Australian building materials giants Boral and CSR have announced their intention to join forces and form a joint venture in an effort to boost their ailing brick manufacturing operations.

In a combined statement released to the Australian Stock Exchange, the companies announced they were seeking permission from the Australian Competition and Consumer Commission (ACCC) to form a joint venture to combine operations on the east coast of Australia including Queensland, New South Wales, the ACT, South Australia, Victoria and Tasmania.

The new venture would be 60/40 owned by the CSR/Boral respectively, with neither side contributing any additional cash.

Boral’s site at Scoresby in Victoria would be excluded from the joint venture, as would CSR’s at Schofields in New South Wales.

In their announcement, the two companies say a structural decline in demand bought about by bricks becoming an increasingly smaller component of the broader cladding market has seen a decline in capacity utilisation, and that immediate benefits from the proposed transaction would see initial overhead cost savings of $7-10 million whilst consolidation of selected manufacturing sites would lower per unit cost of production and enable the business to deliver returns which cover the cost of capital irrespective of building cycles in the longer term.

 “This joint venture is about retaining manufacturing in Australia and maintaining clay bricks as a choice for consumers in a broader cladding market” CSR Managing Director Rob Sindel said. “It is about strengthening the opportunity for employees and reinvesting in the industry while delivering satisfactory returns through the building cycle.”

Whilst the statement does not mention job cuts and stresses there are no plans for immediate plant closures, talk in the statement about rationalising sites indicates headcount reductions may be a possibility over the longer term.

The companies say more information about the proposed structure will be disclosed following completion of the ACCC review process.