Engineering, Passenger Rail

East-West road project scrapping ‘difficult to fathom’

Cement rocks. Photo: Honeywell

Despite the rail industry’s support of the Victorian Labor Government’s scrapping of the East-West Link tollroad project, one contractor is still struggling to comprehend the decision.

Martin Brydon, chief executive of cement business Adelaide Brighton, told Fairfax this week that the scrapping of the tollroad was not in the best interests of the economy.

“Australia needs an infrastructure program,” Brydon reportedly told the Australian Financial Review on Tuesday. “It is very frustrating to see the political machinations in Victoria with the East-West; it is difficult to fathom.

“It is incredulous that contracts of that size could be entered into in good faith only for them to be effectively torn up. I don’t see how that engenders investment or confidence.”

Australia’s construction sector – like the world’s as a whole – has slowed down in recent years, and that slowdown was no doubt worsened in Brydon’s eyes by the Andrews Government’s decision.

The slowdown has triggered consolidation talks, leading some analysts to bring up the potential re-kindling of a decade-old proposal between Adelaide Brighton and competitor Boral.

Brydon reportedly told Fairfax the impending merger of global players Holcim and Lafarge could trigger a round of consolidation in the Australian construction sector.

If that happens, Brydon told Fairfax this week, he would be keen to see Adelaide Brighton involved. And he said that while a merger with Boral remains unlikely, it still makes sense, a decade on from the failed takeover bid from Boral in 2004.

Boral’s 2004 bid for Adelaide Brighton was valued at $867 million. Adelaide Brighton now has a market capitalisation of $3 billion.

“I’ve always held the view that the construction materials assets of both companies in Australia should come together,” Brydon was quoted yesterday by the AFR. “There is a natural fit.

“I don’t think [a merger with Boral is] going to happen in the short term,” he conceded, however. “Boral has indicated it is not something they are interested in.

“There is some prospect that the existing players in Australia could see further rationalisation and Adelaide Brighton would be very pleased to participate if that were to occur,” he said.

“The Swiss [Holcim, which has interests in Australia] having merged with Lafarge; do they really see this relatively small market in Australia absolutely fitting with their strategy to be in all growth markets in the world? Some would say, probably not,” Brydon was quoted as saying by Fairfax.

“I’m not saying there is anything on the table, but we think about it, and would welcome the opportunity to participate.”


  1. For anyone involved in cost-benefit analysis review for infrastructure PPP’s the decision should not be so “difficult to fathom”. The benefit-cost ratio (or BCR) was publicly disclosed as 0.45 meaning that benefits were 55% LESS than costs on an NPV basis. This means that on a community wide analysis such project should never have proceeded so far within Govt ranks. Note that Infrastructure Australia never got to do a proper review of the benefits and costs and Infrastructure Victoria was just a proposed entity at that stage.
    The major construction contractors who participate in PPP’s should all be very well acquainted with the principles of BCR calculations and so should their suppliers – if, like AdBri say they aren’t, then they should get familiar if they want to manage their infrastructure project exposures properly.
    And note that BCR’s often take into account intangible future benefits, so the position on a cash flow budgetary analysis would likely be even worse than the 0.45 figure indicates.