A couple of ASX news bites to start off the week, with transporter Lindsay Australia ticking its forecasts up nicely, while Fletcher Building has been forced to top up provisions for a defective product.
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The collapse of the Scott’s Refrigerated transport group in early March was supposed to be a crisis and a threat to fresh food and (if you listened to some of the more outlandish claims) to consumer health.
It never really panned out that way and, as is so often the case, Scott’s misfortune parlayed into a benefit for one of its rivals. After making its way through a wet March quarter and the added confusion caused by Scott’s collapse, Lindsay Australia (ASX: LAU) upgraded its 2023 earnings outlook on Monday by 25%.
Lindsay said it had seen “a surge in demand for its transport services following the recent publicised collapse of Scott’s Refrigerated Logistics (SRL), a major refrigerated road and rail logistics provider. “
“The increased demand follows an already tightening supply chain after the continued exit of smaller operators over the past two years.”
Lindsay said third quarter trading had been navigated without material adverse weather events and based on the strength of the Q3 trading results, along with a positive 4th quarter outlook, it had upgraded guidance for underlying EBITDA for the June 30, 2023 financial year, “with the revised range now expected to be between $85 million and $90 million, up from the range of $68 million to $71 million.”
The new range will also see EBITDA ended well ahead of the $72.8 million reported for 2021-22.
Investors loved that news and sent Lindsay shares up more than 16% to $1.22
Lindsay said it had been able to accommodate the increased demand through:
- Improved road and rail equipment utilisation;
- Acquisition of equipment under the FY2023 growth capital expenditure plan; and
- Acquisition of selective SRL equipment predominantly comprised of rail assets.
Lindsay CEO Kim Lindsay said in the statement:
“Lindsay is well-positioned to meet the increased demand for our transport services following the unfortunate collapse of SRL. Our positioning and agility, including the acquisition of new equipment and the integration of SRL assets, have enabled us to expand our operational capacity, maintain customer service levels and deliver strong financial results for FY2023.”
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Fletcher Building (ASX: FBU) boosted a provision to cover the growing costs of a plastic pipe problem in the construction of WA homes to $A15 million from $A2 million previously.
Fletcher revealed the increased provision in a first up statement to the ASX on Monday. The news left the ASX quoted shares down 0.8% at $A4.28.
In the statement, Fletcher revealed an escalation in the number of complaints about leaks associated with a pipe product sold by its Iplex pipes business and used in new home construction.
The Pro-fit hot and cold plumbing pipe is at the centre of 1,200 complaints in Western Australia – from 15,000 installation of the product – between 2017 and 2022, Fletcher said in its statement.
“The complaints relate to leaks in homes, primarily built by group home builders in Western Australia, which have required repair or replacement of the pipes and, in some cases, damage to the affected homes. It was also noted that the Group was aware that the Western Australia building regulator (the Department of Mines, Industry Regulation and Safety, known as DMIRS) was undertaking its own investigation.
“Reports to Iplex Australia are that, to date, about 1,200 of the 15,000 houses constructed in Western Australia using Pro-fit in the period mid-2017 to mid-2022 have experienced leaks. The date range is relevant as builders have told Iplex Australia that they have not experienced unusual levels of leaks in homes constructed prior to that period. Iplex Australia ceased the sale of Pro- fit in mid-2022.
“The Pro-fit product was also sold into other States of Australia in that period. Reports to Iplex Australia are that the leak rate in those States is not materially unusual for a product of this type. The Pro-fit product was sold only in Australia and the resin used in it during the period in question was not used by Iplex New Zealand or any other Fletcher Building company for any other product.”
Fletcher said the WA government department had advised Iplex Australia that, while its tests are not yet complete, “Iplex Australia should expect its results to lead to DMIRS finding that the leaks are due to a manufacturing defect. A Western Australia group home builder has also advised it expects to deliver to Iplex Australia the results of its own tests once they are completed.”
Fletcher said for its own part, Iplex Australia is undertaking its own on-going, extensive investigation into the root cause. At this time, the work that has been completed does not identify a manufacturing defect.
Fletcher Building CEO Ross Taylor said: “We acknowledge the frustration and inconvenience impacted homeowners and their families are facing. We are working hard with builders to arrive at an acceptable outcome for affected homeowners.”
“In the 2023 Interim Financial Results, Fletcher Building noted that Iplex Australia had made a provision for this matter but that there was a risk that the provision was inadequate. As a result of the proposal made to the two group homebuilders and establishing the Fund to support other affected builders, Iplex Australia will increase that provision from A$2 million to A$15 million. That amount will be revisited if facts emerge to warrant it and as part of the full year financial reporting process.”
Fletcher shares eased 2% yesterday to end at $4.22.
