Methven beats forecast with 15% drop in profit, reduced debt, shares gain

Monday 30th November 2009

Methven Ltd, the manufacturer of taps and bathroom fittings, posted a 15% decline in first-half profit, beating its forecast on more robust returns in Australia and New Zealand, and smaller losses from the US.

Net income fell to $4.2 million, or 6.3 cents a share in the six months ended Sept. 30, from $5 million, or 7.5 cents a year earlier, the company said in a statement today. Sales fell 5% to $68 million. Shares of Methven climbed 4% to $1.55 after the results were released.

The company slowed the decline in New Zealand earnings and boosted returns from the Australian market, helping make up for shrinking margins in the U.K., where depressed market conditions squeezed margins, resulting in a 30% slide in EBITDA. The company confirmed it will pay an unchanged first-half dividend of 5.5 cents a share and said its will better its target for debt reduction in the full year.

“The stronger than forecast performance in the first half gives us confidence that our strategies are working,” Chairman Phil Lough said. The manufacturer has strategies in place that will “enable us to ride out the current economic downturn and be in a strong position to accelerate growth as we see the recovery emerging.”

Methven reiterated its forecast for full-year profit to decline by 15% to 20% while the reduction in net debt was likely to be in the order of 30% to 35% - better than its previous estimate of a 20% reduction. In the first half, the company slashed net debt by 47% to $18.3 million.

Chief executive Rick Fala said Methven New Zealand was expected to perform “well” in the second half, reflecting “a resilient renovation market, strong merchant support and introduction of new products.”

In Australia, strong year-on-year profits would reflect increased sales and the relative strength of the market across the Tasman.

Earnings in the U.K. are expected to be “markedly down” in the second half, reflecting a “severely depressed” market and the expected loss of a key DIY customer, which is now buying tapware direct from China.

Regional results at a glance:

New Zealand:

Operating revenue down 7.6% to $22.4 million

EBITDA down 2.3% to $5.7 million

Australia:

Operating revenue up 6.1% to A$18.6 million

EBITDA up 46% to A$1.2 million

U.K.:

Operating revenue down 11% to 10.1 million pounds

EBITDA down 30% to 900,000 pounds

U.S.:

Operating loss cut by 80% to $94,000

Businesswire.co.nz

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