an inquiry is an urgent imperative; others say it’s worth doing but that now is not the right time. Levie has an as-yet-unsent letter on his computer to the minister asking that the Commerce Commission terms of reference be as broad as possible to cover rebates and all the links in the local supply chain for building products. But Master Builders and Master Plumbers have also written to David Clark, saying the industry needs Government support rather than scrutiny at this time.
“This is a political exercise,” said one industry player. “They are going to set their hound dogs on whatever part of the industry they decide to investigate and they may well come up with recommendations – but it’s not going to solve the housing bubble, or the international and local supply chain challenges, or inflation, which will push prices up, or the availability of homes, or the availability of land.”
Another construction leader, Master Plumbers boss Greg Wallace, said there were a dozen wholesalers for plumbers, and anybody could buy a container-load of taps from China – there were no constraints on competition.
The real problems were with labour shortages and the global supply chain. “We wrote to the minister saying this is terrible time to do it,” he said.
“We’re dealing with our biggest building products restraint because of the growth in the sector, because of Covid, and because of freight delays. I mean, we’ve never had an environment where product restraint is at the levels they are now.
“We’re dealing with the biggest growth the construction industry has ever seen, we’re so short of labour because the borders are closed, and if you don’t pre-order your product three to six months ahead of schedule, you just can’t keep up. Because 95 percent of plumbing product is imported, so we rely on the international shipping supply chains to be open, and we’re restrained by that. Until that’s resolved, we’re not going to fix this issue.”
