By Rhiannon Hoyle
SYDNEY--For years, Australia's Fleetwood Corp. (FWD.AU)
developed caravan parks for sunseekers wanting a beach vacation.
Then global commodity prices shot up and the units catered to an
entirely different crowd: contract workers jetting in from as far
as away as Bali to work on the state's mega-pits or big gas-export
projects.
But the recent slowdown in Australia's resources industry is
hurting companies like Fleetwood as profits slump and accommodation
goes unlet, prompting some to focus on holidaymakers once more. On
Monday, Fleetwood shares fell 17% after it warned demand for its
worker camps remained low.
"The significant drop in commodity prices during the year caused
delays and cancellations to resources projects that flowed through
to demand for manufactured accommodation," Stephen Price,
Fleetwood's chief executive said.
For many Australian communities, the accommodation camps
represent both the opportunities and cost of a China-led resources
boom that spanned around a decade. On the one hand, rising
investment by the likes of mining giant Rio Tinto PLC (RIO) and oil
and gas producer Woodside Petroleum Ltd. (WPL.AU) in remote towns
created jobs and infrastructure like schools and roads.
But the influx of workers - some of whom earned $200,000 a year
- also triggered a housing shortage and drove up the cost of living
for ordinary residents. Buying a Big Mac meal in Karratha, a
gateway town to the Pilbara iron-ore production hub in Western
Australia state, costs a lot more than what customers pay at
McDonald's branches in cities like Sydney.
Housing workers in former holiday parks or constructing camps
from scratch aimed to solve the shortage of accommodation. Swimming
pools, gyms, sports pitches and even giant chessboards were built
to keep workers happy after long shifts in a dusty region where
temperatures frequently top 40 degrees.
However, many of the temporary camps are now grappling with
falling rental prices and occupancy, especially in Western
Australia where the workforce is beginning to thin out. Hopes that
Woodside Petroleum Ltd. would expand its $15 billion gas-export
project near Karratha and employ thousands more workers, were
dashed when a drilling campaign failed to find enough reserves. Rio
Tinto is also seeking to cut $5 billion in costs, including in its
iron-ore business.
Western Australia-based Brighthouse specialized in developing
caravan parks for nearly two decades after it was founded, shifting
only to target resources in 2008 as mining investment accelerated.
At the peak of the boom, resources work accounted for half its
business, but this has since fallen to 30%.
David Holland, the company's principal strategist, sees more
opportunity in chasing the tourist dollar and building retirement
villages.
"The boom in that kind of (resources) work is over," he said.
"There is a progression from temporary units to a smaller, more
permanent operational workforce."
According to Fleetwood, occupancy at Searipple--the site of a
former caravan park in Karratha, now used by Rio Tinto mine
workers--is only 65% of capacity. It's also reviewing the size and
cost of a proposed camp for 1,000 workers at the port town of
Gladstone in eastern Australia's Queensland state amid doubts about
whether several resources projects nearby would go ahead.
Underscoring these challenges, Fleetwood said its net profit for
the year through June fell 77% to 12.5 million Australian dollars
(US$11.5 million).
The problem facing mining towns like Karratha is their
isolation, which means they have little other industry to take up
the slack. Karratha is nearly 1,000 miles or a 16-hour drive from
Perth, Western Australia's capital and a key entry point for
tourists visiting the state.
In 2011, half the 12,000 workers living in and around Karratha
were directly employed in the mining or construction industries.
But population growth is now at its slowest since 2005, which was
just before investment in resources soared.
"If you had a room in Karratha, 12 months ago you'd have filled
it in a second," said Anthony Walsh, managing director of Ausco
Modular, one of the biggest builders of mobile homes. Recently,
however, as many as one in five units have been empty and rental
values are down by up to 20%, he said.
Real estate investor Aspen Group (APZ.AU) last month wrote down
the value of a worker camp in Karratha, citing reduced demand.
Warnings of a wider impact on Western Australia, which supplies
the world with two in every five tons of iron ore and is a global
force in natural gas supply and production of metals like gold, are
becoming louder. Bank of America Merrill Lynch's chief economist
Saul Eslake has described the state as "close to experiencing
recession-like conditions" as mining firms lay-off workers and the
number of scrapped investment plans rises.
Similar problems are being faced elsewhere in Australia,
especially in towns which are reliant on the resources industry. A
recent survey by the Transport & Tourism Forum, found revenues
per available room in Gladstone and the coal-export port of Mackay
fell 23-29% in the three months to March, driven by falling
occupancy.
-Write to Rhiannon Hoyle at rhiannon.hoyle@wsj.com
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