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Methven 1H profit slumps 25% on tepid Australasian building activity

Tuesday 29th November 2011

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Methven, the tapware and bath fittings maker, posted a 25 percent slump in first-half profit, blaming a sharp downturn in Australian activity and slow rebuilding programmes after a string of natural disasters on both sides of the Tasman.

Net profit was $3.2 million, or 4.8 cents per share, in the six months ended Sept. 30, down from $4.3 million, or 7.1 cents per share, a year earlier, the Auckland-based company said in a statement.

Sales dropped 14 percent to $54.2 million and earnings before interest, tax, depreciation, and amortisation dropped 19 percent to $6.8 million.

Methven said the poor result was due to downturn in building and renovation activity in Australia and delays to rebuilding in Queensland and Christchurch, along with a slowdown in New Zealand’s housing sector.

Cost-cutting isn’t expected to start showing benefits until the second half.

“Market conditions in our core markets are not expected to improve in the near term,” chairman Phil Lough said. “The second-half of the year will see us consolidate the hard won gains in turning around our UK business, achieving operational and product rationalisation savings across the group and improving shower market share in our core markets.”

Last month, the manufacturer cut its annual earnings forecast range to between $6 million and $8 million from a $9 million estimate it gave shareholders in July, citing Australia’s downturn in housing activity.

Still, the company kept a steady stream of cash flow, and the board was able to announce an interim dividend of 4.5 cents per share, or $3 million. That’s down from 5.5 cents per share, or $3.7 million, a year ago.

Methven’s New Zealand business, which accounts for about 32 percent of the company’s sales, reported a 28 percent fall in EBITDA to $3.9 million with a soft residential housing market unlikely to improve in the next six months.

The Australian unit, which makes up about 46 percent of external sales, reported a 41 percent slump in EBITDA to A$1.4 million in an increasingly competitive market.

The UK business returned to a first-half profit, with EBITDA of 500,000 pounds, compared to a loss of 100,000 pounds a year earlier, when it lost its biggest customer Focus (DIY).

The shares sank 5.5 percent to $1.04 in trading yesterday, and have shed 37 percent this year.

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