The slump in Australian construction is starting to hurt the major companies that operate in the industry.

Key points: Developer Ralan Group has called in administrators and owes an estimated $500m to creditors

Developer Ralan Group has called in administrators and owes an estimated $500m to creditors Building materials group Adelaide Brighton says its profit may be 37pc down on last year — its shares plunged 18pc

Building materials group Adelaide Brighton says its profit may be 37pc down on last year — its shares plunged 18pc Residential building approvals are down by more than a quarter on last year's high levels

One of Sydney's major property developers, Ralan Group, has gone into voluntary administration, leaving billions of dollars worth of apartment projects in doubt and around $500 million owing to creditors.

Meanwhile, cement manufacturer Adelaide Brighton has scrapped its interim dividend, in addition to a severe profit downgrade, sending its share price tumbling.

All this occurred days after building approvals plummeted by 25.6 per cent since last year, according to the latest figures from the Bureau of Statistics (ABS).

Ralan Group collapses

Administrators Grant Thornton said it would undertake an "urgent financial assessment" into Ralan Group and its 57 subsidiary companies, which are also in administration.

The Ralan Group specialises in developing, marketing and managing property — residential and commercial — in Sydney and the Gold Coast.

In a statement, the administrators said Ralan has a "development pipeline of over 3,000 residential units which are in the construction or pre-sale stage as well as operating accommodation assets comprising over 600 rooms".

"The total value of creditors is still to be confirmed but initial indications are around $500 million owed across the group."

One of its high-profile developments is the four-tower Ruby Collection hotel at Surfers Paradise, which comprises 1,600 apartments and is worth $1.4 billion.

Only one of the four Ruby towers has been completed, and construction has not yet started on the remaining three.

Ralan Group managing director William O'Dwyer (right) with Gold Coast Mayor Tom Tate launching construction of the first stage of the Ruby Gold Coast development. ( Supplied: Ralan Group )

"In terms of the operating businesses within the group, it is as far as possible, business as usual," said Grant Thonton's national managing partner Said Jahani.

"We are working closely with key stakeholders to identify and preserve value for creditors."

Grant Thornton did not explain why the company collapsed as it is still conducting an "initial investigation".

The first creditors meeting will be held next Friday, August 9, in Sydney.

Adelaide Brighton's 'vicious cocktail'

Adelaide Brighton's share price has dropped for its fifth straight day, losing almost a quarter of its value on the share market since July 26.

Most of these losses occurred on Wednesday, when its share price plunged 18.1 per cent in one session.

On the same day, the cement manufacturer's shock profit warning also caused investors to dump their shareholdings in rival companies Boral (-7.8pc) and CSR (-6.1pc), which are subject to similar economic pressures.

This was after Adelaide Brighton warned its underlying net profit would fall to $120-130 million this calendar year, a 37 per cent drop compared to the $190.1 million it earned last year.

In a statement to the ASX, the company blamed "further softening of conditions in the residential and civil construction markets" as the main reason for its earnings downgrade.

It also pointed the figure at "continued competitive pressure" in Queensland and South Australia and "sustained increase in raw material costs".

This was the second profit downgrade from Adelaide Brighton in less than three months.

In early May, the company told investors to temper their expectations, as this year's profit was likely to be 10-15 per cent lower than last year's $190.1 million.

That led to Citi's building materials analyst Daniel Kang downgrading Adelaide Brighton's stock to "sell" two months ago.

"A vicious cocktail of an accelerating housing downturn, intensifying competition and higher raw material costs" triggered the company's profit warning, Mr Kang said.

"With competitive pressures unlikely to ease any time soon, we believe earnings risk remains to the downside."

By 12:15pm (AEST) on Thursday, Adelaide Brighton's share price had fallen 4.8 per cent from yesterday's close to $3.37.

Building approvals tumble

Earlier in the week, the ABS revealed that building approvals had fallen 1.2 per cent in June, seasonally adjusted — driven by a downturn in apartment construction.

The annualised results were more downbeat, with the total number of dwellings receiving construction approval falling 25.6 per cent since the previous year.

Within that figure, approvals for houses were down 14.8 per cent over the 12-month period.

However, the result for apartment approvals was far worse, plunging 39.3 per cent since June 2018.

In addition, trend approvals are now at 174,000 over the year, the lowest level in six years.

Morgan Stanley economist Chris Read is pessimistic about the construction industry's future.

"We expect further declines in building approvals in the coming months, given the elevated level of new supply coming to market and still tight credit conditions," Mr Read said.

His sentiments were shared by UBS chief economist George Tharenou who "forecast[s] no recovery, with dwelling commencements to drop to 170,000 this year".

"Hence, as the still near record pipeline of activity completes, GDP-basis dwelling investment will likely still decline for at least a year, and probably slump by around 10 per cent year-over-year, dragging down construction jobs," Mr Tharenou said.

"Indeed our tracking of construction job ads is consistent with about 100,000 jobs losses ahead."

However, BIS Oxford Economics was more upbeat about the prospects of a construction rebound.

"Australia's dwelling stock deficiency will grow once again as rising undersupplies in Victoria, Queensland and Tasmania develop by 2020/21," said BIS managing director Robert Mellor earlier this week.

"We anticipate this pressure to facilitate growth in house prices and rents, helping create a renewed upswing in residential building starts through the early to mid-2020s."

"The downturn has further to run with an additional 8 per cent decline forecast for 2019/20, with the fall in residential building outweighing the growth expected in the non-residential sector."