Methven stock drops after company says profit may tumble 20%

Tuesday 28th July 2009

Methven shares fell after the maker of taps and plumbing fixtures said profit may tumble as much as 20% in 2010, reflecting worsening trading conditions in the UK.

The shares fell 4.2% to $1.36, trimming their gain this year to about 15%. Earnings will decline 15% to 20%, the company said in a statement today.

“No one expects 2009-10 to be easy with extremely challenging trading conditions in all markets, but we are fit to compete,” said chief executive Rick Fala. The company predicts “a significant decline in UK margins and profitability in (a) worsening recession,” while New Zealand sales and profit are set to decline, the company said.

It anticipates a “strong improvement” in the Australian market.The tapmaker has exited the US, which was expected to break even this year from a loss of $900,000 last year, to focus on its core markets. It plans to hold dividend payments unchanged. Methven anticipates a 20% reduction in net debt during the year and is reducing working capital, it said.

It is imposing “very strict cost containment measures,” freezing salaries and directors fees.

“We are aiming to trim fixed overheads and global supply costs further, increase sales of our Satinjet showerware by targeting the hotel market and put Deva tapware into Australia and New Zealand to fill a gap in the low end of the market. We are also continuing our expansion into the Middle East,” Fala said.

Businesswire.co.nz

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