Manufacturing News

ACCC concerned about CSR, Boral joint venture

The Australian Competition and Consumer Commission (ACCC) has raised concerns about the proposed $230m clay brick joint venture between Boral and CSR.

The ACCC released a Statement of Issues which said it wants further information to determine whether the venture would result in a reduction of competition in the clay brick market.

Currently there are three major clay brick suppliers in Eastern Australia – CSR, Boral and Austral Bricks. So the prosed joint venture would reduce this number to just two.

“The proposed joint venture would result in a duopoly in eastern Australia. The ACCC’s preliminary view is that this would be likely to lead to an increase in the price of clay bricks as well as a reduction in the product range available to residential builders, architects, and end-consumers,” ACCC Chairman Rod Sims said.

“This view is based on information provided to the ACCC in its market inquiries.”

The ACCC has undertaken extensive market inquiries, and received considerable information from the joint venture parties.

“A critical issue for the ACCC is determining what would be likely to occur in the markets if the proposed joint venture does not proceed,” Sims added.

CSR and Boral claimed in a statement, "Australian brick manufacturers have experienced a sustained structural downward trend in demand for brick products over the past 30 years."

"The joint venture will be a more sustainable business positioned to deliver returns that recover the cost of capital through building cycles."

According to the SMH, CIMB analyst Andrew Scott said the ACCC has created difficulties for the joint venture.

"We believe that an ACCC decision to block the proposed JV would pave the way for further writedowns," he said.

"It is worth noting that the [brick] businesses are generating inadequate returns while housing starts…approach near record levels."

Image: Boral

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