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Metroglass gives subdued guidance for 2020, promises to slash debt faster

Friday 26th July 2019

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Metro Performance Glass has provided subdued earnings guidance for the 2020 financial year, and said it will cut debt at a faster pace. 

Ahead of its annual meeting today, the company forecast group earnings before interest and tax guidance of between $25-$27 million in the year ending March 31, 2020, after posting ebit before significant items of $25.2 million in the 2019 March year. 

The forecast is before the impact of changes to lease accounting standards which would push the figure up by $2 million, the company said. 

Metroglass chair Peter Griffiths said the company maintains a key position in both New Zealand and Australia and will “generate the appropriate strategic responses as they are required.  

“While some shareholders have asked us to disclose more details of these options, as the only remaining locally listed operator we consider these commercially sensitive,” he said in speech notes published on the NZX. 

In a presentation to shareholders, the Auckland-based glassmaker said it will reduce net debt by about $15 million in the 2020 year. Metroglass reported debt of $83.3 million at March 31, an $11 million reduction on the year prior. 

The company had previously said it would cease paying dividends until its net debt-to-earnings before interest, tax, depreciation and amortisation ratio was 1.5 times. The ratio was 2.1 times at 31 March 2019. 

Today Metroglass said it expects that ratio to be achieved in the first half of the 2021 financial year, at which time dividends could be resumed or a share buyback initiated. An update will come alongside the 2020 results in May next year. 

Metroglass did not provide separate forecasts for its Kiwi and Australian divisions. However, it said while building consents in New Zealand have increased, activity levels would be similar to last year, given supply-side constraints. 

Griffiths noted Metroglass is expecting an impact on New Zealand sales due to NBR Rich Lister backed Architectural Profiles Limited (APL) entering the market. Sales in this country account for about 80 percent of Metroglass group revenue. 

Metroglass said it expects a reduction in sales to APL’s affiliated window fabricator customers, which this financial year contributed $25 million or almost 12 percent of its local revenue.

Forsyth Barr had said in a research note that APL had strong relationships across its fabricator network which accounted for 23 percent of Metroglass's Kiwi revenue. 

The APL factory in Hamilton is expected to open in the middle of next year, meaning the impact would occur in the 2021 year. 

“You can be assured that we are working on customer retention strategies which will help to mitigate the impact from increased competition and industry capacity,” Griffiths said. 

He acknowledged the Australian business, Australian Glass Group, continued to struggle to bed in changes, labelling its results as “not acceptable.”

“At our current rate of progress, we expect to significantly reduce the ebit loss in Australia this financial year, with year-on-year improvements weighted towards the second half,” Griffiths said. 

Metroglass, which has a history of downgrading profit estimates, reported a $5 million net profit for the 2019 financial year, down from $16.3 million the year prior. 

Revenue for New Zealand for 2019 financial year was up 2 percent at $217.4 million while Australian revenue was down 9 percent to $50.4 million. 

The shares rose 2.6 percent to 40 cents, down from 87 cents a year ago and less than a quarter of the $1.70 price when Metroglass floated in July 2014.


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