Business review
APAC

Market review

Market volatility due to COVID-19

The year has been characterised by rapidly changing market demand and volatility in activity by segment in our APAC markets, associated with the impacts of COVID-19.

Government support and low interest rates drove an upturn in demand within the building segment during the second half of the year. In contrast, infrastructure has been impacted by low business confidence and lighter than expected government stimulus. The agriculture segment had a mixed performance due to adverse weather conditions in key geographies.

From contraction to recovery in Australia

The COVID-19 pandemic led to a severe contraction in economic activity in Australia during March. An aggressive approach to virus containment resulted in a series of strict regional lockdowns across the year, impacting local business confidence and market activity.

Economic conditions recovered slowly as containment measures were eased in May, and government fiscal policies provided much needed support to the Australian economy.

Resilient economy in New Zealand

Although the New Zealand economy was significantly impacted by a four-week nationwide lockdown in April, the balance of the year saw a resilient economic response as the building market rebounded from the early uncertainty.

The New Zealand Government’s COVID-19 stimulus programme prioritised employees and impacted businesses with reduced focus on major infrastructure in 2020. As a result, fewer major infrastructure projects went ahead in the year. However, a higher dairy pay-out improved confidence among farmers, encouraging them to invest in new farm water management systems.

Low interest rates also helped boost residential new builds, although restrictions on migration due to the pandemic have hampered efforts to accelerate building demand overall.

Strategy and performance

Focus on our competitive position

The COVID-19 pandemic has dominated activity in a volatile year. The safety of our employees has been paramount, and they have responded both rapidly and impressively to the challenges.

Market conditions and low-cost imports have increased the need for a strong focus on our competitive position this year. Delivering added value for our customers through reliable supply, quality and differentiated products has proven crucial.

The highly competitive Australian market has driven some changes in our market landscape in 2020, with a reduction in competitor footprints in some segments. Our teams have responded well to support key customers and increase our capacity in the building segment to meet customer needs.

Global shortages in PVC resin, combined with freight imbalances in Asia, have required extremely close management of the supply chain. With an increased emphasis on our sales and operations processes, our supply chain has been well managed, and our local teams maintained continuity of supply for our key customers.

Recognised for product and service excellence

Despite the volatile market, our businesses across the Division have had some great successes with new products and innovations during the year. Our Australian teams were recognised for product and service excellence, winning both the Nutrien/CRT supplier of the year and the Think Water supplier of the year awards.

RX Plastics performed strongly in its export markets, in particular via K-Line North America, achieving an impressive sales increase compared to last year.

Our Marley Rainwater Systems category also saw a strong uplift in business compared to 2019, even with several weeks of lockdown. This excellent result has been helped by a wide range of products, such as the popular spouting and downpipe rainwater systems, and the new era leaf, debris and water diverters that allow for increased efficiency in rainwater harvesting.

Improved footprint

A number of projects to rationalise our footprint were completed in the year, including the closure of our factory in Wagga Wagga, and the consolidation and expansion of our Smithfield facility, both in New South Wales. We continued the consolidation of our warehouse network; while maintaining our award winning service levels.

In New Zealand, we consolidated our manufacturing into three facilities and brought together warehouses in other key locations. We made further efficiencies by optimising fittings manufacture into a regional facility in Adelaide.

While this consolidation has improved efficiency, a limited labour pool in the COVID-19 environment has been a challenge for our manufacturing teams. They have responded well by balancing their sales and operations plans and operating assets to manage cash flow, market demand and supply chain challenges.

Looking ahead

In 2021, we will focus the business on further improving how we serve customers in our key markets.

Our main areas of focus will be the effectiveness and reliability of our delivery model for sustainable high-performance products, improving our customer service experience, and overall, making it easier for customers to deal with Aliaxis. This is supported by our ongoing commitment to improving safety, and developing our people through a focused capability and talent development programme.

We are ready to maximise the growth opportunities in key markets in the years ahead. We will do this by continuing to build our innovation capability (product leadership), extending our operational excellence programme (competitive supply base), and working closely together as a team (unlocking our regional synergies).