Tenon shares soar as mouldings maker flags return to profit

Thursday 30th May 2013

Tenon, the wood mouldings company, said it may return to profit this year as a pickup in the US housing market stokes demand for building products. The shares soared 16 percent.

Operating profit before finance costs would be between zero and US$1 million in the year ending June 30, from a loss of US$8 million a year earlier, the company said. Earnings before interest, tax, depreciation and amortisation is forecast at US$4 million to US$5 million.

The Auckland-based company's trading performance is closely tied to demand in America's housing market, which is emerging from the devastation wreaked by the sub-prime mortgage debacle. US home building permits exceeded 1 million in April, the highest since June 2008, "signalling a much stronger level of new building activity," Tenon said.

"While this forecast represents a considerable improvement on our last year's bottom of the cycle result, our expectation is that our next fiscal year will be much stronger yet," said chairman Luke Moriarty.

Assuming the US housing market continues to recover and the kiwi dollar holds near current levels against the greenback, "we would expect our fiscal 2014 EBITDA to be more than twice this year's forecast EBITDA," he said.

Tenon shares climbed 14 cents to $1 and have surged 45 percent in the past year. Rubicon, which owns 59 percent of Tenon, climbed 11 percent to 30 cents.

Moriarty said he believes the shares don't reflect the prospects of earnings growth.

"We are confident the share price will rerate as our future earnings profile reveals itself during the coming year," he said.

BusinessDesk.co.nz

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