The chief executive of the Chinese-owned Australian contractor John Holland has warned that the country’s major contractors are too close to insolvency and that the industry was "teetering on the brink of collapse", despite the country’s infrastructure boom.
Joe Barr made the comment after the company recorded a US$34.4m (A$59.6m) loss for the 12 months to December 2019, reports Australian Financial Review.
Write-downs on project margins contributed to the loss, according to the newspaper.
Owned by state-owned giant China Communications Construction Company since 2014, John Holland racked up a string of high-value project wins in December.
They include the mixed-use Waterloo Metro Quarter in Sydney, awarded by the government of New South Wales (NSW), and the new Sydney Football Stadium (pictured), also for the NSW government.Â
But Barr warned that high revenues were not translating into healthy profit margins.
"Tier one contractors in Australia are not making any money, and governments across Australia keep having successive project cost blowouts," he said.
"We are in the midst of Australia’s biggest infrastructure boom, but as an industry, we are teetering on the brink of collapse."
Governments needed to recognise the pressures on the industry, and stop passing risks they can control on to contractors, said Barr.
"While they have projects worth hundreds of billions in planning along the east coast, it is unclear if there will be an industry left to build them," he said, adding: "Risks that are controlled by governments should be held by governments."
John Holland is not alone in facing financial pressure.
Australia’s biggest contractor, Cimic Group, last month announced a US$1.2bn loss due to its decision to exit the Middle East and sell its 45% stake in Dubai-based BIC Contracting – formerly Habtoor Leighton Group.Â
Also last month, it emerged that a joint venture of John Holland and Cimic Group subsidiary, CPB Contractors, walked away from the US$4.5bn West Gate Tunnel project in Melbourne, over a dispute with Toll-road operator Transurban over who should bear the cost of contaminated soil.Â
Barr said John Holland would no longer bid on projects it believes have unacceptable risks.
Image: The Westgate Tunnel project, which the contractors exited last month, includes a bridge over the Maribyrnong River (John Holland)
How can you loose so much money without realising it .And now we cut jobs to make up for it who is to blame tell us???? MAKING THE WRONG DECISIONS.
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