Taming the concrete jungle, 1973
Source: Australian Building Construction Employees and Builders Laborers Federation, NSW branch, July 1973
Source: Book, 135pp, July 1973
Transcription, mark-up: Steve Painter
For those at the top, construction and development have built some high-rise fortunes.
Young Albert Jennings set up A.V. Jennings in 1932, with an overdraft of $1400. Now the Jennings group has an annual turnover of over $100 million, with net profits around $4 million a year. Jennings himself is Sir Albert and when he retired as chairman in 1972 (succeeded by son Victor) he got a golden handshake of $240,000 as a boardroom version of severance pay.
Leslie Joseph Hooker began as an orphaned newsboy at 13, got into real estate and went broke, then started again with a $200 loan. Now, as a rags-to-riches millionaire, he’s chairman of Hooker Corporation, with about 150 subsidiaries, and gross revenue of more than $70 million in 1971-72. His turn for a knighthood came in June 1973.
Paul Strasser came to Australia from Hungary in 1948 with about $12,000. Now the group he heads (Parkes, Project Development, etc) is said to be worth about $100 million, and Strasser is Sir Paul.
Others, too, are in the big money — the Lend Lease group, with G.J. Dusseldorp as chairman and with a 1971-72 net profit of more than $5.1 million; Mainline, founded by Richard C. Baker (an Australian who spent a period in USA) and Laurie O’Neil and which has about 90 subsidiaries, and Stocks and Holdings, whose managing director, Ervin Graf, came to Australia (like Parkes’ Paul Strasser) as a migrant from Hungary.
For all these, and for others, the profit boom goes booming on. “For Australia’s biggest developers,” said the Financial Review in March 1973, “1972 was a champagne year. They are expecting growth again this year,” even though, the story added, it might have “a little less sparkle”.
The Financial Review in September 1972 said company results announced in a two-month period showed that 17 out of 21 building and construction companies had shown a higher profit than in the year before: a proportion well above the all-industries average. In an industry in which fly-by-night cockroach capitalists crash into bankruptcy or abscond, the big groups pile up new millions year by year. Among the net profits reported for the half-year to the end of December 1972 were Lend Lease, $3,742,133 (up 95 per cent compared with the 1971 half-year); Hooker Corporation, $2,256,000 (up 16 per cent); A.V. Jennings, $2,110,000 (up 80 per cent); Mainline, $1,671,718 (up 251 per cent); Stocks & Holdings, $1,451,480 (up 43 per cent); Leighton Holdings, $1,157,000 (up 51 per cent); RDC Holdings, $1,114,637 (up 12 per cent) and Hanover $838,373 (up 152 per cent).
Those half-yearly figures are equivalent to annual net profits ranging from $1.6 million to about $7.5 million — and possibly going higher. Shareholders have benefited hugely. They draw half-yearly (interim) dividends in cash and then a final cash dividend for the year, paid at a rate for each share they hold (for example, a 10 per cent dividend on shares with a face value of $1 each would amount to a cash payment of 10 cents on every share held). There are also bonus issues of shares; that is, new shares issued free to existing shareholders, in proportion to shares already held (for instance, a one-for-three bonus issue means one free share for every three shares already held). In addition, there are the capital gains; the gains available from the fact that shares can be sold on the Stock Exchange at prices more than their original cost.
In the big developer companies, the returns in all these forms are big. Lend Lease, for example, paid a 20 per cent dividend (totalling more than $2 million) to shareholders in 1971-72. Within six months, it made two bonus share issues; the first was one-for-five in October 1972, the second was one-for-two announced in March 1973. The effect of this was that a shareholder with 1000 shares had his holding increased, free, first to 1200 and then again to 1800 — and in the week after the March announcement Lend Lease shares (50 cents face value) were selling on the Stock Exchange at up to $7 each. Some killing!
Others, too, have never had it so good. In addition to its dividends, Mainline bonus issues have included one-for-eight halfway through 1971-72, one-for-five at the end of 1971-72 and one-for-three halfway through 1972-73. That meant that, over this period, a holding of 1200 shares would have been almost doubled, free, to 2160 — and Mainline shares have at times been above $7 on the Stock Exchange.
In April 1973, just before the permanency dispute began its boilover, Mainline’s managing director, Mr R.C.T. Baker, paid about $500,000 for a harbourside home, The Hermitage at Vaucluse, which had been built in the 1840s. He bought it as a family residence).
Stocks & Holdings midway through 1972-73 produced a one-for-three bonus issue. Stocks & Holdings 50 cent shares have gone above $9 on the Stock Exchanges.
So lucrative has property development become that powerful industrial groupings in other areas have moved in for a slice of the property action. For instance, a new company called Herald Development, with interstate intentions, has the Herald & Weekly Times (the giant press- TV-radio empire-builder) as the major partner. Minor partners include Australasian Temperance & General Mutual Life Assurance Society (T&G) and Australian United Corporation.
Nor does Sydney newspaper baron Sir Frank Packer intend to be left out. In late 1972, his Consolidated Press announced that it was taking up about 15 per cent of a new company, Australian Urban Investments.
Around about that time, too, Chesterton’s Property Group of Britain — associated with the estate of writer G.K. Chesterton, author of the Father Brown series — was moving to make Australia one of its bases.
Insurance companies, glutted with policyholders’ funds and looking for safe but lucrative investment for them, have moved directly into property development and construction. Australia’s largest life insurance office, the AMP, has joined with the Jennings group in a $20 million industrial subdivision project in the Dandenong area in Victoria. T&G and CML are among others that have gone into property development. Another newcomer to development is the big financial grouping of Australian Guarantee Corporation, which has an equal partnership with Regional Landholdings in a real estate and development company, Incorporated Properties.
Property investment is the fastest growing category of life insurance offices’ investment. In a mere three months to the end of September 1972, life offices put another $63 million into real property.
Insurance companies also are substantial shareholders in some of the biggest development and construction groups. We’ll come to that later. In April 1973, the Exoil mining company disclosed that it had moved in to get a piece of the Sydney real estate boom by taking a 45 per cent interest in a company operating in real estate development in Sydney. Exoil’s claims to fame include the fact that Queensland Premier Bjelke-Petersen, one of the Country Party’s political backwoodsmen, has been shown as a substantial shareholder in Exoil.
For all the vaunted competitiveness of “free enterprise,” there are eases where rivals get together for joint operations.
78 For instance, Hooker Corporation (50 per cent) and Mainline and Dillingham (each with 25 per cent) joined as partners in Handel (No 1) Pty Ltd for a $90 million Circular Quay (Sydney) development. At Gove, in Arnhem Land, Mainline has been associated with A.V. Jennings and Dillingham in construction work connected with the Nabalco bauxite project.
Others have come into the Australian construction action from overseas.
Various governments over the years, by calling for tenders in other countries as well as in Australia for projects here, have encouraged overseas groups to muscle in. Many of these foreign companies have bigger revenues and reserves than do companies based in Australia. As a result, they can afford to tender low, so as to get a foothold in Australia, and can even carry losses for a period: something distasteful to any company but which the big ones can swallow when they have long-range prospects in view.
Dillingham is one that came to dinner here and stayed, acquiring S. Haunstrup as a subsidiary. Dillingham’s base is in Honolulu, Hawaii. Dillingham was able to sustain losses in Australia of almost $12 million over a two-year period before getting back into black-ink with consolidated net profits of $600,000 in 1971 and $744,000 in 1972.
It was symbolic of Liberal governments’ obsequiousness to the US dollar that, when the Liberals were in office in Canberra, Qantas — Australia’s public enterprise overseas airline — gave the contract for its new Sydney centre to Dillingham from the USA. The American eagle was invited to dine off the Qantas kangaroo.
Dillingham interests in Australia extend also to cattle, shipping, mining and other things.
On the international scene, Dillingham has profited from US military aggression in South-East Asia and has had contracts for constructing military installations in Thailand, a country used by the USA as a base for bombing and other operations in Indochina. As well, a published Dillingham story a few years ago said about Vietnam: “Dillingham is ready to move in fast when peace comes to that war-torn land; as Lowell Dillingham puts it: ‘In good old US style, we’ll go back to rebuild.’”
That “good old US style” is to make a dollar both ways: from building bases for purposes of destruction, and then from rebuilding some of what was destroyed.
Others have come into the construction scene here from Britain and Europe: Costain, MEPC, Citra, Frankipile and others. Profit is a magnet with an international pull. At the same time, profits from construction and development here have financed Australian companies to move into other areas and other countries. Lend Lease, for example, has extended to such places as Papua-New Guinea, New Zealand, Singapore, Samoa, Mexico and the USA.
Overseas operations of another group, Mainline, include a partnership with W.R. Carpenter (a notorious name in Australian colonialism) in Mainline Miller Constructions (Fiji) Ltd, which is getting its start with a multimillion dollar commercial-retail-hotel complex in Fiji.
Mainline’s managing director R.C. Baker has said: “The idea is to take our activities — property development, property management, construction and accommodation — and cover the entire Pacific Basin.”
Leighton Holdings is another that has gone overseas chasing the dollar. It has 60 per cent ownership of P.T. Leighton Indonesia Construction Co and it has submitted tenders in Fiji, Portuguese Timor and Malaysia, as well as Indonesia. Leighton companies overseas, in addition to that in Indonesia, include Leighton (New Hebrides) and Leighton (Asia).
Selfless assistance to countries like Fiji and others of our neighbours emerging from colonialism, would be commendable. But the Australian companies moving in there are scarcely motivated by any lofty idealism; they’re going there to get all the profit they can out of them. It is economic colonialism: a version in reverse of the colonialism from which Australia has suffered so much from Britain and the USA.
Australians rightly campaign against overseas control of resources and industries in Australia. At the same time, Australians have a responsibility to join in the campaigns of our neighbouring peoples against their being similarly lassooed by companies from Australia. Some of the Australian companies have financial or share or other affiliations with significant groups overseas.
The Hooker group has, or has had, links (in some cases in the forms of borrowings) with the Fidelity Bank of Pennsylvania, Lamar Insurance of Mississippi, Bankers Life of Nebraska, Murchison Bros of Texas, Keystone Custodian Fund of Boston and the Mellon Bank of Pennsylvania (which secured a 20 per cent interest in Network Finance, in which the Hooker group has a substantial interest).
The Parkes group has majority ownership of Wynyard Travelodge. This brings it into association with the USA’s Chase Manhattan Bank which, through a subsidiary, is a minority shareholder in the Wynyard company.
Parkes is associated also with the Chemical Bank of New York and the Union Bank of Switzerland and others as shareholders in the Development Underwriting company.
The Bredero group of Holland (for which Mr G.J. Dusseldorp used to be a top construction man) for a time held 11.4 per cent of the Lend Lease shares, but it is believed that Mr Dusseldorp has since severed this umbilical cord.
Details of company ownership these days are often murky. This is largely because of the device of “nominee” groups, described by the Financial Review as the faceless men of finance. In these cases, shares are held by nominee groups usually in the name of a bank — Bank of NSW Nominees, ANZ Nominees, etc. No information at all is given of the identity of the individual shareholdings; their anonymity is impenetrable.
The 1972 list of the top 20 shareholders in Lend Lease, for instance, is headed by ANZ Nominees of Melbourne, with 4,995,822 shares. Another eight nominee companies, one of them with a London address, are also in Lend Lease’s top 20 shareholders.
Insurance companies are on the Lend Lease top-20 list — MLC is No 2 among the shareholders with 2,389,305 shares, and AMP is No 5 with 1,006,560. Among other insurance companies is Pearl Assurance, of London, which is No 13 with 211,750 shares.
The name of Mr Dusseldorp himself is not in the list of the top 20 shareholders in the company of which he is chairman. But he could very possibly be in one or more of the nominee or other groups. There are, for instance, four of the top 20 shareholding group that have addresses in Australia Square, headquarters of Lend Lease.
Hooker Corporation also has faceless nominees — ANZ Nominees, Melbourne — as its largest single shareholder with 3,744,386 shares in late 1972. ANZ Nominees, Sydney, has another 1,206,587 Hooker Corporation shares. Insurance companies figure among the top 20 shareholders in Hooker Corporation: T&G being No 3 among the shareholders with 861,000 shares. The NSW government Insurance Office is No 17, with 122,713 shares.
As in the case of Mr Dusseldorp in Lend Lease, the Hooker Corporation top 20 list does not contain the Hooker name; again, however, Hooker holdings may be cloaked in one of the nominee groups.
Mainline’s major shareholders are what appear to be two family companies, no doubt based on the O’Neil and Baker founders — Joanrich Holdings (headed by Mr Baker) and L.C. O’Neil Enterprises. A report in April 1973 showed each of these holding more than 660,000 Mainline shares. Next biggest among the Mainline shareholders were W.R. Carpenter Holdings and the busy Australian Mutual Provident Society (AMP).
Parkes Developments is owned by Sir Paul Strasser, Robert Ryko, John Boyer and the families. The Strasser-Boyer interests are represented by Finance Facilities, which they own in 70-30 Strasser-Boyer holdings and which in turn has 50 per cent ownership of Parkes.
Sir Paul Strasser’s interests, as well as Parkes Development and Finance Facilities, include Development Underwriting, Bridge Oil (with SA explorations), Project Mining (bauxite in WA and uranium in the Northern Territory) and Project Development (meatworks in the Kimberley and at Broome, in WA).
The AMP (third biggest shareholder), Pearl Assurance (UK) and CML figure in the top 20 shareholders in E.A. Watts Holdings. The Fischer construction and property investment group, including hotel-motel interests (Gazebo in Sydney and Terrace in Brisbane, for instance), is headed by millionaire yachtsman Syd Fischer.
As well as the profits being made from construction and development, there’s a lot of it to be made, too, from building supplies.
Concrete companies’ net profits for 1971-72 included Pioneer $6,225,874 (up 31 per cent on the previous year), Ready Mixed Concrete $4,225,895 (up 11 per cent), Concrete Industries (Monier) $3,217,000 (up 30 per cent), Farley & Lewers $604,150 (down 33 per cent).
In the subsequent half-year to the end of December 1972. Concrete Industries (Monier) was one of those that showed further improvement, with a net figure of $1,955,000 for the six months. In cement, 1971-72 net profit figures included A&K $2,380,456 (down 3 per cent), Associated Portland $1,824,492 (down 17 per cent), Adelaide Brighton $1,817,000 (up 80 per cent), Queensland Lime & Cement $1,562,398 (down 2 per cent), Goliath $1,096,720 (up 52 per cent) and Southern Portland $911,000 (up 19 per cent).
In July 1973, A&K (Australian & Kandos) announced a record net profit of $2,788,358 for the year ended May 31, 1973.
Gravy as rich and thick as that is attractive even to some of the biggest of top-drawer companies in Australia, such as Broken Hill Pty, the No 1 Australian monopoly, and Colonial Sugar Refining, which is always looking for lucrative investments for the fortunes made originally from sugar.
BHP (1972-73 net profit, $78.6 million) supplies steel and steel products; it has a 50.6 per cent interest in Southern Portland Cement, and it once had a temporary marriage with A&K Cement — a marriage that was dissolved on its first anniversary, although grounds for the divorce were not divulged.
CSR (1972-73 net profit, $23.3 million) said happily in its latest annual report: “Our business in materials for building and construction achieved significant growth and higher profit.”
CSR subsidiaries supply Gyprock plasterboard, tiles (Wunderlich is a fully owned CSR subsidiary), vinyl flooring, hardboards, particle boards, etc, and CSR has a half-ownership (with Comalco as its partner) in a new plant for extruding aluminium sections for windows.
In July 1973, CSR announced that it was taking a 50 per cent interest in the Home Units Australia group, a home builder, which in 1972-73 sold more than 350 home units and townhouses at prices averaging about $24,000 but in some cases as high as $100,000.
CSR also has a substantial interest in concrete. CSR is, for one thing, partner with Blue Metal Industries in Ready Mixed Concrete ($4.2 million net profit in 1971-72), Australia’s largest ready-mixed concrete manufacturer, with about 40 per cent of the Sydney market.
Ready Mixed Concrete has operated, too, in Britain, South America, Singapore and Hong Kong. Also, the Ready Mixed Concrete partners (CSR and Blue Metal Industries) have formed a company that has a 75 per cent interest in a ready-mixed concrete operation in Jakarta (Indonesia).
Other CSR interests in concrete and quarrying include holdings of more than 40 per cent in Farley & Lewers and 25 per cent in Hymix Australia, full ownership of Australian Quarries and 51 per cent ownership of Gravel & Sand Suppliers.
In Hymix, CSR has Boral as a fellow shareholder. Boral itself (through its Albion Reid subsidiary) has substantial ready-mixed concrete interests in Victoria. Boral also supplies other construction materials.
As well as Ready Mixed Concrete’s international scale of operation, some of the other concrete companies also have moved into overseas activity.
For example, Pioneer Concrete (1971-72 net profit: $6.2 million), which has about 20 per cent of the Sydney market, is operating in the United Kingdom, Spain, Hong Kong, Italy, Israel, apartheid South Africa, West Germany, Portugal and maybe other places too.
Concrete Industries (Monier), which showed a 1971-72 net profit of $3.2 million, has extended to Papua New Guinea, New Zealand, the USA, the Philippines, Thailand, West Germany and elsewhere, and it is moving into Japan in a company, Nippon Monier KK, in which it has two Japanese partners, to make tiles.
In Australia itself, Concrete Industries (Monier) reached further out in the building materials scene in June 1973, when it acquired all the shares in the Australian offshoots of the British-based Marley group. The Australian operations of Marley have included ready-mixed concrete.
Rocla Industries in 1973 announced substantial moves into Canada; firstly, by building a $1.5 million concrete pipe factory near Vancouver, and secondly by buying all the shares in Bestpipe, Ontario’s second largest concrete pipe manufacturer.
Rocla already operated two wholly owned factories in Britain and had a substantial interest in Superocla, which has 12 factories in South Africa, South-West Africa and Zambia. Rocla processes are also used under licence in 20 countries. Its overseas earnings are estimated to be about one-third of its gross income in 1973.
While the concrete rivals’ accent in their operations in Australia is on competition, and while there has been a price war of some vigour in Sydney, the contending companies are still able to establish some crisscrossing of relationships.
For example, CSR (through Ready Mixed Concrete) and Pioneer Concrete are competitors. But both are substantial shareholders in another competing concrete company, Farley & Lewers. Also, CSR and Pioneer are partners, through interests in Northern Pastoral Services, in a Northern Territory cattle venture. So CSR and Pioneer are rivals and also partners.
Pioneer is the biggest customer for Associated Portland’s cement. Monier and Farley & Lewers also buy from Associated Portland. Ready Mixed Concrete buys mostly from Goliath.
A Builders Laborers’ Federation pamphlet published in Melbourne in 1972, for which research was done by B. Phayer, accused powerful premixed concrete companies of running a cartel there to illegally fix prices and eliminate competition.
It said that the main ringleaders were Pioneer Concrete Services (controlling about 47 per cent of the Victorian pre-mixed concrete market), Ready Mixed Concrete (owned by CSR and Blue Metal Industries) and Albion-Reid (in which all shares except four are owned by Boral Basic Industries). It said that they operated a price-fixing cartel entitled the Concrete Producers Association but widely known as the Combine. Other companies had been drawn in either by takeover or under threat of a price war.
One of the victims, the pamphlet said, was Consolidated Quarries, which fought back at the cartel and its efforts to inflate prices. The Combine operators then got at Consolidated Quarries by dropping the price down below Consolidated Quarries’ cost of production — a well known tactic to squeeze a troublesome rival, after which prices can be raised again.
During the battle, Consolidated directors said that the scheme was designed to force Consolidated to support an extravagant and economically unjustified price structure and establishment of a level that might severely affect the cost of all government and local government works, as well as housing, street construction, sewerage, etc.
Consolidated Quarries lost. It went under to Pioneer. And that was just one front of the concrete war.
The union’s pamphlet said collusive price-fixing in the pre-mixed concrete industry was one of the main causes of the increasing price of homes, hospitals, roads and schools — “and it is always the general public which has to pay through the nose”. It urged that there be a public investigation by the Restrictive Trade Practices Commission.
As well as attracting Australian giants such as BHP and CSR, Australian construction and supplies have brought overseas groups elbowing in for a piece.
We have already referred to some of these. There are others, too, which are worth a mention.
Redland Ltd, of Surrey (United Kingdom), has about 50 per cent ownership of Concrete Industries (Monier).
In paint, Imperial Chemical Industries’ offshoot, ICIA&NZ, is dominant. It controls Balm Paints, with its network of subsidiaries.
The British SGB group, one of the world’s leading suppliers of scaffolding and formwork to the building industry, in 1972 launched a scaffolding and formwork supply company — SGB Building Equipment — in Australia, with headquarters at Brookvale (Sydney). It hoped to win a substantial slice of the market within two years.
Another immigrant company, Prestressed Concrete (Australia), a subsidiary of PSC Equipment of Britain, has merged with Frankipile Australia, a civil engineering and foundation construction group, whose own origins are in Europe.
Alcan Australia, offshoot of the North American Alcan corporation, late in 1972 announced the establishment of a specialised building products devision.
Other companies we meet up with in the construction and building industry and which have full or part overseas ownership include:
Babcock & Wilcox Australia: Fully owned by Babcock & Wilcox (Holdings) of London.
Bernard-Smith PDM: 33 per cent owned by Pittsburgh Des Moines Steel, USA.
Forwood Johns: 50 per cent owned by Pittsburgh Des Moines Steel, USA.
Rallip Holdings: Fully owned by RTZ Pillar, of London.
H.H. Robertson (Australia): Fully owned by H.H. Robertson Co, USA.
Associated Portland Cement Manufacturers (Australia) with its web of subsidiaries: 74 per cent owned, via a subsidiary, by Associated Portland Cement Manufacturers of London.
Cockburn Cement: 85 per cent owned by Rugby Portland Cement of Rugby (United Kingdom).
Hollostone: 91 per cent owned by Amelco Corp, of Hawaii (USA).
Altogether, building and construction industry is a hungry industry. It is made that way by big, hungry operators, both Australian-based and those that have come here from overseas. And what are some of results, as they affect the people — home-seekers, for instance? Let’s have a look.