Monday 2nd July 2018
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Food processing and stainless steel equipment manufacturing company Mercer Group has refinanced a Bank of New Zealand loan through until September next year. This follow a warning in May that weak earnings from its Haden & Custance automated handling systems unit meant it might breach banking covenants.
The stock fell 8.3 percent, or 2 cents, to 22 cents, matching an 18-month low it set in May.
Christchurch-based Mercer's refinancing was accompanied by confirmation the H&C division missed expectations and that the company has cut costs in the automated and robotic bulk foods handling system unit. The stainless steel division generated positive earnings before interest tax, depreciation and amortisation in the year ended June 30, while the still-to-be-commercialised medical sterilisation technology business S-Clave aims to have a unit operating this calendar year.
The original Mercer company was established in Christchurch in 1884 and it has been listed on the stock exchange for more than 25 years.
In May, the company warned it would report an ebitda-loss due to the H&C unit's weak sales, which would breach its earnings covenant with BNZ.
As at Dec. 31, the company had drawn $1.4 million down on a bank overdraft and had $838,000 of borrowings falling due in the following 12 months, with a further $6.2 million of non-current borrowings.
The directors adopted a 'going concern' assumption for the first-half accounts after renegotiating its banking facilities last year and projecting a second-half profit.
Mercer also reiterated it's still in talks with various parties over the Edendale silo collapse, which cost Fonterra Cooperative Group $20 million. Mercer supplied a silo to TetraPak that collapsed at Fonterra's Edendale factory in September 2016. It has previously said cover from its professional indemnity and public and products liability insurance would depend on the findings of an investigation, the extent of its liability, the amount of cover and any relevant exclusions.
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